OKLAHOMA CITY (FNS) -- Fleming Cos. here last week secured credit approval from its bankers to post a bond to appeal a Texas jury verdict ordering the company to pay more than $200 million for defrauding and overcharging a small supermarket chain.
The move came as representatives of the wholesaler and David's Supermarkets, Grandview, Texas, went into mediation over the case under the direction of former appellate judge David Keltner, now a partner at a Fort Worth, Texas, law firm.
However, as of late last week, observers did not expect the mediation to be successful and were anticipating that the Texas state court judge, C.C. "Kit" Cooke, would hand down a final judgment Friday, April 12. The judge said he hoped to rule by that time on the mid-March jury award that found Fleming and former executive, Jim Stuard, guilty of fraud, breach of contract and deceptive trade practices.
"We are encouraged by the confidence our banks have shown in Fleming by approving this amendment," Robert E. Stauth, Fleming chairman and chief executive officer, said in a company statement. "By this action, the banks have demonstrated their support for Fleming's plans to appeal the case."
As part of the ruling, the judge also was expected to set the amount of the bond required for Fleming to appeal.
The number of lawsuits against Fleming continues to grow, including four investor suits stemming from accusations that Fleming did not disclose
the David's case to investors and violated federal Securities and Exchange Commission regulations.
Fleming spokeswoman Nancy Del Regno said the company was reviewing the four investor suits, adding that "we believe we have met our disclosure requirements."
About 10 days ago, a Fleming debt investor, Robert Mark, filed a class-action suit in U.S. District Court in Oklahoma City for people who purchased $500 million in senior notes due 2001. The suit accuses Fleming and the note underwriters, Merrill Lynch and J.P. Morgan, of failing to disclose the David's litigation in a prospectus issued in December 1994 and in its 1994 10K form to the SEC, despite significant discovery in the case.
As a result, bondholders lost substantial amounts on their investments after the verdict announcement when values dropped from about 97% per $1,000 to 87% per $1,000 last week. "They have a risk of going down further+ if there are other credible lawsuits," said Frederick Taylor, director of corporate bond research for Salomon Bros., New York.
Mark's attorney, Vincent Cappucci of Bernstein, Litowitz Berger & Grossmann, New York, said he would not release his estimate of damages. However, he noted, "Our investigation indicates the amount will be significant."
J.P. Morgan spokeswoman Margaret Sutherland said her firm had no comment on the suit. Merrill Lynch spokesman Timothy Gilles said the financial firm fulfilled its responsibility as underwriter. "There is absolutely no merit to the claims," he said.
A class-action suit for equity shareholders was filed in U.S. District Court in Oklahoma City April 5. In that suit, investor Ronald T. Goldstein seeks damages for those who purchased Fleming stock from Nov. 15, 1993, to March 14, 1996. He claims that Fleming violated securities regulations by not telling stockholders about the David's suit and investors subsequently lost money. Fleming stock has declined from about $20 a share before the jury verdict was announced in mid-March to as low as roughly $13 a share.
Such declines also resulted in two other class-action suits. At the end of March, investors Kenneth Steiner and Lawrence B. Hollin both filed similar shareholder lawsuits in U.S. District Court in Oklahoma City.
