FLEMING SUES DAVID'S, ATTORNEY FOR DEFAMATION

Janin Friend

OKLAHOMA CITY (FNS) -- Fleming Cos. here is suing David's Supermarkets and the retailer's owner and attorney for allegedly making defamatory statements after the grocery chain won a large verdict against the wholesaler in a fraud and overcharging case.

In a suit filed Feb. 11 in U.S. District Court in Lubbock, Texas, Fleming accuses the supermarket chain owner, David Waldrip, and his Dallas attorney, Bill Sims, of making false and misleading statements in press releases and remarks to the media in the events surrounding last year's $211 million verdict against Fleming.

The verdict was later thrown out and a new trial ordered after the presiding judge recused himself because of past financial ties with David's owner. The new trial is scheduled for May 12.

However, Fleming maintains statements made by Sims and Waldrip caused financial damage to the company, although it does not specify how much. That included loss of profits due to injury of company reputation, the cost associated with posting a bond in the lawsuit, loss of goodwill, downgrading of Fleming's debt and restructuring of credit. It also claims punitive damages are warranted.

"Throughout the course of events, Fleming suffered significant injury to its reputation as well as financial harm," the company said in the suit. "Fleming is entitled to punitive damages from Waldrip and Sims because they acted with malice, acted with specific intent to cause injury to Fleming and/or with conscious indifference to the rights, safety or welfare of Fleming."

Fleming accuses the David's representatives of issuing a press release that incorrectly implied three separate actual damage figures awarded by the Texas jury should be totaled, initially resulting in misleading newspaper stories that reported higher figures. The company also claims that Waldrip and Sims failed to disclose the financial relationships between the presiding judge and representatives of David's Supermarkets, and made defamatory statements when Fleming asked the judge to recuse himself after the trial was completed. For example, Fleming objected to being characterized as "sleazy" and "thugs."

Restricted by a judge's order limiting comments to the press, Sims said he was served with the lawsuit early this week and would file an appropriate response. "Nothing that Fleming does will deter me from trying the David's Supermarkets case against Fleming on May 12," he said. Sims has maintained the facts in the case are so strong that David's will easily win a second trial.

Waldrip said he has rented a trial office in Cleburne, Texas, where the case is to be heard, but declined to comment further, citing the gag order by the trial judge, C.W. Duncan Jr.

Court observers said Fleming's suit could be intended to put pressure on David's to settle its claim for a lesser amount. Late last year, Fleming successfully urged Duncan to toss out damage models that were linchpins in the case, which could increase its leverage when the two parties meet April 9 and 10 for a mediation session.

A Fleming spokesman declined to comment on the mediation.

"In other cases, it has been used as a bargaining chip in settlement negotiations," said Robert Sack, a libel attorney and partner with Gibson Dunn & Crutcher in New York. "I don't think it would have a substantial effect on the trial."

Barbara McDowell, partner at Jones Day in New York, said she would have to know more about the case to make a full comment, but noted: "It does seem like a stretch to turn this into a libel suit."

The defamation lawsuit is the latest event in the long legal battle that culminated last March when the Texas jury found Fleming guilty of fraud and breach of contract by inflating manufacturers' prices and thus overcharging David's Supermarkets, a 23-store chain based in Grandview, Texas, under a cost-plus agreement.

Fleming has been under pressure since that time by investors who have filed class-action lawsuits claiming the company failed to disclose the litigation with David's in violation of federal Securities and Exchange Laws. Its unsecured senior debt is considered speculative and was downgraded about six months ago to B-plus by Standard & Poor's Corp. and Ba3 by Moody's Investors Service.

Fleming's fiscal 1995 earnings -- the last full year reported -- amounted to $42 million, and earnings for the first nine months of fiscal 1996 were $16.4 million after it took a large one-time charge to settle other litigation. Year-to-date revenues are $12.6 billion.