JUDGE ORDERS A NEW TRIAL FOR DAVID'S FLEMING SUIT

JANIN FRIEND

CLEBURNE, Texas (FNS) -- Fleming Cos. and David's Supermarkets are headed back to trial next year, extending their three-year legal battle, after a Texas judge tossed out a $211.2 million jury verdict against the wholesaler.

Amid much controversy last week, Judge C.W. Duncan Jr. granted Fleming's request for a new trial because the former presiding judge, C.C. "Kit" Cooke, had past financial ties with David's owner, David Waldrip, his associates and an attorney.

In May, Cooke voluntarily removed himself from the trial, saying the past financial relationships gave the appearance of impropriety, and recommended a new trial. Duncan then was appointed to hear the motion for a new trial, and will preside over it after his schedule is cleared.

"Justice has been served. This whole process has unjustly impugned Fleming's character and the character of our 44,000 associates," said Robert E. Stauth, Fleming's chief executive officer, in a statement on the order for a new trial. "All we ever asked for is a fair day in court, where our case could be tried on a level playing field."

Oklahoma City-based Fleming has claimed the trial was unfair and the fraud and breach-of-contract verdict "unfounded" and "absurd," partly because of Cooke's financial relationships, including a past $2,985 loan made by Waldrip and loans made through the First National Bank of Cleburne, which was controlled by Waldrip.

In March, the jury awarded David's $211.2 million when it found Fleming guilty of defrauding the Grandview, Texas-based chain by inflating manufacturers' prices under a cost-plus contract and breaching its contract. Industry observers have said the verdict could precipitate a flurry of lawsuits by other retailers, who would have similar claims against the wholesaler, the nation's largest.

"We look forward to a new trial where we can put these allegations to rest once and for all," Stauth stated.

However, Bill Sims, counsel for David's, said he will win a second time because the facts in the case have not changed. "We clobbered them the first time and, mark these words, we will clobber them again," he said. "I can't wait for a new trial to start." Sims noted that internal memos written by Fleming executives were particularly damaging. One executive memo introduced at the first trial referred to "artificially inflating" costs "to build in margin."

Before the new trial begins, David Almond, Fleming general counsel, said the wholesaler will consider asking for a change in venue because it's unsure if an impartial jury can be found in Cleburne, where the initial trial was held in the 18th Judicial Circuit Court.

"There are serious questions whether a potential jury panel could be found that doesn't have some views considering the heavy publicity," Almond said. Fleming may hire consultants to do a survey of Cleburne and Johnson County residents to determine if it will file a change-in-venue motion, he added.

Sims said David's would oppose the motion, but he is not worried that it will change the case's outcome. "We could try this case in the Bronx and win it," he said.

Both sides agree that a settlement of the case is unlikely. "I don't expect any settlement talks," Sims said. "It's a matter of principle for us."

Fleming executives said no settlement offer was on the table and they did not expect to make one because the company's integrity had been attacked. "We feel strongly that Fleming's business practices were right and ethical, and this process [granting of a new trial] has worked to repair the inappropriate challenge to that," said Harry L. Winn Jr., Fleming's chief financial officer.

Winn noted the release of the $230 million bond posted to cover the jury verdict helps Fleming's ability to pursue its growth strategies and continue programs to support retailers. "The $230 million was an inhibitor, and now we have removed it.