JURY MULLS DAMAGES ISSUE IN FOOD LION SUIT VS. ABC

ELLIOT ZWIEBACH

GREENSBORO, N.C. -- A federal jury returns to court today to decide whether to award damages to the Food Lion supermarket chain in connection with its successful lawsuit against ABC News.

Food Lion, Salisbury, N.C., won the first phase of its case when the jury in U.S. District Court here ruled that New York-based ABC and four producers had committed fraud and that two of the producers had committed trespass and breach of fiduciary duty in gathering material for the "PrimeTime Live" broadcast that aired Nov. 5, 1992.

The hard-hitting broadcast, some of which was developed through the use of hidden cameras, questioned Food Lion's sanitary practices.

In the wake of the broadcast, Food Lion's sales and equity value dropped sharply. Food Lion has said it lost up to $2.5 billion in sales and stock value. Food Lion's current annual sales volume is about $10 billion.

The broadcast also focused increased public attention on food safety, and, many observers maintain, caused many industry players to pay more attention to such issues. Chris Ahearn, a spokeswoman for Food Lion, told SN last week that as for Food Lion sanitation methods, "the freshness standards in existence before the broadcast were at or above those of the rest of the industry, and we don't concede that we were doing anything wrong.

"But we did review our policies following the broadcast and imposed stricter standards on ourselves, which led to some changes in procedures."

For example, she said, before the broadcast Food Lion would inspect perishable products a day before the pull date to see whether they should be put out for another day; after the "PrimeTime Live" segment, the chain began throwing away any product that had not sold by the day before the pull date, regardless of its condition or salability.

Food Lion's lawsuit didn't challenge the accuracy of the broadcast but instead focused on matters such as the news-gathering methods of the producers, and the fact that they were employed at Food Lion stores while gathering substance for the broadcast.

Since there are no libel claims at issue, during this week's penalty phase the jury will be confined to considering losses such as those Food Lion may have experienced in connection with the time it spent hiring the ABC employees. Punitive damages may also be considered by the jury. The current aspect of the trial is expected to last about two weeks.

During the earlier-concluded liability phase of the trial, the jury found that ABC and four producers were guilty of fraud.

The jury also found that two of the producers -- Lynne Neufer Dale and Susan Barnett -- had violated state laws against trespass, breach of fiduciary duty and duty of loyalty to Food Lion because they had falsified employment histories and references to obtain jobs at Food Lion and, once hired, created incidents to film rather than doing their jobs for the retailer.

However, the jury specified that neither producer had intentionally damaged Food Lion property, nor did the producers "unreasonably interfere with and unreasonably disrupt the work of other Food Lion employees for the purpose of furthering an investigation on behalf of ABC."

Dale was hired as a meat clerk and worked eight days in 1992 at two Food Lion stores in the Hickory, N.C., area; Barnett worked for seven days as a deli clerk at a store in Myrtle Beach, S.C.

They recorded activities at the stores using cameras hidden under their wigs and microphones hidden in their bras.

Following the liability verdict, Tom Smith, president and chief executive officer of Food Lion, said in a statement that, "We're delighted with the jury's verdict. We think, with this verdict, that the jury has told ABC that networks, producers and reporters -- like everyone else in this country -- are not above the law."

ABC News issued a statement after the verdict that said: "We never engage in undercover activities lightly, but sometimes they are necessary to bring stories of real importance to the public's attention. Our report on Food Lion was such a story."

And, commenting on Food Lion's decision to challenge the way the information was gathered rather than the information itself, ABC said, "Food Lion is asking the jury to punish the messenger without challenging the message. The truth of the 'PrimeTime Live' report on Food Lion was not questioned in this trial."

Food Lion executives, and other observers, suggested at the time of the broadcast that impetus for information contained in the report came from the United Food and Commercial Workers Union, which had been trying unsuccessfully to organize Food Lion employees at the time.

A UFCW official told SN shortly after the broadcast that the union had provided ABC with names of 20 or 25 Food Lion employees, but that no union representatives were present during interviews with Food Lion workers that were a part of the broadcast.

SN's parent, Fairchild Publications, is a unit of the ABC segment of Walt Disney Co. The majority of Food Lion's voting stock is owned by Delhaize, Brussels, Belgium.