FLEMING SEEKS CLOSURE TO DECADE-LONG RETAIL LAWSUITS

ELLIOT ZWIEBACH

DALLAS -- Fleming here said it has reached an agreement in principle to settle all claims stemming from a lawsuit involving alleged overcharges filed by multiple retailers in Missouri and Kansas, marking the end of nearly a decade of litigation by a variety of customers.

The suit, which combined five actions filed in 1997 and 1998, had been scheduled to go to trial in Kansas City, Mo., Aug. 13; however, the parties reached the preliminary settlement agreement a few days later.

The suit alleged Fleming had overcharged customers for a number of years and had withheld information from them about so-called inside margins -- payments from vendors to the wholesaler that actually reduced the cost of goods. The suits charged that Fleming never told the retailers about those inside margins, although its supply agreements said it would sell products to customers at cost plus specified fees.

Fleming said it continues to deny the allegations, "[but] the settlement proposal eliminates the continued expense and uncertainty and puts the matters behind the company."

According to Mark Hansen, Fleming chairman and chief executive officer, "Although these suits have nothing to do with current Fleming operations, we are very pleased to put a final conclusion to these pending issues and bring them to a close. This is a very positive development for our company as we are closing a chapter on the past and clearing the way for more aggressive Food 4 Less expansion in the Southwest."

Fleming said terms of the preliminary settlement include payments to the plaintiffs over a 16-month period, the transfer by one of the plaintiffs of a minority interest in several Food 4 Less stores in Arizona to Fleming, and lease concessions by Fleming to certain plaintiffs.

Although Fleming did not specify the amount of the payments it will make, it said it plans to revise previously released results from the second quarter ended July 14 to record a $21 million after-tax charge to reflect the total estimated cost of the settlement and other related expenses.

The plaintiffs' lawsuit had asked for damages of $120 million.

Fleming said the preliminary agreement is contingent on preparation and execution of a definitive settlement agreement, including a full release of the wholesaler from liability to the plaintiffs. A final agreement is expected in the next few weeks, Fleming said.

The settlement resolves the last in a series of legal actions filed against Fleming over the last eight years by a variety of retailers. All previous suits have been settled out of court, including the most recent settlement in July, when Fleming agreed to pay $16 million to customers and former customers from Utah, Idaho, Nevada and Wyoming.

Other settlements over the years included a $19 million payout by Fleming to David's Supermarkets, Grandview, Texas, in 1993 and an $800,000 payout to Furrs Supermarkets, Albuquerque, N.M., in 1997; Fleming also settled a 1997 dispute with Randall's Food Markets, Houston, through arbitration.