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FLEMING WINS ROUND IN DAVID'S CASE

CLEBURNE, Texas (FNS) -- Fleming Cos. has won a round in court here that could trim a potential damage award it may face in the retrial on whether it defrauded and overcharged former customer, David's Supermarkets.Last week, Senior District Judge C.W. Duncan Jr. ruled that, in the second trial, he would limit the expert testimony by Texas economist Dr. Ray Perryman. Perryman provided the damage-award

CLEBURNE, Texas (FNS) -- Fleming Cos. has won a round in court here that could trim a potential damage award it may face in the retrial on whether it defrauded and overcharged former customer, David's Supermarkets.

Last week, Senior District Judge C.W. Duncan Jr. ruled that, in the second trial, he would limit the expert testimony by Texas economist Dr. Ray Perryman. Perryman provided the damage-award models in the first trial earlier this year and was considered a key witness in determining the huge $211 million verdict against Oklahoma City-based Fleming, the nation's biggest wholesaler.

That verdict was tossed out this summer and a retrial granted after Fleming complained that the first proceeding was tainted by Judge C.C. "Kit" Cooke's past financial ties with the winning plaintiff, David's, a 23-unit, Grandview, Texas-based chain. Now, as it prepares for a new trial Jan. 13 in state district court in Cleburne, Fleming has been jockeying for a more favorable verdict. The previous award was about five times Fleming's annual earnings and drew outcries from some observers, who called the judgment outrageous.

In his ruling, Duncan said he would sustain Fleming's objections to Perryman's economic models but would not eliminate the economist's testimony from the next trial. The disputed models projected that David's failed to receive more than $50 million in revenues because it lost customers and could not expand the number of stores due to grocery overcharges from 1989 to 1991. Those losses were the basis of the $53.7 million actual damages award, which was combined with $100 million in punitive damages plus legal fees and interest to arrive at the $211 million verdict.

"Perryman -- through unaccepted, unsupported or unidentified methodology -- mysteriously transforms approximately $3 million in alleged overcharges into over $50 million in speculative lost-profit damages. This legerdemain is inherently incredible," Fleming said in a brief in support of its motion to exclude the testimony.

However, Bill Sims, one of the plaintiff's attorneys, defended the model and said he is considering appealing Duncan's ruling, depending on the contents of the final order scheduled to be signed last Friday. "We are waiting to see the exact scope of the limitation," he said.

Sims said that if he doesn't appeal he plans to have alternative damage models ready for the trial, and those should be ready within about 30 days. He said he will ask the judge to delay the trial 60 days or until mid-March to give the plaintiffs time to prepare new damage models and was canceling a mediation that had been scheduled for Dec. 16. "In view of the court's ruling on our damage model, mediation on Monday [Dec. 16] would be a colossal waste of everyone's time," he wrote in a letter to Fleming attorneys.

Meanwhile, Fleming is making other moves to reduce its liability in cases connected to the David's lawsuit. Those include more than 10 class-action investor lawsuits claiming that Fleming failed to disclose the David's litigation, violating federal Securities and Exchange Commission regulations and causing stockholders and bondholders to lose millions of dollars when the value of their securities plummeted after the March verdict.

To get maximum insurance coverage to pay damages from the investor suits, Fleming has filed a suit Oct. 24 in U.S. District Court in Oklahoma City against three of its insurance carriers: Federal Insurance Co., National Union Fire Insurance Co. of Pittsburgh and Executive Risk Indemnity. Fleming is asking that the three insurance companies be ordered to provide coverage under its 1996 policies, not its 1993 policies. That move would give Fleming an extra $60 million in available coverage.

Financial analysts have been concerned about the number of legal claims against Fleming, which had $17.5 billion in sales and $42 million in earnings last year. Its high debt and the erosion of its customer base have left Wall Street cautious.

"Despite the fact that the $211 million verdict was set aside in June and a new trial granted, Fleming still faces potentially large liabilities from this and other pending legal actions," said Standard & Poor's, New York.

Some of Fleming's legal tactics to reduce the damages have not been successful. Last month, Duncan denied Fleming's motion for summary judgment in the David's case, and last week the judge again declined to immediately move the trial from Cleburne, where Fleming has maintained it can't get a fair trial because of extensive media coverage of the case.

In a ruling about five days ago, Duncan continued the motion and said the large pool of prospective jurors should be made available in Cleburne when the retrial opens next month, and he instructed that attorneys meet to come up with questions for the jury selection process.