According to the latest docket posted, on September 6, 2001, the Court entered the Order approving lead plaintiffs’ motion for attorney fees and reimbursement of expenses. Further, the Court granted the motion for order for approval of proposed settlement of the class action and for the allocation of the net settlement fund. The Court entered the Order and Final Judgment and the case was terminated. On November 19, 2002, the Court entered the Order approving the distribution of the net settlement fund.
In a press release dated July 24 2001, Fleming Companies, Inc. announced that it has reached an agreement to settle a purported class action filed by two noteholders ahead of the trial set for October this year. The memorandum of understanding was reached in April and involves payment by the Company of $2.5 million to the class members. The company said in a recent regulatory report to the Securities and Exchange Commission that the settlement still needs court and class approval.
As summarized by the docket, on April 15, 1997, the defendants filed motions to dismiss the complaint. On March 27, 1998, the Court entered the Order signed by U.S. District Judge Vicki Miles-LaGrange granting the motions to dismiss with leave to amend. On April 5, 1999, the plaintiff filed an Amended Class Action Complaint and the defendants responded by filing motions to dismiss on May 27, 1999. On August 1, 2000, the Court entered the Order granting in part and denying in part the defendants’ motions to dismiss. According to the Order, the Court grants the Fleming Defendants’ motion to dismiss the plaintiffs’ Section 10(b)/Rule10b-5 claim and Section 20(a) claim, and denies the Fleming Defendants’ motion to dismiss as to plaintiffs’ Section 11 claim. The Court denied the defendants Merrill Lynch & Co. and J.P. Morgan Securities Inc.’s motion to dismiss. On April 13, 2001, the Court further issued the Order dismissing one of the individual defendants. On May 25, 2001, a Stipulation of Settlement was filed. On May 30, 2001, the Court entered the Order certifying the settlement class, preliminary approving the settlement, scheduling a hearing and providing for notice.
The Complaint, which sets forth claims under the federal securities laws, alleges that during the Class Period Fleming and certain of its senior officers and directors, repeatedly misrepresented and failed to disclose the existence of a lawsuit filed in a Texas state court in August, 1993 entitled David's Supermarkets, Inc. vs. Fleming Companies, Inc. (the "David's Litigation"), in which the plaintiff sought over $200 million in damages. The Complaint also charges Merrill Lynch and J.P. Morgan Securities Inc., the underwriters on the Notes offering, with violations of Section 11 of the Securities Act of 1993 because the Registration Statement and Prospectus issued pursuant to offering failed to disclose the David's Litigation.
The complaint alleges that in the David's Litigation, Fleming was charged with fraud, breach of contract, conspiracy, and a violation of the Texas Deceptive Trade Practices Act, a statute that provides for, among other things, the recovery of treble damages and attorneys' fees. By the time of the Notes offering on December 8, 1994, significant discovery was undertaken in the David's Litigation and by the time Fleming disseminated its 1994 10-K, Fleming's motion for partial summary judgment had been denied. On March 14 and 15, 1996, a Texas jury found that Fleming breached its contract with David's Supermarket's, Inc. ("David's"), and that the Company had committed fraud and engaged in deceptive trade practices in its dealings with David's. The jury found that Fleming must pay $207.5 million in damages and legal fees, approximately five times Fleming's 1995 annual net income and more than three times its average net income over the past ten years. The announcement of the verdict was the first time that the lawsuit's existence was disclosed to Fleming investors.
The complaint further alleges that as a result of Fleming's failure to disclose these material facts in its public filings and failure to accrue a loss contingency under Generally Accepted Accounting Principles, the prices of the Notes were artificially inflated as initially offered and throughout the Class Period. Defendants' course of conduct has resulted in significant damages to Notes purchasers for which relief is now sought.
The securities fraud class action has been commenced on behalf of persons who purchased 10 5/8% Senior Notes and Floating Rate Senior Notes due December 15, 2001 issued by Fleming Companies, Inc. during the Class Period.