Settlement ends former U.S. Foodservice CEO’s severance lawsuit
Nov 20, 2007

BEN MOOK Daily Record Assistant Business Editor November 19, 2007 6:52 PM
The former chief executive of Columbia-based U.S. Foodservice has agreed to a settlement with the company’s former owner, Royal Ahold NV, over a three-year-old breach of contract lawsuit.

The settlement comes a few days before the case was scheduled to head to a jury. Terms of the deal were not disclosed.

James L. Miller filed the $10 million lawsuit against his former employer, claiming the company reneged on its promise to extend post-termination benefits and a severance payment after he resigned his position. Ahold filed counterclaims, contending that Miller breached his fiduciary duties of care, good faith and loyalty, as well as his employment agreement.

Miller’s lawyer, Benjamin Rosenberg of Rosenberg Martin Funk & Greenberg LLP, said the case was scheduled to begin Monday and likely would have taken a month. He said while both sides were ready to head to trial, a settlement conference earlier this month led to the agreement that culminated in the case being dismissed on Monday.

“I think everyone is pleased we were able to come to a settlement before going to trial,” Rosenberg said.

An attorney for U.S. Foodservice did not return a phone call seeking comment.

The case was originally filed in Baltimore County Circuit Court in February 2004, but was removed to the U.S. District Court in Baltimore in April 2004. The case was removed after it was determined Miller’s claims under the Employee Retirement Income Security Act pre-empted his state law claims, which included fraudulent inducement, breach of contract and negligent misrepresentation.

In his complaint, Miller claimed U.S. Foodservice, then a subsidiary of Dutch retailer Royal Ahold, made him the scapegoat for a financial scandal over inflated earnings. The Securities and Exchange Commission charged more than two dozen people over the scandal, but Miller was not charged. Ahold, owner of grocery chains including Giant Food Inc., has since sold U.S. Foodservice.

The fraud cost investors more than $800 million. In May, Mark P. Kaiser of Ellicott City, former chief marketing officer of U.S. Foodservice, was sentenced to seven years in prison for his role in the scheme.

Miller claimed he was not aware of the overstated earnings that were at the heart of the scandal. However, as the scandal unfolded, he said Ahold officials coerced him into resigning. He claimed he was told it was “necessary for him to fall on his sword for the good of the company,” according to the lawsuit.

In return for leaving, Ahold promised he would get extensive post-termination benefits and a severance payment, and be vested in the retirement plan, Miller claimed. Instead, he said, he received a letter telling him his post-termination benefits would end on Feb. 29, 2004. He was also told to return all bonus payments made to him since Ahold bought U.S. Foodservice in 2000.

Miller’s settlement comes on the heels of some other Ahold housecleaning events over the past few months.

Ahold sold U.S. Foodservice in July to Kohlberg Kravis Roberts and Clayton, Dubilier & Rice in a $7.1 billion deal.

On Friday, the company made acting President and CEO John Rishton’s position permanent.

In October, Royal Ahold announced it had reached a settlement with its former CEO Cees van der Hoeven. Under the deal, van der Hoeven agreed to pay the company $7 million and also drop a countersuit.


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