BEHIND THE NEWS: David Marsh settles with grocer after bruising battle

September 3, 2007

David Marsh's legal battle with Marsh Supermarkets Inc. was so contentious that it seemed the parties never would make peace. But that's what just happened, and both sides are keeping the terms of their deal under wraps.

Court records show David Marsh and the company his grandfather founded reached a settlement in late August, after weeks of discussions.

To be sure, David Marsh-the former president of Marsh Supermarkets who now serves as president of the locally based Crystal Flash convenience-store chain-was feeling significant financial pain in the waning days of the 11-month tussle.

His attorneys had argued for months that Marsh was obligated to pick up his legal tab, a position the Fishers-based grocery chain was rejecting.

In a court filing just days before the settlement, his attorneys wrote: "Mr. Marsh has incurred over $300,000 in attorney's fees and expenses. ... [He] does not have the resources to pay those amounts, and his lawyers cannot continue to represent him without receiving payment for their services."

The attorneys continued: "The company's refusal to pay Mr. Marsh's attorney's fees and costs as incurred has crippled his defense of this case."

Such pleas of poverty from David Marsh, 44, would have seemed unfathomable just a year ago. He sued the company in September 2006 over a relatively small amount-about $102,000 he charged Marsh Supermarkets was shorting him on his $2.1 million severance package.

But Marsh Supermarkets quickly turned the tables. First, it charged that before Marsh left as president in February 2006, he used the company "as his personal checkbook," expensing family trips to exotic locales, including Africa and New Zealand.

Documents gathered as part of that inquiry included an even harsher allegation-that David Marsh pressured the company's chief financial officer in an unsuccessful effort to get him to cook the books. David Marsh denied that charge, and in court papers defends his spending as appropriate.

This spring, the company officially fired David Marsh for cause, saying his spending of hundreds of thousands of dollars from company coffers on personal expenses amounted to "gross misconduct."

Marsh Supermarkets then took the position that the termination for cause was retroactive to his departure, and thus he was due no severance and should have to repay the roughly $750,000 he'd already collected.

Court records provide no hint on the financial terms of the settlement. The company's attorney, David Herzog of Baker & Daniels, and David Marsh's counsel, Linda Cooley of Krieg DeVault, declined to comment.

A possible downside from the deal for David Marsh: He won't have the opportunity to attempt to clear his name at trial.

In court papers, David Marsh had said many of the expenses were necessary to foster innovation and develop new store technologies at a time the grocery industry was going through wrenching change.

"Over time, Mr. Marsh discovered that Marsh Supermarkets could differentiate itself in marketing and advertising by telling customers about innovative ideas that Mr. Marsh and other executives gathered by networking with businesspeople from around the world," a filing said.

Yet the company noted that the spending was occurring at a time Marsh Supermarkets was under increasing financial strain.

Because of that strain, the board of directors put the company on the block two years ago. Last October, Floridabased Sun Capital Partners acquired Marsh Supermarkets for $88 million in cash and the assumption of $237 million in debt.

Clearing the legal decks

The David Marsh settlement brings to a close the last of three major legal tangles Sun inherited when it bought the grocer.

In a federal lawsuit filed in the summer of 2006, class action attorneys blasted members of the Marsh family, saying they ran Marsh Supermarkets "as their private fiefdom despite its public ownership."

The plaintiffs, who charged self-dealing and breach of fiduciary duty, dropped their case in March after a federal judge rejected their request that the case be transferred to state court, where they presumably thought they had a better chance of winning.

That same month, the company reached a settlement with its former vice president of community relations, Jodi Marsh, who had charged in a lawsuit that she was owed more than $720,000 in severance. Terms were not disclosed.

Jodi left Marsh in January 2006, two months after she filed for divorce from David Marsh. After the filing, court papers allege, she went from "having executive officer status" to "almost clerical status."
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