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Court Declines to Dismiss Breach of Contract Charge Against Miller

COLUMBIA, MD -- A federal judge has refused today to dismiss breach of contract and breach of fiduciary duties charges by Royal Ahold against James L. Miller, the former head of its U.S. Foodservice subsidiary here, who resigned after an accounting scandal, according to local news reports.

However, U.S. District Judge Catherine Blake did dismiss unjust enrichment and corporate waste claims against Miller, who is being countersued in response to his claim that his former employer failed to pay severance benefits he was promised when he stepped down in 2003.

Miller, who was president and ceo of U.S. Foodservice, is seeking at least $10 million in compensatory damages. He was also a member of the executive board at Royal Ahold, the Dutch company that owns U.S. Foodservice.

In 2003, accounting irregularities surfaced at the second larges U.S. foodservice distributorship, covering fiscal years 2000, 2001 and 2002. The irregularities involved an overstatement of income from promotional allowances or marketing dollars. The company overstated nearly $900 million in income and was forced to restate its earnings to the Securities and Exchange Commission.

At the request of Royal Ahold, Miller announced in May 2003 that he was stepping down. In exchange for his resignation, which took effect Oct. 1, 2003, Miller said the company promised him a severance payment and full retirement benefits. But in late 2003 and early 2004, U.S. Foodservice and Royal Ahold told Miller that they would cut or halt his benefits. Miller sued in Baltimore County Circuit Court, but the case has since been moved to federal district court in Washington.

Miller claims that he had "absolutely no involvement in the purported wrongful conduct," and that he is being used a scapegoat for the misconduct.

Ahold and U.S. Foodservice responded to his suit by countersuing on a number of claims, including breach of contract, corporate waste and unjust enrichment. The companies sought restitution from Miller for his breach of contract and fiduciary duties of due care, good faith and loyalty.

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