A new wrinkle has been added to a lawsuit filed by a local activists group against a proposed Wal-Mart distribution center in the city of Merced.

What until now was a straightforward case about whether the environmental review process on the project was adequate and open, may now involve corporate espionage.

In a routine case management meeting in Merced County Superior Court on Friday, newly appointed Judge William Burby set Sept. 3 as the date that oral arguments in the case will begin.

But when Burby asked the lawyers on both sides if there were any further issues before they proceed, Wal-Mart's lawyer, Arthur Friedman, said he wanted another month for discovery to see if the lawyer representing the Merced Alliance for Responsible Growth (MARG), Keith Wagner, is being paid by Wal-Mart's competition, not the local residents he purports to represent.

Friedman then pulled out a recent Wall Street Journal article showing that in many cases Wal-Mart's competitors have indeed secretly paid for or aided local litigation and opposition against the company.

"That experience has brought us to the view that we need to do some exploring to see if there is linkage," said Friedman.

The article chronicled how a group of large supermarket chains competing with Wal-Mart hired a firm called Saint Consulting to secretly block Wal-Mart's growth. According to the article, Safeway hired Saint to stall or stop hundreds of Wal-Mart Supercenters across the West. In some cases, Saint coordinated with unions and activist groups, according to the article.

In reply to Wal-Mart's request for discovery, Wagner denied the implication that he is being paid as part of some corporate espionage against Wal-Mart. He said he is paid by MARG, not any competitor of Wal-Mart. "It's irrelevant to the case," he added, saying that the matter of who pays him is totally separate from the issues at hand.

One of the city's attorneys in the case, John Ramirez, said Wal-Mart's desire to see if Wagner is being paid by a competitor is a separate matter from the case and shouldn't slow down the proceedings.

Burby agreed, saying the case should be heard as soon as possible, since the outcome is important to the people of Merced and the project has been ongoing for almost four years.

"This matter has been pending since '06. It's been four years," said Burby. "Wal-Mart may pack it up and go down to Madera. They want Wal-Mart down there."

Before the request for discovery, the case was ready to be heard Friday, said Wagner. Now, he said, the request from Wal-Mart could delay the proceedings even more.

"We were surprised and thought it was unfortunate," Merced's City Attorney Greg Diaz said of Wal-Mart's request.

By the end of the case conference, Burby said the case will proceed apart from the discovery request, which was granted.

Oral arguments in the case will be heard Sept. 3 at 10 a.m. in Courtroom 1.

Retired Superior Court Judge Frank Dougherty recused himself from the case in late May because of a conflict of interest.

Reporter Jonah Owen Lamb can reached at (209) 385-2484 or jlamb@mercesun-star.com.