ESTRANGED MODEL TO LET FAYED REST IN PEACE.

Byline: Mary Schubert Daily News Staff Writer

Less than three weeks after filing suit against Dodi Fayed, a Malibu model announced through her attorney Monday that she will drop the legal action in light of the Paris car crash that killed him and Princess Diana.

In a change of heart triggered by grief over Fayed's death, model Kelly Fisher won't pursue the $440,000 claim she filed last month against the Egyptian-born playboy, attorney Gloria Allred told reporters outside her Mid-Wilshire office.

``She was shocked. She has been crying,'' Allred said of Fisher's emotions since learning the news. ``She was emotionally drained. She hasn't been out of the house since this happened.''

Fisher filed the lawsuit Aug. 14 in Santa Monica Superior Court after learning - through tabloid photographs of Fayed and Diana embracing aboard a yacht - that her fiance was squiring the Princess of Wales.

``Kelly loved Dodi very much and is devastated by his loss and that of Princess Diana. Nothing is more important than the life of a human being,'' Allred said in a prepared statement.

``In light of the tragedy that has occurred and out of respect for the Fayed family's loss, Kelly Fisher has decided that she will not pursue her breach of contract lawsuit against Mr. Fayed,'' Allred said. ``Out of respect for the . . . tremendous loss the Fayed family has suffered, she has authorized me as her attorney to dismiss her lawsuit against Mr. Fayed.''

Allred also noted that Fisher was acquainted with the driver of the Mercedes-Benz in which Fayed was killed.

``She was quite distressed to learn about the reports . . . that made allegations about the blood-alcohol level of the driver. She did know the driver,'' Allred said.

Fayed had met Fisher in July 1996 in Paris, Allred said, and he asked her to marry him at the wedding last November of Fisher's sister. ``She was engaged to him and they had planned to marry Aug. 9,'' Allred said.

Five days after that date at the altar passed, Fisher filed the lawsuit alleging Fayed promised to financially support her if she curtailed her modeling career to spend more time with him.

``Although she does have the legal right to pursue the lawsuit against his estate after his death, she is voluntarily choosing not to exercise that right,'' Allred said, adding that Fisher had no regrets about filing the lawsuit.

``Had Mr. Fayed lived, the action would have been vigorously pursued and vigorously litigated,'' the attorney stated. ``We looked forward to having our day in court. But everything has changed with this terrible tragedy.''

Fisher wanted to attend Fayed's funeral, ``but it happened so quickly'' in accordance with Muslim tradition about swift burials, Allred said.

``Now he's dead, and she's going to try to go on with her life.''