It was bad news for author Gwen Davis when her 1971 novel "Touching" prompted a lawsuit. A California nude-encounter therapist, angrily claiming that he recognized himself in the book, sued Davis and her publisher, Doubleday, for libel -- and won.

It was worse news when a California appeals court upheld that decision -- and worse yet when the U.S. Supreme Court recently decided against hearing the case, letting the lower court decision stand.

Now, Gwen Davis has another problem: Doubleday is using her -- demanding that she pay the full court award to the therapist, plus Doubleday's legal fees.

All that for a book that Davis says barely made back its $150,000 advance.

The suit, filed in federal district court in Manhattan Friday afternoon, is the latest development in what one Doubleday editor called "a long, long, very unpleasant situation."

Davis, 45, is being asked to pay a little over $137,000, which includes $75,000 in libel damages to Paul Bindrim, the therapist, (plus over $15,000 in interest), the cost of the case, Doubleday's $34,000 in legal fees, their cost of disbursements and their printing costs.

"I'm stunned and I'm shocked," Davis said this week from her Beverly Hills home. "This is the unkindest cut of all. I thought this was a First Amendment issue that threatened everybody, all publishers and all writers. I thought we were all in this together."

The 1977 ruling that Paul Bindrim had been libeled in a work of fiction was considered "unprecedented" by publishing officials and writers' groups around the country.

As of Sunday evening, Davis has not het been served with notice of the Doubleday suit.

"I knew something bad was going on," said Davis. "I thought my attorney was going to meet with [the publishers] and try to negotiate. They didn't even give us a chance to sit down and talk. That's what's so shocking."

Davis herself is no stranger to the other side of a libel suit.

In 1962, Davis threatened to sue Ken Kesey, author of "One Flew Over the Cuckoo's Nest," claiming that a charac ter named Gwendolyn was a libelous portrayal of herself. Viking, publisher of "Cuckoo's Nest," reportedly asked Kesey to change the character into a man for subsequent editions. Viking also reportedly gave Davis an $8,000 cash settlement.

Two years earlier, Davis said, Kesey had succeeded in making Davis' publisher ask her to change parts of a novel she was just finishing called "Someone's in the Kitchen with Dinah." The book was about wife-swapping, and Kesey alleged in his complaint, according to Davis, that he and his wife were recognizable.

Davis said the two cases are not comparable with the Bindrim libel suit controversy. "It was a long time ago, and we were both very foolish children," she said yesterday.

As of Sunday night, Davis' lawyer, Ronald Konecky, said in New York that he had not seen the new Doubleday suit. "I know she intends to resist it -- we'll just have to see. One would hope Doubleday would give us more consideration."

In the suit, Doubleday argues that Davis is responsible for the entire payment because of an indemnity clause in her contract that makes her "liable" to the publisher in the case of a libel judgment against the author and publisher and requires her to reimburse the publisher.

"All roads lead to Gwen," said Gerard Toner, assistant general counsel at Doubleday.

According to one editor at another major house, Doubleday's indemnity clauses have long been among the stiffest in the publishing business -- although other companies' clauses are becoming more specific, because of more numerous libel suits and at the request of authors.

"Normally you'd split the costs," said Viking senior consultant editor Kenneth McCormick, "but that sort of thing is tightening up -- and it depends on the circumstances and how honest the author has been with the publisher. There seems to be some bitterness about this case."

McCormick, who was Davis' editor when she was at Doubleday, said he advised Doubleday against suing Davis. "I thought this would slap us in the face as being cruel to authors. But you have to look at the circumstances. She wasn't very square with us."

McCormick said that Davis, when she attended a nude-encounter session at Bindrim's, had signed a "paper" saying that she would not write about the event. McCormick said Davis never told Doubleday about the document.

Davis admits signing an agreement, and says she does not remember whether she told the publisher. But she said yesterday that "it is my contention that I did not disclose what was going on because I was writing fiction." Davis said that her experience at the nude encounter session was simply "inspiration" for the book.

Davis, author of a novel called "The Pretenders," which sold three million copies over 10 years ago, as well as the recent "Ladies in Waiting," said she now has some regrets about writing "Touching."

"For the agony it's brought to my family," said Davis, "I wish I hadn't written it."