Without seeing the LIT I wouldn't be 100% sure but I've seen problems like this when the LIT has been created from an MSWord document that has 'smart tags' enabled.
If you are comfortable with HTML and you want to take the time to fix it you can extract the HTML out of the LIT using the Convert - Debug option. Then open the HTML file in a text editor and remove the not-so-smart tags manually before reimporting the HTML into Calibre.
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