/raid1/www/Hosts/bankrupt/CAR_Public/000105.MBX
C L A S S A C T I O N R E P O R T E R
Wednesday, January 5, 2000, Vol. 2, No. 3
Headlines
ARK RESTAURANTS: Faces N.Y. Suit over Violation of Wage and Hour Laws
ARK RESTAURANTS: Faces Lawsuit in Columbia over Minimum Wages & OT Pay
ARK RESTAURANTS: Faces Nevada Suit over Employees’ Tips & Severance Pay
ARK RESTAURANTS: Contests Charges over Labor Practice at Las Vegas Br.
ASBESTOS LITIGATION: Sp Ct Rejects Prudential Petition on Settled Case
BAKER HUGHES: Cohen, Milstein Files Securities Suit in Texas
BAKER HUGHES: Pomerantz Haudek Files Securities Suit in Texas
BANK ONE: Keller Rohrback Files Securities Lawsuit
DIGI INT’L: Files Motion for Dismissal of Securities Suits in Minnesota
DOJ: Nearly 8,000 Attorneys Join Class Action Suit over Back Pay for OT
FEN-PHEN: Columnist Takes a Look at Case and Where the Award Should Go
HMOs: Cos. Are under Legal Attack; Sp Ct Will Hear Arguments in Feb.
INCOMNET INC: Says Securities Suit Plaintiffs Won’t Get from Settlement
INMATES LITIGATION: Families Sue Private Prisons & Phone Companies
INMATES LITIGATION: NY State Agrees to Pay Inmates $8M in Attica Case
INSPIRE INSURANCE: Berman DeValerio Files Securities Suit in Texas
IRS: Union Wins First Round; Class Action over Back Pay Can Proceed
NORWEST MORTGAGE: N.Y. Borrowers Can Recover Damages for Fax Fees
OAKWOOD HOMES: Intends to Vigorously Defend Securities Suit in Carolina
PADUCAH PLANT: Former Employees Testify before House Subcommittee
PERITUS SOFTWARE: Ct Preliminarily Oks Settlement of Securities Suit
RIBOZYME PHARMACEUTICALS: Shepherd & Geller Files Colo. Securities Suit
UNITED COMPANIES: Keller Rohrback Files Securities Lawsuit
*********
ARK RESTAURANTS: Faces N.Y. Suit over Violation of Wage and Hour Laws
---------------------------------------------------------------------
A lawsuit was commenced against Ark Restaurants Corp. in October 1997 in
the District Court for the Southern District of New York by 44 present
and former employees alleging various violations of Federal wage and
hour laws. The complaint seeks an injunction against further violations
of the labor laws and payment of unpaid minimum wages, overtime and
other allegedly required amounts, liquidated damages, penalties and
attorneys fees. The Company believes that most of the claims asserted in
this litigation, including those with respect to minimum wages, are
insubstantial. The Company believes that there were certain violations
of overtime requirements, which have been largely corrected, for which
the Company will have liability. The period of time in which affected
employees could "opt-in" to the lawsuit asserting similar violations has
expired and a total of 214 individuals have so elected. Discovery in
this action has not been completed. This uncertainty prevents the
Company from making any reasonable estimate of its ultimate liability.
However, based upon information available to the Company at this time,
the Company does not believe that the amount of liability which may be
sustained in this action will have a materially adverse effect on its
business and financial condition.
ARK RESTAURANTS: Faces Lawsuit in Columbia over Minimum Wages & OT Pay
----------------------------------------------------------------------
An action was commenced in May 1998 in Superior Court of the District of
Columbia against the Company and its Washington, D.C. subsidiaries by
seven present and former employees of the restaurants owned by such
subsidiaries alleging violations of the District of Columbia Wage & Hour
Act relating to minimum wages and overtime compensation. The Company
does not believe that its liability if any, from an adverse result in
this matter would have a material adverse effect upon its business or
financial condition.
ARK RESTAURANTS: Faces Nevada Suit over Employees’ Tips & Severance Pay
-----------------------------------------------------------------------
A lawsuit was commenced against the Company in April 1997 in the
District Court for Clark County, Nevada by one former employee and one
current employee of the Company's Las Vegas subsidiary alleging that (i)
the Company forced food service personnel at the Company's Las Vegas
restaurant facilities to pay a portion of their tips back to the Company
in violation of Nevada law and (ii) the Company failed to timely pay
wages to terminated employees. The action was brought as a class action
on behalf of all similarly situated employees. The Company believes that
it will have no liability in connection with the first allegation. The
Company also believes that its liability, if any, from an adverse result
in connection with the second allegation would be inconsequential. The
Company intends to vigorously defend against these claims.
ARK RESTAURANTS: Contests Charges over Labor Practice at Las Vegas Br.
----------------------------------------------------------------------
In addition, several unfair labor practice charges have been filed
against the Company before the National Labor Relations Board with
respect to the Company's Las Vegas subsidiary. One consolidated
complaint alleged that the Company unlawfully terminated seven employees
and disciplined seven other employees allegedly in retaliation for their
union activities. An Administrative Law Judge (ALJ) found that five
employees were terminated unlawfully and two were discharged for valid
reasons. As far as the discipline, the Judge found that the Company
acted legally in disciplining four employees but not lawfully with
respect to three employees.
The Company has appealed the adverse rulings of the ALJ to the National
Labor Relations Board in Washington, D.C. The Company believes that
there are reasonable grounds for obtaining a reversal of the unfavorable
findings by the ALJ and does not believe that an adverse outcome in this
proceeding will have a material adverse effect upon the Company's
financial condition or operations.
In May 1999, the ALJ issued a favorable decision involving unfair labor
practice charges filed against the Company before the National Labor
Relations Board with respect to the Company's Las Vegas subsidiary. The
complaint alleged that four employees were terminated and three other
employees disciplined because of their union activities. The ALJ found
that none of the employees were terminated or disciplined for
inappropriate reasons. The ALJ found two violations of management
communications rules for which non-economic remedies were proposed. A
second unfair labor practice matter is pending before the full National
Labor Relations Board.
The Company believes that these unfair labor practice charges and the
litigation pending in Nevada are part of an ongoing campaign by the
Culinary Workers Union which is seeking to represent employees at the
Company's Las Vegas restaurants. However, rather than pursue the normal
election process pursuant to which employees are given the freedom to
choose whether they should be represented by a union, a process which
the Company supports, the Company believes the union is seeking to
achieve recognition as the bargaining agent for such employees through a
campaign directed not at the Company's employees but at the Company
itself and its stockholders. The Company intends to continue to support
the right of its employees to decide such matters and to oppose the
efforts of the Culinary Workers Union to circumvent that process.
ASBESTOS LITIGATION: Sp Ct Rejects Prudential Petition on Settled Case
----------------------------------------------------------------------
The U.S. Supreme Court has denied Prudential Insurance Co. of America's
petition for a writ of certiorari seeking a ruling that would allow the
carrier to continue to litigate subrogation claims against former
manufacturers of asbestos-containing products in U.S. District Court for
the District of New Jersey. Prudential has been precluded from
litigating the claims based on a Pennsylvania appellate court holding
that the claims were extinguished by a class action settlement of
Prudential's insureds in a competing Pennsylvania action. The Prudential
Insurance Co. of America et al. v. Prince George Center Inc. et al.
(U.S., petition for certiorari denied Oct. 4, 1999).
Prudential filed its subrogation action in October 1987, attempting to
recover over $110 million paid in claims arising from asbestos abatement
activity in 61 buildings across the country. The seven asbestos
manufactures sued by Prudential included United States Gypsum (USG) and
W.R. Grace & Co.
Prior to Prudential's lawsuit, however, numerous Prudential insureds
brought suit in Pennsylvania Court of Common Pleas, Philadelphia County.
The Pennsylvania action included eight of the same properties at issue
in the subsequent New Jersey district court action. The properties were
private buildings that had been leased to the federal government and
were subsequently subject to asbestos remediation.
In 1995, certain Pennsylvania plaintiffs settled for $3.8 million.
Prudential opted out of the settlement but failed to request exclusion
from the remaining trial class. The trial class ultimately settled in
the Pennsylvania case for $7.8 million.
While litigating the New Jersey action, Prudential was advised by
counsel for USG and W.R. Grace that its overlapping claims were
considered resolved via the Pennsylvania trial class settlement.
Prudential challenged the defendants' position before the Pennsylvania
trial court, which rejected the carrier's arguments without issuing an
opinion. Prudential was also unsuccessful on a motion for
reconsideration, and subsequently appealed to Pennsylvania Commonwealth
Court.
On appeal, Prudential contended that it did not receive timely notice of
the proposed settlements and was, therefore, deprived of its due process
rights. The appellate court rejected Prudential's contentions,
concluding that the carrier:
-- had actual knowledge of the class action;
-- was properly notified of the proposed settlements; and
-- did not properly raise the due process issue.
Citing jurisdictional issues and again raising due process arguments,
Prudential then sought relief before the U.S. Supreme Court via
certiorari. The high court refused to grant Prudential's petition
without opinion.
Prudential was represented by Phillip Allen Lacovara, Evan M. Tager, and
Eileen Penner of Mayer, Brown & Platt in Washington, DC, and Edward A.
Zunz Jr., Robert J. Gibson, and James S. Rothschild Jr. of Riker,
Danzig, Scherer, Hyland & Perretti, LLP in Morristown, NJ. (Toxic
Chemicals Litigation Reporter November 15, 1999)
BAKER HUGHES: Cohen, Milstein Files Securities Suit in Texas
------------------------------------------------------------
The following Notice is issued on January 3 by the law firm of Cohen,
Milstein, Hausfeld & Toll, P.L.L.C. on behalf of its client, who filed a
lawsuit in the United States District Court for the Southern District of
Texas on behalf of all persons who purchased the common stock of Baker
Hughes, Inc. ("Baker") (NYSE:BHI) between May 3, 1999 and December 8,
1999 (the "Class Period").
A similar lawsuit asserts claims as far back as July 24, 1998. The
complaint alleges that defendants, Baker and certain of its officers
and/or directors, violated the federal securities laws (Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934) by issuing materially
false and misleading statements due to improper accounting practices at
its Inteq drilling unit. As a result of these misrepresentations and
omissions, the price of Baker's common stock was artificially inflated
throughout the Class Period. On December 8, 1999, Baker announced it had
discovered various accounting issues at its Inteq drilling services unit
which could have a cumulative pretax effect of $40-$50 million,
including the possible restatement of prior periods.
Contact: Cohen, Milstein, Hausfeld & Toll, P.L.L.C. at 888/240-1238 or
206/521-0080. Contact: Steven J. Toll by e-mail at stoll@cmht.com or
Matthew J. Ide, E-mail mide@cmht.com or Tamara J. Driscoll E-mail
tdriscoll@cmht.com
BAKER HUGHES: Pomerantz Haudek Files Securities Suit in Texas
-------------------------------------------------------------
Pomerantz Haudek Block Grossman & Gross LLP and the Law Office of Klari
Neuwelt announced on January 3 that it has filed a class action suit
against Baker Hughes, Inc. ("Baker Hughes" or the "Company") (NYSE: BHI)
and two of the Company's senior officers. The case was filed in the
United States District Court for the Southern District of Texas on
behalf of all those who purchased the common stock of Baker Hughes
during the period between May 3, 1999 and December 8, 1999, inclusive
(the "Class Period").
The Complaint alleges that Baker Hughes violated Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 by issuing materially false
and misleading statements during the Class Period regarding the
Company's financial and operational health, by allegedly incorporating
materially overstated earnings of the Company's INTEQ drilling unit into
its consolidated financial statements. This overstatement enabled Baker
Hughes to materially inflate the Company's reported earnings during the
Class Period in violation of Generally Accepted Accounting Principles
("GAAP"). As a result of defendants' false and misleading statements,
the price of Baker Hughes' common stock was artificially inflated during
the Class Period.
Baker Hughes stunned the market on December 8, 1999 when it announced
that it planned to restate its prior financial statements as a result of
accounting violations at its INTEQ drilling unit which would cost the
Company between $40 and $50 million and postpone a $200 million note
offering. The market reaction to the news was disastrous. The price of
Baker Hughes common stock lost more than 50% of its value.
If you purchased Baker Hughes common stock during the Class Period, you
have until February 7, 2000 to ask the Court to appoint you as one of
the lead plaintiffs for the Class. In order to serve as lead plaintiff,
you must meet certain legal requirements. If you wish to discuss this
action or have any questions, please contact Andrew G. Tolan, Esq. of
the Pomerantz firm at 888-476-6529 (or (888) 4-POMLAW), toll free, or at
agtolan@pomlaw.com by e-mail. Those who inquire by e-mail are encouraged
to include their mailing address and telephone number.
BANK ONE: Keller Rohrback Files Securities Lawsuit
--------------------------------------------------
A notice on Januray 3 says that Keller Rohrback L.L.P.'s Complex
Litigation Group is investigating charges against Bank One Corp.
(NYSE:ONE) ("Bank One" or the "Company") and certain of its officers and
directors for violation of federal securities laws on behalf of those
persons who purchased Bank One securities between October 22, 1998 and
November 10, 1999, inclusive.
Complaints allege that Bank One and certain of its officers and
directors ("defendants") disseminated false and misleading statements
concerning the Company's financial condition and operating results in
violation of the Securities Exchange Act of 1934. Shareholders claim
that Bank One's wholly-owned subsidiary and primary credit card unit,
First USA, violated the Federal Truth in Lending Act and other laws by
"accelerating" late fees and interest overcharges. Although aware of
customer complaints, a federal investigation, and class action consumer
fraud complaints since at least October 22, 1998, defendants failed to
disclose the potential liability. Instead, shareholders claim the
Company reported double-digit growth, record earnings, and issued
inflated earnings forecasts.
On November 10, 1999, defendants finally revealed the full extent of the
First USA liability, announcing earnings of up to 15% lower than revised
analysts' expectations. On the same day, the Company's common stock
dropped 11.5% from the prior day's close to $34.625 per share on heavy
trading.
If you purchased Bank One securities between October 22, 1998 and
November 10, 1999, inclusive, you may wish to join the securities class
actions that have been filed. You may move the court to serve as a lead
plaintiff on or before February 15, 2000.
Contact: Keller Rohrback L.L.P. (Lynn L. Sarko, Juli E. Farris or
Elizabeth A. Leland, Esq.) toll free at 800/776-6044, or via e-mail,
with mailing address and telephone number provided, at
investor@kellerrohrback.com Website: http://www.SeattleClassAction.com
DIGI INT’L: Files Motion for Dismissal of Securities Suits in Minnesota
-----------------------------------------------------------------------
Between January 3, 1997 and March 7, 1997, DIGI International Inc. and
certain of its previous officers were named as defendants in putative
securities class action lawsuits filed in the United States District
Court for the District of Minnesota by 21 lead plaintiffs on behalf of
an alleged class of purchasers of the Company's common stock during the
period January 25, 1996 through December 23, 1996. The putative class
actions were thereafter consolidated (Master File No. 97-5 DWF/RLE). The
Consolidated Amended Class Action Complaint ("Consolidated Amended
Complaint") alleges that the Company and certain of its previous
officers violated the federal securities laws by, among other things,
misrepresenting and/or omitting material information concerning the
Company's operations and financial results.
On February 25, 1997, the Company and certain of its previous officers
also were named as defendants in a securities lawsuit filed in the
United States District Court for the District of Minnesota by the
Louisiana State Employees Retirement System (Civil File No. 97-440,
Master File No. 97-5 DWF/RLE) (the "Louisiana Amended Complaint"). The
Louisiana Amended Complaint alleges that the Company and certain of its
previous officers violated the federal securities laws and state common
law by, among other things, misrepresenting and/or omitting material
information concerning the Company's operations and financial results.
In a decision issued on May 22, 1998, the Court dismissed without leave
to replead all claims asserted in both cases, except for certain federal
securities law claims based upon alleged misrepresentations and/or
omissions relating to the accounting treatment applied to the Company's
AetherWorks investment. The Court also limited the claims asserted in
the Louisiana Amended Complaint to the 11,000 shares of the Company's
stock held subsequent to November 14, 1996, for which the Louisiana
Amended Complaint claims damages of $184,276.40 and seeks an award of
attorneys' fees, disbursements and costs. The Consolidated Amended
Complaint seeks compensatory damages of approximately $43.1 million plus
interest against all defendants, jointly and severally, and an award of
attorneys' fees, experts' fees and costs. The claims in the two actions
remain pending against the Company and its former officers Ervin F.
Kamm, Jr. and Gerald A. Wall.
The 21 lead plaintiffs have moved for class certification with respect
to the claims asserted in the Consolidated Amended Complaint. The
Company and its former officers intend to oppose the motion. No date has
been set for a hearing on the class certification motion. With the
possible exception of additional depositions of certain lead plaintiffs,
discovery in all of the actions has been completed.
The Company and its former officers served motions for summary judgment
in all actions on November 19, 1999. Briefing on the motions is
scheduled to be completed by February 4, 2000, and a hearing is expected
to be held before the Court after that date.
The ultimate outcomes of these actions cannot be determined at this
time, and no potential assessment of their effect, if any, on the
Company's financial position, liquidity or future operations can be
made.
DOJ: Nearly 8,000 Attorneys Join Class-Action Suit over Back Pay for OT
-----------------------------------------------------------------------
Some 7,800 current and former attorneys with the Department of Justice
have joined an opt-in class-action suit against DOJ claiming they are
entitled to back overtime pay.
The opt-in deadline for the suit has also been extended until Feb. 16,
2000, so the number may grow even higher.
The suit, filed in the United States Court of Federal Claims, is seeking
more than 500 million to compensate the attorneys for overtime work
dating back to Nov. 25, 1992.
It claims that DOJ was "fully aware" of its statutory obligations to
compensate attorneys for "all hours worked in excess of eight per day or
40 per week," but failed to do so. It also says that attorneys were
required to maintain two sets of time records, one showing 40 hours per
week and another reflecting actual hours worked.
"There is no argument that the attorneys are eligible for overtime pay,"
Robert Van Kirk, lead counsel for the attorneys, told FEDHR. "The DOJ
has simply taken the position that the overtime was not authorized so it
does not have to compensate the attorneys for it."Van Kirk said that the
suit is currently in the discovery phase and that it will move forward
early next year.
The DOJ had no comment at press time. (Federal Human Resources Week
December 29, 1999)
FEN-PHEN: Columnist Takes a Look at Case and Where the Award Should Go
----------------------------------------------------------------------
The American Home Products Co. may have deserved the punishment, but
does Douglas J. Axen have a right to take half of it home?
We are talking about an award of $ 20 million in punitive damages
against the pharmaceutical company. In a case from Oregon now pending on
a petition for review, the Supreme Court is asked to take a look at a
relatively new development in tort jurisprudence. The states have
entered the orchards of civil litigation, ready to pick up any windfalls
that come their way.
This is the story as told by Oregon's Court of Appeals:
In 1994 Douglas Axen collapsed while running. He was then 56 years old.
His cardiologist diagnosed his condition as severe and life-threatening
cardiac arrhythmia and recommended a drug known technically as
amiodarone, marketed under the trade name of Cordarone. The Food and
Drug Administration had approved the drug in 1985.
Beginning in 1986, medical studies began to link Cordarone with vision
loss and optic neuropathy. The company knew of these critical studies.
In August 1994, when Axen began taking the drug, the package insert
warned of many serious side effects. Among these were "optic neuritis,"
or inflammation of the optic nerve, said to occur in fewer than 1
percent of the patient population. The package contained no warning
against optic neuropathy.
It took only a month for Axen to notice changes in his vision. In
November his cardiologist took him off the drug, but the deterioration
continued. Because of "irreversible degeneration and atrophy of the
optic nerve in each eye," Axen is now legally blind.
Axen sued American Home Products for intentional failure to warn that
Cordarone could cause permanent loss of vision. His wife joined in the
suit. Eventually a jury awarded her $ 936,000 (reduced to $ 500,000),
but this is no longer at issue. The total award amounted to $
22,843,657, including $ 20 million in punitive damages. The company
protested that the award was irrational, ill-considered and excessive,
but this was only part of its complaint.
The company also challenges an Oregon law by which the state itself
takes roughly half of an award of punitive damages. Since 1990 at least
half a dozen other states have adopted similar laws. The Eighth
Amendment says that "excessive fines shall not be imposed." If Oregon
makes off with half of the $ 20 million awarded in this case, has the
Eighth Amendment been implicated? Is the 50-50 allocation tantamount to
a "fine"? That is the company's contention.
It strikes me as a close point. True, the state of Oregon did not
initiate or prosecute an action against American Home. Its criminal
courts did not "impose" the punitive award, but the state treasury
benefits nonetheless. By its own legislation the state has created its
own windfalls.
I like the principle. In theory, at least, before a jury considers an
award of punitive damages, the jury already has taken care of the
plaintiff. In the Axen case, the jury awarded Axen $ 207,000 in
"economic damages" plus $ 1.5 million in "noneconomic damages." Then it
tacked on the $ 20 million to punish American Home Products. The company
may have deserved it.
But should Axen and his lawyer share in a bonanza? Under the Oregon law,
the attorneys' fees are first deducted from the $ 20 million. Counsel
and the plaintiff have thus been fully compensated. What line of
reasoning supports the additional payment of a huge fine to them, rather
than to the state?
In their petition to the Supreme Court, Axen's attorneys note Georgia,
Indiana and Iowa take 75 percent of an award of punitive damages.
Missouri and Utah claim up to 50 percent. In Illinois a trial court may
apportion an award in its discretion.
State judges in Wyoming, Texas and California have commented favorably
on the system. In a 1983 case, Chief Justice William Rehnquist made his
own view clear: "Even assuming that a punitive 'fine' should be imposed
after a civil trial, the penalty should go to the state, not to the
plaintiff - who by hypothesis is fully compensated."
I venture no opinion on whether the $ 20 million in the Axen case was
"excessive." The FDA in 1989 sharply criticized American Home for
promoting Cordarone in a manner inconsistent with its package insert.
Oregon's Court of Appeals ruled that, given the gravity of the company's
misconduct and the extent of Axen's injuries, the sum was not
constitutionally excessive. Maybe so. All I am saying is just
compensation is the province of a jury. Beyond that point, punishment
becomes the business of the state. Kilpatrick is a columnist for United
Press Syndicate. (The Post and Courier (Charleston, SC) January 2, 2000)
HMOs: Cos. Are under Legal Attack; Sp Ct Will Hear Arguments in Feb.
--------------------------------------------------------------------
Cindy Herdrich, a part-time legal secretary, said she suspected all
along that the sharp pain in her lower abdomen was appendicitis. But
Lori Pegram, a doctor at her husband's H.M.O. in Bloomington, Ill., did
not agree. Fourteen painful days later, the health maintenance
organization finally authorized an ultrasound scan. Too late. Ms.
Herdrich's appendix ruptured. She contracted peritonitis and required
emergency surgery.
Ms. Herdrich, by then 35, sued the H.M.O. in 1992. And what began as a
simple malpractice claim has grown into the first direct challenge to
managed care to be accepted by the United States Supreme Court, which
has been asked to decide whether her challenge merits a trial.
But it is by no means the only challenge. Managed-care companies -- like
makers of cigarettes, lead paint and guns -- are under growing legal
attack. This includes at least 16 recent class-action suits, most filed
by some of the same lawyers who won huge settlements from the tobacco
industry. Several new state laws and measures in Congress could open the
industry to still more suits. And the Federal law that has long
protected many managed-care companies is being whittled away in a series
of judicial decisions in malpractice cases. "Managed care is under a
very fundamental attack in the judicial system right now," said William
G. Schiffbauer, a Washington lawyer who advises insurance companies and
employer health plans.
The issue in many of these cases comes down to this: Does an H.M.O., by
linking what it pays its doctors with their success in holding down
costs, ignore the best interest of patients in a way that violates its
legal duty as defined by a federal law governing employer-sponsored
health plans.
The legitimacy of financial incentives, and whether health plans have a
legal obligation to disclose them, is at the heart of a number of recent
suits against big managed-care companies filed by prominent class-action
lawyers. The H.M.O. industry itself urged the Supreme Court to resolve
this matter, hoping that a ruling in its favor would undermine the
class-action suits. The Supreme Court has agreed to hear arguments in
the case in February, and a decision is expected by early summer.
The federal law is the same one that has effectively barred state jury
trials and huge awards for punitive damages in malpractice suits by
transferring most cases to federal courts. A related question is whether
this will be changed.
Lawyers on both sides see the Herdrich case as a fundamental test of the
underpinnings of managed care. Those in favor of the insurers warn of
dire consequences for health maintenance organizations if the Supreme
Court upholds the idea that companies can be sued on this basis. And
insurance executives say that financial incentives are a crucial method
of preventing wasteful practices and do not interfere with necessary
care. "The nation's employer-based health care system simply cannot
function or indeed survive if every treatment decision made while
implementing a managed-care program is treated as a fiduciary decision,"
an industry group argued in a brief in the Supreme Court case.
Managed-care executives said they did not intend to let plaintiffs'
lawyers determine their policies. "This is the way the industry has
worked for some years," said Richard Huber, chief executive of Aetna,
the biggest managed-care company. "To allege that practicing according
to the norms of the industry is criminal strikes us as absurd."
Aetna is the defendant in six class-action and 40 other cases. Similar
class-action suits have been filed against Humana, Cigna, United
Healthcare, Foundation Health Systems, PacifiCare Health Systems, Kaiser
Permanente, a number of Blue Cross/Blue Shield plans and the Prudential
unit of Aetna.
Ms. Herdrich won $35,000 in damages in federal district court in Peoria,
Ill., a paltry amount compared with recent multimillion-dollar state
court awards. The judge rejected the argument that her health plan had
not met its obligations under the federal law. But an appeals court,
while not resolving the matter, ordered a trial on that issue in 1998.
Ms. Herdrich refused all requests for interviews, her lawyer, James P.
Ginzkey, said. Dr. Pegram also did not respond to requests for comment.
L. J. Fallon, a lawyer for her group, the Carle Clinic Association of
Urbana, Ill., said there had been no clear signs of appendicitis at
first, and a sonogram did not seem appropriate until a mass in her
abdomen became apparent a week later.
Judge John L. Coffey of the federal appeals court in Chicago suggested
in 1998 that doctors at Ms. Herdrich's H.M.O. might have been caught in
a conflict of interest between safeguarding her health and protecting
their chances of getting a year-end bonus as a reward for keeping down
medical costs.
"Where physicians delay providing necessary treatment, or withhold
administering proper care to plan beneficiaries for the sole purpose of
increasing their bonuses," Judge Coffey said, a managed-care company may
be breaching a "fiduciary duty" to serve its members and patients.
A three-judge panel voted 2 to 1 to order a trial on the issue. The full
appeals court declined to review that ruling, and lawyers for the
managed-care industry persuaded the Supreme Court to take the case.
One widely accepted theory is that market forces will ultimately result
in the best care at the lowest cost, because health plans and providers
of care will compete to attract business. But Judge Coffey took a dim
view of such reasoning, writing, "Market forces are insufficient to cure
the deleterious effects of managed care on the health care industry." In
a dissenting opinion, Judge Joel M. Flaum said that he shared those
concerns, but that judges should not "pre-empt legislative and
regulatory efforts."
Financial incentives are among a weakening arsenal of cost-control tools
as managed-care companies maneuver to calm criticism. A number of
companies have eased requirements for previous approval of medical
treatments and for established external review boards that can
reconsider the denial of care.
Some lawsuits also made claims of fraudulent marketing, accusing the
providers of advertising that their care met high standards but not
making clear that financial incentives might undercut those standards.
Some suits seek triple damages under the federal antiracketeering law,
based on claims that the companies engaged "in a nationwide fraudulent
scheme" to mislead the public about the essential nature of their
business.
The same lawyers have filed suits in state courts in California
contending that the companies violated provisions of the state's
business code.
The attacks may grow more intense. California, Georgia and Missouri have
passed laws permitting suits against the managed-care companies. A
two-year-old Texas law permitting such suits is being tested in the
courts. And the attorneys general of Connecticut and Missouri also
jumped in recently with separate suits against managed-care companies.
In Washington this past October, the House passed a bill that would
permit malpractice suits in state courts against managed-care plans;
such suits could not, however, be class actions. A House-Senate
conference is expected to take up the House measure this year, said John
Stone, a spokesman for Representative Charlie Norwood, a Georgia
Republican and a principal sponsor of the measure.
Richard F. Scruggs, the lead lawyer in several recent suits, is a
Mississippi-based specialist in class-action suits who played a big role
in winning huge awards against tobacco companies in 1997 and 1998.
The dozens of class-action lawyers in various managed-care suits include
such well-known names as David Boies of Armonk, N.Y., who is also
assisting in the Justice Department's antitrust case against Microsoft;
Ronald L. Motley of Charleston, S.C.; John Eddie Williams of Houston;
Fred Furth of San Francisco; Russ Herman of New Orleans; and Edith
Kallas, of Milberg, Weiss, Bershad, Hynes & Lerach in New York.
In an interview, Mr. Scruggs predicted that the new lawsuits would force
managed-care companies to agree to change their business practices in
exchange for legal protection against potentially ruinous suits.
Investors drove down the share prices of H.M.O. companies when the
latest suits were filed in October, which Mr. Scruggs interprets as
adding to the pressure for a settlement.
In a brief for the Supreme Court, insurance industry trade associations
and lobbyists for employers laid out the arguments the companies are
likely to use there and elsewhere.
The brief was signed by the American Association of Health Plans, the
Health Insurance Association of America, the United States Chamber of
Commerce and the Association of Private Pension and Welfare Plans. It
said that doctors, when making medical decisions, were not acting as
administrators and therefore were not subject to the fiduciary-duty
provisions of the Employee Retirement Income Security Act, known as
Erisa, the federal law that governs employer health plans and requires
that the plans act in the best interests of patients.
The Clinton administration, in a brief by the Labor Department, agreed
with the industry argument. But in December, 18 state attorneys general
urged the Supreme Court to uphold the appellate bench's order for a
trial on whether Ms. Herdrich's H.M.O. placed its own financial
interests ahead of the interests of its members.
More broadly, industry lawyers said that if the door was opened wide to
malpractice suits against H.M.O.'s, companies would have to charge
higher premiums, driving away customers and adding to the 43 million
people without insurance.
Taking another tack, the industry argued that encouraging managed care
was a public policy legislated and regulated by Congress and the states.
Changing such a policy should be left to legislatures and to commercial
decisions that reflect market forces, not decreed by courts.
Legal experts cautioned against trying to predict how the Supreme Court
might resolve this issue. It could shore up the Erisa shield, or it
could weaken it. The court could also issue a narrow opinion without
addressing larger policy issues.
Since the 1980's, the law has protected health plans by requiring that
most malpractice suits be heard in federal courts, where damages are
strictly limited. But in a number of recent cases, federal courts made
exceptions that permitted suits in state courts.
A federal appeals court in Philadelphia ruled in 1998 that a New Jersey
couple had the right to bring medical negligence charges in state court
against their H.M.O., doctor and hospital. Steven and Michelle Bauman
blamed the plan when their baby died in 1995, the day after Mrs. Bauman
and the baby were sent home under a 24-hour maternity policy then in
effect. "The courts are human; they want to be generous," said Clark
Havighurst, a health law expert at Duke University Law School.
But the outlook is murky for class-action cases. Legal experts say that,
for one thing, it may be difficult to persuade judges that health plan
members have enough in common to be certified as a class.
Lower courts ruled against class-action lawyers in two recent decisions.
On Sept. 29, a federal district judge in Philadelphia denied class-
action status in a suit accusing Aetna of fraudulently advertising that
its primary concern was quality of care, not cost controls. The judge
said the plaintiffs could not sue because they had advanced "a vague
allegation" and failed to show that they had been harmed.
On Dec. 1, a district judge in Houston denied a request for class-action
status in a suit against Nylcare that also argued that advertising to
consumers was misleading. The judge suggested it was not clear whether
"a particular consumer saw a particular advertisement" and was misled by
that advertisement or induced by it to join a Nylcare H.M.O.
"What the Supreme Court says in the Herdrich case will make a big
difference," said Peter D. Jacobson, an associate professor of health
policy at the University of Michigan's School of Public Health. (The New
York Times January 4, 2000)
INCOMNET INC: Says Securities Suit Plaintiffs Won’t Get from Settlement
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Financially troubled Incomnet Inc., which filed for bankruptcy
protection in September, said it is unlikely that its stock will be
listed again on any exchange or that shareholders will receive any value
for their shares.
The Irvine long-distance service reseller also said that plaintiffs in a
class action against the company will not receive anything from a
settlement last June. The plaintiffs, who had accused the company of
falsely denying the existence of a Securities and Exchange Commission
investigation, had settled for $ 500,000 in cash, $ 100,000 in expenses
and about $ 4 million worth of stock.
Incomnet's stock was removed from the Nasdaq SmallCap market soon after
the company filed for Chapter 11 bankruptcy. Incomnet said it planned to
submit a restructuring plan in U.S. Bankruptcy Court in Santa Ana during
the week beginning January 10, 2000. The approval process could be
completed within 90 days. Under the plan being formulated, the company
said, creditors would be repaid and nothing would be left for
shareholders or class-action members.
The company, which has 120 employees in Southern California, had listed
$ 27.5 million in debts in its bankruptcy filing. It listed assets of $
23.1 million. Incomnet has lost money for seven consecutive quarters and
said its third-quarter loss was significant. It had third-quarter sales
of $ 7.7 million. The company has been beset with financial and legal
problems for several years.
In 1997, one of its subsidiaries, National Telephone & Communications
Inc., paid $ 1.25 million to settle accusations that it had switched the
long-distance service of at least 10,000 customers without their
permission, a process known as slamming. That same year, it had paid $
800,000 to settle a shareholder lawsuit that involved former Chief
Executive Sam Schwartz.
The class action stemmed from the company's denial in 1994 that it was
under SEC investigation. Schwartz, who resigned from Incomnet in 1995,
had been investigated by the agency for allegedly making improper trades
of the company's stock. In 1996, he turned over to Incomnet more than $
2 million he made on his trades. He defended his actions by saying he
was trading the shares in an attempt to protect the stock from short
sellers. (Los Angeles Times January 4, 2000)
INMATES LITIGATION: Families Sue Private Prisons & Phone Companies
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Two New Mexico women have sued the nation's largest private prison
operators and the telephone companies they use, saying they are being
gouged for collect calls from imprisoned relatives. The lawsuit filed in
state district court says families and friends are forced to pay
"uncompetitive, unconscionable and illegal charges" for such calls.
Recipients of collect calls are charged up to 10 times more than
competitive rates - sometimes $20-plus for a 15-minute phone call,
according to lawyers for the women. Prison operators get commissions -
as high as 60 percent - for giving the phone companies the monopoly over
the service, said the lawsuit, which called the payments "illegal
kickbacks."
The two women from Rio Arriba County who filed the lawsuit asked the
judge to certify it as a national class action, potentially expanding it
to tens of thousands of plaintiffs who get collect calls from inmates.
Felicita Valdez and Sadie Moya also asked the court to stop the
practices and award them restitution and unspecified damages. Valdez has
a son in prison, and Moya a grandson.
The private prison companies named in the lawsuit run more than 200
facilities in at least 33 states, according to lawyers from two firms in
Santa Fe and one in Denver who filed the lawsuit.
Inmates are allowed to make only collect calls, and generally must use
the phone service chosen by the prison, according to the lawsuit. The
lawsuit involves collect phone calls only from privately operated
correctional facilities. But Santa Fe lawyer Mark Donatelli said
separate lawsuits may be filed against states, counties or cities that
have similar arrangements. New Mexico, for example, expects to get $1
million in the next budget year - 48 cents on each $1 generated - from
its contract with a firm that provides telephone service to state-run
prisons. It has collected more than $5 million since 1993, officials
confirmed. The state of New York collected $21 million in similar fees
in the last year.
The lawsuit alleges that the prison and jail operators conspired with
the phone companies to establish monopolies over collect call services
that constitute racketeering and unfair trade practices, and that
violate New Mexico's anti-trust laws.
The defendants include:
- Wackenhut Corrections Corp., which runs prisons near Hobbs and Santa
Rosa and 73 other correctional facilities in 12 states and Puerto
Rico.
- Corrections Corporation of America, which runs the women's prison
near Grants and detention facilities in Cibola and Torrance counties,
and 76 other facilities in 21 states and the District of Columbia.
- Cornell Corrections of Texas, Inc., which runs Santa Fe County's
adult jail and 56 other correctional facilities in 11 states and the
District of Columbia.
- Correctional Services Corp., which operates the detention facility in
McKinley County and 38 other facilities in eight states and Puerto
Rico.
- Evercom Systems Inc., a telephone service provider based in Texas.
- PCS America, Inc., a telephone service provider based in Oklahoma.
Telephone companies say most of the extra costs are due to additional
security features, such as blocking prisoners from calling numbers that
haven't been approved. (The Associated Press January 3, 2000)
INMATES LITIGATION: NY State Agrees to Pay Inmates $8M in Attica Case
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New York state agreed on January 4 to pay $8 million to 1,280 inmates
caught up in the nation's deadliest prison riot at Attica Correctional
Facility in 1971. Without admitting wrongdoing or liability, the state
said it would set aside the money in an effort to settle a class-action
lawsuit by inmates who were in prison yard ''D'' when state police
stormed the prison to quell a four-day uprising. The state also agreed
to pay the inmates' lawyers $4 million in legal fees and costs. When the
lawsuit was filed in 1974, the plaintiffs sought $100 million.
The maximum-security prison near Buffalo was taken back in a raid on
Sept. 13, 1971. In all, 32 inmates and 11 correction officers died, most
of them killed during the raid.
U.S. District Judge Michael Telesca, who brokered the deal, said
hearings on the proposed settlement would take place in February. He
said he expected a final settlement to be reached by the end of the
year. ''There is no ideal time to solve a case like this ... but I am
assured the time is now,'' Telesca said, adding that the proposed deal
does not decide ''who was right and wrong. I will leave that to
history.'' The judge would have to decide how to divide the money.
One of the inmate plaintiffs, Frank B.B. Smith, thanked the judge for
helping resolve the lawsuit. ''God bless you. ... I think where we're at
today is where we need to be,'' he said. Smith was forced to lie on a
table while officers beat and burned him. He was also ordered to hold a
football under his chin and threatened with death if he allowed it to
fall. ''No settlement compensates people for what really happened,''
said Elizabeth Fink, attorney for the late Akil Al-Jundi, the lead
plaintiff. However, she said, the proposed settlement ''brings closure
to what is a significant event in American history, one that still lives
today.'' (AP Online January 4, 2000)
INSPIRE INSURANCE: Berman DeValerio Files Securities Suit in Texas
------------------------------------------------------------------
Berman DeValerio & Pease LLP announced on January 3 that a class action
was filed in the United States District Court for the Northern District
of Texas on behalf of all persons who purchased common stock of INSpire
Insurance Solutions, Inc. (Nasdaq: NSPR) ("INSpire") between January 28,
1998 and October 14, 1999, inclusive (the "Class Period"). The complaint
charges INSpire and certain of its officers and directors and its parent
company with violations of the Securities Exchange Act of 1934. INSpire
is a provider of policy and claims administration solutions to the
property and casualty insurance industry and offers comprehensive
outsourcing services, software and software services. The complaint
alleges that INSpire made false and misleading statements, issued false
financial results and continually announced new contracts, representing
that the new contracts would provide significant "recurring" revenue
when, in fact, the contracts were generally contingent on the
profitability of its customers.
As a result, INSpire's stock traded at inflated levels during the Class
Period. Defendants took advantage of this inflation, completing a
secondary public offering of 3.9 million shares in March 1998, wherein
INSpire sold 2.7 million shares and Millers Mutual, INSpire's largest
shareholder (and largest customer), sold 975,000 shares for $20.5
million. INSpire's chief executive officer also sold 157,000 shares for
$3.3 million in the secondary offering.
INSpire used part of the proceeds from the secondary offering in which
it sold 2.7 million shares for $54 million to purchase another software
vendor, Paragon Interface, Inc. Nonetheless, INSpire's software business
continued to deteriorate. In November 1998, INSpire entered into a large
outsourcing agreement with Arrowhead General Agency, Inc. Defendants
told the market that this transaction would generate $35 million in
revenue in year one, that it would allow INSpire to expand
geographically into California, that it would add $0.05 per share to
1999 earnings and was a "major leap forward" for INSpire.
As a result of these statements, INSpire's stock immediately increased
to more than $30 per share. Several of the defendants immediately took
advantage of this inflation, selling 106,150 of their INSpire shares for
$3.2 million.
Finally, on October 15, 1999 INSpire revealed the poor state of its
business, including the write-off of nearly all its assets associated
with software and lower operating earnings from outsourcing. Analysts
now project INSpire will have EPS of only $0.32 in 1999 (before charges)
and only $0.17 in 2000 compared to Class Period forecasts of $.89 and
$1.20, respectively. Upon these disclosures, INSpire stock dropped to
less than $4 per share. While the Class has suffered millions in
damages, the complaint alleges that defendants improperly received
substantial benefits. As the price of INSpire stock soared to as high as
$35-3/8, the defendants sold more than 1.5 million shares of their
INSpire stock for proceeds of more than $33.6 million.
Contact: Patrick Egan, Esq. or Michael Lange, Esq. at Berman, DeValerio
& Pease, LLP, One Liberty Square, 8th Floor, Boston, MA 02109, at
800-516-9926 or 617-542- 8300, or by e-mail at bdplaw@bermanesq.com
IRS: Union Wins First Round; Class Action over Back Pay Can Proceed
-------------------------------------------------------------------
The U.S. Court of Federal Claims has approved a petition by the National
Treasury Employees Union to pursue as a class action a suit against the
IRS involving overtime payments.
The suit, originally filed in September, names as defendants the Office
of Chief Counsel field offices. It alleges that for years the IRS
failed, and continues to fail, to pay bargaining unit attorneys for
overtime hours worked and time spent in travel. (see FEDHR, Sept. 20,
1999, page 337).
The union's central argument is that, given the attorneys' workloads and
deadlines, they are effectively forced to work overtime without being
paid for the hours beyond 40 in a workweek.
NTEU President Colleen M. Kelley said the court's ruling would allow the
suit to go forward "in the most efficient manner." The court also ruled
that the case should proceed as a so-called "opt out" action under which
all members of the class will be covered unless they formally elect not
to take part - that is, to "opt out." The agency opposed this process.
Some 600 IRS lawyers will make up the class of plaintiffs.
A victory for the NTEU could be costly to taxpayers. The suit seeks back
payments and interest over a period of six years, an amount that could
total many millions of dollars. (Federal Human Resources Week December
29, 1999)
NORWEST MORTGAGE: N.Y. Borrowers Can Recover Damages for Fax Fees
-----------------------------------------------------------------
Lender-imposed mortgage payoff statement fees and recording fees
constitute prima facie examples of consumer fraud and violations of New
York Real Property Law, held the New York Supreme Court, Appellate
Division in Negrin, et al. v. Norwest Mortgage Inc., No. 1998-06198
(N.Y. App. Div. 11/15/99). Borrowers in New York have a private right of
action to recover damages for such monetary impositions.
In preparing for the sale of her condominium, Elsie M. Negrin telephoned
Norwest Mortgage Inc. and requested a payoff letter. The next day
Norwest faxed the payoff letter, which listed the outstanding principal
and per diem interest due plus a 13.50 recording fee and a 10 fax fee.
At the closing five weeks later, Negrin paid all amounts listed on the
payoff statement.
Two weeks after her closing, Negrin filed a class action against Norwest
alleging violations of Section 274-a of New York's Real Property Law and
Section 349 of New York's General Business Law. Specifically, Negrin
claimed that Norwest improperly charged a 13.50 recording fee because
her closing agent, not Norwest, recorded her mortgage satisfaction. She
further contended that the fax fee was exorbitant and a violation of
Section 274-a's provision that requires mortgagees to provide free
payoff documents.
Norwest moved to dismiss the complaint on grounds that the Real Property
Law did not provide a private right of action. Finding that neither law
relied on by Negrin "expressly or by implication prohibit[ed] the
imposition of the challenged fees," the New York Supreme Court granted
Norwest's motion. Negrin appealed the decision.
Imposition of Fax Fee
The Appellate Division considered the applicability of Real Property Law
274-a. Section 274-a provides in pertinent part: a mortgagee, upon
written demand, shall provide to the mortgagor within 30 days any
mortgage-related documents, including a payoff statement, without
charge.
Writing for the appellate court, Judge Sondra Miller explained that the
legislative history of the statute indicated that Section 274-a was
intended to encourage mortgagees to provide timely satisfactions and to
create a formal demand procedure for homeowners to obtain mortgage
documents at no charge. Norwest did not persuade the appellate court
that the statute only prohibited the imposition of fees for payoff
letters demanded in writing.
To allow a mortgagee to charge a mortgagor who requests a payoff
statement by telephone would not affect the purpose of the statute, said
the court. "The state should be construed to require prompt, no-charge
compliance irrespective of the manner in which the request is
transmitted," opined Judge Miller. "An oral request for a payoff
statement should be honored with the same consideration as a written
demand."
The Appellate Division held that Norwest's imposition of the fax fee was
prima facie evidence of a Real Property Law violation.
Private Right of Action
Because Real Property Law Section 274-a did not expressly provide a
private right of action, the court reviewed the legislative history to
determine if the New York legislature intended, by implication, to
permit private suits to affect recalcitrant mortgages. The court
explained Negrin had to show: She was a member of the class for whose
benefit the statute was enacted, that recognition of a private right of
action would promote the legislative purpose of the statute and that the
creation of a private right of action would be consistent with the
legislative scheme. According to the appellate court, Negrin satisfied
all three elements of the three-part test.
First, the court found that Negrin was a member of the class to which
the legislature intended to give legal leverage. The court noted,
"[E]mpowering mortgagors to challenge alleged abuses by lenders by
permitting private actions for violations of Real Property 274-a is
consistent with the goals of the statute."
Secondly, the appellate court held that recognition of a private right
of action for a clear violation of the plain language of the statute
would also promote the legislative purpose to proscribe the imposition
of unwarranted fees.
Thirdly, the court ruled that allowance of a private right of action
would compliment the legislative scheme. It held Norwest's argument that
creation of a private cause of action would interfere with the
regulatory scheme and "usurp the regulatory authority" of the New York
State Department of Banking was specious because there is no regulatory
action that would enforce compliance with Section 274-a.
Consumer Fraud
The court also ruled in Negrin's favor on her claim that the unilateral
imposition of the mortgage recording fee constituted consumer fraud
where Norwest did not perform the service. In response to Norwest's
claim that Negrin paid the fax and recording fees at closing five weeks
after she received notice of them, Judge Miller stated, "[T]he plaintiff
had no choice but to pay ... . [T]he only sane thing to do was to pay
the charges rather than jeopardize the closing and the sale of her
condominium."
Judges Daniel W. Joy and Sandra J. Feuerstein concurred in reversing the
lower court's decision while Judge Howard Miller dissented.
Mitchell Twersky of Fruchter & Twersky in New York City and Jeffrey S.
Abraham of New York City represented the plaintiffs. Anthony J. Laura of
Reed, Smith, Shaw & McClay LLP in New York City represented Norwest.
(Consumer Financial Services Law Report December 29, 1999)
OAKWOOD HOMES: Intends to Vigorously Defend Securities Suit in Carolina
-----------------------------------------------------------------------
In November 1998 Oakwood Homes Corp. and certain of its present and
former officers and directors were named as defendants in lawsuits filed
on behalf of purchasers of the Company's common stock for various
periods between April 11, 1997 and July 21, 1998 (the "Class Period").
In June 1999 a consolidated amended complaint was filed in the United
States Middle District Court in Guilford County, North Carolina. The
amended compliant, which seeks class action certification, alleges
violations of federal securities law based on alleged fraudulent acts,
false and misleading financial statements, reports filed by the Company
and other representations during the Class Period and seeks the loss of
value in class members' stockholdings. The Company has filed a motion to
dismiss the amended complaint which has not yet been ruled upon by the
court. The Company intends to defend such lawsuit vigorously.
PADUCAH PLANT: Former Employees Testify before House Subcommittee
-----------------------------------------------------------------
Former workers at the Paducah Gaseous Diffusion Plant in Kentucky
testified before the House Commerce Committee Subcommittee on Oversight
& Investigation (OI Subcommittee) regarding the Department of Energy's
(DOE) failure to take adequate measures to protect the health and safety
of its employees. The Paducah workers recounted extensive asbestos
exposures while at the plant, calling for Congress to enact additional
federal workers' compensation legislation for nuclear and toxic
exposures for employees of the Cold War production era to supplement the
recently proposed Beryllium Exposure Compensation Act. Beryllim Exposure
Compensation Act, H.R. 675; Related Legislation (Sept. 16, 1999); see
Toxic Chemicals LR, Oct. 4, 1999, P. 10.
Under the Clinton Administration's proposed Beryllium Exposure
Compensation Act, federal employees who faced beryllium exposures may
benefit from allocation of up to $13 million for purposes of
compensating them for medical expenses, lost wages, and other damages.
Although the beryllium statute is narrow scope, President Clinton issued
a directive for congressional investigation of all types of nuclear and
toxic exposures experienced by Cold War-era employees when he presented
the statutory proposal this summer.
The Paducah investigation conducted by the OI Subcommittee resulted, in
part, from the President's recent request for investigation of federal
energy facilities. According to OI Subcommittee Chairman Fred Upton
(R-MI), the investigation was also authorized through the Price Anderson
Amendments Act of 1998.
The Paducah facility was built in the early 1950s, and was jointly
operated by the DOE (through its predecessor the Atomic Energy
Commission) and Union Carbide Corp. between 1951 and 1984. From 1984
through 1996, Lockheed Martin and its predecessor, Martin Marietta Inc.,
operated the site in conjunction with the DOE.
A federal radiation exposure class action suit was recently filed in the
Western District of Kentucky on behalf of thousands of f ormer Paducah
facility workers (see Ranier v. Union Carbide Corp., Toxic Chemicals LR,
Oct. 4, 1999, P. 3).
Witnesses who presented testimony on Paducah before the OI Subcommittee
included the following:
-- Jim H. Key, Paper, Allied Industrial, Chemical and Energy Workers
Union (PACE) Local 5-550 (a 25-year employee at the site);
-- Garland E. Jenkins, a 30-year resident of Paducah, and a 21-year
employee at the site;
-- Ronald Fowler, a site employee;
-- M. Brad Graves, a Lockheed Martin Energy Systems Inc. employee who
worked at the site;
-- John Jay Hummer, Lockheed Martin;
-- David Michaels, U.S. DOE;
-- Richard D. Green, U.S. Environmental Protection Agency, Region 4;
-- Malcolm R. Knapp, U.S. Nuclear Regulatory Commission; and
-- Robert Logan, Kentucky Department for Environmental Protection.
Key testified regarding his job responsibilities at the site between
1977 and 1982, which involved grinding asbestos so that it could be used
to cover high voltage electrical cable. According to Key, no personal
protective equipment was provided by the DOE or Union Carbide. Key
recounted that " a t the end of the day, I went to the change room with
my entire body covered with asbestos dust."
In addition, Key discussed repeated spontaneous uranium fires at the
site, and the fact that no respiratory protection was provided to
employees involved in uranium and plutonium processes at the site. Key
also pointed to a 1952 Union Carbide memo indicating that the company
was aware of health and safety problems at the site during that time
period.
In conclusion, Key asked the OI Subcommittee to consider "coverage for
the workforce under a federal compensation system that reverses the
burden of proof onto the federal government to demonstrate that
workplace exposures didn't lead to illness, in light of DOE's failure to
monitor workers for radiation and other toxic risks" and "health
insurance for all at risk workers and their spouses."
OI Subcommittee Chairman Upton noted at the hearing that the Secretary
of Energy will remain actively involved in further investigation of
nuclear, asbestos, and other toxic exposures at federal energy
facilities, as will other administrative leaders pursuant to the Clinton
Administration's directive. (Toxic Chemicals Litigation Reporter
November 15, 1999)
PERITUS SOFTWARE: Ct Preliminarily Oks Settlement of Securities Suit
--------------------------------------------------------------------
Peritus Software Services, Inc. (OTC Bulletin Board: PTUS), a provider
of solutions for software maintenance, announced on Janurary 3 that it
has received preliminary approval from the U.S. District Court for the
District of Massachusetts of the settlement of the previously filed
class action securities litigation brought against the Company and
certain of its officers and directors covering the class period of
October 22, 1997 through and including October 26, The $2.8 million
settlement will become effective upon receiving final approval from the
Court. A final approval hearing is scheduled on February 28, The
settlement will be funded entirely by the Company's directors and
officers liability insurer and provides that the Company and the
individual defendants will receive a full release and dismissal of all
claims brought by the class during the class period when the settlement
becomes final.
Separately, the Company announced that it has terminated its engagement
of Covington Associates, the advisor it had retained to render financial
advisory and investment banking services.
About Peritus
Founded in 1991, Peritus Software Services, Inc. is a provider of
software maintenance outsourcing services. Peritus is headquartered in
Westborough, MA. For more information, see the Peritus web site at
http://www.peritus.com
RIBOZYME PHARMACEUTICALS: Shepherd & Geller Files Colo. Securities Suit
-----------------------------------------------------------------------
The Law Firm of Shepherd & Geller, LLC announced on January 4 that it
has filed a class action in the United States District Court for the
District of Colorado on behalf of all individuals and institutional
investors that purchased the common stock of Ribozyme Pharmaceuticals,
Inc. ("Ribozyme" or the "Company") (Nasdaq:RZYM) between November 15,
1999 and November 17, 1999, inclusive (the "Class Period").
The complaint charges that the Company and its CEO and President Ralph
E. Christoffersen ("Christoffersen") violated the federal securities
laws by providing materially false and misleading information about the
development of the Company's drug Angiozyme. In a press release issued
on November 15, 1999, headlined "Colorado Pharmaceutical Co. Makes
Cancer Drug History," the Company stated that Angiozyme "has taken an
important step forward . . . making both clinical history and industry
news." A press conference was to be held on November 17, 1999 at which
Christoffersen was to "explain Angiozyme and its history-making leap, an
achievement which may be of great significance to cancer patients
everywhere." However, the Company was merely going to announce that
Angiozyme had entered into Phase I/II testing - a development the
Company had twice previously expressed would occur before the end of the
year. As a result of these false and misleading statements the Company's
stock traded at artificially inflated prices during the class period.
When the truth about the Company was revealed, the price of the stock
dropped significantly.
Contact: Jonathan M. Stein SHEPHERD & GELLER, LLC 7200 West Camino Real,
Suite 203 Boca Raton, FL 33433 (561) 750-3000 Toll Free: 1-888-262-3131
E-mail: jstein@classactioncounsel.com
UNITED COMPANIES: Keller Rohrback Files Securities Lawsuit
----------------------------------------------------------
Keller Rohrback L.L.P.'s Complex Litigation Group announced on January 3
that class action complaints have been filed for violations of federal
securities laws on behalf of those persons who purchased United
Companies Financial ("United Companies Financial" or the "Company")
equity securities between April 30, 1998 and February 2, 1999, inclusive
(the "Class Period").
Shareholders assert that certain officers and directors of United
Companies Financial issued false and misleading statements and public
filings during the Class Period. Specifically, the complaint alleges
that defendants misled the investigating public to believe that the
Company was generating strong revenues and positive earnings quarter
after quarter when, in reality, defendants were overstating income and
assets by applying materially erroneous loan loss, discount and
prepayment rate assumptions in violation of Generally Accepted
Accounting Principles and the Securities Exchange Act of 1934. Not until
September 1999 did defendants reveal the extent of the errors,
announcing write-offs to the Company's 1998 year-end financial
statements in the amount of $605.6 million attributable to the Company's
Interest-only and residual certificate asset. As a result, shareholder
equity dropped from $505 million as of September 30, 1998, to negative
$114 million as of December 31, 1998.
If you purchased United Companies Financial securities April 30, 1998,
and February 2, 1999, you may wish to join the securities class actions
that have been filed. You may move the court to serve as a lead
plaintiff on or before February 15, 2000.
Contact: Keller Rohrback L.L.P. (Lynn L. Sarko, Juli E. Farris or
Elizabeth A. Leland, Esq.) toll free at 800/776-6044, or via e-mail,
with mailing address and telephone number provided, at
investor@kellerrohrback.com Website: http://www.SeattleClassAction.com
*********
S U B S C R I P T I O N I N F O R M A T I O N
Class Action Reporter is a daily newsletter, co-published by Bankruptcy
Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc.,
Washington, DC. Theresa Cheuk and Peter A. Chapman, editors.
Copyright 1999. All rights reserved. ISSN 1525-2272.
This material is copyrighted and any commercial use, resale or
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