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/raid1/www/Hosts/bankrupt/CAR_Public/000117.MBX C L A S S A C T I O N R E P O R T E R Monday, January 17, 2000, Vol. 2, No. 11 Headlines ADAC LAB: Announces Agreements-in-Principle to Securities Litigation AMOCO PIPELINE: Class Certification Upheld in LA Spill Suit AUTO INSURANCE: Motorist in Accident Sues Liberty Mutual Re Repair Shop BLUE CROSS: Georgia Ap Ct Will Hear Arguments Re Stock to Policyholders BOSTON HOUSING: Grant Is Met with Criticism Amidst Suit on Racial Bias CAMPBELL SOUP: Shapiro Haber, Berger & Montague File NJ Securities Suit DOJ: Opt-in Deadline for Lawyers’ Action on OT Pay Extended to Feb. 16 DREYFUS CORP: Mutaual Fund Shareholders Suit over Fid Breach Will Go on FEN-PHEN: Feuding Lawyers Could Unravel AHP Settlement Pact FREEMARKETS INC: Bernstein Liebhard Files Securities Suit in PA HOLOCAUST VICTIMS: Government Delays Presenting Law For Nazi Labor Fund LOCKHEED MARTIN: Fed. Probe Finds Racial Bias Against Black Employees MANHATTAN GROCERS: A.G. Sues over Minimum Wages for Delivery Workers MEDIAONE GROUP: Desire to Suppress Criticism Is Not a Motive for Fraud MOUNT GLENWOOD: Edelman, Combs Sues Cemeteries on Racial Discrimination NEWCASTLE UNITED: To Defend in Feb Magpie Fans' Claims Re Stadium Seats PUBLIC GUARDIANS: Daughter of Elderly Mother Sues over Neglect & Abuse TOBACCO LITIGATION: NY Judge Oks $37M for Attys. In Philip Morris Case UNITED AIRLINES: IL Ct Oks Class for Suit over Delay at X’mas Eve 1997 VALUE AMERICA: Abbey, Gardy Files Securities Suit in Virginia Y2K LITIGATION: Active Voice Defends Case In Indiana after MA, AL Cases ********* ADAC LAB: Announces Agreements-in-Principle to Securities Litigation -------------------------------------------------------------------- ADAC Laboratories (NASDAQ: ADAC) announced on January 13 that it has reached an agreement-in-principle to settle the consolidated class action lawsuit currently pending against the Company. The plaintiff class will receive $20 million in full settlement of their claims. A final settlement is contingent upon the satisfaction of numerous conditions, including among others, approvals by the Federal Court in the Northern District of California and by the Company's Board of Directors. In addition, ADAC announced it has concurrently reached an agreement-in-principle to settle related derivative litigation filed against current and former officers and directors of the Company. The derivative settlement calls for the defendants to contribute their respective benefits under certain Directors and Officers Insurance Policies to the Company. This settlement is similarly contingent on satisfying certain conditions. The total pre-tax cost of these settlements to ADAC, net of insurance, is expected to approximate $9 million. As a result, the Company announced that it intends to record a non-ordinary pre-tax charge of $10-11 million representing its total costs for the settlements, including the related legal fees to bring these matters to a conclusion. These charges will be recorded in ADAC's first fiscal 2000 quarter ended January 2, 2000. R. Andrew Eckert, ADAC's Chairman and CEO stated, "The settlement of this litigation will be an important milestone for our Company. We feel that by resolving the litigation now, we can move forward more confidently, focusing all our energies on achieving our strategic objectives and creating shareholder value." He went on to say, "We will have no further comment on the litigation until the settlements have been finalized." ADAC Laboratories is the world market-share leader in nuclear medicine and radiation therapy planning systems and a technology leader in providing clinical workflow solutions, management information and knowledge systems to healthcare organizations in North America. ADAC is headquartered in Milpitas, CA with its HealthCare Information Systems Division in Houston, TX. Additional information about ADAC can be found on its web site at http://www.adaclabs.com AMOCO PIPELINE: Class Certification Upheld in LA Spill Suit ----------------------------------------------------------- An appellate panel in Louisiana has unanimously upheld class action status for thousands of residents in an area where 3,000 barrels of crude oil were released by an overfilled tank. Mayho et al. v. Amoco Pipeline Co. et al., No. 99-CA-620--624 (LA Ct. App., Dec. 15, 1999). In 1992, crude oil was released into a containment dyke when a tank overfilled at a Louisiana Shell Oil Co. facility. None of the oil escaped the containment dyke, cleanup began immediately, and all oil was returned to the system the day after the release. In separate consolidated complaints, the plaintiff neighbors sued in St. James Parish District Court, alleging that fumes from the oil spill caused them great discomfort, reached hazardous levels, and threatened their health and safety. Shell claimed that its employees had monitored air quality around the site from the time of the spill until cleanup was finished, and also reported that hydrogen sulfide levels never reached a hazardous level. The proposed class representatives suffered no recoverable damages, the company said, but merely were inconvenienced by the nuisance. Judge Guy Holdridge granted the plaintiffs' motion for class certification, and Shell appealed. The Court of Appeals, Fifth Circuit, unanimously affirmed in an opinion by Judge Marion F. Edwards, finding no abuse of discretion in granting certification. First, the panel rejected Shell's argument that the trial court failed to exercise its gatekeeper role, finding there was sufficient testimony from two experts, one in meteorology and air dispersion modeling and the other in toxicology. Second, it said the plaintiffs met their burden of proving numerosity, commonality, and adequacy of representation. Several thousand people, many of whom filed proofs of claim with Shell, live within the geographic borders established by the trial judge, the court said. All class representatives allegedly experienced adverse effects from inhalation of hydrogen sulfide fumes as well. In addition, there was a common character to their claims, namely that Shell is liable for any damages from the released of hydrogen sulfide and benzene into the air. The court declined to decide Shell's argument that the plaintiffs failed to state a cause of action for damages. Roy F. Amedee Jr. of LaPlace, LA, argued for the plaintiffs. Patrick A. Talley Jr. and Michael R. Phillips of Frilot, Partridge, Kohnke & Clements in New Orleans appeared for the defense. (Hazardous Waste Litigation Reporter, December 23, 1999) AUTO INSURANCE: Motorist in Accident Sues Liberty Mutual Re Repair Shop ----------------------------------------------------------------------- A Peterborough motorist is pursuing a class-action lawsuit against Liberty Mutual Insurance Co. for allegedly telling auto repair shops to use low-quality replacement parts on clients' autos. Terrance O'Brien charges in his claim that Liberty ordered installation of imitation parts or agreed to pay an amount based on using them in repairs at a specific shop. O'Brien said Liberty's policy calls for the installation of parts of ''like kind and quality'' and it should have used components from original manufacturers after his car sustained damages in an accident. He is seeking $10 million in aggravated, exemplary and punitive damages on behalf of himself and other drivers insured by Liberty and other companies for allegedly breaching their policies. Liberty, which alone has 212,000 holders of auto insurance policies, said the company is aware of the claim but has not seen it. ''Because we haven't officially been served with the suit, it would be premature to comment on the allegations,'' said Arlene Healy, Liberty's manager of communications. In his accident, O'Brien allegedly attempted to steer his 1994 Chevrolet Blazer sport utility vehicle around an obstacle on the highway, lost control and landed in a ditch. O'Brien, 45, was unhurt but the truck allegedly sustained damage to the front and rear ends and the roof. In his claim, O'Brien alleged U.S.-based Liberty directed the shop to install the inferior replacement parts without his consent or knowledge. Another shop owner informed him later that those parts had been installed on his truck. O'Brien said in his claim that Liberty's insurance policy called for the company to pay for the repair, replacement or rebuilding a client's vehicle with the ''like kind and quality'' parts. He claimed inferior imitation parts are not authorized for use by auto manufacturers and installation into an insured vehicle does not restore it to pre-loss condition. ''Since many of these imitation parts are manufactured in Taiwan, in the motor vehicle repair trade they are commonly referred to as 'Taiwan tin' which reflects their inferior quality and craftmanship,'' the claim said. O'Brien said the use of imitation parts has diminished his vehicle's value, jeopardized the manufacturer's warranty and impaired the auto's structural integrity and occupant safety. He described the company's conduct as ''high- handed, reckless, deliberate and disgraceful.'' O'Brien wants a court declaration that Liberty breached its policy, is liable for damages and his class of policyholders is entitled to installation of replacement parts from the original manufacturer when there are damages. His lawyer, Harvin Pitch, said O'Brien is seeking an order to certify the claim into a class-action proceeding, which could affect thousands of other auto-insurance policyholders. The Automobile Protection Association, which represents motorists' interests, said there is generally nothing wrong with after-market parts in repairs. They also keep prices down, according to the association. However, the association said it has found problems with some parts and the insurance industry is slow to acknowledge and address them. Consumer Reports magazine found in its research that some imitation parts offered less protection because of improper fit and quality in low-speed collisions. (The Toronto Star, January 14, 2000) BLUE CROSS: Georgia Ap Ct Will Hear Arguments Re Stock to Policyholders ----------------------------------------------------------------------- Georgia's Court of Appeals will hear oral arguments in March that could settle the issuing of up to $28 million in stock to Blue Cross and Blue Shield of Georgia policyholders. The money constitutes shares of Cerulean Inc., the parent company of the Georgia Blues. The stock was offered to all 144,000 policyholders of the Georgia companies, but only about half had accepted the offer of five shares each when the distribution was closed. The shares originally had no value but are now believed to be worth $800 each, or $4,000 for the five shares issued to each policyholder who accepted the offer. The issue the Court of Appeals is to review is whether the 70,000 policyholders who either made no response or declined the initial offering still have vested rights to the stock. Blue Cross and Blue Shield of Georgia v. Tiller, No. A00A0874 (Ga. Ct. App. Dec. 15, 1999). In June, State Insurance Commissioner John W. Oxendine refused to review the way the company offered common stock to policyholders in 1996 when it converted to a for-profit business. However, Richmond Superior Court Judge J. Carlisle Overstreet struck down Oxendine's decision and found that Georgia Blue's conversion plan, which Oxendine had approved in December 1995, created a vested right to shares of Cerulean common stock. Oxendine, Cerulean and Georgia Blue all seek review of Overstreet's decision. Oral arguments are scheduled for the week of March 20, says Cerulean and Georgia Blue's lawyer, Bruce P. Brown, a partner with Long, Aldridge & Norman LLP. (Brown and his firm also represent the Daily Report). Cerulean is seeking to merge with Wellpoint Health Networks of California, but the two have postponed their agreement-first announced in July 1998-until Dec. 31. (Daily Report, Jan. 5, 2000). Declaratory Judgment Sought The policyholders had asked Oxendine for a declaratory judgment that Georgia Blue should have issued, not just offered, shares of Cerulean common stock to its 144,000 policyholders in 1996. Georgia Blue created Cerulean at the time of the company's conversion as a holding company for the new for-profit corporation. About half the policyholders, or some 74,000 people, accepted the offer of the Cerulean stock when it was made. These policyholders received five shares each. The policyholders who petitioned Oxendine were part of a group of 70,000 who either failed to respond to the offer or rejected it. The stock initially had no set value because it could not be publicly traded. However, says Cerulean spokesman Charles E. Harman, WellPoint has agreed as part of the proposed merger to pay approximately $800 for each share, or $4,000 a shareholder. Oxendine decided "it would be inequitable to revisit this process now, more than two years after it was completed"-which Overstreet's ruling reversed. Overstreet said the policyholders' rights to the shares should be resolved before Cerulean's merger with WellPoint. "The petitioner has exhausted his administrative remedies and a review of the merits of the petitioner's claim is appropriate," Overstreet ruled. Conversion Plan Called Contract Overstreet said Georgia Blue's conversion plan was a contract with the policyholders who were "specifically identified third-party beneficiaries of the plan." He found that Georgia Blue's conversion plan, which Oxendine had approved in December 1995, created a vested right to shares of Cerulean common stock. Brown says the stock distribution was designed to prevent adverse tax consequences to those receiving the stock. "There was a risk of taxation because these people were getting something without any additional consideration," says Brown. "The reason why it wasn't automatically considered income is because we structured it as an exchange." Georgia Blue's policyholders "had a legislative right under O.C.G.A. section 33-20-33 to be given a right of first offer if Georgia Blue ever distributed shares to the public," says Brown. "And what we argued was, since you are giving up that right by taking it, or not taking it, that's an exchange for the shares and therefore you can make an argument that it's an exchange that's not subject to taxation." Overstreet's order, "because of its content, has made it very difficult to proceed" with the merger, Brown says. Lawyers for the policyholders have filed a motion to dismiss arguing, Cerulean and Georgia Blue lack standing to bring their appeal. They point to the denial of Cerulean and Georgia Blue's attempts to intervene in the proceedings before Oxendine and in Overstreet's judicial review. "Our contention is they are not a party to the case and they don't have standing to appeal," says Atlanta lawyer Jerry L. Sims of Sims, Moss, Kline & Davis LLP. Sims admits that if the motion to dismiss is granted, "it would only dismiss the appeal of Georgia Blue. The commissioner has also appealed. And there's no question they have standing to do that appeal." 2nd Ruling for Policyholders Overstreet's decision is his second in favor of the policyholders. His first came in December 1998 in a class action suit filed by the same policyholders. Tiller v. Cerulean Companies Inc., et al., No. 98-RCCV-806 (Richmond Super. Ct. Filed Sept. 18, 1998). That suit contained a declaratory judgment request that the plaintiffs should have shares of Cerulean and also contained fraud claims related to the stock distribution (Daily Report, March 15, 1999). Overstreet certified a class in that suit of all eligible subscribers who did not receive Cerulean common stock. In December 1998, Overstreet granted relief to the plaintiffs in that case after a two-day bench trial. He issued a declaratory judgment that the class plaintiffs each deserved five shares of the Cerulean common stock, even if they previously had made no response to the offer or rejected it. However, that ruling was reversed in a 6-1 decision by the Georgia Supreme Court (Daily Report, May 4, 1999). The high court said Overstreet had no jurisdiction to hear the policyholders' claims until they had exhausted administrative remedies before Oxendine, who the court said was entrusted with overseeing the process of conversion. This ruling brought the disgruntled policyholders to Oxendine for relief in June. But that decision by the Georgia Supreme Court did not end the suit in Overstreet's court. "We filed a motion for judgment saying, 'We won it; let's go ahead and get a judgment on this,' " says Brown. Overstreet "denied it and denied our petition for appeal," Brown says. "He said that, 'I'll hold it until the administrative petitions are exhausted.' "Overstreet and the plaintiffs are looking at exhaustion of remedies as punching your ticket," Brown says. "You just gotta get your ticket punched and then you can go get the real relief." Amended Complaint Filed In the wake of the Supreme Court's May ruling, lawyers for the policyholders filed an amended complaint with Overstreet, expanding the fraud claims against Cerulean and Georgia Blue, and adding claims by two of the named plaintiffs, Charles Deal and Olean Lokey, that they never even received the offering materials. "The fraud claim is that everybody was defrauded," says another of the five lawyers representing the plaintiffs, Atlanta lawyer Jay Brownstein of Brownstein & Nguyen, LLC. The other lawyers for the plaintiffs in this suit and the appeal are Sims, Augusta lawyers Travers W. Paine III of Paine Little LLP and John C. Bell Jr. of Bell & James; and Palm Beach lawyer Richard L. Stone of Blackner, Stone & Associates. Says Brownstein: "Some folks were defrauded by never having been told, they never received any material, no notice whatsoever that they had a right to the stock and those that did receive the materials weren't told the entire picture." Those claims are now in discovery, Brownstein says, and Overstreet has ordered that the case be ready for trial by the end of August. Lawyer Conflict Claimed Brown and his co-counsel, Augusta lawyer David E. Hudson, a partner in Hull, Towill, Norman, Barrett & Salley, filed a motion on Dec. 27 to disqualify the plaintiffs' lawyers in the ongoing Richmond County suit. The motion contends Brownstein, Sims and Stone have conflicts of interest in representing policyholders who did not get stock because they previously represented those who did. The motion refers to their representation in 1998 of Cerulean common stockholders in an attempt to intervene in a suit to protest a settlement between Georgia Blue and activists who claimed the insurer should have transferred all its assets in a charitable foundation when it converted to a for-profit business. The intervention request was denied and the matter was never appealed. "It's a motion that can clearly be seen for what it is, which is a tactic. It doesn't have any weight to it," says Brownstein. Says Sims: "We don't believe they have standing to assert a conflict. Also, what they allege creates a conflict are facts they have known since before the case was started. "We have client waivers," he adds. The motion also seeks to disqualify all the plaintiffs' lawyers, including Paine and Bell, on the grounds that their representation of Deal and Lokey-who claim never to have received offering materials-has suffered because of the interests of the larger class who received the offering materials but did not respond. "Plaintiffs' counsel, in their effort to avoid splitting their class, has downplayed the Deal/Lokey claim and in fact alleged and asserted at trial that all members of the class received this offer," says the motion by Cerulean and Georgia Blue. This has left Deal and Lokey vulnerable to the argument that they waived their right to their unique claims, the motion argues. Brownstein disagrees. "If you analyze what our class members want, their claims are in harmony." Sims says the parties "have had settlement discussions but it wouldn't be accurate to say that they are ongoing at this time." Brown agrees. "But you know I can't say what's going to happen next month or next week," Sims adds. (Fulton County Daily Report, January 14, 2000) BOSTON HOUSING: Grant Is Met with Criticism Amidst Suit on Racial Bias ---------------------------------------------------------------------- US Housing Secretary Andrew Cuomo embarrassed Boston nationally last year with a scathing report accusing the Boston Housing Authority of fostering racial discrimination and ignoring the complaints of harassed tenants. Now, Cuomo has made the BHA the envy and the enemy of housing advocates nationwide by awarding the agency almost $300,000 in fair-housing funds. In a move that has incensed fair-housing organizations across the country, the BHA has won a $297,060 grant to produce brochures and conduct a door-to-door campaign to teach tenants about fair housing and their right to file discrimination complaints. The BHA had promised to start the programs as part of a $1.5 million settlement it reached in July with tenants who sued over the authority's failure to stop a pattern of racial harassment in the Old Colony and Bunker Hill developments. The grant appears to violate terms of the federal Fair Housing Initiatives Program, which prevents the funds from being spent to settle legal claims. Housing advocates also say it sends a dangerous message: Civil rights violations will be rewarded with federal cash. "It really is like saying to housing authorities, 'It pays to discriminate,' " said Nadine Cohen, interim director of the Lawyers Committee for Civil Rights Under the Law, and one of the lawyers who represented tenants in the case against the BHA. " 'You get caught and we'll give you a lot more money so you can remedy your problems.' " Lydia Agro, a BHA spokeswoman, said the authority is simply trying to comply with its settlement agreement, and it sought the grant for the benefit of tenants. In addition to the brochures and door-to-door campaign, the grant would pay for diversity training for residents in about 20 developments across the city, Agro said. "It was our understanding that we could apply for that funding," Agro said. "It was a competitive process, and we applied." The case is generating grass-roots opposition across the country among organizations that compete for limited funds to promote equal access to housing, said Lisa Rice, president of the National Fair Housing Alliance in Washington. "From the civil rights perspective or the fair-housing practitioners' perspective, this establishes a very scary precedent," she said. "If you're going to now start funding violators of the law, what does this signify? Is this indicative of something that's very ominous for the future" for the fair-housing program? The program, administered through the department of Housing and Urban Development that Cuomo heads, more typically benefits private organizations that educate tenants about fair housing and try to crack down on discrimination. Of the $15 million HUD awarded to 53 cities on Dec. 15, Boston's was the only public housing authority to win funding; most went to legal services or groups promoting equal access to housing. After the grants were announced, an unsigned complaint was sent Jan. 3 to the US inspector general's office, an independent arm of HUD. The complaint, obtained by the Globe, alleges that the Boston grant amounts to a misappropriation of funds through the fair-housing program, which specifically prohibits using grants to settle lawsuits. Peggy Johannsen, a HUD spokeswoman in Washington, said she was unaware of the complaint to the inspector general, but was aware of controversy surrounding the grant. "This matter was recenty brought to our attention, and we're reviewing it," she said. She declined to detail what remedies were possible if HUD determines the funds were misappropriated. However, the grant money has not yet been received in Boston. The advocates don't dispute the need for the grant, but they object to the source. "I don't question the appropriateness of HUD providing financial support to the BHA to fulfill the agreement," said David Harris, executive director of the Fair Housing Center of Greater Boston, a new organization that won $100,000 in federal funds. "It's the particular pool of money that I think is really a problem. It's a finite pool that people competed for." When the BHA settled its case with tenants in July, it made it clear that it would need HUD funding to comply with some terms of the agreement. One item was the hiring of a "civil rights outreach coordinator" to visit each unit in the two developments to explain civil rights protections. Since HUD offered no explanation of how the funding was awarded to the BHA, some housing advocates allege that there was a deal cut at the time of the settlement agreement to make compliance easier for the city, which already had suffered considerable bad publicity from HUD. But Cohen suggested that the sprawling agency may have simply failed to take note of the settlement agreement in awarding the BHA grant. Cohen said that during settlement negotiations in the Boston case, HUD declined to give the BHA additional funding to comply with the settlement. "They said they'd have to apply and go out and get it," Cohen said. "It was never intended to be FHIP money." Some speculated privately that the grant was a peace offering from Cuomo to Mayor Thomas M. Menino, who was stung by his criticism last year. Cuomo, whose department had conducted a three-year probe into the BHA, had called it the most serious discrimination case ever brought against an agency. Menino suggested at the time that Cuomo was grandstanding on a problem that had been alleviated in recent years. The HUD report ended in 1996. That year, 13 tenants had filed a class-action suit alleging the BHA had failed to protect them from racial harassment and assaults in the historically white Charlestown and South Boston housing developments; the city's housing developments were forced to desegregate in 1988. The case dragged on until last February, when Cuomo issued the HUD report and a subsequent study that looked at progress since 1996. While that study confirmed there had been improvements, it included a host of other suggestions and urged a settlement with the tenants. (The Boston Globe, January 14, 2000) CAMPBELL SOUP: Shapiro Haber, Berger & Montague File NJ Securities Suit ----------------------------------------------------------------------- The Boston law firm Shapiro Haber & Urmy LLP and the Philadelphia law firm Berger & Montague, P.C. filed a class action suit in the United States District Court for the District of New Jersey against Campbell Soup Company alleging securities fraud has been committed said company and certain of its officers. The case was filed on behalf of all persons who purchased Campbell Soup common stock during the period November 18, 1997 through January 8, 1999, inclusive. The complaint charges the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. As alleged in the Complaint, Campbell claimed to have "sold" product to major distributors or resellers when in actuality Campbell never shipped the product to its customers. Campbell claimed these phantom sales in order to meet Wall Street's earnings estimates for the Company and therefore artificially inflate the price of Campbell's stock. When Campbell disclosed that it would have declining earnings as a result of lower sales, the price of Campbell stock dropped from approximately $54 per share to approximately $46 per share and has never recovered. Contact: Ted Hess-Mahan, Esq. or Lisa Palin, paralegal Shapiro Haber & Urmy LLP 75 State Street, Boston, MA 02109 800-287-8119 Fax: 617-439-0134 e-mail: cases@shulaw.com or Sherrie R. Savett, Esq. Stuart J. Guber, Esq. Michael T. Fantini, Esq. Berger & Montague, P.C. 1622 Locust Street Philadelphia, PA 19103 888-891-2289 or 215-875-3000 Fax: 215-875-4604 Web site: http://home.bm.nete-mail: InvestorProtect@bm.net DOJ: Opt-in Deadline for Lawyers’ Action on OT Pay Extended to Feb. 16 ---------------------------------------------------------------------- Current and former Justice Department lawyers have another chance to join the overtime class action against the department. U.S. Court of Federal Claims Judge Robert Hodges Jr. extended the opt-in deadline from Dec. 2 to Feb. 16 because about 20 percent of the addresses the DOJ provided to plaintiffs lawyers were wrong. According to plaintiffs lawyer Robert Van Kirk of Williams & Connolly, about 6,800 DOJ lawyers have joined the suit. The class is open to any DOJ lawyer who, since Nov. 25, 1992, has at least once worked more than 40 hours in a week or eight hours in a day. Former Hogan & Hartson partner David Martin has joined the Securities and Exchange Commission as director of the Division of Corporation Finance. He will oversee the SEC's corporate disclosure operation. Former director Brian Lane left the agency to join the D.C. office of L.A.'s Gibson, Dunn & Crutcher as a partner. Commissioner Gloria Tristani of the Federal Communications Commission has decided not to return to New Mexico to run for Congress. Tristani, a Democrat, had been eyeing the seat held by freshman Republican Heather Wilson, but federal law would have required her to resign from the FCC as soon as she announced her candidacy. In a statement, she said she was staying at the Administration's request; her term ends July 2003. Also at the FCC, Linda Kinney has been named special advisor for advanced services at the Common Carrier bureau. She was a legal advisor to Commissioner Susan Ness, focusing on common carrier issues. Her replacement is Jordan Goldstein. Several high-level changes at DOJ's Criminal Division. Bruce Swartz, a partner at D.C.'s Shea & Gardner, likely will take the place of Mark Richard as deputy assistant attorney general early next year. Swartz, who was deputy independent counsel in the investigation of HUD officials, would oversee the DOJ's Office of International Affairs, the Office of Special Investigations, and the Internal Security Section. Richard Rossman, chief of staff to Criminal Division chief James Robinson, will be leaving the DOJ at the end of the year to return to the Detroit office of Philadelphia's Pepper Hamilton as senior litigation partner. Rossman will be replaced by Deputy Assistant Attorney General Michael Horowitz, who now oversees the department's Fraud Section. Alan Gershel, chief assistant U.S. attorney for the Eastern District of Michigan, will assume Horowitz's post.- Jenna Greene at jgreene@legaltimes.com and Sam Skolnik at sskolnik@legaltimes.com DREYFUS CORP: Mutaual Fund Shareholders Suit over Fid Breach Will Go on ----------------------------------------------------------------------- A U.S. judge has given a green light to a class action by mutual fund shareholders against Dreyfus Corp., a unit of Mellon Financial Corp. in Pittsburgh. In an order dated Jan. 5, Judge Harold Baer of the U.S. district court ruled that the plaintiffs could proceed with allegations that Dreyfus breached its fiduciary duty in violation of state and federal securities laws. The suit, filed in June 1998, alleges that Michael L. Schonberg, who managed two aggressive growth funds for Dreyfus, which is based in New York, made trades in the funds to benefit his personal holdings. Dreyfus which manages $117.4 billion of mutual fund assets, placed Mr. Schonberg on administrative leave in April 1998. Judge Baer's ruling came in response to a motion filed by Dreyfus to dismiss the case. The judge threw out five additional claims that had been filed by the group under the Investment Company Act of 1940. (The American Banker January 14, 2000) FEN-PHEN: Feuding Lawyers Could Unravel AHP Settlement Pact ----------------------------------------------------------- Two factions of attorneys fighting for the same cause are now embroiled in a power struggle in one of the nation's biggest product liability battles -- over the diet drug combination fen-phen. The contentious mood that has settled over the two camps could, at the very least, put an end to some state court claims and might even derail the multibillion-dollar settlement reached with the makers of the weight-loss drug. At the center of the debate is whether all fen-phen users who are part of class action litigation in Florida and several other states should be forced to accept a deal hammered out last October by American Home Products, manufacturer of the drug. "There is disagreement among the bar as to whether the settlement is acceptable," said Karen Cohen, a Miami attorney who is litigating a handful of fen-phen cases. "I don't think it's an adequate settlement." American Home Products agreed to pay $3.75 billion to settle the federal multidistrict litigation overseen by U.S. District Judge Louis Bechtle in Philadelphia. Now there is growing sentiment among attorneys in several states that the deal is unacceptable and will not address the needs of their clients. Opting out "There are a lot of problems with the settlement," said Paul Napoli, a New York attorney with Napoli Kaiser & Bern. Napoli represents some 5,000 fen- phen users, many of whom are opting out of the national settlement agreement. "We are getting 300 to 400 opt-outs a day," he said. Like Napoli, Ervin Gonzalez of Robles & Gonzalez in Miami believes the agreement does not do enough to compensate his clients. "If the federal deal is allowed to go through and it's rubber-stamped, then all of these people will not have local doctors checking them out. They are not going to have a court-appointed administrative plan to make sure they are healthy. They will not have the ability to be diagnosed at an early stage. I don't think that's right," said Gonzalez, who represents some 5,000 Florida residents in a class action against American Home Products. "We are doing what we are doing because we want to make sure that Floridians are properly treated," he added. Last month, Gonzalez won a ruling from a Florida state appellate court, which ruled that former fen-phen users should have the right to free follow-up exams to check for possible health problems even if they show no signs of illness. If attorneys continue to make good on their threats to opt out of the federal settlement, the deal will fall apart, Gonzalez predicts. "Ultimately there will be no settlement deal approved by the court. It's approved subject to several conditions, one of them is being accepted nationally," he said. American Home Products has the right to terminate the settlement if there are too many opt-outs after class notice ends in March. If that happens, it will be because there were just "too many egos involved," said J. Michael Papantonio, a Pensacola, Fla., attorney who served on the plaintiffs' multidistrict litigation steering committee. "Rather than say what is the best thing here, what is the most efficient, effective thing to do for the victims, too often that becomes secondary to people's egos," Papantonio said. "We have to consider how to bring closure to this program in the best way we can for the clients." While he is sympathetic to Gonzalez and other attorneys who believe they are acting in the best interests of their clients, Papantonio said that ultimately the fate of the litigation will be up to Judge Bechtle. His prediction: "The judge will not allow class action cases to go forward because the validity of what he is doing will be diluted. To make this thing move, it has to move with some form." Susan R. Miller is a reporter at the Miami Daily Business Review, an American Lawyer Media affiliate. (The Recorder, January 14, 2000) FREEMARKETS INC: Bernstein Liebhard Files Securities Suit in PA --------------------------------------------------------------- Bernstein Liebhard Lifshitz, LLP commenced a securities class action lawsuit in the United States District Court for the Western District of Pennsylvania on behalf of all purchasers of the common stock of FreeMarkets, Inc., between December 10, 1999 and January 4, 2000, inclusive. The complaint charges that FreeMarkets and certain of its directors and executive officers have made some violations of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Further, it was also alleged that the defendants failed to disclose material information about the Company in the prospectus issued in connection with the Company's initial public offering. Specifically, the complaint charges that prior to the IPO, defendants knew that General Motors Corporation, one of FreeMarkets' largest customers, intended to cancel its contract with FreeMarkets in the first quarter 2000 and funnel its internet business to Commerce One. The loss of this revenue would have a material adverse impact on FreeMarkets. Defendants, however failed to disclose this information to the investing public prior to the IPO. As a result of these misrepresentations and omissions, the price of FreeMarkets's common stock was artificially inflated throughout the Class Period. Upon the disclosure of said facts, FreeMarkets's stock price plunged more than $70 per share. For further information and details regarding the above mentioned suit, contact Mark Punzalan, Director of Shareholder Relations, Bernstein Liebhard; Lifshitz, LLP, 10 East 40th Street, New York, New York 10016, telephone: 800-217-1522 or 212-779-1414 or FreeMarkets@bernlieb.com via e-mail. HOLOCAUST VICTIMS: Government Delays Presenting Law For Nazi Labor Fund ----------------------------------------------------------------------- The German government is pushing back the date to present a draft law establishing how compensation will be distributed to victims of Nazi labor, a government spokesman said on January 14, 2000. The announcement comes a day after lawyers for the victims delivered a letter to German envoy Otto Lambsdorff and U.S. envoy Stuart Eizenstat complaining that the proposed law limits payments to some survivors and is being drafted without their input. One of the class-action lawyers said they will proceed with their suits despite an earlier agreement to suspend them. A spokesman for the German Finance Ministry that is drafting the law stressed the government was not trying to circumvent those who negotiated the Nazi labor compensation deal. ''Those leading the negotiations must articulate want they want in the bill proposal, and when that is articulated then that is what will be in the proposal,'' Torsten Albig said. Government spokesman Bela Anda said the date for presenting the bill to the Cabinet was delayed a week until Jan. 26 because of a ''misunderstanding'' about the earlier date. The major point of contention was put aside last month when Germany announced the fund would total 10 billion marks (dlrs 5.2 billion) to be split by government and industry. Up to 2.3 million people, mostly non-Jews from Eastern Europe, forced to work under the Nazis could be eligible for payments. But negotiators, who meet again this month or in early February in Washington, still must work out how the fund will be divided. A chief complaint of the class-action lawyers and Eastern European governments is that Germany is making unilateral decisions that will determine how much money the people they represent will receive. The current draft, for example, deducts payments for compensation already received. Since the war, Germany has paid about dlrs 60 billion in compensation for Nazi crimes. The draft also would limit compensation to those workers who were deported to Germany under its 1937 borders before Hitler's offensives into Europe started. ''There will be absolutely no negotiations when a law is created without the consultation of others,'' Jiri Sitler of the Czech foreign ministry told ARD national television. New York lawyer Deborah Sturman said the proposal to deduct for payments already made was an act of bad faith, and said lawyers planned to resume filing motions on class-action lawsuits, suspended after the December agreement on the fund's size. German firms that used slave and forced labor sought the fund largely to receive protection from class-action suits. (AP Worldstream January 14, 2000) LOCKHEED MARTIN: Fed. Probe Finds Racial Bias Against Black Employees --------------------------------------------------------------------- A federal investigation has concluded that some white managers at Lockheed Martin Aeronautical Systems discriminated against black employees by overlooking them for promotion, training and overtime. The U.S. Equal Employment Opportunity Commission found that, despite the Marietta-based company's assertion that promotions were based on seniority and experience, black employees often had more of both than white employees who won the promotions, according to copies of the findings obtained by the Journal-Constitution. "This is an extremely serious situation with far-reaching consequences for employees at both Lockheed's Marietta plant and other Lockheed plants," said Josie A. Alexander, one of the lawyers representing more than 20 current and former Lockheed employees. "My clients believe there is an atmosphere of racism that permeates the plant." Lockheed President Tom Burbage denied a racist culture exists in the plant, and he emphasized that the defense contractor has long-standing policies forbidding discrimination. "I don't think the issues that were raised are widespread," he said. "I think it all relates to the past. I can do nothing about the past but apologize for it. What I can deal with is the future." The company is contesting the EEOC allegations, he said. Bernice Williams-Kimbrough, director of the Atlanta District of the EEOC, issued nine findings of racial discrimination and one case of discrimination against the disabled. The EEOC also found Lockheed managers retaliated against one employee for filing an EEOC complaint. The investigation is continuing in at least 10 other cases, involving race, gender and disability, Alexander said. Alexander has teamed up with Johnnie Cochran, the prominent trial lawyer who became a household name in the O.J. Simpson case, in pursing the case against Cobb County's largest private employer. The case could achieve class action status, since the EEOC found discrimination existed against blacks as a group. The EEOC outlined its allegations in "letters of determination," dated Sept. 30, which do not carry a legal penalty. Instead they are one of the steps in a long process of bringing discrimination claims under the federal statute. Lockheed and the plaintiffs are tentatively scheduled to engage in what amounts to settlement talks in February, Alexander said. If an agreement can't be reached, the EEOC will either issue a "right-to-sue" letter to the plaintiffs, or elect to sue the company itself. "The process takes a lot of time and a lot of investigation," Burbage said. "We work with the EEOC office to understand the issues and resolve them." The timing of the allegations, however, couldn't have been worse for Lockheed. The Marietta plant has had its leadership reshuffled and scattered, has just finished a tough budget fight in Congress to keep funding for its F- 22 stealth fighter. It is struggling to find buyers for its mainstay, the C-130J transport plane. Burbage, who became president in April, said he was frustrated that there has been so much focus on the allegations of a handful of the company's employees, when he believed the company has a good record of minority hiring and doing business with minority companies. Burbage also has established committees, he said, to facilitate better communication between the blue-collar labor force and upper management to cut out the filter of middle-management --- where the EEOC documents indicated the discrimination problem existed. "In any workforce that is 10,000 people big, it's not to say the same frailties don't exist there as you find anywhere else in society," Burbage said. "If you get a picture of this company by reading EEOC findings, that's one picture. If you try to get a real understanding of what this company is all about, that's another picture." (The Atlanta Journal and Constitution, January 14, 2000) MANHATTAN GROCERS: A.G. Sues over Minimum Wages for Delivery Workers -------------------------------------------------------------------- The state attorney general on January 13 sued companies employing delivery workers at Manhattan supermarkets, alleging they violated minimum-wage laws. Eliot Spitzer filed a lawsuit in State Supreme Court 1 NEW3 in Manhattan against several companies, including the Great Atlantic & Pacific Tea Co., the parent of Food Emporium; Waldbaum's, and A & P.. The lawsuit sought six years in back wages for grocery deliverers at the Food Emporium store on Broadway and 68th Street. Aides said the wages could total $ 1 million. A separate lawsuit filed on January 13 in U.S. District Court in Manhattan alleged that grocery stores including those operated by Great Atlantic & Pacific were using delivery contractors which paid workers far below minimum wage and no overtime. That lawsuit sought class-action status on behalf of nine delivery persons and more than 500 additional workers. It said those making deliveries earn $ 60 to $ 120 for work weeks averaging 69 hours, or 87 cents to $ 1.74 an hour. State law allows employers to pay workers in some low-level jobs as little as $ 4.25 an hour, below the $ 5.15 federal minimum wage, but requires time and a half for work beyond 40 hours a week. Under the $ 4.25 minimum, a 69-hour week translates to at least $ 354.88. (The Record (Bergen County, NJ), January 14, 2000) MEDIAONE GROUP: Desire to Suppress Criticism Is Not a Motive for Fraud ---------------------------------------------------------------------- Plaintiffs brought an uncertified securities fraud class action against defendants. Defendants moved to dismiss the complaint, pursuant to Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act, for failure to plead fraud with particularity. The court noted that all securities fraud actions were subject to Rule 9(b) and that the Reform Act heightened Rule 9(b)s requirement for pleading scienter. Under the Reform Act, plaintiffs must "state with particularity facts giving rise to strong inference that the defendant acted with the required state of mind," by showing motive or opportunity to commit fraud. The court found that plaintiffs failed to meet this heightened requirement because plaintiffs argued that defendants were motivated by a desire to suppress criticism and this desire was insufficient to allege scienter. Judge Scheindlin KALNIT v. EICHLER QDS:02761952 Richard L. Kalnit, on behalf of himself and all others similarly situated, brings this uncertified securities fraud class action against MediaOne Group, Inc. ("MediaOne") and its directors, Frank M. Eichler, Robert L. Crandall, Charles P. Russ III, Pierson M. Grieve, Louis A. Simpson, Allan D. Gilmour, Charles M. Lillis, Grant A. Dove, John Slevin, Kathleen A. Cote and Daniel W. Yohannes (collectively the "Directors" or "individual defendants"). Plaintiff alleges that defendants violated Section 10(b) of the Securities and Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. @ 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. @ 240.10b-5, by fraudulently failing to disclose certain information in connection with a publicly announced, proposed merger between MediaOne and Comcast Corporation ("Comcast"). Plaintiff brings an additional claim against the individual defendants for controlling person liability pursuant to Section 20 of the Exchange Act. Plaintiff seeks damages for losses incurred as a result of defendants' alleged violations. Defendants move to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6), for failure to state a claim upon which relief may be granted, and pursuant to Fed. R. Civ. P. 9(b) and the Private Securities Litigation Reform Act of 1995 ("Reform Act"), 15 U.S.C. @ 78u-4 (1999), for failure to plead fraud with particularity. Defendants' motion is granted. Dismissal of a complaint pursuant to Rule 12(b)(6) is proper "only where it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle him to relief." Scotto v. Almenas, 143 F.3d 105, 109-10 (2d Cir. 1998) (internal quotations omitted). "The task of the court in ruling on a Rule 12(b)(6) motion is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998) (internal quotations omitted). Thus, in deciding such a motion, the court must accept as true all material facts alleged in the complaint and draw all reasonable inferences in the nonmovant's favor. See Thomas v. City of New York, 143 F.3d 31, 36 (2d Cir. 1998). Nevertheless, "[a] complaint which consists of conclusory allegations unsupported by factual assertions fails even the liberal standard of Rule 12(b)(6)." De Jesus v. Sears, Roebuck & Co., 87 F.3d 65, 70 (2d Cir. 1996) (internal quotations omitted). In deciding a Rule 12(b)(6) motion, the district court must limit itself to facts stated in the complaint, documents attached to the complaint as exhibits or documents incorporated in the complaint by reference. See Newman & Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 661 (2d Cir. 1996). However, in securities fraud actions, the court "may review and consider public disclosure documents required by law to be and which actually have been filed with the SEC...." Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991). Fed. R. Civ. P. 9(b) sets forth additional pleading requirements with respect to allegations of fraud. Rule 9(b) requires that "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." But, under Rule 9(b), "malice, intent, knowledge and other condition of mind of a person may be averred generally." Securities fraud actions are subject to the requirements of Rule 9(b). See Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1127 (2d Cir. 1994). However, the Reform Act heightened Rule 9(b)'s requirement for pleading scienter. See 15 U.S.C. @ 78u-4(b)(3)(A); see also Press v. Chemical Inv. Servs. Corp., 166 F.3d 529, 537-38 (2d Cir. 1999). As a result, in securities fraud actions, scienter may not be averred generally. Rather, plaintiffs must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." Press, 166 F.3d at 538 (quoting 15 U.S.C. @ 78u-4(b)(3)(A)); see also Chill v. General Elec. Co., 101 F.3d 263, 268-69 (2d Cir. 1996). Defendants' motion to dismiss is granted with leave to amend. Any amended complaint must be served and filed no later than twenty-one days from the date of the court Order. A conference is scheduled for January 27, 2000 at 4:30 p.m. A discussion of the ruling is available in New York Law Journal, January 3, 2000. MOUNT GLENWOOD: Edelman, Combs Sues Cemeteries on Racial Discrimination ----------------------------------------------------------------------- The Chicago law firm of Edelman, Combs & Latturner has filed a class-action suit against three cemeteries under common ownership by South Suburban -- Mount Glenwood Memory Gardens, Mount Glenwood Memory Gardens West, and Evergreen Hills Memory Gardens for business practices that discriminate against minorities. The case is Covington-Macintosh, et al. v. Mount Glenwood Memory Gardens, Inc., et al., 00 C The suit was filed in the U.S. District Court for the Northern District of Illinois. The defendants own and operate three cemeteries -- Mount Glenwood South, Mount Glenwood West and Evergreen Hills. The two Mount Glenwood cemeteries historically serviced African-Americans. Evergreen Hills has historically serviced Caucasians. The suit alleges that defendants maintained Evergreen Hills in decent condition, while allowing the Mount Glenwood cemeteries to fall into disrepair. The complaint alleges that defendants violated the federal Civil Rights Acts by contracting with minorities on a less favorable basis than Caucasians. The conditions at the Mount Glenwood cemeteries have already received widespread public attention from local news media. In August 1999, hearings on the matter were conducted by the Office of State Comptroller Dan Hynes. The suit also alleges that defendants enforced unreasonable rules and regulations at the Mount Glenwood cemeteries which hinder minority families from decorating gravesites and installing upright headstones. Contact: Daniel A. Edelman or John M. Broderick, both of Edelman, Combs & Latturner, 312-739-4200 or fax, 312-419-0379 NEWCASTLE UNITED: To Defend in Feb Magpie Fans' Claims Re Stadium Seats ----------------------------------------------------------------------- A court date has been set for Newcastle United to defend a claim against fans who are being forced to leave their regular stadium seats. Four thousand Magpie fans have been asked by the club to pay (GBP) 1,350 to keep their seats at the ground - which cost them less than (GBP) 500 - or move to the new upper tier of St James' Park at the end of the season. The Save Our Seats campaign, which is fighting the move, was at the High Court in Leeds to issue class action proceedings against the club to bar fans being moved to make way for corporate hospitality suites. The legal action sought an injunction preventing the club from depriving fans of their current seats, as well as damages for breach of contract and misrepresentation on the part of the club. Their request was upheld by the court, and a three to four day trial will be held in Newcastle, in February, to hear the case. The legal challenge of the bond-holders, who each paid (GBP) 500 five years ago to secure their seats for ten years, is being spearheaded by Jane Duffy, who was named as applicant on behalf of the bond-holders bringing the action. She said: "We are delighted the court case will be heard sooner rather than later, and we would ask any bond-holders upset by the club's plans, who have not yet done so, to get in touch on 0191-213 6015." The club says the price rise is to meet the cost of extra perks, including membership of a sports bar. It has offered the 4,000 the chance to move to the upper tier, currently under construction, for no extra cost with the added incentive of purchasing an extra seat if they wish. A spokesperson for the club said: "Eighty-seven per cent of bond -holders affected by the development have met with the club and selected their seats for next season. "The club regrets the legal action by a named bond-holder on behalf of a minority of those affected. "The club is keen this matter is resolved and sought the earliest possible court date." (The Northern Echo December 22, 1999) PUBLIC GUARDIANS: Daughter of Elderly Mother Sues over Neglect & Abuse ---------------------------------------------------------------------- A lawsuit filed on January 13 in Oakland charges that Alameda County social service employees are working with nursing homes to suppress complaints of neglect and abuse by elderly patients' families. The workers, known as public guardians, intimidate relatives of the sick and threaten to prevent them from visiting if they lodge complaints with state health officials, the lawsuit alleges. At issue in the lawsuit is the care of Eva Blacksher, an 85-year-old Berkeley widow and double amputee who suffers from dementia. The lawsuit, filed in U.S. District Court by Blacksher's daughter, Georgia Blacksher-Hill, 49, of Oakland, seeks $2.5 million for physical and emotional pain and suffering. "This is about incredible arrogance and violation of human rights and the law by public agencies that know that what they're doing is illegal," said Fremont attorney Susan Guberman-Garcia. County Counsel Richard Winnie denied any wrongdoing, saying public guardians "are not biased toward any particular individual" and are subject to scrutiny by the courts. Public guardians are appointed by judges to take over decision-making for infirm or disabled adults. Although it is not a class-action suit, Guberman-Garcia said other elderly patients and their families have undergone similar experiences. The suit claims public guardians and officials at Fremont HealthCare Center prevented Blacksher-Hill from visiting because she repeatedly complained about her mother's treatment, such as making sure she had dentures to be able to eat. Officials also never consulted with Blacksher-Hill about whether her mother should be transferred to other nursing homes, the suit said. "It's devastating," Blacksher-Hill said. "My mother is dying. She has been abused and tortured as if she's an inmate in prison and has committed a crime." Several years ago, another daughter of Blacksher granted conservatorship to a public guardian. The lawsuit said Blacksher was involuntarily transferred in November, under an assumed name, from the Fremont nursing home to Guardian of Elmwood in Berkeley with instructions from the public guardian's office that no family members were to visit her. Guberman-Garcia called the transfer, which occurred at night, a "kidnapping." "The public guardian cannot hide people in solitary confinement," she said. When Blacksher's family repeatedly asked about her whereabouts, public guardians refused to answer them, the lawsuit said. An assistant public guardian called Blacksher-Hill a "troublemaker" who had a "tendency to file complaints," the lawsuit said. Guberman-Garcia acknowledged that her client is "extremely pushy and won't take no for an answer." Officials at both nursing homes were unavailable for comment, as was Vicky Morris, a supervisor in the public guardian's office who is named in the suit. Another defendant, Linda Kretz, the director of the county's Department of Adult and Aging Services, which oversees the public guardian's office, did not return a call for comment. Alameda County Superior Court Judge Sandra Margulies ruled that Blacksher should have regular visits at Guardian of Elmwood as long as relatives are not disruptive. But Winnie said the judge did not hear any allegations that public guardians were allying themselves with nursing homes. (The San Francisco Chronicle, January 14, 2000) TOBACCO LITIGATION: NY Judge Oks $37M for Attys. In Philip Morris Case ---------------------------------------------------------------------- $$37,146,029 to attorneys who represented shareholders of Philip Morris Companies Inc. (PM) in two class action suits which charged the company with securities fraud for concealing the addictive properties of nicotine in cigarettes. U.S. District Judge Michael B. Mukasey also approved an award of $1,667,427 in costs for the attorneys. Kurzweil v. Philip Morris Companies Inc. et al., No. 94 civ2373 (MBM) (SD NY, Nov. 24, 1999); see Securities Litigation & Regulation Reporter, Sept. 9, 1998, P. 4. Judge Mukasey awarded the fees in connection with two class actions. One of the suits , Kurzweil et al. v. Philip Morris Companies Inc. et al., was filed in the Southern District of New York on behalf of all those who purchased shares of PM common stock between June 11, 1991, and May 6, 1994. The suit alleged that PM violated Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by concealing from investors material information regarding the addictive nature of nicotine in its cigarettes and by making misrepresentations concerning the addictive properties of nicotine and the company's manipulation of nicotine in its products. The suit was filed in April 1994, shortly after PM's former president, William Campbell, and the CEOs of six other tobacco companies testified under oath before the House Subcommittee on Health and the Environment that nicotine is not addictive. A separate suit, Lawrence et al. v. Philip Morris Companies Inc. et al., was filed in the Eastern District of New York against PM and four of its officers. It alleged that the defendants violated federal securities laws by failing to disclose that PM artificially inflated its financial performance, including earnings, revenues, unit volumes, and market shares, through an inventory management practice called "trade loading." The practice allegedly involved the shipment of more inventory to PM's direct customers than was necessary to satisfy consumer demand. PM addressed the problem by cutting its cigarette prices by 40 cents per pack in April 1993. The price cut caused the company's stock price to plunge by 25 percent, and the Lawrence suit was filed shortly thereafter. PM agreed to a $123 million settlement of both class actions in June 1998. The shareholders said at the time that it was appropriate to resolve both actions with a single settlement agreement because the actions arose from the same stock purchases. Judge Mukasey approved a plan for allocating the settlement proceeds to class members who suffered recognized losses at a hearing on Nov. 8. Counsel for the plaintiff shareholders asked for 30 percent of the settlement fund, or $37,146,029, in fees, and Judge Mukasey granted their request. In his Nov. 24 order awarding the fees, the judge rejected arguments that the court should apply a lodestar approach in determining the fees to be awarded. Under this approach, fees are based on reasonably hourly rates and then multiplied by a factor typically ranging between 1 and 5 to adjust for the difficulty of the case. Application of a lodestar approach to this case would entail use of a base figure of $15 million, an amount that would have to be multiplied to reflect the difficulty of the case, the judge explained. He also noted that the requested fee of $37 million is approximately 2.46 times the lodestar figure, and that multipliers of this magnitude have been approved in other securities fraud class actions. The Kurzweil plaintiffs are represented by Daniel W. Krasner, Jeffrey G. Smith, and Neil L. Zola with Wolf Hadenstein Adler Freeman & Herz, L.L.P., in New York; Zachary A. Starr with Starr & Holman, L.L.P., in New York; Charles D. Maurer of New York; and Pamela Tikellis with Chimicles, Jacobsen & Tikellis in Wilmington, DE. The Lawrence plaintiffs are represented by Richard A. Speirs and Jeffrey A. Klafter with Benstein Litowitz Berger & Grossman in New York; Harold Tyler with Patterson, Belknap, Webb & Tyler in New York; John E. Ryan with Kwiatkowski & Ryan in Floral Park, NY; Richard A. Lockridge with Schatz Paguin Lockridge Grindal & Holstein in Minneapolis; and Joseph Goldberg with Freedman Boyd Daniel Peifer Hollander Guttman & Goldberg in Albuquerque, NM. (Securities Litigation & Regulation Reporter, December 22, 1999) UNITED AIRLINES: IL Ct Oks Class for Suit over Delay at X’mas Eve 1997 ---------------------------------------------------------------------- According to Chicago Daily Law Bulletin of January 12, 2000, Judge Robert V. Boharic on January 11 granted the plaintiff's motion for class certification in the case. United Flight 1536, carrying 168 passengers, departed from Orange County, Calif., and was scheduled to arrive at O'Hare International Airport at 5 p.m. Instead, it was diverted to Milwaukee's Mitchell International Airport, where it remained on the runway for six hours. During that time, passengers were without food, water or functioning toilet facilities, said plaintiff attorney Todd M. Hanson of the Law Offices of Stackler and Holstein. According to the complaint, the passengers were abandoned in Milwaukee and had to find accommodations or make other arrangements to travel to their final destination. Allyson W. Rudman v. United Airlines, No. 98 CH 547. A status hearing in the matter is set before Boharic on Feb. 16. David R. Zeigler of Merlo, Kanofsky & Brinkmeier Ltd. represents United Airlines. Chicago Tribune of January 14, 2000 says that for almost two years, lawyers for United Airlines have been trying to quash a lawsuit filed by a passenger who alleges the Elk Grove Township-based airline "abandoned" more than 150 passengers when Flight 1536 to Chicago was diverted to Milwaukee on Christmas Eve 1997. Cook County Circuit Court Judge Robert Boharic rejected the airline's arguments to dismiss the suit and certified the case for class-action status. His decision may allow Allison Rudman, then a college student returning home for Christmas, and the 167 other passengers to obtain some compensation from United for the flight that turned into a nightmare when the jet was diverted to Mitchell Field because of bad weather in Chicago. According to court documents, it's a flight that mimics the ones that resulted in thousands of Northwest Airlines passengers being stranded for hours aboard planes at Detroit Metropolitan Airport in the 1999 New Year's Day snowstorm. Just like those passengers, United Flight 1536 passengers were left sitting on the tarmac in Milwaukee for hours, without food, water or working toilets, before being allowed to disembark just before midnight. And when the flight finally was canceled, Rudman and the other passengers were left standing in an empty terminal with no way to complete their trip other than to call friends or relatives to pick them up or find a hotel room on what was by then Christmas Day. "It was an all-nighter for Allison and her parents, whom she called to pick her up," said Todd Hanson, a member of the Chicago law firm of Stackler and Holstein and the lead counsel in the almost two-year-old case. It goes without saying that it also ruined Christmas Day plans for the family. "The case has been highly contested up to this point," Hanson said. "We are now in a position to obtain relief for a number of persons who were seriously aggrieved and who otherwise would have had no opportunity to be heard by the court." As a result, the tune United's lawyers have been playing may change. "Judge Boharic has given us the opportunity to see whether a settlement is a possibility or whether the case will go to trial," said Rudman's attorney. Too bad United just tried to crush the case. Those 168 passengers aboard Flight 1536 likely will always believe Congress needs to establish rules for the treatment of an airline's customers, just as it threatened to do after last year's meltdown in Detroit. Bill of rights: The experience of Rudman and the other passengers is the type of information that the U.S. Department of Transportation's inspector general's office says it wants to obtain. It is information that Sen. John McCain (R-Ariz.), chairman of the Senate Commerce and Transportation Committee, has asked the inspector general's office to collect in its review of implementation of the airlines' customer-service commitments. The commitments were made after Congress threatened to adopt a Passenger Bill of Rights that would have established standards for passenger treatment. In addition to reviewing implementation of the commitments, the inspector general's office said it wants to review the practice of overbooking flights and look at how to provide consumers access to the lowest fares. Consumers can obtain electronic forms at the IG Web site at http://www.oig.dot.govand a hard copy can be obtained by calling 1-800-884-9190. Other types of aviation complaints, such as canceled flights or lost baggage, are being collected by the Department of Transportation's Office of Aviation Consumer Affairs at http://www.dot.gov/airconsumer and the inspector general is evaluating the plans and the extent to which carriers have met all the commitments they have made. An interim report to Congress is due June 15 with a final report due Dec. 31. VALUE AMERICA: Abbey, Gardy Files Securities Suit in Virginia ------------------------------------------------------------- Abbey, Gardy & Squitieri, LLP gives notice on January 12 that a class action lawsuit was filed on January 10, 2000 in the United States District Court for the Western District of Virginia (Civ. No. 3:00-CV-00004) on behalf of purchasers of Value America, Inc. (Nasdaq: VUSA) stock in the April 7, 1999 IPO, or at any time between April 7, 1999 and December 28, 1999. The complaint charges defendants with violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, Section 10(b), 20 (a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Defendants include Value America, Craig A. Winn (former Chairman of the Board), Thomas Morgan (former CEO), Rex Scatena (former Vice Chairman) and Dean M. Johnson (former CFO). Among other things, plaintiff claims that the defendants issued materially false and misleading statements regarding the company's true operating condition and financial performance. Contact: Lee Squitieri, Esq. or James S. Notis, Esq., both of Abbey, Gardy & Squitieri, LLP, by e-mail at jnotis@a-g-s.com telephone: 800-889-3701 or 212-889-3700, fax, 212-684-5191 Y2K LITIGATION: Active Voice Defends Case In Indiana after MA, AL Caes ---------------------------------------------------------------------- Active Voice Corp., which is defending class actions in Massachusetts and Alabama, is also defending a previously unreported class action brought by an Indiana user of Active Voice's "Replay Plus" voice mail system (Leed Selling Tools Corp. v. Active Voice Corp., No. 82D03-9906-CP, Ind. Super., Vanderburgh Co.). The plaintiff is Leed Selling Tools Corp., which filed the lawsuit on June 16 in Vanderburgh County (Ind.) Superior Court. Leed said it purchased the Replay Plus system in August 1997 and still uses the system. Active Voice contacted the company in March to inform it that Replay Plus is not Year 2000 compliant, and offered "very special prices" for an upgrade to a Year 2000 program, according to the complaint. Active Voice offered a Year 2000 software patch, but Leed's local dealer estimated installation at $ 818, Leed complained. Leed is seeking damages for itself and all others similarly affected. The complaint listed four counts: unjust enrichment, breach of warranties, fraud and negligence. Leed alleges in the fraud count that Active Voice falsely represented that the product was "virtually foolproof," "flexible," extremely sophisticated," "the latest" in technology, "easy to maintain," and could be supported without on-site visits. Leed has asked the court to order Active Voice to provide free updates or upgrades, interest and other relief the court deems appropriate. The case is in discovery with a hearing on class certification issues tentatively set for February. The case has been assigned to Judge Scott R. Bowers. Leed is represented by Steve Barber of Barber, Hamilton & Shoulders in Evansville. 2 Other Class Actions Active Voice is defending two similar actions: H. Levenbaum Insurance Agency Inc. v. Active Voice Corp. (No. 98-3864, Mass. Super., Suffolk Co.) and Garrison and Sumrall v. Active Voice Corp. (No. CV 99 587, Ala. Cir., Montgomery Co.). Those actions are also in discovery. Website of Mealey Publications Inc. at http://www.mealeys.com(Mealey's Year 2000 Report, November 1999) ********* 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 publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *