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C L A S S A C T I O N R E P O R T E R
Friday, January 21, 2000, Vol. 2, No. 15
Headlines
BANK ONE: Abbey, Gardy Files Securities Suit in Illinois
BANK ONE: Entwistle Cappucci Files Securities Lawsuit in Illinois
BANK ONE: Schiffrin Barroway Files Securities Suit in Illinois
BROTHERHOOD OF LOCOMOTIVE: Retired Union Officials Lose ERISA Suit
CENDANT CORP: Chairman Bounced Back from Accounting Problem Gets $41M
COMMISSIONAIRES LAY-OFF: Ticket Writers Handed Their Walking Papers
HOME DEPOT: Investor Group Requests Data On Employment of Minorities
LEAD PAINT: Makers Not Liable under Market Share Theory, NY Ap Ct Rules
LEGATO SYSTEMS: Milberg Weiss Files Securities Suit in California
LUCENT TECHNOLOGIES: Chitwood Harley Files Securities Suit in NJ
MCKESSON, HBOC: Opt-outs Join to File Private Actions over Acquisition
MITSUBISHI MOTORS: Denies Employment Discrimination in IL Plant
MOBIL OIL: AOPA Members Advised Not To Join Legal Action Yet
MOBIL OIL: Aust Aircraft Owners Want Lawsuit Against Mobil Thrown Out
MUTUAL FUNDS: Claims Are Derivative; New Mgt, Not Dissolution Was Goal
NATIONAL MUTUAL: VA Sp Ct Throws Out $100M Judgment in Racial Bias Case
SHERIFFS: Lawsuits Challenge Bond Fees, Raise Constitutional Issue
SOIL CONTAMINATION: Daly City Residents Are Heard After 10 Yrs Battle
STYLING TECHNOLOGY: Rabin Peckel Files Securities Suit in Arizona
TOBACCO LITIGATION: Flight Attendants Plan to File Suits in Miami
VITAMINS SUPPLIERS: Chem Int’l Receives Cash As Settlement Agreement
*********
BANK ONE: Abbey, Gardy Files Securities Suit in Illinois
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Abbey, Gardy Squitieri, LLP, Faruqi Faruqi and Kenneth A Wexler and
Associates, filed a class action lawsuit in the United States District
Court Northern District of Illinois (Civ. No. 00C 0348) on behalf of
purchasers of Bank One Corp. stock during the period October 22, 1998
through and including November 10, 1999.
The complaint charges defendants with violations of Sections 10(b) and
20 of the Securities and Exchange Act of 1934, 15 U.S.C. 78j and 78t,
and Rule 10b-5, 17 C.F.R. 240.10b-5, promulgated by the SEC under
Section 10(b). Among other things, plaintiff claims that the defendants
issued materially false and misleading statements regarding the
company's true operating condition and financial performance.
Defendants include John B. McCoy, Thomas E. Reilly, Jr., Richard J.
Lehman, David J. Vitale, Richard W. Vague, Robert A. Rosholt, First USA
Bank, N.A. and Bank One Corp.
For additional information on this securities suit, you may contact
either of the following persons: Mark C. Gardy, Esq. Abbey, Gardy
Squitieri, LLP, 212 East 39th Street, New York, New York 10016,
telephone: 800-889-3701 or 212-889-3700 Fax: 212-684-5191 E-MAIL:
mgardy@a-g-s.com or Nadeem Faruqi, Esq. Lubna M. Faruqi, Esq. Faruqi
Faruqi, LLP, 415 Madison Avenue, 21st Floor, New York, New York 10017
Telephone: 212-986-1074 or 877-247-4292 Fax: 212-986-1792 E-MAIL:
faruqilaw@aol.com or Kenneth A. Wexler, Esq. Kenneth A. Wexler and
Associates, One North La Salle Street, Suite 2000, Chicago, Illinois
60602 TELEPHONE: 312-346-2222 FAX: 312-346-0022 E-MAIL:
kawexler@wexlerlaw.com
BANK ONE: Entwistle Cappucci Files Securities Lawsuit in Illinois
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Entwistle Cappucci LLP, a prominent New York law firm specializing in
securities litigation, filed a class action lawsuit against Bank One
Corp. and certain of its officers and directors in the United States
District Court for the Northern District of Illinois. The lawsuit was
brought on behalf of all persons who purchased Bank One common stock
between October 22, 1998 and November 10, 1999, inclusive.
The complaint charges Bank One and certain of its officers and directors
with violations of the Exchange Act. Specifically, the complaint alleges
that defendants issued a series of materially false and misleading
statements concerning the Company's financial condition and results of
operations. Because of the issuance of such false and misleading
statements, the price of Bank One common stock was artificially inflated
during the Class Period. Prior to the disclosure of the actual financial
condition of the Company, certain defendants sold tens of thousands of
shares of Bank One common stock to the unsuspecting investing public at
artificially inflated prices. These defendants realized over $7.4
million in proceeds from their insider trading activities.
For more details on the above mentioned securities lawsuit, you may
contact Entwistle Cappucci LLP, Shareholder Relations Dept., 400 Park
Avenue New York, New York 10022, Telephone: 212-894-7200, Telecopier:
212-894-7272 or via e-mail: mboyle@entwistle-law.com
BANK ONE: Schiffrin Barroway Files Securities Suit in Illinois
--------------------------------------------------------------
The law firm of Schiffrin Barroway, LLP, filed a class action lawsuit
in the United States District Court for the Northern District of
Illinois on behalf of all purchasers of the common stock of Bank One
Corp. from October 22, 1998 through November 10, 1999, inclusive. The
complaint charges Bank One and certain of its officers and directors
with issuing false and misleading statements concerning the business,
financial condition, earnings and prospects of the Company and its
wholly-owned subsidiary, First USA. For more details on this securities
suit, you may contact Schiffrin Barroway, LLP (Stuart L. Berman, Esq.)
toll free at 888/299-7706 or 610/667-7706, or via e-mail at
info@sbclasslaw.com
BROTHERHOOD OF LOCOMOTIVE: Retired Union Officials Lose ERISA Suit
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Retired officials of the Brotherhood of Locomotive Engineers (BLE) have
lost their suit against their union for reducing health benefits which
the officials say had been proffered as an incentive for early
retirement. Voyk et al. v. Brotherhood of Locomotive Engineers, No.
98-CV-3937 (6th Cir., Dec. 1, 1999).
The decision by a unanimous Sixth Circuit U.S. Court of Appeals panel
found BLE violated neither the breach of contract nor the fiduciary
duties provisions contained in the Employee Retirement Income Security
Act (ERISA).
In fact, the appellate court held that BLE did not owe the retirees any
fiduciary obligation at all because its amendment of the retirees'
health plan had not been made in a fiduciary capacity. "Under ERISA, an
employer is a fiduciary with respect to a plan only 'to the extent it
exercises discretionary authority or discretionary responsibility in the
administration of such a plan,'" the panel said. Since plan design
and/or amendment falls outside plan administration, the panel added, no
fiduciary duty had been breached.
Jim Voyk was one of many BLE officials who took early retirement in 1991
based on BLE's written and oral statements promising no-cost lifetime
health coverage. However, in 1994 BLE changed the plan and instituted a
$100 co-pay obligation. Voyk's consequent class action claimed their
right to no-cost coverage had vested and that BLE's co-pay amendment was
effectively a breach of contract.
The panel disagreed, citing the Sixth Circuit's ruling in Sprague v.
General Motors (1998). In Sprague, as in the case at bar, employees were
induced to take early retirement with the promise of specific benefits.
When those benefits were changed by the employers, the retirees sued.
However, in both cases written plan communications specifically warned
that the employer reserved the right to change the conditions of
benefits or to terminate the plan outright.
Under Sprague, the Sixth Circuit held that companies are only obligated
to provide benefits for life if they clearly make the promise in
writing. Since the BLE plan just as clearly reserved the right to modify
or terminate benefits and made no mention of benefits for life, BLE
could not be held liable for instituting the co-pay provision, the panel
held. (See Document Section D for the opinion.) (Pension Fund Litigation
Reporter, December 13, 1999)
CENDANT CORP: Chairman Bounced Back from Accounting Problem Gets $41M
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Henry Silverman, the chairman of Cendant, the US group that owns the
UK's NCP car park chain, bounced back from an embarrassing accounting
problem with a pay package worth $ 41 million last year. Mr Silverman
got $ 33.78 million in new share options and the rest in pay and bonus.
Overall he holds options worth $ 685 million, according to a company
filing released last night.
Cendant, which owns the Avis car rental brand, recently agreed to pay $
2.83 billion to settle a class action lawsuit brought by investors.
Cendant was sued after it revealed in 1998 that accounting
irregularities would force it to restate profits. The revelation caused
its share price to slump. (The Times (London), January 20, 2000)
COMMISSIONAIRES LAY-OFF: Ticket Writers Handed Their Walking Papers
-------------------------------------------------------------------
More than a dozen contracted bylaw cops were handed their walking papers
on January 19. Several Corps of Commissionaires officers gathered in the
lobby of a downtown municipal building, waiting to be officially told by
their employer that they've been laid off, effective immediately.
"They've already changed all the lock combinations," said Karin Simmons,
27, a part-time military police officer in the army reserve and formerly
one of the parking bylaw enforcement officers working under a corps'
contract with the city. "I just got told this morning," said a
grey-faced Robert Good, 21. "I guess I'm looking for another job now.
Nothing like this has ever happened to me before."
Corps CEO Brian Craig insist the dismissed ticket-writers knew two
months ago they'd be out of work. Paul John Trenholm strongly disagreed
with that statement, saying he and Simmons are in the market for some
legal help. "We're looking to file a class-action wrongful dismissal
suit," he said. "We're trying to contact everyone who was let go without
notice."
While both the corps and the city are remaining tight-lipped about
exactly how many commissionaires have been canned and why, Trenholm said
he's counted 13 dismissals in the past month. "The corps is taking
direction from the city to lay us off," he said. "The laid-off
commissionaires are being replaced by trainees, and we understand 20
commissionaires in total could be laid off."
City bylaw enforcement offices downtown were staffed on January 19 by
private security guards who prevented Simmons from retrieving her
personal effects from her locker. (The Edmonton Sun, January 20, 2000)
HOME DEPOT: Investor Group Requests Data On Employment of Minorities
--------------------------------------------------------------------
A group of Home Depot investors continues to press the retailer for
details on its hiring of minorities and women.
New York-based Interfaith Center on Corporate Responsibility has filed a
resolution with the Atlanta-based home improvement retailer, asking it
to expand its annual summary of diversity employment. The group, which
represents 20 investors who own about 284,000 shares, wants detailed
information, including departmental breakouts of the number of women and
minority workers.
Certain institutional investors have been asking Home Depot for
employment data since 1998, after the retailer settled a class-action
sex discrimination lawsuit for $ 104 million. The resolutions were
repeatedly voted down, but last year Home Depot voluntarily published a
summary of minority and female employment in its annual "social
responsibility report."
The summary breaks down employment by officers, managers, sales
associates and office workers. It also includes the employment growth in
each of those categories.
But the Interfaith Center on Corporate Responsibility, which has taken
on social issues ranging from tobacco to sweatshops, wants an employment
report that is "not realistic," according to Home Depot.
"When you're hiring 1,000 to 2,000 people a week, the numbers change
rapidly," said Suzanne Apple, vice president of community affairs. "We
have explained our commitment to diversity to (these shareholders), and
we think our efforts at recruiting and retaining employees is more
meaningful than just a snapshot of data at any given time." Apple said
Home Depot will publish a new report on minority and female hiring prior
to the company's annual shareholder meeting in May.
The newest resolution coincides with a racial discrimination lawsuit
filed this month against the company by employees at a Michigan store.
Twelve black employees in metro Detroit allege they faced discrimination
in hiring and promotions. Home Depot denies the allegations. (The
Atlanta Journal and Constitution, January 20, 2000)
LEAD PAINT: Makers Not Liable under Market Share Theory, NY Ap Ct Rules
-----------------------------------------------------------------------
A state appeals court has ruled all manufacturers of lead pigment cannot
be held proportionately responsible for damages in lead poisoning cases
when the specific maker of a specific lead product cannot be identified.
In a first-of-its-kind decision in New York, the state Supreme Court
Appellate Division in Rochester ruled last month the "market share
theory" of liability cannot be applied in lead poisoning cases.
The market share theory of liability was first adopted by the state's
highest court in allowing manufacturers of DES (diethylstilbestrol) to
be held proportionately responsible for medical problems suffered by
women whose mothers took the drug while pregnant. The Court of Appeals
decided in that case the market share theory of responsibility was an
appropriate remedy for a unique situation.
In a decision released Dec. 31, the Appellate Division rejected an
attempt to apply the same standard in lead-paint poisoning cases based
on the facts of a child poisoning case from Erie County. Justice Leo
Hayes from Syracuse wrote the decision in which he detailed how lead
poisoning cases differ from DES cases.
The case before the court involved allegations a toddler had become ill
in 1992 after ingesting lead-based paint chips and inhaling dust from
the deterioration of lead-based paint applied to the walls of the
family's residence.
His parents filed suit against all manufacturers and their successors
involved in the manufacture of white lead carbonate from 1926, the year
the house in which the family lived had been built, to 1955, the year
lead-based paint was no longer sold for interior residential use.
They were unable to identify the manufacturer of the white lead
carbonate found in their residence, but contended all manufacturers
should be held responsible under a variety of legal theories, including
the market share theory.
Hayes said the only factor common to the DES case and the lead paint
case was the inability to identify the actual manufacturer of the
injury-causing product. Other factors distinguish between the two types
of cases, he wrote.
In the DES case, there were about 300 known manufacturers of DES subject
to liability and the Court of Appeals limited the case to only those who
marketed the drug for pregnancy use, the judge wrote. But a national
market is not as easily identified in lead poisoning cases and there are
lead compounds other than white lead carbonate found in paint products,
he added.
The DES case also was able to identify a narrow time period in which to
apply the market share theory based on when the mothers had ingested the
drug. By contrast, Hayes noted the lead poisoning case covered a period
from 1926 to 1955 and defendants that may have been out of the business
at the time the paint in question was used in the victim's home.
Third, Hayes noted DES was an identical chemical compound regardless of
the various manufacturers. That's not the case with lead-based paint,
which contains varying amounts and different kinds of lead pigments, the
judge wrote.
Fourth, DES manufacturers had exclusive control over any risk posed by
their product since there was no change in the drug from manufacture to
ingestion by a patient. That's not the case with manufacturers of lead
pigment, Hayes said.
A final factor is the nature of the injuries allegedly caused by the
product, the judge said.
The plaintiffs in the DES case had "signature injuries" linked to the
drug, but no such "signature injuries" exist in lead poisoning cases,
Hayes said. The child's injuries could have been caused by some source
other than lead or by a source of lead other than lead-based paint, he
added. (Syracuse Newspapers, January 10, 2000)
LEGATO SYSTEMS: Milberg Weiss Files Securities Suit in California
-----------------------------------------------------------------
Milberg Weiss commenced a class action in the United States District
Court for the Northern District of California on behalf of purchasers of
Legato Systems, Inc. common stock during the period between October 21,
1999 and January 19, 2000.
The complaint charges Legato Systems, Inc. and certain of its officers
and directors with violations of the federal securities laws by making
misrepresentations about Legato's business, earnings growth and
financial statements and its ability to continue to achieve profitable
growth. During the Class Period, the Individual Defendants (Louis C.
Cole, Kent D. Smith, Stephen C. Wise and Nora M. Denzel), who controlled
and were senior officers of Legato, engaged in the scheme to conceal
Legato's badly flagging growth to prevent the decline in the price of
Legato stock in order to:
(i) use Legato's artificially inflated stock as currency to fund the
Company's acquisition of companies in stock-for-stock
transactions; and
(ii) receive $11.5 million in insider trading proceeds. As Legato
continued to report "record" profits and defendants
created the fiction that they were achieving 150% growth in net
income, the price of Legato stock reacted, rising to a Class
Period high of $79-1/4 on December 23, 1999.
Defendants sought to profit from Legato's fictional record profits and
purported growth and sold over 178,000 shares in just six days for total
proceeds of $11.5 million. In order to inflate the price of Legato's
stock, defendants caused the Company to falsely report its results for
the third quarter of 1999 and continued to attempt to improperly
recognize revenue throughout the Class Period. On January 19, 2000,
Legato dropped an atomic bomb on investors, revealing that it would
restate its third quarter earnings and that it would fall desperately
short of meeting its forecasted earnings for the fourth quarter 1999.
This revelation caused Legato stock to be halted on NASDAQ and
ultimately to plummet to $29 per share in after-hours trading, a decline
of 63% from its Class Period high.
For additional information on this securities suit, you may contact
William Lerach or Darren Robbins of Milberg Weiss at 800/449-4900 or via
e-mail at wsl@mwlbhl.com
LUCENT TECHNOLOGIES: Chitwood Harley Files Securities Suit in NJ
----------------------------------------------------------------
Chitwood Harley has filed a securities class action in the United States
District Court for the District of New Jersey on behalf of a class of
persons and entities, other than Defendants, who purchased Lucent
Technologies, Inc. common stock between October 27, 1999 and January 6,
2000, inclusive.
The above mentioned securities suit alleges, among other things, that
Lucent and certain of its officers and directors have violated certain
provisions of the Securities Exchange Act of 1934. The complaint alleges
that Defendants made misrepresentations about the Company's business,
earnings growth, and financial statements, as well as its ability to
continue to achieve profitable growth in order to artificially inflate
and maintain the price of Lucent's stock. The complaint alleges that as
a result of these misrepresentations and omissions made by the Company,
the price of Lucent's common stock was artificially inflated during the
Class Period. The complaint alleges that on January 6, 2000, Lucent
revealed that results for the first fiscal quarter would fall short of
analysts' expectations. This revelation caused the price of Lucent's
stock to drop more than $20 per share.
For additional information on this action, you may contact Nichole T.
Browning, CHITWOOD HARLEY, 2900 Promenade II, 1230 Peachtree Street,
N.E., Atlanta, Georgia 30309 (888) 873-3999 (toll-free) or by e-mail at
ntb@classlaw.com or visit website at http://www.classlaw.comfor more
information about the firm.
MCKESSON, HBOC: Opt-outs Join to File Private Actions over Acquisition
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Several large McKesson Corporation ("McKesson") (NYSE:MCK) shareholders
are filing individual proxy and breach of fiduciary duty claims arising
from last year's disastrous merger with HBO & Company ("HBOC"). These
current and former shareholders of McKesson intend to opt-out of a
massive class action filed last year on behalf of both McKesson and HBOC
shareholders and other securities and option purchasers in which the
district court has denied separate representation to these McKesson
shareholders. These McKesson shareholders believe that their interests
conflict with those of the other purported "class members," including
shareholders of the fraud-riddled HBOC. In addition, proxy and breach of
fiduciary duty claims, the class action fraud claims have a much higher
standard of proof, more stringent pleading requirements and unique
defenses.
These individual proxy and breach of fiduciary duty claims are being
prosecuted by William Lerach of Milberg Weiss Bershad Hynes & Lerach LLP
("Milberg Weiss") and Michael Freed of Much Shelist Freed Denenberg
Ament & Rubenstein, P.C. ("Much Shelist"). The claims are being
prosecuted on a contingent fee basis and plaintiffs' counsel will
advance and be responsible for all costs and expenses of prosecuting the
action. Investors participating in the suits will have no responsibility
for fees or costs if the case does not result in a recovery.
On April 28, 1999, McKesson shocked investors when it revealed that
prior improper revenue recognition at HBOC required restating McKesson's
financial results, resulting in a reduction of previously reported 1999
fiscal year (ended March 31, 1999) earnings. As a result, McKesson's
stock collapsed by $31 per share in one day. When McKesson revealed
additional improper revenue recognition and that the restatements would
be larger than previously announced, the stock fell to $18-9/16. Owners
of McKesson stock when McKesson made the disastrous HBOC acquisition
have suffered very substantial damage. After this debacle, McKesson HBOC
announced the appointment of new executive management, the dismissal of
Charles W. McCall and the resignations of President Mark A. Pulido and
Chief Financial Officer Richard H. Hawkins.
During 1999, several class action suits were filed arising out of this
situation on behalf of both McKesson and HBOC stock purchasers both
before and after the merger. Unfortunately, the federal district court
overseeing the action has denied separate representation to the McKesson
shareholders who received McKesson's false November 27, 1998 proxy
statement.
According to Milberg Weiss, plaintiffs in these private actions believe
this ruling is prejudicial to the McKesson shareholders who have these
proxy claims for several reasons. McKesson shareholders at the time the
HBOC merger was approved are the persons most harmed by the HBOC
acquisition as it damaged what was a very successful business. The HBOC
shareholders on the other hand, benefitted by the merger. Further,
McKesson shareholders who received the proxy to vote on the HBOC
acquisition do not need to allege or prove fraud, as open market
purchasers of McKesson stock after the merger must do. As a result, our
clients believe that the proxy claims of the McKesson shareholders who
received the proxy to vote on the HBOC merger are the most valuable
federal law claims. Yet these federal claims are being lumped in with
class action suits brought by HBOC shareholders and purchasers of
McKesson HBOC stock before and after the merger - and others. In
addition, the McKesson shareholders who received the proxy to vote on
the HBOC acquisition have unique and valuable breach of fiduciary duty
and negligence claims under state law which deserve separate
representation and prosecution.
Plaintiffs in private actions believe the McKesson shareholders on
November 27, 1998 who were damaged by the HBOC acquisition will be much
better served by pursuing their own non-class action suits with separate
counsel.
These new suits will:
* charge that McKesson, HBOC, certain of their officers and directors,
certain financial advisors and HBOC's auditors violated Section 14(a)
of the 1934 Act;
* charge that the November 27, 1998 Proxy Statement omitted material
information concerning the fairness of the transaction, the
sufficiency of McKesson's due diligence investigation and true
condition of HBOC's business, earnings, growth and financial
condition;
* charge that by soliciting votes through this false Proxy Statement,
defendants consummated a merger with HBOC to the detriment of long-
term McKesson shareholders, grossly diluted McKesson shareholders'
equity and damaged McKesson's business;
* seek to hold responsible the financial advisors, accountants and
lawyers who substantially participated in the solicitation of proxies
and approval of McKesson shareholders of the merger with HBOC; and
seek to set aside the merger with HBOC, rescind the issuance of
common stock in connection with the merger to HBOC shareholders or
recover monetary damages to compensate the existing shareholders of
McKesson stock for their damages.
If you wish to participate in these proxy/breach of fiduciary duty
claims, you can sign-up online at http://www.milberg.com/mckessonor
http://www.muchlaw.com/mckessonsubject to the law firms' agreement to
represent you. If you wish to discuss these actions or have any
questions concerning individual proxy claims or your rights or
interests, contact Milberg Weiss shareholder relations at 800/449-4900
or via e-mail at wsl@mwbhl.com or Michael Freed and Carol Gilden of Much
Shelist at 312/346-3100, or via e-mail at mfreed@muchlaw.com or
cgilden@muchlaw.com by February 10, 2000.
MITSUBISHI MOTORS: Denies Employment Discrimination in IL Plant
---------------------------------------------------------------
Mitsubishi Motor Manufacturing of America has responded to a suit
alleging racial discrimination at an Illinois plant by saying
"discrimation of any kind has no place in our workplace." The Mitsubishi
Motors Corp unit said: "We have policies and procedures to address any
violations to our zero tolerance policy. "Our policies and procedures
for investigating any complaints have been scrutinized both internally
and by third parties. These policies to support zero tolerance are
working.
Earlier, officials representing employees at the company's assembly
plant in Normal, Illinois said they are seeking millions of dollars in
damages for alleged racial discrimination.
The suit was filed by nine current and former employees, but if it is
granted class-action status, more than 200 current and former employees
would become plaintiffs, said Patricia Benassi, one of the lawyers
involved in a sexual harassment suit against MMMA that led to it paying
out 34 mln usd.
According to the lawsuit filed in the District Court in Peoria,
Illinois, the auto company made it clear that "African-Americans were
unwanted and despised." The suit alleges that the company did nothing in
spite of repeated complaints, including some filed through the United
Auto Workers union grievance procedure. (AFX - Asia, January 20, 2000)
MOBIL OIL: AOPA Members Advised Not To Join Legal Action Yet
------------------------------------------------------------
The Aircraft Owners and Pilots Association (AOPA) advised its members
not to join a proposed class action against Mobil over Australia's fuel
contamination crisis.
A class action was launched in the Federal Court by commercial law firm
Ebsworth and Ebsworth on behalf of two aircraft operators, with more
aviators expected to join the suit.
AOPA president Bill Hamilton said his members had been advised against
joining the action yet because compensation talks with Mobil were
continuing. "AOPA's primary aim is and remains to get its members'
aircraft safely back in the air as quickly as possible," Mr Hamilton
said in a statement. "AOPA is also committed to ensuring that its
members receive just and fair compensation for any loss they have
suffered relating to the fuel contamination affecting piston engined
aircraft."
He said the AOPA had retained class action specialists Slater and Gordon
to assist them in an advisory capacity should negotiations with Mobil
break down. The AOPA said if negotiations were unsuccessful they would
coordinate a class action to be conducted by Gordon and Slater.
The two aircraft operators are suing Mobil for an undisclosed amount of
compensation over Mobil's avgas crisis, which has grounded 5,000
aircraft across Australia.
MOBIL OIL: Aust Aircraft Owners Want Lawsuit Against Mobil Thrown Out
---------------------------------------------------------------------
Aircraft operators will attempt on January 21 to thwart a Federal Court
class action against Mobil over Australia's fuel contamination crisis.
Aircraft Owners and Pilots Association (AOPA) president Bill Hamilton
said the lawsuit, by Sydney firm Ebsworth and Ebsworth, could hinder
compensation negotiations it is holding with the oil giant.
Mr Hamilton said the association had between 250 and 300 claimants
already while the Ebsworth and Ebsworth lawsuit only had two. "Our
preference is for negotiated settlements, but we have to be absolutely
prepared to support our members if we are forced to litigation," Mr
Hamilton told AAP. "What we don't want to see is a number of little
actions around the countryside causing Mobil to pull the shutters down
and hinder a rapid settlement for all those people that have been
financially, so disastrously affected." "So we'll be saying to Justice
Beaumont (in the federal court) that they don't represent a class, we do
and we'll be asking for orders that we continue with the negotiations
with Mobil."
Meanwhile, uncontaminated aircraft could be back in the air within days,
Mr Hamilton said. He was confident contamination tests would be
validated by Monday. However, it could take months before contaminated
aircraft were ready to fly again, Mr Hamilton said. He also anticipated
a world-wide shortage of spare parts and licensed aircraft maintenance
engineers as a result of the contamination crisis. "This completely
unprecedented demand for fuel pumps... overhaul kits and fuel injection
components inevitably they will be, and in many cases all ready are, in
short supply, even in the US let alone Australia," Mr Hamilton told AAP.
He said the crisis was costing the industry $5 million a day, with many
businesses already forced to close down.
One aircraft owner claimed safe aircraft had been grounded because the
Civil Aviation Safety Authority (CASA) was too busy with the
contamination issue to handle regular paper work.
Aerolink Air Services owner Danny Ryan told AAP one of his turbine
aircraft, which he hires out at $1,000 an hour, has been grounded for
three weeks. He said CASA had told him they were too busy to process
standard paper work which would see him flying again. "We were told they
can't look at it because they are too busy with the fuel crisis," Mr
Ryan said. "We have an aircraft out there that is capable of carrying
one and a half tonne, which everybody would just love to have out
working, and it is sitting on the ground and it has been sitting there
for three weeks." He says he is losing $3,000 profit a day on that one
plane.
Ebsworth and Ebsworth partner Simon Liddy said he was unaware the AOPA
wanted the class action thrown out. He would not comment, other than to
say the matter would be decided in court. (AAP Newsfeed, January 20,
2000)
MUTUAL FUNDS: Claims Are Derivative; New Mgt, Not Dissolution Was Goal
----------------------------------------------------------------------
Plaintiff brought class actions against three closed-end mutual funds on
behalf of the shareholders. The funds have been trading at a discount to
their respective net asset values. Plaintiff claimed that defendants had
failed to take adequate steps to reduce this discount, thereby breaching
their fiduciary duties to the shareholders. Defendants moved to dismiss
the complaints on the ground that plaintiff's claims were derivative and
she had failed to exhaust intra-corporate remedies or to plead futility.
Plaintiff argued that her claims were not derivative because the remedy
sought - dissolution of funds - would not benefit the corporation. The
court agreed with defendants because plaintiff did not seek dissolution,
instead, she asked the court to become involved with the board of
director's day-to-day management.
Judge Martin
MARQUIT v. DOBSON QDS:02761980 - Plaintiff brought these three class
actions against three closed end mutual funds - The Central European
Equity Fund, The Spain Fund, and The New Germany Fund - and their
respective managers, investment advisors, and directors. The Central
European Equity Fund and The New Germany Fund are managed by Deutsche
Bank and The Spain Fund is managed by Alliance Capital.
These three funds have been trading at a discount to their respective
net asset values ("NAVs") for years. Plaintiff claims that defendants
have failed to take adequate steps to reduce this discount, because such
steps would reduce the number of shares outstanding in the fund, thereby
reducing the amount of fees paid to the funds' investment advisors and
managers.
Plaintiff has filed a class action on behalf of each of the three funds'
shareholders alleging that defendants have breached their fiduciary
duties to the funds' shareholders pursuant to the Investment Company Act
of 1940 and Maryland common law. Each complaint seeks, inter alia, a
declaration that the defendants have breached their fiduciary duties,
monetary damages, punitive damages and an order "Directing the
defendants to forthwith take serious steps to reduce the discount to the
NAV at which the Fund trades."
Defendants move to dismiss the complaints on the grounds that (1)
plaintiff's claims are derivative and she has failed to exhaust
intra-corporate remedies or plead futility; (2) plaintiff has failed to
overcome the business judgment rule presumption; and (3) plaintiff has
failed to allege personal misconduct against the directors who are not
interested. Since the court concludes that the complaint must be
dismissed because the claims asserted are derivative, it will not
consider the other grounds for dismissal.
Discussion
Under the Investment Company Act, the law of the state in which the
corporation is incorporated governs whether a claim is derivative or
direct. Kamen v, Kemper Fin. Servs., Inc., 500 U.S. 90, 97-99, 111 S.
Ct. 1711, 1716-18 (1991). Since all three funds were incorporated in
Maryland, Maryland law determines whether plaintiff's claims are
derivative or direct in nature. Under Maryland law, where the directors
are alleged to have violated a right that belongs to the corporation and
it affects the rights of all shareholders, the action is derivative and
not direct. Waller v. Waller, 49 A.2d 449, 453-54 (Md. 1946).
In Strougo v. Scudder, Stevens & Clark, Inc., 964 F. Supp. 783 (S.D.N.Y.
1997), Judge Sweet applied Maryland law to a case where a closed end
mutual fund's NAV price declined as the result of a rights offering. The
plaintiff alleged that the fund's manager and directors made the rights
offering to increase the net assets of the fund, thereby increasing the
management and advisory fees paid to the manager. Judge Sweet held that
such a claim was derivative and not direct, because the claims related
to defendants' manipulation of the fund's overall capitalization and,
therefore, belonged to the corporation. Id. at 791.
Strougo is directly on point. Although plaintiff claims, that the Second
Circuit's decision in Eisenberg v. Flying Tiger Line, Inc., 451 F.2d 267
(2d Cir. 1971) compels a different result, that case is distinguishable.
The Second Circuit in Eisenberg held that under New York law, an action
to overturn a reorganization and merger was representative and not
derivative. In Eisenberg, plaintiff held shares in a corporation, Flying
Tiger, that was merged into an affiliated entity, FTL. The shareholders
of Flying Tiger approved the merger and in exchange for their Flying
Tiger shares received shares of FTL. Plaintiff claimed that the Flying
Tiger shareholders were relegated to a minority holding in FTL with no
voting influence. The circuit court held that this was a representative
action, because the right to vote on the affairs of Flying Tiger never
belonged to the corporation and, therefore, the corporation was not
enforcing its right. Id. at 269.
In this case, there is simply no right that runs directly to the
shareholders or that is distinct from the corporation's right. Plaintiff
claims that because the remedy she seeks is dissolution of the funds,
her claim can not be derivative since this would not benefit the
corporation. It is true that a derivative claim must typically benefit
the corporation, Eisenberg at 270, but the plaintiff's complaints do not
seek the dissolution of the funds. Rather, the complaints ask the Court
to become involved in the day-to-day management of the funds and to
determine what steps the funds should take to bring the share price in
line with the NAV. These are decisions which are generally left to
management under the direction of the board of directors. The
consequences effect all shareholders equally and management's failure to
take appropriate action harms the corporation not the individual
shareholders.
Because plaintiff's claims are derivative, they must be pled in
accordance with FRCP 23.1. Rule 23.1 requires plaintiff to first seek
action from the board of directors or to show that such a request would
be futile. See also Parish v. Maryland and Virginia Milk Producers
Assoc., 242 A.2d 512, 545 (Md. 1968) (holding that Maryland law requires
the same). In this case, plaintiff did not seek action from the funds'
boards before instituting these actions, and she has not pled that such
a request would be futile.
Nor does it appear from the face of any of the complaints that a demand
would be futile. Under Maryland law, at least two disinterested
directors are necessary to consider a shareholder demand. Strougo, 964
F. Supp. at 795. Therefore, a shareholder demand would not be futile if
the fund had at least two disinterested directors. A director is
interested if he is employed by the fund's manager or investment
advisor. Strougo, 964 F. Supp. at 794; see also Rales v. Blasband, 634
A.2d 927, 936-37 (Del. 1993).
However, the fact that the investment advisor and/or manager appointed
the director or the fact that the director receives remuneration from
the fund is not enough to make a director interested. Id. Nor is the
fact that there are other business relationships among the directors
sufficient to compel the conclusion that the directors are not
disinterested. Strougo, 964 F.Supp. at 794. While Judge Sweet found in
Strougo that allegations that the directors received substantial
remuneration from their service on the boards of other funds managed by
the same adviser would constitute interest, there are no such
allegations here.
The New Germany Fund and The Spain Fund both have more than two
disinterested directors who have no association with any other fund
managed by Deutsche Bank. While the Central European Equity Fund has no
director who does not serve on the board of at least one other fund
managed by Deutsche Bank more than two of these serve only on one other
board and there is no allegation that their compensation is so
substantial that it would have an impact on their independence. It is
doubtful that the mere fact that a director serves on the board of two
funds would be sufficient to compel the conclusion that he was not
disinterested. For the foregoing reasons the complaints are dismissed.
(New York Law Journal, January 10, 2000)
NATIONAL MUTUAL: VA Sp Ct Throws Out $100M Judgment in Racial Bias Case
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A divided Virginia Supreme Court threw out a $100 million judgment
against Nationwide Mutual Insurance Co. in a racial discrimination
lawsuit filed by a fair-housing organization. The court ruled 4-3 that
Housing Opportunities Made Equal could not bring its lawsuit because it
was not injured by the Nationwide's alleged discrimination against
minorities in issuing homeowners insurance. ``HOME itself has not
suffered any denial of homeowners insurance and cannot claim injury
based upon such a denial,'' wrote Chief Justice Harry Carrico.
A jury found in 1998 that Nationwide denied homeowners coverage to black
applicants while approving insurance for whites under similar
circumstances. HOME claimed during the trial that the company's
marketing efforts were targeted to ZIP codes in predominantly white
areas while black neighborhoods were excluded - a practice known as
``redlining.''
The fair housing group had 15 pairs of people - one black and one white
in each case - pose as homeowners seeking insurance from Nationwide. In
seven of the 15 cases, HOME said, the whites were quoted a premium and
the blacks were not. ``But the testers suffered no recognizable
injury,'' Carrico wrote. ``They had no bona fide interest in purchasing
insurance from Nationwide.''
In a dissenting opinion, the court's minority said a 1991 amendment to
the state's fair-housing law gives groups like HOME standing to sue, but
even they found the verdict excessive. ``I would hold that the jury's
award of punitive damages in the amount of $100,000,000 is so excessive
as to shock the conscience of this Court,'' Justice Leroy Hassell wrote
for the minority. ``We're obviously pleased by the decision,'' said
Nationwide spokesman John Millen.
SHERIFFS: Lawsuits Challenge Bond Fees, Raise Constitutional Issue
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Two federal class-action lawsuits have been filed against the sheriffs
of DuPage and Kane Counties, alleging that an administrative fee
assessed against accused criminals when they post bond is
unconstitutional. The lawsuits were filed late January 18 in federal
court in Chicago on behalf of Richard Ringswald, 49, who was arrested in
DuPage in 1999, and Anthony Coleman, 22, who was arrested in Kane County
in October 1998.
Both had bond set by circuit court judges. But when they sought to post
bond, Ringswald was assessed an additional $15 by the DuPage County
sheriff and Coleman was ordered to pay an additional $11 by Kane County
Sheriff Ken Ramsey's office.
Lawyers for Coleman and Ringswald say there are many other individuals
who were affected by the fees, which have been in place for a few years.
They have asked a judge to certify as a class all affected individuals.
The plaintiffs are also seeking unspecified monetary damages.
In an interview last year on the subject, Ramsey said the bail surcharge
of $11 was approved by the Kane County Board in 1998 to help defray the
costs of processing short-term inmates. Ramsey made reference to a
little-known state law that allows sheriffs to collect $1 for taking
"special bail." The law also allows for that fee to be increased if such
an increase is justified "by an acceptable cost study showing that the
fees . . . are not sufficient to cover the costs of providing the
service."
Ramsey and other sheriffs throughout the state have cited this law as
justification for assessing higher fees. But Illinois Atty. Gen. Jim
Ryan, in a memorandum to the Livingston County state's attorney in 1997,
said he did not believe the law referred to criminal bonds, but rather
to civil matters, such as when the sheriff is called on by private
individuals to serve someone with a subpoena or an eviction notice. "It
may be noted that we have located only two reported cases in the United
States regarding the authority of the sheriff to assess an additional
fee for a bail bond, and in those cases the courts have rejected the
procedure," Ryan said in the letter.
The Ryan letter was made part of a court record in a Peoria case brought
by individuals waging a state court challenge to the fee. The letter,
which Ryan made clear was only an opinion, was made available to the
Tribune by lawyers for Ringswald and Coleman.
A state appellate court panel in Peoria in a June 1999 opinion refused
to dismiss the lawsuit brought by plaintiffs in that case.
The cases filed in Chicago allege that the fee is unconstitutional
because it improperly gives a sheriff the power over bond amounts, which
only judges have authority to set, said plaintiff's lawyer Kevin Peters,
of Chicago. As such, the fee violates the separation of powers doctrine
of the U.S. Constitution, the lawsuit alleges.
The lawsuit also alleges that the fees violate the due-process clause
and equal protection clauses of the U.S. Constitution. The fee is not
assessed against accused suspects who are able to post bond at a police
station, before ever going to jail, Peters noted. "This fee is not
authorized by any state law and amounts to a criminal penalty that is
imposed without due process of law on persons who are presumptively
innocent of any offense," the lawsuit alleges. (Chicago Tribune, January
20, 2000)
SOIL CONTAMINATION: Daly City Residents Are Heard After 10 Yrs Battle
---------------------------------------------------------------------
Basilia de Guzman reached inside her duffel bag, riffling through dozens
of plastic bottles filled with a lifetime of prescription pills.
Synthroid. Beconase. Codine. Methocarbamol. Nitroglycerine.
Guaifen-Phenylprop. Tylenol. Tagamet. Promethazine. "Oh, I take many,
many drugs," the 68-year-old allows with a sigh. "I can't remember when
I didn't take medicine for something or another. I'm sick from head to
toe."
Guzman and dozens like her living at the Midway Village housing project
in Daly City have long suffered from health problems they believe are
caused by carcinogens in contaminated soil beneath their homes. Their
complaints have been dismissed by the courts and largely ignored by
county, state and federal officials.
The Chronicle says that after its report about defective genes showing
up in most of the 58 residents tested, authorities began showing a new
interest in Midway Village. Officials from the Agency for Toxic
Substances and Disease Registry, which analyzed the DNA at the
residents' request, said they will revisit the cleanup issue. And
Assemblyman Kevin Shelley, D-San Francisco, said his office will ask the
agency for more studies at the site. "Most of us are taking so many
medications we've lost count," says Lula Bishop, 54, a Midway Village
tenant for 23 years. "We have stomach problems, we're depressed, we're
nervous and we're in constant pain. Me, I spent a lot of time in bed."
In a cluttered corner of the activist's tiny living room, notebooks,
manila folders and computer files hold years of scribbled notes, letters
and phone messages documenting the decade-old fight.
Ten years ago, state and San Mateo County officials told residents that
the ground under Midway Village was contaminated with PNAs, or
polynuclear aromatic hydrocarbons, which have been linked to cancer and
other illnesses. They also learned the complex is located next door to a
state Superfund site owned by Pacific Gas and Electric Co.
Since then, many of Midway Village's 150 families have been fighting to
clean up their neighborhood. A small, hardy contingent holds regular
meetings, stages protests and badgers government officials in hopes of
leaving behind the neighborhood they say is making them sick.
According to The Chronicle, in court documents and in interviews with
The Chronicle dating back to the early '90s, residents have complained
of recurring, mysterious symptoms, including skin rashes, bloodshot
eyes, vomiting and blood in their urine. A few say they wake up gasping
for air at night.
Others cite memory loss, troubled pregnancies -- including stillbirths
-- and fear that their exposure to poisons in the soil has left them
prone to cancer. In one building alone, residents claim, there have been
16 miscarriages.
The residents are demanding money for medical bills, they say, that have
been piling up as a result of the toxic soil. Most important, they want
those responsible to pay for what they have done wrong.
Greenaction, a San Francisco health and environmental justice group,
took up the residents' plight about two years ago. But some are too
tired or too sick to continue the battle. Patricia Redwood, a mother of
three who moved to Midway Village about 11 years ago, was diagnosed with
cervical and uterine cancer in the mid-1990s. Shortly after, she had a
miscarriage. Redwood also suffers from "constant rashes all over her
body," said Ken Barnes, Redwood's physician in San Francisco. "I've
never seen anything like this," he says. "There's something making
Patricia very sick. And I don't know what that is."
The contamination dates back to the turn of the 20th century. PG&E
operated a gas plant in the area, which shut down in 1913. PNA-laden
waste from the old gas plant was used to fill the ground beneath nearby
military housing during World War II. San Mateo County rebuilt the
housing project in 1976 with federal money. No soil tests were done at
the time.
The utility uncovered contaminated soil at the site of the old gas plant
in 1980. Residents first came to believe their illnesses were linked to
toxic chemicals in 1990, when county and state officials told them of
the contamination. "But it goes back even further than that," said
Ladona Williams, a former resident. "We believed for a long time that
there was evidence that they knew way before they told us in 1990."
Still, such evidence has yet to surface -- one of several missing pieces
in the puzzle that residents must solve before they can prevail in
court, experts say.
In 1993, more than 250 current and former residents of Midway Village
joined in class-action lawsuits in federal court claiming negligence on
the part of the federal government and the U.S. Navy. The suits were
eventually dismissed, as was a later case against the county Housing
Authority and PG&E. Some of the plaintiffs accepted $2,000 to $4,500 as
part of the 1997 settlement offer.
Others, however, are pursuing more money and an admission of guilt by
the utility company. Indeed, the largely elderly tenants say that
despite the defeats, they are not ruling out any future lawsuits.
David Roe, a senior attorney at the Environmental Defense Fund in San
Francisco, said the tenants' losing streak is typical of cases claiming
environmentally caused illnesses. "It is a rare case when you can prove
what actually caused a sickness," Roe said. "If you're talking about
cancer and birth defects, as is the case in Midway Village, those have a
lot of causes. Even if you're 100 percent sure that chemical X causes
disease Y, that may or not be the case in a specific person."
Over the years, a handful of sick tenants were relocated after their
doctors informed county authorities that remaining in Midway Village
would pose a danger to their patients' already frail health. "They were
the lucky ones," says Guzman, who has lived in her two-bedroom apartment
since the complex was owned by the U.S. Navy. But for many tenants,
packing up and moving away is simply not an option. "We can't afford
it," said 19-year resident Irma Anderson. "It's hard enough to find a
place to live in the Bay Area. We're on a fixed income. That makes it
almost impossible for us." A four-person household, for instance, can
earn no more than $36,000 annually to live in Midway Village, said
Maurice Dawson, executive director of the county Housing Authority.
Midway Village is tucked away in Daly City's Bayshore neighborhood.
Eucalyptus trees shade neatly kept lawns. A day care center, two
elementary schools and a park wrap around the quiet complex where
Latinos, blacks and whites have lived side-by-side for years.
On a recent evening, Bishop sat in her living room alongside a group of
neighbors, venting her frustrations. Dealing with government agencies
and PG&E for 10 years, she says, has taken its toll. "We have very
little choice," she said. "I might not enjoy the benefits, but our kids,
our grandkids will." She points to her bloodshot right eye. The
condition, she says, began in 1990 after crews first dug up the tainted
dirt around her apartment for the first of several drainage projects.
Since then, she has suffered from recurring rashes and back problems and
has difficulty breathing.
Rudy Garcia says his family developed similar health problems soon after
moving into the complex five years ago. "My boys get sick all the time,"
said the 39-year-old roofer. "I'm constantly wiping their bloody noses.
My wife developed kidney stones. I have rashes all over my legs. I can't
prove it, but I know it's this place that's making us sick."
State Legislator Requests Cal-Epa Investigation
A lawmaker is calling for further studies to be conducted on the Midway
Village housing project after a federal report revealed genetic defects
among residents. "We've sent a letter off to . . . Cal-EPA asking them
to immediately investigate the situation and report back the findings,"
said Assemblyman Kevin Shelley, D-San Francisco. The federal DNA
analysis was undertaken by the Agency for Toxic Substances and Disease
Registry at the request of residents, who have a long list of ailments.
For years, they have asked to be permanently moved from the area. They
also want compensation for any medical expenses incurred as a result of
the toxic soil on the Daly City site. Shelley requested that the
Environmental Safety and Toxics Committee convene to take testimony from
toxics experts and Midway Village residents. In the meantime, his staff
will investigate ways for residents to be moved.
Dan Strausbaugh, regional representative for the state agency, said
toxicologists with the agency's Atlanta office are revisiting the case
to see what, if anything, can be done at this point.
Over the years, crews hired by Daly City and PG&E have dug up trenches
as part of construction and drainage projects, including the latest at
nearby Bayshore Park. A mothball-like stench mixed with periodic diesel
fumes has lingered over the complex for weeks as workers overturn
contaminated soil in nearby Bayshore Park as part of a drainage project.
The most immediate concern for residents are heavy winter rains washing
the park soil onto residential property. (The San Francisco Chronicle,
January 20, 2000)
STYLING TECHNOLOGY: Rabin Peckel Files Securities Suit in Arizona
-----------------------------------------------------------------
Rabin Peckel LLP filed a class action complaint in the United States
District Court for the District of Arizona on behalf of all persons or
entities who purchased or otherwise acquired shares of Styling
Technology Corporation between May 5, 1998 and November 29, 1999,
inclusive.
The Complaint alleges that Styling and certain of its officers and
directors violated the Securities Exchange Act of 1934 by making a
series of materially false and misleading statements concerning the
Company's financial results during the Class Period. During the Class
Period, the Company misled the investing public concerning its financial
results. On November 29, 1999, Styling shocked the financial community
in announcing that it has been unable to file its third quarter report
on Form 10-Q with the Securities and Exchange Commission as a result of
various revenue recognition issues relating to the first and second
quarters of the current fiscal year as well as the prior fiscal year;
that it has become aware of information indicating the occurrence of
certain financial reporting errors and irregularities that materially
affect previously reported financial statements for the Company's
fiscal year ended December 31, 1998; that the Company's auditors have
withdrawn their audit report with respect to the fiscal 1998 financial
statements; that its operating results during the third quarter ended
Sept. 30, 1999, have resulted in a default under certain provisions of
its senior secured credit facility; and that it has been notified by
NASDAQ that its stock may be de-listed.
For more details on this securities suit, you may contact plaintiff's
counsel, Elana M. Bourkoff, Rabin Peckel llp, 275 Madison Avenue, New
York, NY 10016, by telephone at (800) 497-8076 or(212) 682-1818, by
facsimile at (212) 682-1892, by e-mail at email@rabinlaw.com or visit
website at http://www.rabinlaw.com
TOBACCO LITIGATION: Flight Attendants Plan to File Suits in Miami
-----------------------------------------------------------------
About 300 flight attendants who say they never smoked cigarettes are
planning to file suit in Miami on January 20 charging that secondary
smoke in airplanes made them sick. The individual suits are seeking
millions of dollars in damages from the tobacco industry. They are among
thousands of suits expected to be filed by September, the deadline set
in 1997 in a settlement reached by flight attendants and cigarette
makers.
As part of the settlement in Miami-Dade Circuit Court, flight attendants
were given the right to sue on an individual basis. Under the agreement,
the tobacco industry will have to prove that something other than
secondhand smoke caused the attendants' respiratory problems. The
settlement was reached by attorneys Stanley and Susan Rosenblatt, who
picked six law firms to represent 50 flight attendants each. They
planned to file together on January 20.
The Rosenblatts are also the attorneys in a class-action suit under way
in Circuit Court in Miami for 500,000 Florida smokers. The case could
results in billion-dollar damages that could cripple the industry.
(United Press International, January 20, 2000)
VITAMINS SUPPLIERS: Chem Int’l Receives Cash As Settlement Agreement
--------------------------------------------------------------------
Chem International, Inc., (Nasdaq: CXIL, CXILW) announced on January 20
that the Company received a $4.9 million cash payment in settlement of a
pending class action lawsuit.
The Settlement Agreement is with a major supplier in connection with a
multidistrict consolidated class action brought on behalf of direct
purchasers of vitamin products, in which plaintiffs have alleged
violations of Section 1 of the Sherman Antitrust Act and other wrongful
anti-competitive conduct in violation of various federal and state laws.
The settlement is in exchange for the Company's release and agreement to
opt out of any settlement or litigation pertaining to the pending class
action lawsuit and to release the supplier from any and all claims it
may have concerning the pricing, selling, discounting, marketing or
distributing of vitamin products.
In the event that the plaintiffs in the class action receive a
percentage distribution under the class settlement agreement in excess
of the percentage agreed to in the Settlement Agreement, the Company
will be entitled to an additional payment to increase the Company's net
recovery to the same percentage as that received by the other plaintiffs
in the class action suit.
*********
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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