/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000228.MBX C L A S S A C T I O N R E P O R T E R Monday, February 28, 2000, Vol. 2, No. 41 Headlines ADAM'S MARK: Tries to Resolve Charges of Discrimination against Blacks AETNA INC.: Replaces Its Chief Executive with Wall Street Veteran AETNA, INC.: 1997 Securities Litigation Still in "Early Stages" ARENA FOOTBALL: Scraps 2000 Season; Labor Dispute and Lawsuit Continue AURORA FOODS: Lionel Z. Glancy Commences Securities Lawsuit in CA AURORA FOODS: Steven E. Cauley Files Securities Lawsuit in CA BREAST IMPLANTS: U.S. District Judge Pointer Announces Retirement BRE-X MINERALS: Lawyers Look to Bring Barrick into Amended TX Suit CBS: More Employment Sex Bias Charges Filed; Technician Sues in NY CINAR CORPORATION: Stull, Stull Files Securities Lawsuit in NJ CONTINENTAL AIRLINES: Securities Fraud Charges in Ch 11 Case Live on DRUG COMPANIES: Canadian Suit Alleges of Hiding Study on Thyroid Market GUNTHER INTERNATIONAL: Company Opposes Filing of 2nd Amended Complaint HMO: REPAIR Serves UnitedHealth Suit with UM Policy on the Menu INTERNATIONAL GAME: Gaming Class Certification Issues Still Unresolved MTI TECHNOLOGY: Disposes of Shareholder Litigation for $900,000 NETWORK ASSOCIATES: Lieff Cabraser Secures Lead Counsel Slot NORWEST FINANCIAL: Door on Creditors' Reaffirmation Cases May Reopen PARAMETRIC TECHNOLOGY: Files Motion to Dismiss Shareholder Litigation PARTY CITY: N.J. Court to Entertain Motion to Dismiss Next Month POLICY MANAGEMENT: Berman, DeValerio Files Securities Lawsuit in NY POLO RALPH: April 18 Fairness Hearing in Outlet Merchandise Case SIMON TRANSPORTATION: Year-Old Securities Suit Continues in Utah SYKES ENTERPRISES: Berger & Montague Files Securities Lawsuit in FL UPGRADE INTERNATIONAL: Milberg Weiss Files Securities Lawsuit in WA VISX INC: Milberg Weiss Files Securities Suit in California WAR VICTIMS: Poll Says Most Californians See No Need for Japan Apology ********* ADAM'S MARK: Tries to Resolve Charges of Discrimination against Blacks ---------------------------------------------------------------------- Hoping to resolve a federal discrimination lawsuit, the Adam's Mark hotel chain proposed a settlement on Thursday, February 24 to the U.S. Justice Department. The 21-hotel chain still denies that it has discriminated against blacks - allegations that were first raised after last April's Black College Reunion in Daytona Beach. But the proposed settlement offers to improve corporate policies guarding against discrimination, submit periodic reports and hire a third-party observer to prove that all guests are treated equally. That could include using "secret shoppers" to pose as hotel guests. "We are opening the company up to verify what we have been saying all along - that our policies and procedures are consistent with the company's record of diverse hiring practices," said Senior Vice President Fred Kummer III, son and namesake of the hotel chain's founder and president. Justice Department officials would not comment on the offer, saying they were studying it. Kummer said the proposal followed weeks of "intense" negotiations between the company and the agency. The Adam's Mark hotel in Daytona remains the target of a separate discrimination suit filed in Orlando's federal district court in May by five visitors to Black College Reunion, who say they were charged higher room rates than white guests and subjected to stricter security measures. The Florida Attorney General's Office later joined the proposed class-action lawsuit. Attorneys in the case were unhappy with Adam's Mark, saying the company has ignored them while negotiating with the Justice Department. "We've made many offers to meet with them and try to make a united settlement proposal, but the Adam's Mark has refused to talk to the plaintiffs," said Sam Smith, a Tampa attorney representing the BCR visitors. "We welcome any efforts by the Adam's Mark to resolve the suit." The National Association for the Advancement of Colored People, which also has attorneys representing the Black College Reunion visitors, criticized the Adam's Mark for dealing exclusively with the Justice Department and has called on its members to boycott the chain. The Justice Department lawsuit stands to have the gravest consequences for the Adam's Mark. The original suit alleged discrimination only at the hotel chain's Daytona Beach resort. The Justice Department lawsuit was the first to charge a national hotel chain with a companywide pattern of racial discrimination. It has prompted a number of groups to cancel conventions or other plans at Adam's Mark hotels since it was filed in December. Kummer said the Adam's Mark is negotiating with Justice because it needs to fight one battle at a time. "Many battles, many wars have been lost because generals divided their resources among too many fronts," he said by telephone from the company's corporate offices in St. Louis. "We chose to work first with the Justice Department. We didn't feel we could deal with both [lawsuits) at one time." As part of the settlement, the company offered to contract with an outside company to set up procedures that would allow guests to register complaints more easily and to investigate them. The Adam's Mark already has hired Project Equality - a nonprofit Kansas City, Mo., organization that assists companies in meeting equal-employment standards - to provide diversity training for its employees. The Adam's Mark asked that Project Equality be designated as the third-party observer in the settlement. Project Equality lists the Adam's Mark as one of 27 corporate sponsors after the hotel chain donated what Kummer said was $1,500. Project Equality officials vowed at a news conference in St. Louis that the donation would not bias their report. (The Orlando Sentinel, February 25, 2000) AETNA INC.: Replaces Its Chief Executive with Wall Street Veteran ----------------------------------------------------------------- Aetna Inc. replaced its outspoken chairman with a Wall Street veteran on February 25 as the nation's largest health insurer struggled to cope with rising medical costs and a falling stock price. Chief executive Dick Huber was succeeded by long-time board member William H. Donaldson. Donaldson is the co-founder of the investment banking firm of Donaldson, Lufkin and Jenrette. He previously was chairman and CEO of the New York Stock Exchange and has been on the Aetna board of directors since 1977. ''The Board and I share not only pride in the company's leading position in health care and financial services, but also frustration at the recent returns received by Aetna shareholders,'' Donaldson said in a statement. Aetna's stock price has slumped from about $100 last spring to $39 today. Its shares have been under pressure since last fall, when the company became the target of several class-action lawsuits alleging the insurer put profits before patient care. The suits were filed by the same trial attorneys who won big awards against the tobacco companies. The company denies wrongdoing. The company has also had more difficulty than expected in turning around the money-losing Prudential Healthcare business, which is bought last year. Aetna has also had to wage a public relations battle to maintain its image against consumers groups and medical providers who argue the company skimps on care. Earlier this month, Aetna posted stronger-than-expected fourth quarter profits, but warned it was having trouble controlling rising medical costs. Huber took over the top position at Aetna five years ago and led the company through rapid expansion, punctuated by the purchases of U.S. Healthcare in 1996 and Prudential Healthcare in 1999. (AP Online, February 25, 2000) AETNA, INC.: 1997 Securities Litigation Still in "Early Stages" --------------------------------------------------------------- Purported Class Action Complaints were filed in the United States District Court for the Eastern District of Pennsylvania on November 5, 1997 by Eileen Herskowitz and Michael Wolin, and on December 4, 1997 by Pamela Goodman and Michael J. Oring against Aetna, Inc. Other purported Class Action Complaints were filed in the United States District Court for the District of Connecticut on November 25, 1997 by Evelyn Silvert, on November 26, 1997 by the Rainbow Fund, Inc., and on December 24, 1997 by Terry B. Cohen. The Connecticut actions were transferred to the United States District Court for the Eastern District of Pennsylvania for consolidated pretrial proceedings with the cases pending there. The plaintiffs filed a Consolidated and Amended Complaint seeking, among other remedies, unspecified damages resulting from defendants' alleged violations of federal securities laws. The Complaint alleged that the Company and three of its current or former officers or directors, Ronald E. Compton, Richard L. Huber, and Leonard Abramson, are liable for certain misrepresentations and omissions regarding, among other matters, the integration of the merger with U.S. Healthcare and the Company's medical claim reserves. The Company and the individual defendants filed a motion to dismiss the Complaint on July 31, 1998. On February 2, 1999, the Court dismissed the Complaint, but granted the plaintiffs leave to file a second amended complaint. On February 22, 1999, the plaintiffs filed a second amended complaint against the Company, Ronald E. Compton and Richard L. Huber. The litigation is still in the preliminary stages, and the Company is defending the actions vigorously. ARENA FOOTBALL: Scraps 2000 Season; Labor Dispute and Lawsuit Continue ---------------------------------------------------------------------- There won't be any Kurt Warner success stories coming out of Arena football this year. The season was to have started April 17, but Arena Football League owners, after two days of meetings in Chicago, voted on February 24 to cancel the 2000 season after the 18-team league failed to reach a contract agreement with its players. The cancellation of the season could be a devastating blow to the future of the league, which has gained financial stability and earned national attention when Warner, a former Iowa Barnstormers quarterback, led the St. Louis Rams to victory in the Super Bowl. ''Under the present circumstances and with deep regret, the AFL owners have voted, in light of the antitrust lawsuit commenced against the league, to cancel the 2000 season,'' the league's board of directors said. The class-action antitrust lawsuit was filed Feb. 4 in Newark, N.J., against league owners by a group of players. The suit accuses the franchise owners in the 14-year-old league of conspiring to illegally limit the players' rights and salaries and restrict the ability of players to offer their services to competing employers, as athletes in other professional sports do. ''The AFL teams have conspired to push players down, push salaries down and to deny us any injury protection,'' James Guidry, the first of six Arena League players named as plaintiffs, said when the suit was filed. ''But we are fighting back.'' Guidry, whose football career in Portland ended last season after he was partially paralyzed during a game, also is the president of the new Arena Football League Players Association. John Gregory, coach of the Iowa Barnstormers, blamed the players' asssociation lawyers for the labor dispute. ''I'm really disappointed with what has happened tonight,'' Gregory told The Des Moines Register. ''Things were going so well for us over the last couple of years. I can't believe that a few people could screw this up.'' League commissioner C. David Baker had told the players in a letter that the season would be canceled if they failed to form a union to negotiate a collective bargaining agreement or refused to drop the threat of a lawsuit. In recent years, Arena football franchise values have grown from $125,000 to as much as $7 million. (AP Online, February 25, 2000) AURORA FOODS: Lionel Z. Glancy Commences Securities Lawsuit in CA ----------------------------------------------------------------- The Law Offices of Lionel Z. Glancy commenced a class action lawsuit on behalf of all purchasers of Aurora Foods, Inc. securities between April 28, 1999 and February 17, 2000 in the United States District Court for the Northern District of California. The complaint asserts claims against Aurora and certain of its officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by reason of material misrepresentations and omissions. As the complaint alleges, Aurora announced positive and growing earnings for the first three quarters of 1999, and was expected to do so for the fourth quarter and full year as well. On February 18, 2000, however, the company stunned investors by announcing that four of its top executives had resigned, that the company was investigating accounting improprieties in its 1999 financial reporting, and that to correct these improprieties the company expected to take a charge against 1999 earnings that would result in a "material reduction of earnings for 1999 and possibly a small loss for the full year." The complaint alleges that investors, who bought the shares in the company believing it to be a profitable organization, and who were suddenly told that despite all of Aurora's previous public statements the company had little or even negative 1999 earnings, bought their shares at inflated prices and were damaged through no fault of their own. For additional information regarding this action, please contact Michael Goldberg, Esquire, of the Law Offices of Lionel Z. Glancy, 1801 Avenue of the Stars, Suite 311, Los Angeles, California 90067, by telephone, at 310-201-9150 or toll-free at (888) 773-9224 or by e-mail to info@glancylaw.com AURORA FOODS: Steven E. Cauley Files Securities Lawsuit in CA ------------------------------------------------------------- The Law Offices of Steven E. Cauley, P.A. filed a class action lawsuit in the United States District Court for the Northern District of California on behalf of all persons who purchased the securities of Aurora Foods Inc. between February 23, 1999, and February 17, 2000, inclusive. The complaint charges that the Company and certain of its officers and directors violated the federal securities laws by providing materially false and misleading information about the Company's financial results. As a result of these false and misleading statements the Company's stock traded at artificially inflated prices during the class period. On February 17, 2000, according to the complaint, Aurora admitted that its 1999 financial results were false. When these alarming truths were revealed, the Company's stock trading was halted. When trading was resumed, the price of the stock dropped significantly. For more details concerning this lawsuit, please contact LAW OFFICES OF STEVEN E. CAULEY, P.A. at 11311 Arcade Drive, Suite 201 Little Rock, AR 72212 or e-mail at CauleyPA@aol.com or call toll free at 1- 888-551-9944. BREAST IMPLANTS: U.S. District Judge Pointer Announces Retirement ----------------------------------------------------------------- United States District Judge Sam C. Pointer, Jr., sitting in Birmingham, Alabama, and serving as the Transferee Judge for MDL 926 (the Silicone Gel Breast Implant Products Litigation), announced his resignation from the bench Friday, February 25, in this public statement: I have decided to retire from the bench after the end of March, and at that time another judge from this court will assume the role of "transferee judge" in MDL926. During the next few weeks I will be working on the outstanding motions in this litigation and hope to leave my successor with a relatively clean deck. My work in this litigation certainly has been among the most challenging of the responsibilities I have had during my nearly 30 years on the bench. More than 27,000 breast-implant lawsuits were transferred to this court during the past 7+ years, and I expect that, when my retirement becomes effective, there will be fewer than 70 cases still pending in this court. Even so, there will still be much to be done, particularly in the oversight of the administration of the Revised Settlement Program and -- if it is ultimately approved -- of the Dow Corning Claim's facility. I have appreciated the high degree of dedication and professionalism shown by so many of the thousands of attorneys who have been involved in this litigation. There is no way to list all those whose friendship and support have helped to make this task not merely bearable, but enjoyable--but I do want to express a special note of gratitude to Judge Ann Cochran, to Judge Frank Andrews, to Ed Gentle, to Professor Francis McGovern, to the folks at the Judicial Panel on Multidistrict Litigation and the Federal Judicial Center, and certainly to my law clerks who have had to bear the criticisms and complaints from angry implant recipients. Many thanks. SCP BRE-X MINERALS: Lawyers Look to Bring Barrick into Amended TX Suit ------------------------------------------------------------------ Lawyers representing shareholders caught in the Bre-X Minerals Ltd. gold swindle are asking a Texas judge to consider new evidence that Barrick Gold Corp. was alerted to the possibility of fraud months before the scandal rocked North American markets. Toronto-based Barrick not only failed to disclose the disturbing findings by one of its own experts, but company officials made 'misleading' public statements about Bre-X that did not reflect doubts about the find's voracity, according to the filing in Texarkana, Tx. The class-action lawyers are asking a U.S. federal court judge for permission to amend their complaint to add the new allegations. The filing comes as both sides await a key ruling on whether Barrick, which was among those dismissed from the Bre-X suit last year, will be reinstated as a defendant. The fresh evidence is based on the findings of Jan Merks, a sampling expert employed by Barrick on Dec. 16, 1996, to analyze troubling Bre-X test results. Barrick had sent 135 samples from what was supposedly the richest gold find in the world and 133 had come back showing no gold. Mr. Merks was given the results on Dec. 17 -- and within hours had warned Barrick in a memo that 'extreme caution is in order,' as reported in the Financial Post in January. He also mentioned a previous gold fraud and suggested they test for the same telltale signs. 'Barrick knew this crucial information for almost five months while tens of thousands of shares of Bre-X continued to trade on the Nasdaq and elsewhere,' according to the filing. 'Despite this knowledge, Barrick made unqualified public statements about gold and future mines at Busang, statements which were false, or at best misleading to investors. 'Not once did Barrick even hint at the troubling evidence of fraud that it and its consultants had discovered,' the filing said. Bre-X was trading at the pre-split equivalent of about $200 a share around that time. Barrick was doing due diligence on Bre-X as a prelude to a proposed partnership with the Calgary exploration firm, which claimed to have discovered the largest gold find ever, deep in the Indonesian jungle. Barrick has insisted in the past that Mr. Merks -- who is often called in by firms experiencing sampling problems -- never raised the possibility of fraud until February 1997, less than a week before Barrick was knocked out of the running. Yet according to the court filing, in the nine weeks he worked for Barrick, Mr. Merks, a mathematician and engineer with a background in analytical chemistry, wrote a series of memos speaking of 'ominous' conclusions, 'grave concern' and the 'extraordinary' characteristics of the supposed gold find. 'Although Merks remained diplomatic in the opinions he expressed to Barrick in writing, the earmarks of fraud were unmistakable,' lawyers said in the filing. 'He urged Barrick to take precautionary steps to safeguard Bre-X's unprocessed [and thus unadulterated] library cores. Likewise, Merks counselled heightened scrutiny of the sampling procedures at Busang. 'In short, by Dec. 20, 1996, three days after being hired, this expert was urging Barrick in writing to take steps to investigate what was a potential billion-dollar case of fraudulent gold assays.' The 25-page application also said Mr. Merks came to Barrick's head office on Jan. 20, 1997, to meet directly with Alan Hill, the firm's vice-president of corporate development, and Rene Marion, a staff mining engineer. For over an hour they discussed the 'serious discrepancies' in the data and possible explanations. 'Merks made it plain that the only plausible explanation was salting,' according to the filing. 'This was not news to Barrick. Merks was not telling Hill and Marion anything they did not already suspect, and they acknowledged as much. 'The Barrick representatives did a lot of listening, and they never once challenged Merks' conclusion that the Bre-X samples probably were salted.' According to the new filing, the most damning evidence that Barrick acted improperly is its efforts to prevent Mr. Merks, who was bound by a confidentiality agreement until Dec. 16, 1999, from publicly discussing his findings after the hoax was exposed in May 1997. 'Barrick refused to allow Mr. Merks to speak, out of fear of being held responsible to investors,' the court filing says, citing a Sept. 22, 1997, letter from Barrick's corporate general counsel who said: 'There are multibillion dollar lawsuits pending with respect to the Bre-X matter, as well as half a dozen civil and criminal investigations.' Barrick said it told Mr. Merks it was willing to allow him to talk privately with authorities but that he did not take them up on the offer. He was cautioned again this past January about discussing his work with a third party and warned 'Barrick intends to hold you accountable' for any consequences. Barrick has not yet had a chance to file its response. 'These efforts to avoid disclosure of the facts Barrick first learned in late 1996, and the grave concerns that these facts raised, are perhaps the strongest possible evidence of its culpability,' according to the filing. (National Post (formerly The Financial Post), February 25, 2000) CBS: More Employment Sex Bias Charges Filed; Technician Sues in NY ------------------------------------------------------------------ Another woman has filed a class action complaint of sex discrimination against CBS in federal court in New York February 24. This complaint mirrors the allegations of sex discrimination made in a suit filed as a class action in federal court in Minnesota. Both complaints are filed on behalf of female technicians at several of CBS' owned and operated television stations across the country, including stations in New York, Los Angeles, Chicago, Minneapolis, Detroit and Green Bay. Both complaints allege that female technicians, as a class, have been denied promotion, training and overtime opportunities that have been given to male technicians. The women also allege that they are forced to work in a sexually hostile work environment that is accepted and condoned by CBS management. For example, Linda Karpell, who filed her class action complaint in New York on February 24, alleges that two-women camera teams are referred to as the "Pussy Patrol" and a one-woman camera assignment is referred to as an "OBB" - meaning "One Bitch Band." The women also say that it is not uncommon to see male technicians and even supervisors displaying pornography over the monitors at the stations. Karpell, who was one of the pioneer female technicians at WCBS-TV in New York, alleges that in her 18 years of working as a technician at WCBS, she was repeatedly denied assignments to cover lucrative national and international news events while lesser qualified male technicians received those assignments. "The damage these women have suffered as a result of CBS' ongoing discrimination has had a very real effect, costing each of them hundreds of thousands of dollars in lost income" says the women's lawyer, Susan Stokes. Stokes is a partner in the Minneapolis office of Sprenger & Lang, which specializes in national employment class action litigation. Sprenger & Lang has obtained some of the country's largest gender, age, and race discrimination judgments, including landmarks such as Jenson v. Eveleth Mines, the first sexual harassment lawsuit ever certified as a class action. In addition, Sprenger & Lang has successfully represented classes of plaintiffs against companies such as Burlington Northern, Cargill, Northwest Airlines, First Union, and Ceridian Corporation. Karpell will seek to join her lawsuit with the lawsuit pending in Minnesota, which is expected to be tried within the next few months. Contact: Sprenger & Lang, Minneapolis Susan Stokes, 612/871-8910 or Sprenger & Lang, Washington DC Paul Sprenger, 202/265-8010 (The Toronto Star, February 25, 2000) CINAR CORPORATION: Stull, Stull Files Securities Lawsuit in NJ -------------------------------------------------------------- The law firm of Stull, Stull & Brody filed a class action lawsuit in the United States District Court for the District of New Jersey on behalf of all persons who purchased the common stock of CINAR Corporation between March 3, 1999, and February 18, 2000. The complaint charges CINAR and certain of its officers and directors with violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that defendants failed to disclose that the Company was falsely representing that scripts written by United States citizens were written by Canadian citizens in order to obtain favorable tax credits and that, as a result, the Company's financial results were artificially inflated. In October 1999, press reports revealed that CINAR was the subject of a tax investigation by Canadian federal authorities relating to the issue of whether the company had improperly obtained tax credits available to Canadian-only television productions by falsely attributing scripts written by American authors to Canadians. At that time, the complaint alleges that defendants falsely characterized any impact from the investigation as not material. Then, on February 18, 2000, CINAR issued a press release announcing that at "a meeting of its Board of Directors, CINAR Corporation reported today on the status of the reviews initiated by its management and Audit Committee of its Board of Directors in connection with certain allegations relating to Canadian content regulations with respect to its productions" and that the "financial and accounting impact" would be greater than initially anticipated. In response to this announcement, the price of CINAR stock plummeted by 27%. As alleged in the complaint, during the Class Period, without disclosing the aforementioned adverse facts, defendants raised more than $150 million through the sale of CINAR stock in a public offering. For additional information regarding this action, please contact Tzivia Brody, Esq. at Stull, Stull and Brody by calling toll-free 1- 800-337-4983, or by e-mail at SSBNY@aol.com or by fax at 212/490- 2022, or by writing to Stull, Stull and Brody, 6 East 45th Street, New York, NY 10017. CONTINENTAL AIRLINES: Securities Fraud Charges in Ch 11 Case Live on -------------------------------------------------------------------- Like old soldiers, big Chapter 11 cases never die, they simply fade away. So, too, the jointly administered Chapter 11 cases of Continental Airlines live on in our federal courts and continue to make new law in the 3rd Circuit. In the most recent Continental decision, Gillman v. Continental Airlines (In re Continental Airlines), No. 98-5509, 2000 WL 116293 (3d Cir. Feb. 1, 2000), the 3rd Circuit considered the validity of a provision in the Continental Airlines plan releasing and permanently enjoining shareholder lawsuits against certain of Continental Airlines' present and former officers and directors. The appellants in Continental are plaintiffs in various securities fraud class action lawsuits brought against present and former officers and directors of Continental Airlines Holdings Inc., known as the D&O defendants. In the class actions, the appellants allege that the D&O defendants caused Continental to issue false and misleading statements in violation of section 10(b) of the Securities and Exchange Act of 1934 and common law. After the debtors filed their bankruptcy cases in December 1990, they brought an adversary proceeding seeking to enjoin the appellants from prosecuting the suits so they would not interfere with the debtors' reorganization process. In February 1991, the bankruptcy court issued an order temporarily enjoining the appellants from prosecuting these suits, which was affirmed by the district court in June 1993. In December 1992, the bankruptcy court approved a tripartite settlement among the Continental debtors, their officers and directors and certain insurers with whom the debtors held officer and director liability insurance policies. Under the tripartite settlement, the D&O liability insurers paid $ 5 million to the debtors and the parties executed mutual releases. In addition, this settlement provided that it was binding upon its signatories as well as all persons and entities insured under the insurance policies. The appellants did not object to the tripartite settlement or appeal the bankruptcy court's order approving the same. The Continental debtors thereafter proposed a plan of reorganization. The plan contained broad releases of all claims and causes of action against any present or former officer or director of the debtors and enjoined any party from suing the debtors' directors or officers or pursuing the class actions. The appellants filed at least five objections to the release and injunction provisions of the plan during the plan disclosure and approval process, including an objection to plan confirmation. Interestingly, the appellants did not appear at the confirmation hearing, and therefore their objections were not heard. The appellants did, however, notify the bankruptcy court that they might not be able to attend the confirmation hearing. In April 1993, the bankruptcy court entered an order confirming the plan, including the release and injunction provisions contained therein. The appellants appealed the confirmation order, which order was affirmed by the district court in September 1998. In affirming the confirmation order, the district court acknowledged that third-party releases are regarded with disfavor in general, but that a confirmed and implemented plan of reorganization should be disturbed only for "compelling reasons," which the district court did not find in this case. First, the district court held that the appellants did not object to the tripartite settlement which, the district court believed, governed the rights of the parties. Second, the district court found that the release and injunction provisions were a "key element" of the plan because, if the class actions were allowed to proceed, the debtors would be required to indemnify the D&O defendants, thereby diminishing the return to the debtors' other creditors and burdening the debtors with litigation. Third, the district court also based its affirmance on the theory that the class actions would implicate the debtors' D&O policies and thereby affect property of the debtors' bankruptcy estate. The 3rd Circuit addressed three issues on appeal. First, the debtors argued that the appellants' objections to the plan were barred under the doctrine of claim preclusion. In essence, the debtors maintained that the appellants' rights were governed by the bankruptcy court's order approving the tripartite settlement, which order the appellants did not challenge. Thus, argued the debtors, the final order approving the settlement was res judicata and prevented the appellants from attacking similar provisions in the confirmation order. The 3rd Circuit swiftly dispensed with this argument, noting that it amounted "to little more than sleight of hand." Specifically, the court held that the tripartite settlement did not affect the appellants' rights. Rather, this settlement resolved only claims among the debtors, its directors and officers, and the debtors' D&O insurers. In addition, the debtors did not assert, as they might have, that the appellants claims are somehow derivative of claims held by (and, thus, could be waived by) the debtors. Second, the debtors argued that the appellants appeal should be dismissed on the grounds of equitable mootness. In this regard, the debtors relied on the 3rd Circuit's 1996 decision in the Continental case (In re Continental Airlines, 91 F.3d 553 (3d Cir. 1996), in which the court denied as moot an appeal by certain collateral and certificate trustees of an order denying their motion for adequate protection seeking a cash deposit from the debtors in the amount of approximately $ 123 million. In this case, the 3rd Circuit identified certain "prudential factors" used by courts to evaluate equitable mootness, including whether the plan has been substantially consummated or stayed; whether the requested relief would affect the rights of other parties; whether the requested relief would affect the success of the plan; and the public policy of affording finality to bankruptcy judgments. In that case, these prudential factors militated in favor of barring the relief sought. In particular, the 3rd Circuit found that investors relied on the order denying adequate protection as part of their overall reliance on the confirmation order. As a result, the 3rd Circuit refused to fashion even a limited remedy for the trustees. The 3rd Circuit concluded, however, that "[w]e face a very different situation in the instant appeal. "To begin, the debtors did not raise the equitable mootness argument before the district court, and, therefore, the issue was not properly preserved on appeal. Even if the issue had been preserved, the court found that no record had been established before the district court regarding the application of the doctrine in the present case. For instance, the debtors did not establish of record that investors and creditors ever relied upon the release and injunction provisions in deciding whether to support the plan. Likewise, there was no evidence that, if successful, the appeal would "necessitate the reversal or unraveling of the entire plan of reorganization." Finally, the policy in favor of the finality of judgments did not favor the debtors. The court reasoned that the appellants should not be forced to waive their claims against non-debtor parties without receiving consideration in return. Lastly, the 3rd Circuit reached the merits of the appellants' appeal the validity of the release and injunction provisions. The court began its analysis by stating that Section 524(e) of the Bankruptcy Code "makes clear that the bankruptcy discharge of a debtor, by itself, does not operate to relieve non-debtors of their liabilities." See Copeline v. Spirco, Inc., 182 F.3d 174, 182 (3d Cir. 1999). The court further noted that, although Section 105(a) of the Bankruptcy Code gives the bankruptcy court the authority to issue orders necessary or appropriate to carry out the provisions of the code, it does not create substantive rights not otherwise available thereunder. See United States v. Pepperman, 976 F.2d 123, 131 (3d Cir. 1992). The court then reviewed decisions issued by courts throughout the country on the propriety of provisions in a Chapter 11 plan of reorganization permanently releasing and discharging third-party actions against non-debtors. The 9th and 10th Circuit Courts of Appeal have created a per se rule that bars debtors from including such releases and injunctions in their Chapter 11 plans. Other courts, such as the 2nd and 4th Circuit Courts of Appeal, have developed a more flexible approach. For example, in mass tort cases, such as the Manville case in the 2nd Circuit, courts have permitted releases and injunctions of third-party actions against co-debtors, but only where doing so was necessary to the debtor's reorganization and accompanied by consideration to affected parties. The 3rd Circuit noted that the appellants did not ask the court to establish a blanket rule prohibiting all non-consensual releases and permanent injunctions of non-debtor obligations. Taking this lead, the court refused to address the wisdom of a per se rule, instead holding that the debtors had not shown that the release and injunction provisions were appropriate under the more flexible, case-by-case analysis. Thus, the 3rd Circuit reversed the district court's order. In so holding, the court opined that the bankruptcy court's confirmation order was not accompanied by any findings that the release was fair to the appellants or necessary to the debtors' reorganization. The court also dismantled the district court's attempt to "salvage" the release and injunction provisions (and in doing so, took parting shots at the district court's reasoning and five-year delay in processing the appeal). First, the district court did not discuss whether the appellants received fair consideration for the relevant plan provisions, when even the debtors did not dispute that the appellants received no consideration whatsoever. On that basis alone, the court found that the release and injunction provisions were not appropriate. Furthermore, there was nothing in the record supporting the argument that these provisions were a necessary part of the plan, as the district court found. Rather, the 3rd Circuit "found no evidence that the non-debtor D&Os provided a critical financial contribution to the Continental debtors' plan that was necessary to make the plan feasible in exchange for a release of liability for the plaintiffs' claims." In addition, the fact that the debtors might one day face "litigation or experience some financial ramifications" based on D&O indemnification claims, or that D&O liability resulting from the class actions might trigger claims against the debtors' D&O liability insurance policy (whose proceeds might be estate property), did not render the release and injunction provisions necessary to plan approval. In sum, the 3rd Circuit concluded on the basis of the record before it that the bankruptcy and district courts lacked a sufficient evidentiary and legal basis to authorize the release and injunction provisions under any standard adopted by other courts. Therefore, these provisions violated Section 524(e) of the Bankruptcy Code. NEEDS PICS NUMBER (Copies of the 25-page opinion in In re Continental Airlines, PICS NO. 00-0305, are available from The Legal Intelligencer. Please refer to the order form on page 2). (The Legal Intelligencer, February 25, 2000) DRUG COMPANIES: Canadian Suit Alleges of Hiding Study on Thyroid Market --------------------------------------------------------------------- A $250 million lawsuit has been launched in Canada against two international drug companies, alleging they suppressed a study to control the market for thyroid drugs. The suit, filed in Ontario's Superior Court of Justice, alleges Boots Pharmaceuticals, Inc., Germany's BASF AG and its American subsidiary Knoll Pharmaceutical Co., concealed the results of a study showing their drug was no more effective than cheaper, generic versions. It alleges the companies also marketed their drug, called Synthroid, as superior to less-expensive ones even though they knew the results of the 1990 study. The suit is similar to 60 class action lawsuits that were filed in the United States dating back to 1997. Those actions are up for a settlement in April in the Chicago courts for $87.4 million, although the companies have not acknowledged any wrongdoing, said Harvin Pitch, a civil litigation lawyer with Toronto law firm Teplitsky, Colson. Pitch is representing Toronto thyroid patient Bette Malc-Barmherzig, who suffers from hyperthyroidism, a condition caused by an underactive thyroid gland. The gland, located in the neck, produces a hormone called thyroxine, which regulates the body's metabolism. But Pitch said he is seeking class action status here for people in all provinces except British Columbia, where another class action suit has been filed. 'They could never possibly deal with it (alone). ' ''If an individual consumer is out of pocket $1,000 to $2,000, they could never possibly deal with it (alone). The only way they can redress a wrong is through class action," he said. It is estimated two out of 100 people suffer from hypothyroidism and must receive thyroxine in order to survive. Many people take the drug Synthroid - a synthetic version of the compound levothyroxine - manufactured and sold by Boots and later by Knoll. The Ontario claim alleges Malc-Barmherzig purchased Synthroid since 1988 on the advice of her doctor, who recommended it over other thyroid medications because of Synthroids' claims it was more effective. Pitch said the drug costs two to three times more than other thyroid drugs. It is paid for either by the Ontario Health Insurance Plan, private insurers or individuals. The 1990 study, by researchers at the University of California at San Francisco, had concluded Synthroid was no more effective than less expensive versions. The American class action lawsuit alleged the results were not published for seven years because its sponsor, Boots Pharmaceutical, objected to the findings. When the researchers told Boots they would publish their article anyway, the company invoked a clause in its contract with the university to block them from doing so. Unable to defend herself, chief researcher Dr. Betty Dong withdrew the article, set to be published in a January, 1995 edition of the Journal of the American Medical Association. Later that year, Boots sold its drug division to BASF, which incorporated the division into its subsidiary Knoll. After increased pressure from U.S. health officials, Knoll agreed in November, 1996 to let the results be published. The study finally appeared in the journal in April, 1997. After the study was published, Knoll said in a statement it disagreed with the study's findings. (The Toronto Star, February 25, 2000 GUNTHER INTERNATIONAL: Company Opposes Filing of 2nd Amended Complaint ---------------------------------------------------------------------- As previously reported in the CAR, a purported class action lawsuit was filed against Gunther International, Ltd., its then-current chief executive officer and its then-current chief financial officer asserting claims under the federal securities laws. The action was filed in the United States District Court for the District of Connecticut. Among other things, the complaint alleges that the Company's financial statements for the first three quarters of fiscal 1998 were materially false and misleading in violation of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act. The plaintiffs are seeking compensatory damages and reimbursement for the reasonable costs and expenses, including attorneys' fees, incurred in connection with the action. On December 17, 1999, the plaintiffs requested leave to file a second amended and consolidated complaint. On January 21, 2000, the Company filed a formal objection to this request. The Company's objection is currently pending before the Court. HMO: REPAIR Serves UnitedHealth Suit with UM Policy on the Menu --------------------------------------------------------------- UnitedHealth Group's much-ballyhooed step back from the physician-patient relationship is the target of class-action lawsuit filed by the REPAIR team. The lawsuit specifically cites UnitedHealth's new Care Coordination policy of allowing physicians final say over medical decisions, which received a lot of favorable attention from the media, politicians and consumer advocacy groups when it was announced last fall (MCW 11/15/99, p. 1). The suit charges UnitedHealthcare with including numerous unpublicized exceptions to the policy, which it describes it as "part and parcel of the fraudulent scheme" of defrauding enrollees and physicians (McRaney vs. UnitedHealthcare, No. 2:00CV35, USDC S.D. Miss.). The managed care giant is charged with violations of ERISA and RICO, the Racketeer Influenced and Corrupt Organizations Act. The proposed class would be made up of all UnitedHealthcare commercial enrollees during the period from Feb. 8, 1996 through the time the class is certified. Like other recent high-profile class-action lawsuits, this complaint does not allege any personal injury or medical malpractice. Instead, it charges that provided services "are worth far less than the health care services described in UnitedHealthcare's advertising, marketing, and member materials." The suit seeks compensatory damages, subject to tripling under the RICO statue, as well as punitive damages, injunctive relief to end utilization management and other fraudulent practices cited in the suit, and the creation of a public trust. The recent spate of HMO class-action lawsuits has received significant criticism from many industry observers. Because HMOs' product descriptions - evidence of coverage, marketing materials and the like - are most often approved by state insurance departments, it's hard to see how they could be considered fraudulent, notes David Main, a partner with Washington, D.C. law firm Shaw Pittman. For the whole industry to be accused of fraud in its product description, like the tobacco industry hid the true effects of addiction, isn't a fair comparison, he says. The REPAIR team, composed of over 20 lawyers representing firms nationwide, has filed a number of class-action suits in recent months (MCW 11/29/99, p. 1). (Managed Care Week, February 14, 2000) INTERNATIONAL GAME: Gaming Class Certification Issues Still Unresolved ---------------------------------------------------------------------- Along with a number of other public gaming corporations, International Game Technology is a defendant in three class action lawsuits, one filed in the United States District Court of Nevada, Southern Division, entitled Larry Schreier v. Caesar's World, Inc., et al., and two filed in the United States District Court of Florida, Orlando Division, entitled Poulos v. Caesar's World, Inc., et al. and Ahern v. Caesar's World, Inc., et al., which have been consolidated into a single action. The Court granted the defendants' motion to transfer venue of the consolidated action to Las Vegas. The actions allege that the defendants have engaged in fraudulent and misleading conduct by inducing people to play video poker machines and electronic slot machines, based on false beliefs concerning how the machines operate and the extent to which there is an opportunity to win on a given play. The amended complaint alleges that the defendants' acts constitute violations of the Racketeer Influenced and Corrupt Organizations Act, and also give rise to claims for common law fraud and unjust enrichment, and seeks compensatory, special, consequential, incidental and punitive damages of several billion dollars. In December 1997, the Court denied the motions that would have dismissed the Consolidated Amended Complaint or that would have stayed the action pending Nevada gaming regulatory action. The defendants filed their consolidated answer to the Consolidated Amended Complaint on February 11, 1998. At this time, motions concerning class certification are pending before the Court. MTI TECHNOLOGY: Disposes of Shareholder Litigation for $900,000 --------------------------------------------------------------- In May 1999, as previously reported in the CAR, MTI Technology Corp. agreed to settle a purported stockholder class-action lawsuit. A Stipulation of Settlement was signed providing for a total settlement amount of $900,000. The Company's unreimbursed portion of the aggregate settlement was $100,000. An order, preliminarily approving the settlement was signed by the court on May 17, 1999. A final judgment, resolving and disposing of the litigation in all respects, was entered by the court on December 1, 1999. NETWORK ASSOCIATES: Lieff Cabraser Secures Lead Counsel Slot ------------------------------------------------------------ IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF CALIFORNIA In re NETWORK ASSOCIATES, INC. SECURITIES LITIGATION. ____________________________________/ AND CONSOLIDATED CASES ____________________________________/ No. C 99-01729 WHA CLASS ACTION ORDER APPOINTING CLASS COUNSEL [filed Jan. 24, 2000] The lead plaintiff has reviewed counsel proposals from a number of law firms and has submitted them with his recommendations under seal for the Court's review. The Court sought clarification concerning certain of the proposals. Supplemental information was then submitted under seal by the lead plaintiff. For good cause, the Court also communicated by telephone with the lead plaintiff seeking further clarification on January 22, 2000, and received the reply on January 24, 2000. Based on the recommendation of the lead plaintiff and based on the Court's review of the proposals, the Court now approves the firm of Lieff, Cabraser, Heimann & Bernstein as class counsel in this case with the understanding that Richard Heimann of that firm will conduct all important depositions and court hearings and will be lead trial counsel for the class. In making the selection, the predominant factors were relevant trial and securities litigation experience and attractive fee options. The selection in no way reflects poorly on any other proposal or firm. The Court appreciates the willingness of each applicant to serve as class counsel. The lead plaintiff is ORDERED to maintain the confidence of all proposals and not to discuss the selection process without further order of the Court. Within 45 days, less if practicable, the lead plaintiff, through class counsel, SHALL file a consolidated first amended complaint, and within 45 days thereafter, defendants SHALL respond. IT IS SO ORDERED. Dated: January 24, 2000. ____________________________ /s/ WILLIAM ALSUP UNITED STATES DISTRICT JUDGE NORWEST FINANCIAL: Door on Creditors' Reaffirmation Cases May Reopen -------------------------------------------------------------------- Along with Gold Bennett Cera & Sidener associate Gary Garrigues, Solomon Cera just scored a rare court victory that could help push open the door to an area of class litigation that was closing fast. The pair was shepherding a class action against financial creditors centered on the controversial practice of reaffirming consumer debts after bankruptcy proceedings. In Malone v. Norwest Financial California, 99-692, Eastern District Judge Lawrence Karlton ruled that not only do debtors have a private right of action against creditors who fail to file the agreements with a court, but they have the right to a jury trial and are entitled to seek punitive damages. "I'm unaware of any other opinion that's held that you can have a jury trial in a reaffirmation case," said Pawtucket, R.I., attorney Christopher Lefebvre, who brought the first major reaffirmation case several years ago, against Sears, Roebuck & Co. "That's a groundbreaking ruling." If upheld, Karlton's ruling could chill creditors' aggressive efforts to collect on bad debts from their bankrupt debtors. It could also inspire a lucrative frontier for plaintiffs class action litigation targeting reaffirmation agreements. "You're really talking about a class of people, economically, that are at the bottom of the barrel in terms of being able to protect themselves," says Cera. In the past, judges have refused to allow debtors to file suit against their creditors, and instead have ordered a contempt hearing in instances where a bankrupt debtor alleges a creditor bullied him into agreeing to repay his debt. But Karlton refused to honor the defendant's request to move the putative class action to bankruptcy court, writing on Feb. 3 that " reaffirmation agreements ... are controversies outside the bankruptcy process, whose purpose is to discharge the debts of the bankrupt." Reaffirmation agreements, or post-bankruptcy payment plans struck between a creditor and a debtor, have become popular with creditors struggling to deal with an estimated $3.2 billion in annual losses from Chapter 7 bankruptcies, which have nearly doubled in the last decade despite unprecedented economic expansion. Creditors say debtors are taking advantage of lenient bankruptcy laws to skirt their debt responsibilities. Many have sought debt reaffirmations in an effort to recoup some of their losses. But plaintiffs attorneys say creditors routinely break the law by failing to file the agreements with the court as required, and that the practice amounts to an illegal collection of debt. Agreements with pro se debtors are also supposed to come under the scrutiny of a judge, and judges haven't looked favorably on them. "More often than not, these agreements are not in the best interests of the debtor because it basically puts them back on the hook," said Northern District Bankruptcy Judge Randall Newsome, the 1999 president of the National Conference of Bankruptcy Judges. Both Norwest Financial and the defendant in its sister suit, U.S. Bancorp, have moved to appeal. But defense attorneys in the field are expressing doubt about Karlton's ruling. "Plaintiffs class action counsel are getting somewhat carried away in bringing questionable claims in an attempt to link up class action and bankruptcy law," said Donald Querio, who specializes in class action defenses as a partner at Severson & Werson in San Francisco. Profitable Litigation? The potential for profitable litigation in the area of reaffirmation agreements was foreshadowed in 1997, when Sears agreed to hundreds of millions of dollars in civil and criminal penalties for failing to file close to 200,000 such agreements with bankrupt Sears credit card holders. Since that bellwether case, some of the biggest names on Wall Street, including Circuit City, May Department Stores, Federated Department Stores (including Macy's and Bloomingdale's), GE Capital Corp., and Ford Motor Credit Co., have coughed up multimillion-dollar payments, usually in civil settlements and regulatory fines. But until recently, large civil settlements in reaffirmation cases were spurred primarily by regulatory investigations, either from the Federal Trade Commission or state attorneys general. And creditors agreed to class action certification only for the purposes of settlement. Winning a private right of action which would enable plaintiffs to bring a separate lawsuit against a creditor outside of bankruptcy court, meanwhile, has been a rare feat. For the most part, creditors have successfully argued that under 11 U.S.C. sec. 524 allegations of illegal post-bankruptcy collections should stay in bankruptcy court. "In that context, there's no way you could ever get a class-wide remedy," Cera said. Neither the U.S. Supreme Court nor the Ninth Circuit U.S. Court of Appeals has ever weighed in whether a private right of action exists, and district courts have diverged on the issue. "The case law trend has been away from treating them as class actions," says Gary Klein, an associate attorney with the National Consumer Law Center. Karlton's 23-page opinion in Malone v. Norwest bucks the trend. Both the Norwest case and its companion arose from banks who reaffirmed loans after their debtors went bankrupt. Karlton's Feb. 3 order held that 11 U.S.C. sec. 524 implied there was a private right of action. "While the statute ... explicitly provides potential relief from improper debt collection, it provides no direct remedy, nor compensation, for its violation," Karlton wrote. "Although the court may punish a violation of the injunction by way of contempt, such an order vindicates the power of the bankruptcy court, not plaintiff's rights." Karlton also noted the lack of "persuasive authority" at the district court level for the proposition that plaintiffs do not have the right to bring private actions. While two California district court judges, including Northern District Senior Judge Samuel Conti, have said there is a private right of action, a Rhode Island federal judge recently found that the right was not implied under bankruptcy statutes. That case, Bessette v. Avco Financial Services, 240 B.R. 147, is now on appeal in the New England-based First Circuit U.S. Court of Appeals with a decision expected in the summer. Lefebvre said he will use Karlton's ruling in his amicus curiae brief for Bessette. But Congress may render the question moot. Though the House and Senate haven't chosen conference committee members to hammer out a final version of the Bankruptcy Reform Act, the final House version prohibits class actions from being brought in reaffirmation cases. Needless to say, the proposed legislation has the plaintiffs bar hopping mad. Says Lefebvre: "It's a good argument for campaign finance reform." (The Recorder, February 25, 2000) PARAMETRIC TECHNOLOGY: Files Motion to Dismiss Shareholder Litigation ---------------------------------------------------------------------- Certain class action lawsuits were filed by shareholders in the fourth quarter of 1998 against Parametric Technology Corporation and certain of its current and former officers and directors in the U.S. District Court in Massachusetts claiming violations of the federal securities laws based on alleged misrepresentations regarding the Company's anticipated revenue and earnings for the third quarter of 1998. The plaintiffs in these lawsuits joined together to file a consolidated and amended complaint in the second quarter of 1999. The consolidated and amended complaint seeks unspecified damages. The Company asserts that the claims made in the consolidated and amended complaint are without merit, and the Company intends to defend them vigorously. In the third quarter of 1999 the Company filed a motion to dismiss the consolidated and amended complaint. PARTY CITY: N.J. Court to Entertain Motion to Dismiss Next Month ---------------------------------------------------------------- Party City Corporation counts twelve class action complaints filed against it: (1) Weber v. Party City Corp., Steven Mandell, and David Lauber, Civ. Action No. 99-CV-1252; (2) Opus GT Partners LP v. Party City Corp. and Steven Mandell, Civ. Action No. 99-CV-1327; (3) Klein and Shiffrin v. Party City Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-1325; (4) Flynn v. Party City Corp., David Lauber and Steven Mandell, Civ. Action No. 99-CV-1328; (5) Catanzarite v. Party City Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-1317; (6) Tabbert v. Party City Corp. and Steven Mandell, Civ. Action No. 99- CV-1353; (7) Maietta v. Steven Mandell and Party City Corp., Civ. Action No. 99- CV-1386; (8) Barry v. Party City Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-1453; (9) Kurzweil v. Party City Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-1396; (10)Hormel v. Party City Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-1689; (11)Sacher v. Party City Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-2238: and (12)Gross v. Party City Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-2355. Party City's Company's former Chief Executive Officer and former Chief Financial Officer and Executive Vice President of Operations have also been named as defendants. The complaints have all been filed in the United States District Court for the District of New Jersey. The complaints were filed as class actions on behalf of persons who purchased or acquired Party City common stock during various time periods between February 1998 and March 19, 1999. The complaints allege, among other things, violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and seek unspecified damages. The plaintiffs allege that defendants issued a series of false and misleading statements and failed to disclose material facts concerning, among other things, the Company's financial condition, adequacy of internal controls and compliance with certain loan covenants. The plaintiffs further allege that because of the issuance of a series of false and misleading statements and/or failure to disclose material facts, the price of Party City common stock was artificially inflated. On September 13, 1999, the Court signed an Order appointing lead plaintiffs and lead counsel to represent the classes alleged in the complaints. The Order directed plaintiffs to file a consolidated and amended complaint in October 1999, which the plaintiffs did and which was served on the Company on or about October 18, 1999. Party City has moved the New Jersey court for dismissal of the complaint and it is anticipated that a hearing with respect to that motion will be held in March 2000. POLICY MANAGEMENT: Berman, DeValerio Files Securities Lawsuit in NY ------------------------------------------------------------------- The law firm of Berman, DeValerio & Pease LLP commenced a class action lawsuit on behalf of purchasers of the common stock of Policy Management Systems, between October 22, 1998 and February 9, 2000, inclusive, in the United States District Court for the Southern District of New York. The complaint charges PMS and certain of its officers and directors with issuing materially false and misleading statements concerning the Company's financial condition, its products, and its technologies. The Company recently announced that, after an in-depth review by the Company's auditors of its revenue recognition practices, it is restating its financial results for the third quarter ending September 30, 1999, reducing net income by 89%. Before PMS disclosed this information, however, certain members of the Company's senior management sold Policy Management common stock, generating proceeds of over $13 million. For more inquiries on the above-mentioned lawsuit, you may contact Chauncey D. Steele IV, Michael G. Lange of Berman, DeValerio & Pease LLP at One Liberty Square, Boston, MA 02109 or call at (800) 516-9926 or e-mail at bdplaw@bermanesq.com POLO RALPH: April 18 Fairness Hearing in Outlet Merchandise Case ---------------------------------------------------------------- POLO RALPH LAUREN CORPORATION, as previously reported in the CAR, is a defendant in a purported national class action lawsuit filed in the Delaware Supreme Court in July 1997. The plaintiff has brought the action allegedly on behalf of a class of persons who purchased products at the Company's outlet stores throughout the United States at any time since July 15, 1991. The complaint alleges that advertising and marketing practices used by the Company in connection with the sales of its products at its outlet stores violate guidelines established by the Federal Trade Commission and the consumer protection statutes of Delaware and other states with statutes similar to Delaware's Consumer Fraud Act and Delaware's Consumer Contracts Act. The lawsuit seeks, on behalf of the class, compensatory and punitive damages as well as attorneys' fees. The Company answered the complaint and filed a motion for judgment on the pleadings. At a hearing on that motion on March 5, 1999, the Court ruled that the plaintiff must file an amended complaint within 30 days in order to avoid dismissal. The plaintiff filed an amended complaint, essentially containing the same allegations as the initial complaint, which the Company answered on April 26, 1999. On August 5, 1999, the Company again filed a motion for judgment on the pleadings and, on September 3, 1999, the plaintiff filed a brief in opposition to such motion for judgment. On November 19, 1999, the Company and the plaintiff entered into a Stipulation and Agreement of Compromise, Settlement and Agreement, none of the provisions of which are expected to have a material adverse impact on the business and financial condition of the Company. By February 1, 2000, notice of the settlement was published in a publication of national circulation and mailed to persons listed on the Company's outlet customer list. A hearing will be held on April 18, 2000 to determine the fairness of the settlement to class members and to approve the settlement. SIMON TRANSPORTATION: Year-Old Securities Suit Continues in Utah ----------------------------------------------------------------- As previously reported in the CAR, Simon Transportation Services Inc., and certain of its officers and directors have been named as defendants in a securities class action filed in the United States District Court for the District of Utah, Caprin v. Simon Transportation Services, Inc., et al., No. 2:98CV 863K (filed December 3, 1998). The Plaintiffs in this action allege that Simon made material misrepresentations and omissions during the period February 13, 1997 through April 2, 1998 in violation of Sections 11, 12(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company reiterates in its latest quarterly report that it intends to vigorously defend this action. SYKES ENTERPRISES: Berger & Montague Files Securities Lawsuit in FL ------------------------------------------------------------------- Berger & Montague, P.C. filed a class action lawsuit for violations of the federal securities laws in the United States District Court for the Middle District of Florida against Sykes Enterprises, Inc. and certain of its officers and directors, on behalf of all persons who purchased Sykes common stock between July 26, 1999, and February 4, 2000, inclusive. The complaint alleges that Sykes and certain of its directors and officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing to the investing public false and misleading financial statements and press releases which overstated Sykes' reported revenues and earnings, and misled the marketplace as to its purportedly rapid growth and prospects. On the morning of February 7, 2000, Sykes disclosed that fourth quarter 1999 results were significantly below both market expectations and its results for fourth quarter of 1998. The shortfall was due in major part to revenue recognition issues which required Sykes to delay recognizing revenues, and to restate downward its previously reported results for the second and third quarters ended June 30 and September 30, 1999. As a result, Sykes' net income for these quarters was reduced by 67%. Sykes further conceded that in light of the restatement, it expected fiscal year 2000 earnings of about $1.10 per share, well short of analysts' expectations of $1.53 per share. On February 7, 2000, the market price of Sykes' common stock, which had traded as high as $51 per share during the Class Period, plunged to $14-1/4 per share, thereby culminating in a decline of more than 70% in value over a three-week period. Plaintiff seeks to recover damages on his own behalf and on behalf of all purchasers of Sykes common stock during the Class Period. For concerns regarding this lawsuit, you may get in touch with Sherrie R. Savett, Stuart J. Guber or Kimberly A. Walker, Investor Relations Manager, all of Berger & Montague, P.C. at 1622 Locust Street, Philadelphia, PA 19103, by telephone at 888-891-2289 or 215- 875-3000, by fax at 215-875-5715, or at InvestorProtect@bm.net via e-mail. UPGRADE INTERNATIONAL: Milberg Weiss Files Securities Lawsuit in WA ------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP filed a class action lawsuit in the United States District Court for the Western District of Washington on behalf of purchasers of Upgrade International Inc. common stock during the period between Nov. 29, 1999 and Feb. 24, 2000. The complaint charges Upgrade, Daniel Bland and certain of its officers and directors with violations of the federal securities laws by making misrepresentations about Upgrade's business. Specifically, the complaint alleges that the positive statements concerning Upgrade's licensure of the Keepered Media technology from Ampex, the abilities of Upgrade's UltraCard, Upgrade's listing status with NASDAQ, and Upgrade's reporting status with the SEC were materially false and misleading because, at the time Upgrade issued them, and that defendants knew, or were reckless in not knowing, the following adverse information: * That the Keepered Media technology had never been proven to work on a credit card type format; * That Ampex, the owner of Keepered Media technology, had discontinued its use as it was too costly for commercial manufacturing and did not believe the technology had any material value; * That the value of Keepered Media technology was so insignificant, its value was not even recorded as an asset on Ampex's financial statements; * That Upgrade had not applied for NASDAQ National Market System listing; * That the UltraCard had not been proven to store 20,000 times the storage capacity of magnetic strip cards; * That Keepered Media technology had only been proven to work on hard drive disks and was financially unfeasible to produce; * That despite its license of Keepered Media technology, Upgrade would not have a product to sell, lease or license until the year 2001; and * That there was no reasonable basis for claiming that Upgrade would be an SEC reporting company by February 24, 2000, as its auditors had not even completed Upgrade's audit. By issuing these allegedly false and misleading statements, defendants artificially inflated Upgrade's stock price from $10-1/2 on 11/29/99 to a Class Period high of $82-1/2 in January 2000, resulting in market capitalization of well over $1 billion, before the true facts about Upgrade's troubled operations and false statements concerning Upgrade's product development efforts were revealed. For more information regarding this lawsuit, please contact plaintiff's counsel, William Lerach or Darren Robbins of Milberg Weiss at 800/449-4900 or via e-mail at wsl@mwbhl.com VISX INC: Milberg Weiss Files Securities Suit in California ----------------------------------------------------------- Milberg Weiss (http://www.milberg.com/visx/)announced on February 25 that a class action has been commenced in the United States District Court for the Northern District of California on behalf of purchasers of VISX Inc. ("VISX") (Nasdaq:VISX) common stock during the period between March 1, 1999 and Feb. 22, 2000 (the "Class Period"). The complaint charges VISX and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that defendants' false and misleading statements about the steady and increasing revenues the installed base of VISX's Excimer Laser systems would provide to VISX, the strong procedure and equipment royalties VISX was earning, the limited impact of competition which would allow VISX to maintain its $250 per procedure licensing fee in the United States which would lead to consistent revenue growth, and VISX's continued market share domination which would result in 2000 EPS of $1.70-1.80, artificially inflated the price of VISX stock to a Class Period high of $103-7/8 from just$30-1/4 per share (split adjusted) at the outset of the Class Period. This upsurge in VISX's stock enabled VISX insiders to sell 1.4 million shares of their VISX stock for $97 million in proceeds. On Dec. 10, 1999, VISX received an adverse ruling from the International Trade Commission that competitor Nidek had not infringed on VISX's patents, and its stock retreated to the $58-$60 range. This cast doubt on VISX's competitive position and the ability to maintain its prices. However, VISX continued to represent that the $250 per procedure fee was in tact. Then, on Jan. 19, 2000, VISX revealed a drop in 4thQ 99 revenues versus the 3rdQ 99 and exposed the problems VISX was having growing its business. On these disclosures, VISX's stock fell by 29% in one day to $32-1/4. However, it was not until Feb. 22, 2000, that VISX admitted it would reduce its per procedure fee to $100. This announcement caused its stock price to drop to as low as $16 on huge volume on Feb. 23, 2000. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach, 800/449-4900 wsl@mwbhl.com The Company's disclosure on the antitrust litigation that it faces has been reported in the CAR. Summit Technology Inc.' disclosure on the antitrust lawsuits that it faces with VISX Inc., has also been reported. WAR VICTIMS: Poll Says Most Californians See No Need for Japan Apology ---------------------------------------------------------------------- The first ever poll of Californian attitudes toward Japan's World War II war crimes finds that fewer than a third of state voters believe Japan still needs to apologize and pay compensation--a demand being made internationally and here by former U.S. prisoners of war and Asian American activists. A solid majority of 60% wanted to "put the past behind us." Two-thirds of those polled by the U.S.-Asia Opinion Survey Project in Claremont said it was, nonetheless, important to educate the public on such atrocities as the Japanese army's wartime massacre of civilians in Nanking, China, project founder Alfred Balitzer said. The poll found significant age and gender gaps. More women than men favored putting the past behind them. Older people were more likely than younger ones to favor an apology from Japan. The results suggest that public attitudes are at odds with political and legal efforts that have made California a battleground in the effort to win wartime compensation from Japan. Last year, the state Legislature passed a resolution asking Japan to apologize and pay compensation to victims who allege they were subjected to forced labor, live medical experiments, sexual slavery and other atrocities. So far, all 18 cases seeking compensation from Japanese firms for alleged slave labor practices have been filed in California, where the statute of limitations for wartime claims was extended last year to 2010. The nation's largest class-action law firm, Milberg Weiss Bershad Hynes & Lerach L.L.P., joined the legal fray by filing two actions in Orange County on behalf of ex-POWs and Chinese victims. "People don't want to punish Japan and hold people responsible in the courts of law, but they think we need to know about these things," said Balitzer, a professor of government at Claremont McKenna College. Chinese American activist Ignatius Ding said the poll results underscored the need to redouble efforts to publicize the war crimes through graphic photo exhibits and other activities. "Obviously, the Japanese propaganda machine has prevailed again," said Ding, who directs the Global Alliance for Preserving the History of WWII in Asia, an advocacy group based in the Silicon Valley. Patrick Daniels of Milberg Weiss said the public should understand that the lawsuits are not aimed at the Japanese government, which has paid some state-to-state redress, but at private firms for failing to pay people who toiled for them. Poll director Ted Gover said the survey found higher levels of awareness about the issue than expected. More than two-thirds of respondents knew about the Bataan Death March, for instance, but 51% did not believe that Japanese firms should be held responsible for compensating the POWs who were sent to coal mines, shipyards and other work sites. The survey, conducted between Feb. 4 and Feb. 11, questioned 1,000 "high-propensity voters" in California--those who had voted in three of the last four elections. The margin of error is plus or minus 3 percentage points. The aim was to inform policymakers about the views of those most likely to vote, Balitzer said. "I think elected officials will be a lot less enthusiastic about jumping into this issue, taking sides and proposing legislation--the aim of which will be to slap Japan on the wrist," Balitzer said. The poll also found that hostile stereotypes of the past have largely faded. The phrase chosen most often to describe the Japanese was "hard-working." But some mistrust still remained, Balitzer said, reflected in a virtually even split in opinion over whether Japan could become a menace if allowed to fully rearm and pursue a foreign policy independent of the United States. (Los Angeles Times, February 25, 2000) ********* 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. Romeo John D. Piansay, Jr., editor, Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. 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