/raid1/www/Hosts/bankrupt/CAR_Public/000413.MBX
C L A S S A C T I O N R E P O R T E R
Thursday, April 13, 2000, Vol. 2, No. 73
Headlines
CAREMARK RX: Announces Settlement of Remaining TAPS Litigation in AL
COCA-COLA: Fewer Than Expected Sign up for Bus Ride against Racial Bias
COMMONWEALTH EDISON: Judge Approves $1M Atty. Fee for '95 Outages Suit
CONSECO, INC: Savett Frutkin Files Securities Suit in Indiana
EFTC CORPORATION: Announces Agreement to Settle Securities Lawsuits
FIRST COLONY: FL Suit Alleges Deceptive and Misleading Sales Practices
FOCUS ENHANCEMENTS: Wechsler Harwood Files Securities Lawsuit in MA
HMO: Psychiatrist Fired by Kaiser Sues Over Prescribing Practices
INS: Court Says Immigrant Ex-Convicts Denied Repatriation Must Be Freed
INTERACTIVE TV: Disabled Sue in Miami Alleging Unfairness in Game Show
LOS ANGELES: Alleged of Making Shortchanges in Property Tax Refunds
MIDLAND CREDIT: Varmint Files Securities Suit in TX; Parties Mediate
PACIFIC GATEWAY: Wechsler Harwood Files Securities Lawsuit in CA
PHILIP SERVICES: Emerges from Ch 11; 2% Equity Goes to Claimants
PHILIP SERVICES: TSE Sets Record Date to Determine Shares Entitlement
ROBERTS: AL Dept of Transportation Cleared of '85 Employment Bias Case
SAFETY-KLEEN: Kahn and Associates Files Securities Suit in SC
THRIFTY OIL: Ct of Appeals Upholds Denial of Class of Credit Card Users
TOBACCO LITIGATION: FL Coalition's Position on Engle Suit & Legislation
TOBACCO LITIGATION: FL Rushes to Measures to Sustain Settlement Money
TOBACCO LITIGATION: Judge Hears Heated Arguments Over Punitive Damages
UICI: Named Nominal Defendant in Shareholder Derivative Suit in TX
UICI: Rinderknecht Securities Lawsuit in TX Consolidated
UICI: Settles AR Suit Re Deceptive Trade Practices and Insurance Code
UICI: Settles KS Suit Alleging Fraud and Consumer Protection Act
UICI: Settles TX Suit over Vanishing Premium Life Insurance Policies
UICI: Sued in CA over Advertising of Membership in Credit Association
*********
CAREMARK RX: Announces Settlement of Remaining TAPS Litigation in AL
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Caremark Rx, Inc. (NYSE: CMX) announced on April 11 that it has reached
a settlement in the previously announced class action lawsuit filed in
the Circuit Court of Franklin County, Alabama regarding its Threshold
Appreciation Price Securities ("TAPS"). The settlement, which covers all
TAPS holders except for those included in the previously announced
settlement, has received preliminary court approval and remains subject
to final court approval following customary class notices and hearings.
The remaining lawsuit in New York has been dismissed.
On March 31, 2000, the Company announced the settlement of a lawsuit
filed in the Supreme Court of the State of New York, which covered
approximately 35 percent of the total TAPS outstanding.
The Company said that the combined impact of settling the New York and
Alabama cases would not have a material adverse impact on the operations
or financial condition of the Company.
COCA-COLA: Fewer Than Expected Sign up for Bus Ride against Racial Bias
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Fewer people than originally expected will participate in a ''ride for
justice'' to Coca-Cola Co.'s annual shareholders meeting in Delaware,
where protesters hope to pressure the soft drink giant to settle a race
discrimination lawsuit, organizers said. ''We will have two buses
instead of three because there's less volume than we thought,'' said
Larry Jones, a former human resource manager at Coke and the chief
organizer of the trip.
Jones had hoped for 150 people and three buses, but he said that 60
people have signed up so far. He said he hopes that two buses, each
holding about 55 passengers, will make the 1,300-mile round trip to
Wilmington, Del., for the April 19 meeting.
The federal suit, filed by eight current and former employees, claims
Atlanta-based Coke has discriminated against blacks in pay, promotions
and performance evaluations. The company has denied the allegations and
is fighting efforts to have the suit declared a class action, enveloping
2,000 plaintiffs.
Talks with a federal mediator concerning the lawsuit are scheduled for
April 17-18. Coca-Cola Chairman Doug Daft has said the company is
''working toward an expedient and equitable resolution.''
Jones said the trip to Wilmington was too long for some former and
current Coke employees. He has encouraged white employees to join the
bus trip and said supporters nationwide have donated money for the
campaign. He said $36,000 has been raised so far to pay for the trip.
''We have the minimum amount of money needed to pay for the hotel rooms
and buses,'' Jones said. The group plans stops in Greensboro, N.C.,
Richmond, Va., and Washington before arriving in Wilmington. (AP Online,
April 12, 2000)
COMMONWEALTH EDISON: Judge Approves $1M Atty. Fee for '95 Outages Suit
----------------------------------------------------------------------
A Cook County judge approved a $ 1 million attorney fee award Monday
April 10 in a class-action case against Commonwealth Edison Co. stemming
from power outages during the summer heat wave of 1995.
Three weeks ago, Circuit Judge Ellis E. Reid approved a settlement of up
to $ 2.3 million for about 50,000 ComEd customers, mostly in Chicago's
Wrigleyville area, who were left without power for up to five days in
the summer of 1995. The parties had agreed to cap the attorney fees at $
1 million.
The plaintiffs were represented by Edward T. Joyce and several other
attorneys, while Clinton A. Krislov and his Chicago law firm represented
another group of class members.
Krislov initially sought $ 475 an hour for his work on the case, but
Reid held Monday April 10 that amount was excessive and reduced it to $
400 per hour. Krislov's firm had sought about $ 386,000 in attorney fees
but later agreed to cut that amount by $ 10,000, he said.
ComEd had objected to Krislov's fees, contending they were excessive and
asserted that the plaintiff lawyers should receive a total of about $
775,000 in attorney fees. Joyce charged the highest hourly rate -- $ 375
-- among the lawyers in his group, Reid said. The Joyce group initially
sought $ 669,094 in attorney fees.
Reid said during Monday's hearing that the plaintiff lawyers had to
reduce their fee requests by about $ 37,500 in order to meet the $ 1
million limit, with the Joyce group and Krislov's splitting the hit"
evenly. Krislov then said he believed the reduction should be achieved
by prorating the reduction among all the plaintiff attorneys. But Reid
pointed out that Krislov's firm was receiving a higher hourly rate and
that the Joyce group worked more hours on the case than Krislov's firm.
I think it's the best way I can macro-manage this the attorney fee issue
based on what I've read and heard here," Reid said. Joyce then told
Reid, We'll take a 50-50 haircut with Krislov's firm." Every rate
Krislov's firm charged was higher and the Joyce group objected to a
prorated reduction, he added. Krislov responded that he would accept the
even split of the reduced amount with the Joyce group but that he didn't
believe his firm had been treated fairly.
Under Reid's ruling, Krislov said he expects his firm will receive about
$ 336,000 in attorney fees plus $ 10,715 in expenses. That means the
Joyce group should get about $ 664,000 of the attorney fees and nearly $
24,000 for expenses. The Joyce group also includes Chicago attorneys
Karla Wright, Patrick J. Sherlock, Ron Cohen and and the firm of Beeler,
Schad & Diamond P.C.
Under the settlement agreement, all customers affected by the outages
will receive a credit on future bills ranging from $ 18 to $ 250, Joyce
said. Customers who filed claims for food they lost because of the
outages can receive up to $ 175, he added.
Chicago lawyer Kevin M. Forde and Patrick T. Nash of Grippo & Elden
represent ComEd. The case is Sean B. Crotty, et al. v. Commonwealth
Edison Co., No. 95 CH 6849, consolidated with 95 CH 6895. (Chicago Daily
Law Bulletin, April 10, 2000)
CONSECO, INC: Savett Frutkin Files Securities Suit in Indiana
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Savett Frutkin Podell & Ryan, P.C. gives notice that a class action
complaint has been filed in the United States District Court for the
Southern District of Indiana, Indianapolis Division, on behalf of a
class of persons who purchased the stock of Conseco, Inc. (NYSE: CNC)
during the period April 28, 1999 through March 31, 2000, inclusive
("Class Period"), and who were damaged thereby.
The complaint charges Conseco and certain of its officers and directors
with violations 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 issued a series of materially
false and misleading statements concerning its subsidiary Conseco
Finance, which was formerly known as Green Tree Financial Corporation
("Green Tree") and the value of Green Tree's portfolio of interest-only
securities.
Contact: Savett Frutkin Podell & Ryan, P.C. Robert P. Frutkin, Esquire
or Barbara A. Podell, Esquire 215/923-5400 or 800/993-3233 E-mail:
sfprpc@op.net
EFTC CORPORATION: Announces Agreement to Settle Securities Lawsuits
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EFTC Corporation (Nasdaq: EFTC), a leading provider of high mix
electronic manufacturing services, and the Plaintiffs in two class
action securities cases have reached an agreement to settle, subject to
court approval, two lawsuits, both of which were filed against EFTC in
1998. The proposed settlement provides for contribution of a total of $6
million into the cash settlement fund. Additionally, EFTC will
contribute 1.3 million shares of its common stock to the settlement
fund. The effects of this settlement will be included in EFTC earnings
for 1999.
FIRST COLONY: FL Suit Alleges Deceptive and Misleading Sales Practices
----------------------------------------------------------------------
The law firm of James, Hoyer, Newcomer, and Smiljanich, P.A. has filed a
class action lawsuit on behalf of two current policyholders of First
Colony Life Insurance Company. The lawsuit alleges deceptive and
misleading insurance sales practices in the sale of life insurance
policies. The lawsuit was filed in Tampa, Florida, on April 12, 2000.
First Colony is a wholly owned subsidiary of General Electric Capital
Company, which is a division of General Electric Company (NYSE: GE).
Policyholders Martha Wheeler and Charles Droz allege in the lawsuit that
First Colony induced them to replace paid-up or cash-rich policies
issued by other companies with First Colony policies using the single
premium payment or vanishing premium concepts. Such replacements are
rarely in the best interest of policyholders. It is further alleged in
the complaint that the policyholders were fraudulently lead to believe
that the cash balances in the old policies, coupled with the high
illustrated interest that would accrue on the First Colony polices,
would obviate the need for further "out-of-pocket" premium payments
after a single or a limited number of payments. First Colony also
miscast the nature of the insurance products as investments. The
policyholders are now forced to choose paying continued unanticipated
premiums, having the cash value of their policies eaten up by loans put
on the policies to pay the premiums, or canceling their policies and
looking for new insurance at higher rates for retirees.
It is further alleged in the complaint that First Colony agents
intentionally failed to disclose that high commissions and
administrative charges would be assessed from the funds removed from the
older policies, that the interest rates upon which the promises were
based were not guaranteed, that the cost of insurance would be higher
because of the policyholders' increased ages, and that premiums were due
for the life of the policyholder. The complaint also alleges that First
Colony knew that it could not sustain the interest rates illustrated and
that it was a certainty that additional significant premium outlays
would be required.
The class action plaintiffs are residents of Florida who seek to
represent all persons nationwide who were victimized by the fraudulent,
overreaching, and misleading sales practices of First Colony.
Mike Peacock, an attorney with James, Hoyer, Newcomer & Smiljanich,
P.A., a Tampa firm that frequently represents victims of corporate
fraud, stated: "The First Colony policyholders made their retirement and
estate plans in reliance upon the promises made to them by First Colony.
They have now found that the promises made were deceptive and
misleading. The large number of retirees in Florida makes the state a
prime location for the type of predatory conduct alleged in the
complaint."
Contact: Mike Peacock, mpeacock@jameshoyer.com, or John Yanchunis,
jyanchunis@jameshoyer.com, both of James, Hoyer, Newcomer & Smiljanich,
P.A., 813-286-4100
FOCUS ENHANCEMENTS: Wechsler Harwood Files Securities Lawsuit in MA
-------------------------------------------------------------------
A class action lawsuit was filed in the United States District Court for
the District of Massachusetts on behalf of all persons who purchased the
common stock of Focus Enhancements, Inc. (Nasadaq: FCSE) between April
29, 1999 through March 1, 2000 ( the "Class Period").
The complaint charges Focus and certain of its senior officers and/or
directors with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934. The complaint alleges that the defendants issued
materially false and misleading financial statements for fiscal year
1999. The complaint alleges that on March 1, 2000, the Company announced
that its independent auditors had informed the Board that it had
discovered certain irregularities relating to the Company's financial
controls for fiscal 1999 and prior quarters. The Company's Board
announced that it formed a committee to investigate the matter.
Additionally, two of the Company's top officers were placed on leave and
will cooperate with the committee's review. The complaint further
alleges that prior to the disclosure of the adverse facts described
above, certain insiders collectively sold more than 220,000 shares of
Focus common stock and received proceeds of approximately $1.5 million.
Contact: Wechsler Harwood Halebian & Feffer LLP, 488 Madison Avenue, New
York New York 10022, Telephone: 877-935-7400 (toll free), Website:
http://www.whhf.comor Robert I. Harwood, Esq., rharwood@whhf.com or
Craig Lowther, Shareholder Relations, clowther@whhf.com or at BULL &
LIFSHITZ, LLP, Joshua M. Lifshitz, Esq., 246 West 38th Street, New York,
New York 10018, Telephone: 212-869-9449
HMO: Psychiatrist Fired by Kaiser Sues Over Prescribing Practices
-----------------------------------------------------------------
A former Kaiser psychiatrist has filed suit against the HMO in state
court, charging that he was fired after refusing to prescribe
medications to patients he was not allowed to personally examine.
According to documents filed Monday in Alameda County Superior Court,
Dr. Thomas S. Jensen said the Permanente Medical Group in San Diego
terminated him in February after he refused to go along with the
practice of prescribing medications to patients solely on the
recommendations of social workers who saw them when they came into the
clinic.
Permanente employs the doctors who treat Kaiser patients. The lawsuit
was filed against Permanente and the Kaiser Foundation Health Plan,
which is the HMO.
Jensen's lawsuit does not ask for reinstatement or damages for his
alleged firing. Instead, the San Diego psychiatrist has asked the
California courts to issue an injunction that would stop Kaiser
Permanente from requiring other doctors to prescribe drugs without
personally examining patients.
The suit also charges Kaiser with engaging in "untrue or misleading
advertising" by proclaiming that it leaves treatment "in the hands of
doctors" when -- according to the suit -- it forces doctors in Southern
California "to prescribe drugs based solely on the report of a
nonphysician social worker, social work intern or like employee."
Officials at Kaiser's Oakland headquarters referred calls to Dennis
Cook, chief of the psychiatry practice for the Southern California
Permanente Medical Group. He could not be reached.
Jensen's case is reminiscent of a class-action lawsuit filed against
Kaiser last year by the Santa Monica-based Consumers for Quality Care, a
public interest group associated with Ralph Nader.
That suit also alleged that Kaiser's ads were misleading because they
say the HMO leaves doctors in charge of treatment when administrators
allegedly interfere. But Jamie Court, the activist who brought that
suit, said Jensen's charges were more damaging.
"This is a Kaiser physician saying he doesn't even have the authority to
see a patient," Court said. "This is a huge ethical breach."
Michael Ashcraft, a retired physician who is now a staff member with the
state Senate's insurance committee declined to discuss the particulars
of this case, but he did explain what is usual practice regarding
prescriptions in group practice settings such as Kaiser clinics.
Ashcraft said it is common for social workers, under the supervision of
a psychiatrist, to screen patients and make recommendations for
treatments or medications.
"But once the doctor makes the decision that he needs to make a physical
exam before prescribing, that's it, it's his duty," Ashcraft said. "I'm
not aware of a situation where someone would tell a physician they
couldn't examine a patient."
In his lawsuit, however, Jensen said he was terminated after four months
for insisting that, in his medical judgment, he had to see some patients
before following the prescription recommendations of the social workers.
(The San Francisco Chronicle, April 12, 2000)
INS: Court Says Immigrant Ex-Convicts Denied Repatriation Must Be Freed
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Immigrants convicted of crimes who remain detained by the Immigration
and Naturalization Service because their native countries refuse to take
them back must be freed in the United States, a San Francisco federal
appeals court ruled.
In a 3-to-0 decision, the U.S. Court of Appeals ruled against the INS,
which has been detaining convicted immigrants who have completed their
prison sentences but who cannot be repatriated.
The decision, which the INS said it probably will appeal, affects nearly
800 detainees in California and may ultimately affect 3,800 jailed
immigrants nationwide. "Our priority is to keep the community safe, and
no one will be released if they are deemed a threat to public safety,"
said INS spokesman Bill Strassberger.
The detained immigrants are natives of mostly communist or formerly
communist nations, such as Cuba, Vietnam, Cambodia and Laos, which do
not have repatriation policies with the United States. Immigrants from
those countries, as well as some immigrants from the former Soviet Union
who cannot be deported to their newly independent homelands, have been
languishing in prison cells in the United States, well past the end of
their prison terms.
"It's an important ruling, because people who have served their
sentences aren't being taken back by their home countries," said Monica
Hernandez, program director with the Northern California Coalition for
Immigrant Rights in San Francisco. "They face indefinite terms in
prison. . . . There hasn't been anything that could be done until now."
The court said that the jailed immigrants must be released 90 days after
a final deportation order and allowed to remain free under INS
supervision until their home country reaches an agreement with the
United States to accept them.
The ruling upholds decisions by a special panel of five federal trial
judges in Seattle and U.S. District Judge Terry J. Hatter in Los
Angeles, who have said the INS policy violated the immigrants' rights.
The lead plaintiff in the case, Kim Ho Ma, a 22-year-old Cambodian
refugee, was detained for more than two years by the INS after serving
38 months in prison for his role in a gang-related shooting five years
ago. Ma was freed late last year, along with four other Seattle men,
after the panel of federal trial judges decided that they had been
illegally detained.
The ruling is at odds with decisions rendered by federal appeals courts
in New Orleans and Denver, and the issue will probably be resolved by
the U.S. Supreme Court. (The San Francisco Chronicle, April 11, 2000)
INTERACTIVE TV: Disabled Sue in Miami Alleging Unfairness in Game Show
----------------------------------------------------------------------
Who wants to be a millionaire? A lot of people, including four
individuals with disabilities who sued the owners and operators of the
smash hit game show last month for alleged violations of the ADA. The
suit raises some interesting questions about the degree to which the ADA
applies to the growing phenomenon of interactive television.
Michael F. Lanham of Michael F. Lanham, P.A. in Miami filed the class
action on behalf of five named plaintiffs: Sergio Rendon, who has a
mobility impairment that requires him to use a wheelchair; Jose Galofre,
who has a hearing impairment; Chris Leone, who has muscular dystrophy
and also uses a wheelchair; JoAnn Norris, who has a mobility impairment
resulting from Lupus; and Kelly-Greene, the director of the Center for
Independent Living of South Florida Inc.
Title III of the ADA, Lanham notes in the complaint, requires public
accommodations to take steps to ensure that no individual with a
disability is excluded from participation due to the absence of
auxiliary aids and services. But defendants Valleycrest Productions,
Ltd., of Burbank, Calif., and ABC Television Network, based in New York,
maintain discriminatory eligibility and participation criteria, he
alleges.
In order to gain a chance to appear on the wildly popular "Who Wants To
Be a Millionaire," potential contestants must compete in telephone
qualifying rounds, the suit says. Contestants who answer questions
correctly are ranked based on speed of response. The plaintiffs in the
case tried to use the phone-in system but "discovered that the contest
was based on their ability to press numbers on a telephone and not on
their knowledge," Lanham claims. Plaintiff Galofre tried many times to
access the contest, but there were no provisions for individuals with
hearing impairments, such as a Telecommunication Devices for the Deaf or
Telecommunications Relay Services, he adds. Because plaintiffs Rendon,
Leone and Norris have limited movement in their arms and fingers, it
continues, they were unable to press correct keypad numbers with the
applicable 10-second period. "As such," Lanham says, "the hearing,
visual, speech, and/or upward mobility impaired persons are limited,
because of their disability from the opportunity to be included in the
process to win a million dollars."
The complaint alleges several distinct claims under the ADA:
* Denial of participation.
* Denial of equal benefit.
* Failure to provide an integrated setting.
* Discriminatory policies, practices or procedures.
* Failure to provide auxiliary aids.
* Failure to remove communication barriers.
In addition, the complaint adds a claim for negligent infliction of
mental distress. It seeks injunctive and monetary relief as well as
attorney's fees and costs.
Under an unusual count of the complaint titled "Defense and Mediation
Notices," Lanham indicates a willingness to enter into mediation via the
filing of a formal agreement with the court. "Plaintiff's goal in this
litigation is to achieve ADA compliance; therefore, if both Defendants
agree that the ADA applies to them, and both Defendants agree to remedy
the above violations, the Plaintiffs are willing to enter into
negotiations and/or mediation in an attempt to achieve the Defendants'
compliance, without the need for extensive pretrial discovery and
further litigation."
Contact: Michael F. Lanham, Miami, Fla., (305) 358-7646. (Disability
Compliance Bulletin, April 7, 2000)
LOS ANGELES: Alleged of Making Shortchanges in Property Tax Refunds
-------------------------------------------------------------------
A Hermosa Beach businessman has filed a lawsuit seeking class-action
status alleging that Los Angeles County systematically shortchanges
taxpayers when refunding their overpaid property taxes.
Two major corporations have sued the county over the issue, winning more
than $ 3 million in judgments and settlements. The businessman, Roger
Bacon, found at the end of a lengthy battle with the county that his own
refund checks were short $ 1,500 because of errors in computing the
interest he was due on overpaid taxes.
Because the county's checks do not state the amount paid as interest or
how it was computed, Bacon was only able to discover the errors with the
aid of an experienced tax lawyer who had litigated one of the successful
lawsuits against the county. Given that the county gives more than
200,000 refund checks annually, Bacon decided he had to act.
"People . . . are not going to know how to figure out this interest,"
Bacon said. "These people need the money worse than I do. Why shouldn't
they get the money?"
In court papers, the county denies Bacon's allegations. The lawyer
handling the case for the government, Albert Ramseyer, declined to
comment, saying he does not discuss pending court cases. But other
county officials say Bacon's case is an anomaly and that, if he hadn't
filed his lawsuit, they would have corrected their error by sending him
his second refund.
"Our intent is to ensure the taxpayers get everything they're entitled
to, and we believe they have," said Marianne Reich, the property tax
division chief in the auditor-controller's office.
There are two issues in the litigation. First is the county's alleged
failure to calculate the 9% interest due in refunds of payments made
before March 1, 1993, as required by law. In Bacon's case and others,
the county has computed the interest at a lower rate it is currently
permitted to use.
Second, the county allows interest to accrue only after the date the
entire tax bill is paid, even though most property taxes are paid in two
installments months apart. Lockheed Martin Corp. successfully challenged
this policy in a 1996 lawsuit that was upheld by an appeals court, but
the decision was "unpublished," meaning it does not apply to other
cases.
County officials say they believe state law is on their side in the way
they have allowed interest to accrue. But Robert Pool, who litigated the
Lockheed case and is Bacon's attorney, disagreed.
"They just haven't been doing it right," Pool said. "Their policy is to
fleece the taxpayer."
Pool referred to county documents showing that in 1996, 11,000 refund
checks were distributed without any interest and the county waited for
calls from the taxpayers before resolving individual cases. Other
documents show that the auditor-controller's computer cannot always
calculate the correct interest rate and, again, the county's policy is
to rectify the error only when taxpayers complain about it, county
documents state.
On the first issue, acting Auditor-Controller Michael Galindo said it is
unclear if any of the 11,000 refunds would have been entitled to
interest and that individual reviews would have been expensive.
On the subject of the computer, Reich said that just a tiny fraction of
taxpayers--if any--would miss out on the interest because of the
system's calculations, and that it would cost "hundreds of thousands of
dollars" to reprogram it.
"It sounds worse than it is," she said of the county policy to
recalculate interest only after complaints.
It sounds bad to Bacon. "If the taxpayers have to live by it, then the
people who are collecting the money should have to live by the law that
is on the books," he said.
In 1996, Lockheed Martin won a tax refund after its vast county
properties were reassessed, first by the assessor's office and then by
the Assessment Appeals Board. But the corporation retained Pool and sued
the county. Lockheed contended that it was cheated out of hundreds of
thousands of additional dollars because the county failed to apply the
9% rate to all its refunds and violated state law by not allowing
interest to accrue until the final payment came in.
A Superior Court judge ruled in Lockheed's favor and awarded the
aerospace giant more than $ 300,000. The county appealed the ruling but
lost. However, because the appellate court's opinion was unpublished, it
was not circulated and so cannot be cited as legal precedent.
The county has continued to accrue interest only from the date of final
tax payment, and officials say they believe state law is on their side.
Also in 1996, court documents show, Hughes Aircraft won $ 950,000 in
unpaid interest after a Superior Court jury found that the county failed
to calculate the interest on the corporation's property tax refund at
9%. Last year, Raytheon, which merged with Hughes, sued the county
again, contending that it had been shortchanged on more than $ 1 million
in interest on the same property. The case was settled for $ 1.8
million, attorneys said.
On the question of the 9% interest for pre-1993 payments, the county is
in agreement with Bacon. "There no question about it," said Reich of the
auditor's office. "The law is very clear."
But acting Auditor-Controller Michael Galindo cautioned that though the
law is clear that the interest is 9%, there are many complexities
involving whether it applies to refunds sought during a certain time.
Additionally, he said, the interest rate may depend on how a tax payment
is structured.
The auditor's computer, however, automatically calculates all interest
at a variable rate of between 3% and 6% now used by the county under
state law.
Because the 9% rate applies only to overpayments that are more than 7
years old, Reich says it is virtually never an issue. Most refunds of
that age are made after litigation or a review by the Assessment Appeals
Board--as was Bacon's. In those instances, Reich said, the refund is
calculated manually.
"We catch 98%" of all errors, Reich said. "There are some that slip
through the cracks but in that case the taxpayer needs only give us a
call."
Bacon says he barely even realized an error was made in his case.
He figured that the tax bills on his two-acre Hermosa Beach shopping
center were inflated because the county was billing him for 11,000
square feet of land he was leasing from the city. In 1996, he said, he
applied for a refund.
During his first trip to the Assessment Appeals Board, Bacon met
attorney Pool. In the fall of 1998, Bacon won his argument before the
board and received seven refund checks. He believed he had gotten what
he wanted, he said.
But Pool cautioned him against being certain and ran Bacon's numbers
through a spreadsheet designed by an accountant for the Lockheed case.
It found that because of failure to compute 9% interest, Bacon lost $
1,521.58. Because of the delay in computing interest, Bacon missed out
on an additional $ 48.50.
Taxpayers have four years in which they can seek a refund on property
tax payments. Bacon is seeking to include taxpayers from 1995 onward in
his lawsuit. Last month a Superior Court commissioner ruled against the
county's attempt to dismiss the lawsuit. The county is appealing that
decision. (Los Angeles Times, April 11, 2000)
MIDLAND CREDIT: Varmint Files Securities Suit in TX; Parties Mediate
--------------------------------------------------------------------
MCM Capital discloses in its report to the SEC that, on July 22, 1998,
in the United States District Court for the Southern District of Texas,
Houston Division, Varmint Investments Group, LLC and PanAgora Partners,
LLC filed suit against Midland Credit Management, Inc., a subsidiary of
MCM Capital Group Inc. The plaintiffs alleged securities fraud, common
law fraud, and fraudulent inducement based upon the sale of receivables
by Midland Credit to the plaintiffs in 1997.
On January 27, 2000, in the same district court, Midland Credit filed
counter-suits against Varmint and PanAgora, alleging fraud, fraudulent
inducement, breach of contract and declaratory judgment. The parties met
to mediate these disputes on March 20, 2000 and agreed to a settlement
of all claims asserted although final documentation has not been
completed or executed.
There are a number of lawsuits or claims pending or threatened against
Midland Credit. In general, these lawsuits or claims have arisen in the
ordinary course of our business and involve claims for actual damages
arising from the alleged misconduct of our employees or our alleged
improper reporting of credit information. Based on past experience, the
information currently available and the possible availability of
insurance and/or indemnification from the originating institutions in
some cases, Management does not believe that the pending or threatened
litigation or claims will have a material adverse effect our operations
or financial condition.
PACIFIC GATEWAY: Wechsler Harwood Files Securities Lawsuit in CA
----------------------------------------------------------------
On April 11, 2000, a class action lawsuit was filed in U.S. District
Court for the Northern District of California on behalf of purchasers of
Pacific Gateway Exchange, Inc. (Nasdaq: PGEX) common stock between May
13, 1999, and March 31, 2000, inclusive (the "Class Period").
Pacific Gateway owns and operates an international switched and domestic
switched telecommunications network. The operations of Pacific Gateway
include wholesale and retail long distance, Internet and bandwidth
services. On March 31, 2000, Pacific Gateway stunned investors by
announcing that the Company had materially reduced its quarterly
reported net income for each of the four quarters of 1999, the Company's
auditors had included a "going concern" explanatory note in Pacific
Gateway's annual report, the Company was in default and had not been
able to make a scheduled payment on its $100 million credit line and its
chief financial officer had resigned.
According to the complaint, during the Class Period, defendants issued
to the investing public financial statements and press releases
concerning Pacific Gateway's financial condition and performance that
were false, misleading and deceptive because they failed to conform to
mandatory Securities and Exchange Commission guidelines and Generally
Accepted Accounting Principles. As a result of these false and
misleading statements, the market price of the Company's securities was
artificially inflated during the Class Period, permitting the Company to
consummate a key acquisition in exchange for its highly priced common
stock and the Individual Defendants to sell tens of thousands of shares
of common stock while in possession of material adverse information
withheld from investors throughout the Class Period.
Contact: at Wechsler Harwood Halebian & Feffer LLP, 488 Madison Avenue,
New York New York 10022, Telephone: 877-935-7400 (toll free), Website:
http://www.whhf.com Robert I. Harwood, Esq. rharwood@whhf.com or
Patricia Guiteau, Shareholder Relations pguiteau@whhf.com OR at BULL &
LIFSHITZ, LLP, Joshua M. Lifshitz, Esq., 246 West 38th Street, New York,
New York 10018, Telephone: (212) 869-9449
PHILIP SERVICES: Emerges from Ch 11; 2% Equity Goes to Claimants
----------------------------------------------------------------
On Friday April 7, Philip Services Corp., restructured and incorporated
in Delaware, said it had emerged from the protection of the Companies
Creditors' Arrangement Act in Canada and Chapter 11 of the U.S.
Bankruptcy Code. ''With our financial reorganization complete and
proceeds from the sale of assets, we have significantly reduced our debt
and renewed our financial stability," chief executive Anthony Fernandes
said
Philip shareholders own only 2 per cent of the new entity - getting one
share for every 273 shares in Philip's previous incarnation as a
stock-market darling that later collapsed amid over-expansion and an
accounting meltdown. Secured lenders hold 91 per cent of the equity,
with 5 per cent going to unsecured creditors and the rest to
class-action plaintiffs and other claimants. The corporate head office
is being moved to Chicago.
No longer under court shelter from creditors, Philip Services Corp. on
April 10 said it has sold its metals recycling and mills services
businesses in the United Kingdom to Simsmetal Ltd. Net proceeds from the
sale are about $48 million (U.S.), or $70 million (Canadian). After
selling various assets and reorganizing finances, Philip's senior
secured debt has been reduced from more than $1 billion (U.S.) to about
$187 million and $100 million in convertible debt.
The U.K. metals business operates in 20 locations mainly in the
southwest of England and Wales, including 14 scrap collection and
processing yards, five shredding and processing facilities, and a
non-ferrous heavy media separation facility. The U.K. business employs
about 300 people and had 1999 revenue of about $90 million (U.S.). (The
Toronto Star, April 11, 2000)
PHILIP SERVICES: TSE Sets Record Date to Determine Shares Entitlement
---------------------------------------------------------------------
Philip Services Corporation (TSE:PHV.) announced on April 11 that The
Toronto Stock Exchange ("TSE") has set a record date of April 19, 2000
to determine shareholders entitled to receive shares of the newly
restructured company. Shares of the restructured company, Philip
Services Corporation, will commence trading on the TSE on April 20, 2000
under the stock symbol "PSC".
Philip Services has recently completed its financial reorganization and
has emerged from Chapter 11 of the U.S. Bankruptcy Code and the
Companies Creditors' Arrangement Act in Canada. Under the Company's Plan
of Reorganization, 24 million shares will be issued by Philip Services
Corporation on a pro rata basis to its secured lenders (91%), unsecured
creditors (5%), existing shareholders (2%), class action claimants
(1.5%) and other equity claimants (0.5%).
Shareholders of Philip Services Corp. will receive their pro rata share
of 480,000 common shares of the restructured company or one share for
every 273 shares they hold as of the close of trading on the record date
of April 19, 2000. American Securities Transfer & Trust, Inc., Philip
Services' U.S. transfer agent, will manage the share issuance. It is
expected that the distribution of these new shares will occur within one
week after the record date.
Based on the level of dilution to existing shareholders, the trading
price of the shares in the newly restructured company would have to be
approximately C $ 65.00 per share to equal a present trading price of
approximately C $0.24. The Company cautions existing shareholders, as
well as individuals considering the purchase of shares, that it expects
the shares in the newly restructured company to commence trading well
below this level.
Philip Services is an integrated metals recovery and industrial services
company with operations throughout the United States, Canada and Europe.
Philip provides diversified metals services, together with by-products
management and industrial outsourcing services, to all major industry
sectors.
ROBERTS: AL Dept of Transportation Cleared of '85 Employment Bias Case
----------------------------------------------------------------------
The State of Alabama did not concede that it engaged in racial
discrimination against its own Department of Transportation employees
and job applicants when it entered into a consent decree with several
groups of African-American plaintiffs, the 11th U.S. Circuit Court of
Appeals ruled. Accordingly, it vacated a district court's award of back
pay plus interest totaling almost 35 million. Reynolds v. Roberts, No.
97-6349 (11th Cir. 2/2/2000).
The longstanding racial discrimination suit was initiated in 1985 on
behalf of all African-American "merit" and "non-merit" DOT employees as
well as all unsuccessful African-American job applicants. In their class
action suit, the two groups of plaintiffs alleged violations of Title
VII of the Civil Rights Act of 1964 as well as 42 U.S.C. 1981.
Plaintiffs asserted that DOT discriminated against them by using
non-job-related criteria that effectively precluded the hiring or
promotion of African-Americans. They also contended that DOT prohibited
African-American employees from gaining the job experience necessary for
promotion, and that DOT granted promotions and pay increases to white
employees who were less qualified than their African-American
counterparts.
The case eventually proceeded to trial, which was recessed so that the
parties could engage in settlement negotiations that produced several
consent decrees. The court approved the parties' proposed Consent Decree
I. The decree completely revised the manner in which DOT hires,
promotes, classifies, and pays its employees, and created new
qualifications and procedures for hiring and promotion.
The parties disagreed on the issue of DOT's liability to members of the
three plaintiff classes and on the issue of an appropriate back pay
formula. At a hearing on these issues, the federal district court
announced that the consent decree established "class-wide" liability
against DOT on all individual plaintiffs' claims. The court later
contradicted its own determination regarding "class-wide" liability when
it identified class members who were not entitled to the relief of
promotion or back pay.
The court granted judgment in plaintiffs' favor, awarding injured merit
employees a judgment of almost 35 million. DOT appealed.
The Eleventh Circuit vacated the judgment. Interpreting the consent
decree under contract law provisions, the court held that the consent
decree did not establish DOT's liability. The parties' inclusion of the
phrase "final and complete resolution of all class issues" into the
decree's preamble did not support the determination of liability.
"Common practice is that defendants who consent to the entry of
injunctive orders do so without admitting liability ... If every consent
decree constituted an admission of liability, defendants would have
little incentive to settle the case," the court explained.
In remanding the case for further proceedings, the court stated that the
prospective injunctive relief contained in the consent decree remained
undisturbed. Under the decree, plaintiffs could only obtain individual
relief if they proved that DOT discriminated against them on account of
their race when it failed to hire or to promote them to a higher
position or a merit position. (National Public Employment Reporter,
April 5, 2000)
SAFETY-KLEEN: Kahn and Associates Files Securities Suit in SC
-------------------------------------------------------------
A class action has been commenced in the United States District Court
for the District of South Carolina on behalf of purchasers of the
publicly traded securities of Safety-Kleen Corp. during the period July
7, 1998 to March 6, 2000 (the "Class Period").
The Complaint charges that Safety-Kleen, its senior management and
certain of its directors violated the Securities Exchange Act of 1934 by
issuing false and misleading statements and omissions concerning
Safety-Kleen's financial condition. The Complaint alleges that, among
other things, the Company misled investors by inflating Safety-Kleen's
revenues, income and earnings per share throughout the Class Period.
Contact: Kahn and Associates David B. Kahn, 800/536-0499 Mark E. King,
800/536-0499 e-mail: DBKLAW@FLASH.NET
THRIFTY OIL: Ct of Appeals Upholds Denial of Class of Credit Card Users
-----------------------------------------------------------------------
Rochelle Linder filed suit for herself and on behalf of others
"similarly situated," contending that Thrifty Oil Co. violated the
Song-Beverly Credit Card Act by imposing a surcharge on cardholders who
chose to use credit cards in lieu of paying in cash and by using
preprinted credit card forms that asked for certain personal
identification information.
After Thrifty answered, Linder moved to certify her case as a class
action. The main class, she asserted, were cardholders who had been
wrongfully required to purchase gas at an additional four cents per
gallon, with an additional sub-class of members who were subjected to
the unlawful use of prohibited credit card transaction forms.
The certification motion was denied. On appeal, Linder contended the
trial court was not permitted to consider the merit of her case in
deciding the merits of her motion.
The court of appeal affirmed, holding the trial necessarily was required
to consider the merits of Linder's claim to determine whether her chance
of prevailing was large enough to justify the expense and other problems
associated with a class action.
The court observed that the statute on which Linder relied prohibits
imposing surcharges on card use in lieu of cash payment, but it also
permits retailers to offer discounts cash payments, so long as the
discounts are offered to all prospective buyers. The trial court
concluded it was unlikely that Linder would prevail; that conclusion was
correct, the court said.
The court also noted that the potential benefit (four cents per gallon,
for a potential benefit to class members of less than a dollar) was
small, and substantial time and expense would be consumed in pursuing
the class action. The burdens far outweighed the benefits, the court
said.
With respect to the "sub-class" of customers subjected to the improper
credit card forms, the court found that, assuming use of the form was
other than a bona fide error, Thrifty would be liable for no more than a
total penalty of $1,250. Relying on the reasoning in a federal case, the
court said the maximum statutory penalty ($1,000) could not lawfully
have been imposed for every member of the class.
Counsel for petitioner Rochelle Linder: David Daar, Daar & Newman, 865
S. Figueroa St., Ste. 2500, Los Angeles, CA 90017-2567, 213-892-0999
Counsel for Thrifty Oil Co.: Ronald J. Nessim, Bird, Marella, Boxer,
Wolpert & Matz, 1875 Century Park East, 23rd Fl., Los Angeles, CA
90067-2561
Supreme Court Case No. S065501
Case: B106507; Cal.Ct.App., 2nd Dist., Div. 1; 58 Cal.App.4th 664, 68
Cal.Rptr.2d 180, 97 C.D.O.S. 8109
Petition filed: Nov. 3, 1997
Review granted: Dec. 17, 1997
Justices voting for review: Baxter, Brown, Chin, George, Kennard, Mosk,
Werdegar
Procedure: Petition for review after affirmance of order. (California
Supreme Court Service, March 31, 2000)
TOBACCO LITIGATION: FL Coalition's Position on Engle Suit & Legislation
-----------------------------------------------------------------------
The following is a letter sent to Governor Jeb Bush regarding the
Florida Coalition on Smoking OR Health position on legislation and
proposals that affect the punitive damage stage of the Engle class
action tobacco suit:
April 12, 2000
Attn: Carol Licko
The Honorable Jeb Bush
Governor of Florida
PL 05 The Capitol
400 S. Monroe St.
Tallahassee, FL 32399-0001
Dear Governor Bush:
We are writing to you to express our concern over proposals that have
been proffered by a number of public officials that would provide
protections to the tobacco industry in the Engle class action tobacco
suit.
We realize that the state of Florida benefits financially from the
annual tobacco settlement payments. However, the tobacco industry has
been found guilty in a court of law and the courts should be allowed to
handle this phase without interference from the legislature. Enclosed is
our position, which addresses our concerns regarding proposals to
protect the tobacco industry. We would be deeply disappointed if the
Florida Legislature enacted new legislation to deny victims their rights
and at the same time grant additional rights to those that have already
been found guilty of wrong doing.
The proposals to protect the tobacco industry are predicated on
exaggerated fears of tobacco industry bankruptcy. Many groups and
organizations have already attested to the fact that it is extremely
unlikely that the tobacco industry will go bankrupt. Tobacco analysts on
Wall Street, the plaintiff attorneys in the Engle suit, and health
groups have all said that tobacco industry bankruptcy is very unlikely.
In fact, tobacco industry representatives have stated publicly that they
do not fear bankruptcy. We have also enclosed some information that
addresses the unfounded fears of tobacco industry bankruptcy.
The tobacco industry has obviously been fueling concerns about
bankruptcy. Their motivation is obviously to reduce the amount of the
appeal bond they may have to post and to significantly reduce and delay
any punitive damage award that may be handed down.
Governor Bush, we hope you will keep our concerns in mind. We
respectfully ask you to veto any legislation that comes to your desk
that would in any way intervene in the Engle class action tobacco suit.
Sincerely,
Eliza Perry, R.N. William B. Blanchard, MD Larry W. Serlo
CPA
Chairman of the Board President President
American Cancer Society American Heart Association, American Lung
Florida Division Florida/ Association of
Puerto Rico Affiliate Florida, Inc.
cc: Attorney General, Robert A. Butterworth
Senate President, Toni Jennings
Speaker of the House, John Thrasher
Members of the Florida Legislature
Contact: Ralph DeVitto, American Cancer Society, 813-785-3767
Brian Gilpin, American Heart Association, 727-570-8809
Brenda Olsen, American Lung Association, 850-386-2065
Position of the Tri-Agency Coalition on Smoking OR Health On
legislation and proposals that affect the punitive damage stage
Of the Engle class action tobacco suit
The Tri-Agency Coalition is opposed to any legislation or proposal that
would in any way limit or prevent the Engle class action tobacco suit
from proceeding expeditiously to the punitive damage stage. Florida's
Legislature should not be pushing for special protections that would
shelter the tobacco industry, but should instead focus on protecting the
health of their citizens from the predatory practices of Big Tobacco.
The Engle case should continue without the burden of any new legislation
that would only delay or impede due process for the victims of the
tobacco industry.
The Engle class action lawsuit is the first of its kind to ever go to
trial. The lawsuit was first filed in 1994 on behalf of an estimated
500,000 sick Florida smokers. The jury has already decided that the
tobacco companies are guilty of deceiving the public about the addictive
and harmful effects of cigarettes and has awarded the plaintiffs $12.7
million in compensatory damages. The jury will decide on punitive
damages in the next phase of the trial.
The plaintiff attorneys in the Engle case have stated that they have no
intention of requesting punitive damages that could bankrupt the
industry. In fact, Florida law does not permit them to do so. Punitive
damages are to punish and deter, not to bankrupt.
The purpose of punitive damages is to punish an individual or entity for
their egregious behavior, and to try to prevent them from engaging in
that behavior in the future. Since the Supreme Court recently decided
that the FDA does not have the authority to regulate tobacco products,
the courts are the only recourse available to keep the tobacco
industry's behavior in check.
We now know that the tobacco industry deceived the public about the
dangers of smoking, hid research results, and aggressively marketed
their product to children. The tobacco industry's extreme and outrageous
behavior has compromised the health of millions of Americans.
Tobacco use is the number one preventable cause of death in Florida,
killing nearly 30,000 people in Florida each year. More than $4.6
billion is spent in health care costs each year in Florida to treat
smokers suffering from cardiovascular disease, stroke, cancer, lung
disease, and other related ailments.
The Facts on Tobacco Industry Bankruptcy Fears
The tobacco industry has been fueling fears of bankruptcy in order to
ease the punitive damages they may have to pay in the Engle class action
tobacco suit. However, the facts tell a very different story on the
likelihood of bankruptcy.
Fact: There are over 45 million addicted smokers in the U.S. alone. With
that many dedicated customers, the tobacco industry will not be going
away for a long time.
Fact: The risk of tobacco industry bankruptcy has been greatly
exaggerated. Robert Larkins, a managing director with Morgan Stanley
Dean Witter, stated, "The role of the bankruptcy bogeyman in any
potential financing has been greatly exaggerated. All of the tobacco
companies are solidly investment-grade." (The Bond Buyer, July 1, 1999,
p. 48)
Fact: Representatives from the tobacco industry have stated publicly
that there is no risk of bankruptcy "We certainly have no intention of
going bankrupt." Steven Parrish, senior vice president for Philip Morris
on CBS News' Face the Nation on March 26, 2000.
Fact: Litigation against the tobacco industry in Florida cannot force
bankruptcy. Florida law prohibits a damage award so high that it puts a
company out of business.
Fact: The plaintiff attorneys in the Engle class action tobacco suit
have stated that they have no intention of asking for punitive damages
that would bankrupt the tobacco industry.
Fact: The tobacco industry is afraid of a large punitive damage award,
but they aren't afraid of bankruptcy. "Richard Daynard, law professor at
Northeastern University and chair of the Tobacco Products Liability
Project, believes the bankruptcy scenario is a ruse drummed up by
tobacco's legal team to scare states into enacting special legal
protections before the Miami jury sets punitive damages." (Palm Beach
Post, April 10, 2000)
Fact: The tobacco companies are quite healthy despite all the doom and
gloom. Philip Morris alone pays its shareholders $4.5 billion in
dividends a year. Last year they saw their domestic tobacco sales soar
to $19.5 billion from $15.3 billion.
SOURCE American Heart Association
CONTACT: Ralph DeVitto, American Cancer Society, 813-785-3767; or Brian
Gilpin, American Heart Association, 727-570-8809; or Brenda Olsen,
American Lung Association, 850-386-2065
TOBACCO LITIGATION: FL Rushes to Measures to Sustain Settlement Money
---------------------------------------------------------------------
Like two-pack-a-day smokers, Florida lawmakers faced their tobacco
addiction Monday April 10, wrestling with measures to sustain cigarette
makers and their cash flow to the state, amid fear that a crippling
legal judgment could kill the industry. A hastily formed Senate
committee began reviewing legislative options that would stave off the
possibility that Florida's multibillion dollar settlement with cigarette
makers could go poof if the industry declares bankruptcy.
Under terms of a 1997 settlement, Florida is in line to receive about $
18 billion from the tobacco industry over 30 years. The money, which so
far has brought in about $ 400 million annually, has helped finance
public health and children's programs.
Lawmakers have until the legislative session's scheduled May 5 end to
agree on a tobacco plan, or else roll the dice on the troubled
industry's future.
Doing nothing on tobacco this session "is an enormous risk," said Sen.
Locke Burt, R-Ormond Beach, chairman of the Senate panel. Industry
analysts say a Miami jury considering a class-action case involving
500,000 sick smokers may return a ruinous verdict of perhaps $ 300
billion in punitive damages against the tobacco industry. The prospect
of such a hit has already prompted lawmakers in four big tobacco-growing
states to approve legislation shielding the industry while it appeals
the verdict. On Monday, Florida joined several other states mulling
similar action.
Still, the irony of helping an industry Florida has fought for years was
not lost on at least one senator. "The problem I have is that we seem to
be jumping in bed with these companies that have fraudulently and
deceivedly killed Floridians," said Sen. Walter "Skip" Campbell,
D-Tamarac. But Campbell also acknowledged the risk to state taxpayers
and is proposing legislation that could give tobacco companies a break,
requiring that each post no more than a $ 50 million bond while
appealing a jury award.
By contrast, under current Florida law, a company appealing a damage
award must post a cash bond equal to the verdict, an amount that some
fear could send cigarette makers into bankruptcy.
Also offering advice to the Senate panel was David Fonvielle, a
Tallahassee lawyer who was part of the state's "dream team" that reached
the 1997 settlement with cigarette makers. Fonvielle suggested that
besides the $ 50 million bond, the state set a similar limit of $ 50
million per year as payment to smokers in Miami's Engle case, named for
Howard Engle, a Miami Beach doctor who claims his emphysema was caused
by years of smoking. Fonvielle said it was likely the cigarette industry
would be rocked by legal setbacks, since it's now battling big-ticket
suits nationwide.
Burt, who also is chairman of the Senate budget committee, has advocated
that lawmakers also consider insuring the state's tobacco settlement, a
proposal that is expected to be reviewed at upcoming hearings of the
tobacco panel.
House members are urging that the state follow New York state's lead and
borrow against its expected 30-year settlement, receiving as much as $
2.8 billion up front. The deal, however, would cost the state about $
635 million over the life of the proposed bond issue. (Sun-Sentinel
(Fort Lauderdale, FL), April 11, 2000)
TOBACCO LITIGATION: Judge Hears Heated Arguments Over Punitive Damages
----------------------------------------------------------------------
The punitive damages phase of the Florida tobacco class-action trial --
which some observers fear could bankrupt the tobacco industry -- is
tentatively set for May 15, Miami-Dade Circuit Judge Robert Paul Kaye
ruled after hearing arguments Monday morning.
But billions of dollars could hinge on the scope of the evidence Judge
Kaye allows as testimony during the third phase of the trial. The judge
said he will rule on that issue on April 18.
Plaintiffs attorney Susan Rosenblatt argued Monday morning for a very
narrow scope of evidence in phase three. She asked that tobacco defense
attorneys present only evidence as to financial worth and ability to pay
of the various tobacco companies, and mitigating evidence concerning
earlier damage awards.
But an angry Philip Morris attorney Daniel Webb, arguing on behalf of
all five tobacco company defendants Monday, countered: We have the right
to offer evidence of any mitigating fact or circumstance in a punitive
damages trial. Webb blasted what he called the plaintiffs absurd
position that we should embark on some restriction on what type of
mitigating evidence we can present.
Rosenblatt countered the tobacco companies had listed tobacco farmers,
convenience store operators, and witnesses on tobaccos charitable
contributions for phase three. This good deeds type [of] evidence is
totally irrelevant to a punitive damages trial, she said.
Webb said the tobacco companies should be allowed to present two types
of evidence in the trials third phase. The industry wants to provide
evidence of how the tobacco companies have responded to allegations of
unlawful conduct. The companies also want to offer testimony on the
effects of what a large punitive damages award would be on the
defendants, and on those who have business relationships with the
defendants.
Webb predicted a staggering scenario that is going to unfold in the
case, which continues to draw national attention. Were obviously at the
point of no return. Were not turning back now, Webb told Judge Kaye
Monday in the aftermath of last Friday's award of $ 12.7 million in
compensatory damages to three class representatives in the case.
(Broward Daily Business Review, April 11, 2000)
UICI: Named Nominal Defendant in Shareholder Derivative Suit in TX
------------------------------------------------------------------
On June 1, 1999, the Company was named as a nominal defendant in a
shareholder derivative action captioned Richard Schappel v. UICI, Ronald
Jensen, Richard Estell, Vernon Woelke, J. Michael Jaynes, Gary Friedman,
John Allen, Charles T. Prater, Richard Mockler and Robert B. Vlach,
which was filed and is pending in the District Court of Dallas County,
Texas.
The plaintiff has asserted various derivative claims brought against the
individual defendants, alleging, among other things, breach of fiduciary
duty, conversion, waste of corporate assets, constructive fraud,
negligent misrepresentation, conspiracy and breach of contract.
Plaintiff seeks to compel UICI's directors and officers to conduct a
complete accounting and audit relating to all related party transactions
and to fully and completely restate, report and disclose such
transactions.
At the regular quarterly meeting of the Company's Board of Directors
held on August 4, 1999, George Lane III and Stuart D. Bilton
(non-employee directors of the Company) were appointed, in accordance
with Texas and Delaware law, to serve as a special committee to
investigate and assess on behalf of the Company the underlying claims
made in the Shareholder Derivative Litigation.
On January 18, 2000, plaintiff filed an amended petition and request for
injunctive relief. Plaintiff expanded his complaint to include a request
for an injunction against the Company prohibiting, among other things,
any existing or future transactions between UICI and any and all
entities related to Ronald L. Jensen unless each such transaction is
fully and fairly disclosed to UICI shareholders together with an opinion
from an independent public accounting firm opining with particularity as
to the fairness of each proposed transaction.
On February 4, 2000, the Court granted the Company's motion for a
statutory stay of all further proceedings in the case, in accordance
with Texas law (including action on plaintiff's request for injunctive
relief), pending completion of the review of the claims currently
undertaken by the Special Litigation Committee, and its determination as
to what further action, if any, should be taken with respect to those
claims. Subsequent to imposition of the statutory stay, plaintiff filed
(a) a motion to lift the statutory stay for the limited purpose of
hearing a motion for summary judgement to enforce Mr. Jensen's 1996
agreement to indemnify the Company for any loss or reduction in value of
the Company's Class A investment in Cash Delivery Systems, LLC, (b) a
second amended complaint and (c) a motion to lift the statutory stay for
the limited purpose of hearing a motion for summary judgment against
certain individual defendants with respect to a so-called "diminished
value claim" in the Sun Communications litigation.
The second amended complaint added reference to the consent order issued
by the OCC; attempted to quantify damages alleged to have resulted from
related party transactions; added an allegation of usurpation of
corporate opportunities; and requested injunctive relief that would
require the company to, among other things, freeze, review and where
appropriate rescind all related party transactions, and require detailed
reporting of related party transactions.
On March 20, 2000, the Special Litigation Committee delivered to the
Board of Directors of UICI its findings with respect to the allegations
in the original complaint. Based on its review and assessment of the
allegations in the original complaint, the Special Litigation Committee
recommended that the Company (a) seek dismissal of claims raised in the
original complaint in the derivative lawsuit, including dismissal of
claims relating to Mr. Jensen's June 25, 1996 "Guaranty"; (b) seek the
release to UICI of approximately $7.55 million of uncontested proceeds
from the STP sale held in the District Court's registry; (c) seek from
Mr. Jensen and/or former management certain legal fees incurred by UICI
in connection with the Sun Litigation that it believes were incurred
without appropriate board approval; (d) seek reimbursement of certain
legal fees awarded to Sun if and only if certain ongoing appeals prove
unsuccessful; and (e) implement certain heightened related-party
transaction controls.
The Company's Board of Directors accepted and adopted the Special
Litigation Committee's findings and recommendations and directed
management to implement the specific recommendations as promptly as
practicable. The Special Litigation Committee is now in the process of
assessing the allegations contained in plaintiff's amended complaints.
On March 22, 2000, the Special Litigation Committee reported to the
Court its findings and recommendations with respect to the allegations
in the original complaint, and the Court granted plaintiff's motion to
lift the statutory stay in the proceedings solely for the purposes of
evaluating the Special Litigation Committee's decision on the guaranty
extended by Mr. Jensen (and the derivative plaintiff's motion for
summary judgment on the guaranty) and releasing the $7.55 million of
uncontested funds to the Company. A hearing on the guaranty issue has
been set for May 16, 2000.
The plaintiff in the Shareholder Derivative Litigation is also the
private third-party plaintiff in the Sun Communications Litigation, and
the claims made in the Shareholder Derivative Litigation arose out of
the same transactions that serve as the factual underpinning to the Sun
Communications Litigation.
Sun Communications Litigation
UICI and Ronald L. Jensen are involved in litigation (Sun
Communications, Inc. v. SunTech Processing Systems, LLC, UICI, Ronald L.
Jensen, et al) with a third party concerning the distribution of the
cash proceeds from the sale and liquidation of SunTech Processing
Systems, LLC ("STP") assets in February 1998. The Dallas County, Texas
District Court ruled in December 1998 that, as a matter of law, a March
1997 agreement governing the distribution of such cash proceeds should
be read in the manner urged by Sun Communications, Inc. and consistent
with a court-appointed liquidator's previous ruling. The District Court
entered a judgment directing distribution of the sales proceeds in the
manner urged by Sun. The District Court also entered a finding that UICI
violated Texas securities disclosure laws and breached a fiduciary duty
owed to Sun, and the District Court awarded the plaintiff $1.7 million
in attorneys' fees, which amount could be increased to $2.1 million
under certain circumstances.
UICI believes that the District Court was incorrect in the awarding of
attorneys' fees and in its finding that UICI violated Texas securities
laws and breached a fiduciary duty, and on September 10, 1999 the
Company filed its initial briefs in support of its appeal of the
District Court's decision as to those issues. On September 10, 1999, Mr.
Jensen filed his initial brief in support of his appeal of, among other
things, the trial court's December 1998 finding in the Sun Litigation
that Mr. Jensen was not entitled to any of the proceeds from the sale of
Sun. On October 4, 1999, Sun filed its brief in opposition to the
appeal.
Oral argument before the Dallas Court of Appeals on the appeal was held
on February 1, 2000. The Company cannot at this time predict how, when
or in what fashion the appellate court will dispose of the various
claims of the Company and Mr. Jensen on appeal.
UICI: Rinderknecht Securities Lawsuit in TX Consolidated
--------------------------------------------------------
As has been reported in the CAR, in December 1999 and February 2000, the
Company and certain of its executive officers were named as defendants
in three securities class action lawsuits (Silver v. UICI, Gregory Mutz
and Vernon Woelke; Rinderknecht v. UICI, Ronald L. Jensen, Gregory T.
Mutz, Richard Estell, Warren Idsal, Vernon Woelke and William Benac; and
Uzelac v. UICI, Gregory Mutz and Vernon Woelke, all pending in U.S.
District Court for the Northern District of Texas) alleging, among other
things, that UICI's periodic filings with the SEC contained untrue
statements of material facts and/or failed to disclose all material
facts relating to the condition of UICI's credit card business, in
violation of Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 thereunder. The Rinderknecht case has been consolidated with
the Silver case and the Rinderknecht case was closed. The Uzelac case
was filed on February 11, 2000 and has not yet been consolidated with
the Silver case.
The Company intends to vigorously contest the allegations in the cases.
UICI: Settles AR Suit Re Deceptive Trade Practices and Insurance Code
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MEGA is a party defendant in a purported class action suit filed in May
1995 (Michael D. Jacola, et al. v. The MEGA Life and Health Insurance
Company, et al., pending in the Circuit Court of Saline County,
Arkansas), in which the named plaintiffs have alleged, among other
things, fraud, negligence, deceit, misrepresentation and violations of
the Arkansas Deceptive Trade Practices Act and the Arkansas Insurance
Code. On February 16, 2000, the parties reached a tentative settlement
in mediation for $750,000. The formal terms of the settlement agreement
and the administration of the settlement are currently being negotiated
by the parties and any settlement will be subject to court approval.
UICI: Settles KS Suit Alleging Fraud and Consumer Protection Act
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UICI, Ronald L. Jensen, and UGA, Inc. are party defendants in a
purported class action lawsuit filed in November 1998 (Gottstein, et al.
v. The National Association for the Self-Employed, et al., pending in
the United States District Court for the District of Kansas). The class
representatives have alleged fraud, conspiracy to commit fraud, breach
of fiduciary duty, violation of the Kansas Consumer Protection Act,
conspiracy to commit RICO violations, and violation of RICO, all arising
out of the concurrent sales of individual health insurance policies
underwritten and marketed by PFL Life Insurance Company (PFL) and
memberships in The National Association for the Self-Employed (NASE).
On November 10, 1999, a tentative settlement was reached for $2 million
plus the cost of administration of the settlement, to include all
potential class members in all states, including Kansas. The formal
terms of the settlement agreement and the administration of the
settlement are currently being negotiated by the parties, and any
settlement will be subject to certification of a nationwide class and
court approval. Under the terms of a cost sharing agreement with a unit
of AEGON USA, UICI and/or MEGA will be obligated to reimburse the AEGON
USA unit for 50% of the cash cost of the settlement.
UICI: Settles TX Suit over Vanishing Premium Life Insurance Policies
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previously disclosed, The MEGA Life and Health Insurance Company (a
wholly-owned subsidiary of the Company) ("MEGA") is a party defendant in
a purported class action suit filed in December 1996 (The Klinefelter
Family Revocable Living Trust, et al. v. First Life Assurance Company,
et al. pending in the District Court of Hidalgo County, Texas), in which
the named plaintiffs have alleged breach of contract, violations of the
Texas Deceptive Trade Practices Act and the Texas Insurance Code arising
from the sale of so-called "vanishing premium" life insurance policies.
The Company believes that plaintiffs and defendants reached a tentative
settlement of the suit. The respective parties' counsel are presently
negotiating the terms of a release and settlement agreement. The Company
has agreed to reimburse plaintiffs' class counsel $847,500 in attorneys'
fees and costs. The total value of the settlement remains unresolved
pending the finalization of the class claims filing process, evaluation
by the class claims committee and approval by the trial court of the
class settlement.
UICI: Sued in CA over Advertising of Membership in Credit Association
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The Company and one of its subsidiaries are named defendants in a class
action suit filed in 1997 (Dadra Mitchell v. American Fair Credit
Association, United Membership Marketing Group, LLC and UICI) pending in
California state court (the "Mitchell case"), in which plaintiffs have
alleged that defendants violated California law regarding unfair and
deceptive trade practices by making misleading representations about,
and falsely advertising the nature and quality of, the benefits of
membership in American Fair Credit Association ("AFCA").
The Company marketed credit cards through AFCA through February 2000.
Plaintiffs also filed a companion case in federal district court in San
Francisco captioned Dadra Mitchell v. BankFirst, N.A., which alleges
violations of the federal Truth in Lending Act and Regulation Z. on the
theory that the 90-day notice period required for termination of AFCA
membership was not properly disclosed. The only defendant in the federal
case (the "BankFirst" case) is BankFirst, N.A., a bank that issued a
VISA credit card made available through the AFCA program.
The California state court in the Mitchell case has certified a class of
all California residents who entered into a membership contract with
AFCA through April 12, 1999. Defendants' motions to compel arbitration
and to narrow the class definition are pending before the court.
On September 27, 1999, the parties reached a tentative settlement with
respect to the AFCA case and the BankFirst case. However, the existence
of the Consent Order to which United Credit National Bank is now subject
and certain subsequent statements by AFCA's principal, Phillip A. Gray,
have called into question whether consummation of the tentative
settlement is possible or practicable.
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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
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Washington, DC. Theresa Cheuk, Managing Editor.
Copyright 1999. All rights reserved. ISSN 1525-2272.
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