/raid1/www/Hosts/bankrupt/CAR_Public/000613.MBX
C L A S S A C T I O N R E P O R T E R
Tuesday, June 13, 2000, Vol. 2, No. 114
Headlines
ALLSTATE INSURANCE: To Reimburse Oklahoma Policyholders after Lawsuit
BLOCKBUSTER INC: Deals with Studios Draw Lawsuit by Competitors in TX
CONSECO, INC: Lowey Dannenberg Files Securities Lawsuit in Indiana
FEDERAL-MOGUL CORP: Lionel Z. Glancy Files Securities Lawsuit in MI
FIRST SECURITY: Stull, Stull Files Securities Suit in Utah
HIGHWOODS REALTY: Seeks Dismissal of KS Suit over J.C. Nichols Merger
HMOs: AAHP CEO Calls Reversal of Pegram Case Resounding Victory
HMOs: Lawyer in Microsoft Win to Lead Massive Suit in Miami
OIL COMPANIES: Suit Filed over Home Heating Oil Prices This Past Winter
PAINEWEBBER, INC: Klayman & Lazarus Files Securities Suit on NY Branch
RACING CHAMPIONS: Stull, Stull Files Securities Suit in Illinois
ST. JOHN: Agrees to Settle Shareholder Lawsuit on Management-Led Buyout
SYBILL INC: Detroiters Hope Lawsuits Will Help Fight Odor, Clean up Air
TOBACCO LITIGATION: Aust. Lawsuits on Passive Smoking May Increase
TOBACCO LITIGATION: CNN Coverage on Philip Morris CEO's Message to Jury
TOBACCO LITIGATION: Titans to Testify in Florida
UNICAPITAL CORP: Milberg Weiss Files Securities Complaint in Florida
VARI-L COMPANY: Berman Devalerio Files Securities Lawsuit in Colorado
VARI-L COMPANY: Schiffrin & Barroway Files Securities Lawsuit in CO
VISA, MASTERCARD: Federal Antitrust Suit Opens
WARNER-LAMBERT: Tentatively Sanctioned in Rezulin Case, Mealey Reports
WORKPLACE DISCRIMINATION: Employee Attitude Surveys May Help Plaintiffs
*********
ALLSTATE INSURANCE: To Reimburse Oklahoma Policyholders after Lawsuit
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Allstate Insurance Co. said it is looking to settle a class-action
lawsuit that targets its 1991 cancellation of home-replacement cost
guarantee and roof-surfacing coverage. Under the proposed settlement,
certain Oklahoma homeowners-insurance policyholders who submitted claims
for home-replacement cost guarantee and roof-surfacing between 1991 and
2000 will be reimbursed, the insurer said in statement. Allstate denied
all charges in the suit, but said it has proposed the settlement in
order to "spare" customers and itself "costly and protracted
litigation." The plaintiffs' attorneys also "believe the settlement is
fair, reasonable, and in the best interests of the class member," it
said. If the settlement is approved, current and former policyholders
will be informed of the reimbursement and then will be able to submit
claims as part of the settlement, it said. The settlement has been
conditionally approved by the U.S. District Court for the Western
District of Oklahoma and is now subject to final approval. Allstate is
the nation's largest publicly traded personal lines insurance company,
covering more than 14 million households through about 15,500 agents in
the United States and Canada. (BestWire, June 12, 2000)
BLOCKBUSTER INC: Deals with Studios Draw Lawsuit by Competitors in TX
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In 1997, Blockbuster Inc. was in trouble. The giant video retailer had
recently moved its headquarters from Ft. Lauderdale, Fla., back to
Dallas, where the company began, and in the process it had lost some key
executives and most of the legal department.
Meanwhile, the industry itself was in a slump, the bloom long gone from
the video rose. For consumers, the novelty of being able to rent a
first-run movie cheap and then show it in the privacy of their own home
was becoming overshadowed by the fact that the first-run movie they
wanted was probably checked out.
At Blockbuster, Edward B. Stead's arrival as general counsel in late
1997 marked the beginning of a turnaround. It was largely a legal
department project that moved the company from the industry norm-Stead
called it "controlled customer dissatisfaction"-to a new policy of
guaranteed satisfaction. The key: some deals that were cut with major
movie studios. Instead of buying prints for as much as $ 84 a copy, the
industry norm, Blockbuster would pay an upfront charge of $ 7 or less,
get dozens of prints, then pay the studios a portion of the revenues as
the movies were rented.
The result was that people who walked into a Blockbuster store were
virtually guaranteed to find the first-run movie they were looking for.
The makeover was a huge success.
But Blockbuster's success came at the expense of smaller competitors who
suddenly found themselves at a disadvantage. Two of those competitors,
claiming to represent a class of thousands, filed lawsuits in state and
federal courts in Texas alleging that Blockbuster had violated federal
and state statutes.
Stead says that a faction within an independent retailer's trade group
started to raise money for a legal challenge practically before the ink
was dry on the revenue-sharing contracts. But their initial attempts to
drum up a legal case fizzled, according to Stead, and he says that he
was surprised when the litigation was actually filed in 1999. "We
instituted something that benefits consumers, has grown the industry
overall and has brought more price competition in the industry," he
says. "It's the antithesis of an antitrust case."
Federal and California Law Invoked
The lawsuits were consolidated in March of this year into a single case,
in U.S. District Court for the Western District of Texas, San Antonio
Division. A third amended complaint, incorporating and revising
allegations from both of the original suits, was filed on March 24.
In addition to Blockbuster, defendants include Viacom Inc., which still
owns 80 percent of Blockbuster. At press time, Viacom was expected to
spin off its ownership share soon. According to the complaint, Viacom
has secured indemnity from Blockbuster for liability that might result
from this case. Several film studios and video distributors have also
been named in the complaint, including Paramount Home Video Inc., Time
Warner Entertainment Co., Twentieth Century Fox Home Entertainment Inc.
and Metro-Goldwyn-Mayer Home Entertainment Inc.
"You can call it saving the company, or whatever," says attorney Jon D.
Robinson, partner at Kehart Shafter Webber & Campbell Robinson in
Decatur, Ill. "They set their sights on acquiring market share so they
could spin this company off. That's no secret. "Unfortunately what
Blockbuster did," Robinson says, "is build its market by taking it from
the little guy, from the independents. Blockbuster has been opening
stores at a rapid rate since late 1997, when it started these
revenue-sharing contracts. At the same time, the independents have been
closing stores at up to hundreds per month." Robinson, who frequently
does corporate defense work, is one of the attorneys for the plaintiffs
and the designated spokesman for a group that also includes attorneys
from three Texas firms.
According to Stead, the plaintiffs agreed to consolidation in federal
court only after the state case was granted a waiver from the normal
procedure in Texas court, where successive appearances in court on the
same case are heard by different judges. The plaintiffs made the
request, based on the claim this was a complex case. But once the waiver
was granted, Stead says, they were not happy with the judge and so
acceded to Blockbuster's request for federal court consolidation.
The named plaintiffs are three video retailers, two in Texas and one in
California. The suit is being brought in the name of all current and
past video retail stores that attempted to rent first-run movies after
October 1997, approximately the time the Blockbuster-studio
revenue-sharing agreements began to go into effect. The plaintiffs argue
that the number of independent retailers, about 27,000, is so great that
individual actions would be impractical.
The plaintiffs allege restraint of trade and refusal to deal under the
Sherman Act and similar infractions under California's Clayton Act.
Allegations also include violations of sections 17200-17208 of the
California Business and Professional Code, also known as the California
Unfair Competition Law. In addition to injunctive relief, the complaint
asks for treble damages, as mandated by the two California statutes.
According to one of the plaintiff attorneys, Harry Munsinger of Branton
& Hall, San Antonio, if class-action status is not granted, the
plaintiffs intend to proceed with the individual cases and attempt to
get class-action certification again at a later point in the process.
Exclusivity Question
The plaintiffs allege that the studios "entered into secret 'revenue
sharing' agreements with Blockbuster, under which they have agreed to
provide it with videocassettes for home-video rental on materially more
favorable terms than they have provided or will provide to independent
video retailers such as plaintiffs and the Class."
Blockbuster's strategy of achieving "copy depth" meant that only
Blockbuster was able to satisfy the demand for popular new movies during
the window of peak demand, the plaintiffs argue. "The inevitable effect
of greater copy depth," their complaint says, "is to divert customers
from other video retailers, such as members of the Class."
In the complaint, the plaintiffs accuse Blockbuster and Viacom of having
a plan to "restrain competition and drive Blockbuster's independent
retailer competitors out of business."
Stead maintains that the plaintiffs' case founders on a number of key
points. "First of all, the arrangements were no secret," he says. "When
we did our S-1 filings in mid-1999, we disclosed them. And the text of
the agreements was published in trade publications." (Stead outlined the
agreements and their importance to Blockbuster in a story that appeared
in the June 1999 issue of Corporate Legal Times, "Blockbuster Rebuilds
Its Legal Department and Makes New Deals With Movie Studios," p. 52.)
More central to the case, Stead also denies that Blockbuster's studio
deals were exclusive. But in any case, he argues, to make that
determination it would be necessary to consider the plaintiffs one at a
time. "This is a textbook case where you don't certify a case, because
you would have to look at each plaintiff individually to see if it could
have or would have participated in revenue sharing," he says.
New Technologies
According to Stead, at the time when the independent retailer trade
groups were trying to raise money, they emphasized the threat of
competition from new technologies such as cable and satellite, and how
they needed to respond to those threats and become better business
people. "It's kind of interesting," he says, "that out of all those
things, they single out revenue-sharing, and the action they take is to
bring a lawsuit."
But it's more than interesting, in Robinson's view. It's perfectly
logical. "Blockbuster has been using its market share strength to
leverage the studios, and that lays the groundwork for control of those
new markets," he says. "There are only a few large studios in the world,
and they are the suppliers of the product. If you have a lock on those,
you can control home delivery." (Corporate Legal Times, June, 2000)
CONSECO, INC: Lowey Dannenberg Files Securities Lawsuit in Indiana
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Purchasers Claim to be Misled in the Public Offerings of Conseco
Financing Trust V (8.70%), Conseco Financing Trust VI (9.0%) and Conseco
Financing Trust VII (9.44%) Trust Originated Preferred Securities
Lowey Dannenberg Bemporad & Selinger, P.C. ("Lowey Dannenberg") is
filing a securities class action lawsuit on June 9 in the United States
District Court for the Southern District of Indiana on behalf of
purchasers of the following three issues of preferred securities
(collectively, the "Preferred Securities") guaranteed by Conseco, Inc.
(NYSE: CNC) from the dates of their initial public offerings ("IPOs")
through and including March 31, 2000 (the "Class Period").
Issue IPO Date Interest Rate Conseco Financing Trust V
Originated Preferred August 21, 1998 8.70% Conseco Financing
Trust VI Originated Preferred October 9, 1998 9.00% Conseco
Financing Trust VII Originated Preferred August 27, 1999 9.44%
The complaint alleges that Conseco and other defendants violated
sections 11 and 12 of the Securities Act of 1933 by issuing materially
false and misleading registration statements and prospectuses in
connection with the sale of the Preferred Securities. Specifically,
Conseco inflated its financial condition through improper accounting
with respect to the portfolio of securities and assets of Green Tree
Financial Corporation ("Green Tree"), which Conseco acquired in June
1998. On March 31, 2000, Conseco shocked the market in announcing that
it planned to sell Green Tree and would take a $350 million charge
against earnings for fiscal 1999 for the write-down of Green Tree's
portfolio of interest-only securities. The Preferred Securities
currently trade at a low of about $10 per share.
David Harrison Lowey Dannenberg Bemporad & Selinger, P.C. The Gateway,
11th Floor One North Lexington Avenue White Plains, NY 10601-1714
Telephone 877-777-3581 (toll free) Telecopier 914-997-0035 e-mail:
ldbs@westnet.com
Contact: Lowey Dannenberg Bemporad & Selinger, P.C., White Plains David
Harrison Tel: 877/777-3581 (toll free) Telecopier: 914/997-0035
ldbs@westnet.com
FEDERAL-MOGUL CORP: Lionel Z. Glancy Files Securities Lawsuit in MI
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Pursuant to Section 21(D)(A)(3)(a)(i) of the Securities Exchange Act of
1934, Notice is hereby given that a Class Action has been commenced in
the United States District Court for the Eastern District of Michigan on
behalf of a class consisting of all persons who purchased the common
stock of Federal-Mogul Corp. (NYSE:FMO) between Oct. 22, 1998, and May
25, 2000, inclusive (the "Class Period").
The Complaint charges Federal-Mogul and its Chief Executive Officer with
violations of federal securities laws. Among other things, plaintiff
claims that defendants' material omissions and the dissemination of
materially false and misleading statements regarding the nature of
acquisition integration, revenue and earnings, artificially inflated
Federal-Mogul's stock price to a Class Period high of $64.875 per share.
Federal-Mogul common stock fell to a low of$9.4375 per share, inflicting
enormous damages on investors. Plaintiff seeks to recover damages on
behalf of Class members and is represented by the Law Office of Lionel
Z. Glancy, a law firm with significant experience in prosecuting class
actions, and substantial expertise in actions involving corporate fraud.
Contact: The Law Offices of Lionel Z. Glancy, Los Angeles Michael
Goldberg, 310/201-9150 or 888/773-9224 info@glancylaw.com
FIRST SECURITY: Stull, Stull Files Securities Suit in Utah
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The law firm of Stull, Stull & Brody gives notice that a class action
lawsuit was filed on June 7, 2000, in the United States District Court
for the District of Utah, Central Division, on behalf of all persons who
purchased the common stock of First Security Corporation (NASDAQ:FSCO)
between October 18, 1999, and March 2, 2000 (the "Class Period").
The complaint charges that defendants violated Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder, by issuing a series of material misrepresentations to the
market between October 18, 1999 and March 2, 2000, thereby artificially
inflating the price of First Security common stock. For example, as
alleged in the complaint, on January 19, 2000, the Company reported
earnings of $0.37 per share during its fourth quarter of fiscal 1999,
constituting an increase over the comparable quarter of 1998. In fact,
the Company's fourth quarter earnings per share were affected by an
undisclosed one-time nonrecurring gain of $0.04 per share. Thus the
Company's true operating performance was $0.33 per share, representing a
decrease over the comparable 1998 period. When the Company revealed, on
March 3, 2000, that its operating results for the fourth fiscal quarter
would fall short of estimates, the price of First Security common stock
dropped by 38% falling from $22.50 per share, to $13.968 per share.
Contact: Stull, Stull and Brody, New York Tzivia Brody, Esq.,
1-800-337-4983 Fax: 212/490-2022 e-mail: SSBNY@aol.com
HIGHWOODS REALTY: Seeks Dismissal of KS Suit over J.C. Nichols Merger
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On October 2, 1998, John Flake, a former stockholder of J.C. Nichols,
filed a putative class action lawsuit on behalf of himself and the other
former stockholders of J.C. Nichols in the United States District Court
for the District of Kansas against J.C. Nichols, certain of its former
officers and directors and Highwoods Realty Ltd. Partnership.
The complaint alleges, among other things, that in connection with the
merger of J.C. Nichols and the Company J.C. Nichols and the named
directors and officers of J.C. Nichols breached their fiduciary duties
to J.C. Nichols' stockholders, (2) J.C. Nichols and the named directors
and officers of J.C. Nichols breached their fiduciary duties to members
of the J.C. Nichols Company Employee Stock Ownership Trust, (3) all
defendants participated in the dissemination of a proxy statement
containing materially false and misleading statements and omissions of
material facts in violation of Section 14(a) of the Securities Exchange
Act of 1934 and (4) the Company filed a registration statement with the
SEC containing materially false and misleading statements and omissions
of material facts in violation of Sections 11 and 12(2) of the
Securities Act of 1933. The plaintiff seeks equitable relief and
monetary damages.
The Company believes that the defendants have meritorious defenses to
the plaintiffs' allegations and intends to vigorously defend this
litigation. By order dated June 18, 1999, the court granted in part and
denied in part the company’s motion to dismiss. The court has granted
the plaintiff's motion seeking certification of the proposed class of
plaintiffs with respect to the remaining claims. Discovery in this
matter has now been completed, and Highwoods is seeking summary judgment
and dismissal of all claims asserted by the plaintiff. Plaintiff John
Flake passed away on or about April 2, 2000, and plaintiff's counsel has
moved to substitute his estate as the representative plaintiff in this
action. Highwoods does not oppose that motion.
HMOs: AAHP CEO Calls Reversal of Pegram Case Resounding Victory
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AAHP's President Karen Ignagni calls the Supreme court ruling on June 12
in Herdrich v. Pegram a major breakthrough with important implications
in the patient protection debate'.
"Today's unanimous Supreme Court decision in Herdrich v. Pegram, in
which the high court reversed the Seventh Circuit, is a resounding
victory for maintaining affordable care. It is an equally resounding
defeat for suit-happy trial lawyers and those who seek through class
action suits to destroy the country's private health care system. The
Court's decision validates the principle that the legal system is not
the place to make health care work. Rather, we should all work together
to make sure that patients have a way to quickly and fairly resolve
disputes when they disagree with health plan coverage decisions. We will
continue to advocate strongly for a patient's right to an outside,
independent review.
The Court's decision also should be a clear and compelling warning to
Congress that it should resist a special interest takeover of the U.S.
health care system."
Karen Ignagni is President & Chief Executive Officer of the American
Association of Health Plans (AAHP).
HMOs: Lawyer in Microsoft Win to Lead Massive Suit in Miami
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Boies, the New York lawyer who was the Justice Departments lead outside
counsel in the Microsoft antitrust case, and famed tobacco lawyer
Richard Scruggs of Mississippi were named lead counsel in what may prove
to be the nations next massive lawsuit. The case was filed on behalf of
millions of patients whose health maintenance organizations are accused
of encouraging doctors to steer them toward less costly treatment, even
if that treatment wasnt the most appropriate.
Scruggs, an anti-tobacco lawyer recently portrayed in the movie The
Insider, and Boies are among dozens of lawyers -- and 41 law firms
nationwide -- suing Humana Inc. and about a half-dozen other HMOs in the
class-action case, which seeks to change the way HMOs operate. No
damages have been listed yet.
The case could change the way health care is provided in this country,
said Miami lawyer Mike Eidson, who was appointed one of three local
liaison counsels on the suit.
The appointments are part of an effort by U.S. District Judge Federico
Moreno to streamline the dozens of cases filed across the country.
Earlier this year, the Federal Judicial Panel on Multi-District
Litigation consolidated a number of cases and transferred that
consolidated case to Miami under Moreno.
Before 50 or so lawyers, Moreno approved an organization devised by the
plaintiffs. In addition to approving Scruggs and Boies as lead counsel,
Moreno approved the liaison counsels: Eidson; Eidsons partner Dean
Colson; Hollywood lawyer James Fox Miller; and Miami lawyer Aaron
Podhurst.
The four liaisons will keep track of day-to-day events in the case and
deal with the national media.
Another Miami law firm also is involved with the case, but on the
defense side. Adorno & Zeder is the local liaison to a Washington, D.C.,
firm, OMelveny & Myers, which is representing Humana.
Moreno also approved a 12-law firm steering committee, which includes
Russ Herman of Herman Middleton Casey & Kitchens, a national
consumer-law firm based in Atlanta that filed one of the original class
actions with Colson Hicks Eidson.
The judge's next decision may be whether to consolidate the current
lawsuit against Humana with yet more suits against other HMOs. Edison
said consolidation is probable, because the issues are so similar, said
Eidson. The Humana case alone was filed on behalf of 6.2 million HMO
subscribers. If consolidated, the case will involve some 80 million
subscribers.
Complicating the case is a similar suit brought by doctors and hospitals
against the HMOs. That suit is known as the providers case, while the
suit filed by the subscribers is commonly referred to the subscribers
case.
The two groups decided to keep their cases separate but to share
discovery.
Despite the complexity of the case, Moreno injected a note of levity
into the hearing, according to one of the attorneys present. Looking
down at his computer screen, he cracked to Boies -- fresh off his win in
the Microsoft case -- Is my screen going to work today? (Broward Daily
Business Review, June 12, 2000)
OIL COMPANIES: Suit Filed over Home Heating Oil Prices This Past Winter
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A lawsuit seeking class-action status has been filed alleging that home
heating oil companies failed to abide by "locked-in" oil price contracts
during the recent increase in oil prices. Media attorney Kenneth
Jacobsen said that his client Frank Farina is one of hundreds of
individuals throughout the Delaware Valley region who in 1999 agreed to
one price for oil and this past winter were charged another, higher
price.
In a lawsuit filed in Chester County Common Pleas Court, Farina of Devon
said he entered into a "Locked Price Program" with Mauger & Co. Inc. of
Malvern, in which the company agreed to charge him 89 cents per gallon
in exchange for Farina's agreement to purchase oil throughout the recent
winter. Farina alleges that in late January, Mauger's price for oil
jumped to $ 1.51 a gallon despite the contract, and then ranged between
$ 1.09 and $ 1.19 this spring. Over the length of the winter, Farina's
attorney said Farina lost $ 150 because of the alleged price increases.
The suit alleges breach of contract and violations of Pennsylvania's
Unfair Trade Practices and Consumer Protection Law. "What the companies
did was patently illegal," Jacobsen said in a press release accompanying
the suit. "The reason that consumers enter into these contracts in the
first place is so that they can lock in a price and be sure that there
will be no sudden, unexpected increase in the future."
Oil company owner Clyde "Bud" Mauger said he would have to review
billing records before commenting on Farina's allegations and lawsuit.
"Until I see something, it's really hard to comment," Mauger said. "I
don't know if he signed anything, number one. Number two, there were
times he paid a significantly lower price than what he's referred to as
the 'firm' price." Farina said in addition to the Mauger firm, he is
reviewing the billing records associated with four other home oil
companies, located in Philadelphia, Delaware and Montgomery counties.
Jacobsen said he will seek class action status for the suit to include
other individuals who can claim to have been similarly impacted. "A
class action is the most fair and efficient method in which to
adjudicate the claims arising out of defendant's conduct," the suit
states. "Because each claim of any individual class member may be
relatively small, it is unlikely that any such class member, can, or
will, bring an individual action to remedy the wrongs alleged herein."
Mauger did acknowledge that he and fellow home heating oil companies
went through a five-or six-week stretch this winter when refineries shut
down and it was difficult to get product. Mauger said Farina's
complaints are the exception. "I have no other complaints. No one has
[called] me, I've had no misunderstanding with anyone else," Mauger
said. Mauger is sole owner of the company and son of the company's
founder, also named Clyde Mauger. Jacobsen said he could not estimate
how much money might have been taken from home oil buying individuals.
"It depends on those other customers," Jacobsen said. "We're looking at
the documentation of the clients who have come to us to ensure that they
had fixed-price contracts. We're reviewing the terms of those contracts
and whether there were violations of those contracts during the winter
heating season." (The Legal Intelligencer, June 7, 2000)
PAINEWEBBER, INC: Klayman & Lazarus Files Securities Suit on NY Branch
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The law firm of Klayman & Lazarus LLP filed suit on June 9 against
PaineWebber, Inc., a subsidiary of PaineWebber Group, Inc. (New York
Stock Exchange: PWJ) before the National Association of Securities
Dealers, Inc. for alleged unlawful conduct at its Mitchell Field, New
York branch office.
The Mitchell Field office is part of PaineWebber's Garden City retail
complex which is one of three top producing branch offices.
The suit brought on behalf of three customers alleges that PaineWebber,
through its registered representative, Michael D. Prokop, took advantage
of a 17 year relationship with the Plaintiffs to engage in unsuitable
and excessive trading. The claim seeks compensatory and punitive damages
for violations of the Securities and Exchange Act of 1934, the New
Jersey Securities Laws N.J. Rev. Stat. 49:3-71, common law fraud, breach
of contractual and fiduciaries duties, and gross negligence. The claim
alleges that PaineWebber's Mitchell Field branch office is plagued by
systemic and pervasive fraud. The unlawful conduct perpetrated on the
Plaintiffs, as alleged in the claim, reflects what appears be a complete
failure of supervision and compliance at the Mitchell Field Branch.
On March 15, 1999, Martin Kiffel, a broker at its Mitchell Field branch
office was terminated for cause after admitting to misappropriating
funds from clients. As a result, the United States Attorney's Office for
the Eastern District of New York commenced an investigation.
Subsequently, Kiffel pleaded guilty to a charge of Federal wire fraud.
In August, 1999, it was reported that the PaineWebber branch had
undergone several managerial changes. At that time, a PaineWebber
spokesman stated that the changes "have absolutely no relationship with
Kiffel."
Contact: Klayman & Lazarus LLP Lawrence L. Klayman, Esq., 888/997-9956
lklayman@nasd-law.com www.nasd-law.com
RACING CHAMPIONS: Stull, Stull Files Securities Suit in Illinois
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The law firm of Stull, Stull & Brody gives notice tha a class action
lawsuit was filed on June 7, 2000, in the United States District Court
for the Northern District of Illinois, Eastern Division, on behalf all
persons who purchased the common stock of Racing Champions Corporation
(NASDAQ:RACN) between February 1, 1999 and June 23, 1999 (the "Class
Period").
The complaint charges that defendants violated Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, by issuing a series of material misrepresentations to the
market between February 1, 1999, and June 23, 1999, thereby artificially
inflating the price of Racing Champions common stock. For example, as
alleged in the complaint, on February 23, 1999, the Company reported
seemingly record earnings for its 1998 fiscal year, and represented that
the Company would continue to experience growth in 1999. These
statements were materially false and misleading when made because
defendants did not disclose, and knew or recklessly disregarded, that
the Company's sales were then being negatively impacted by the
competition from Star Wars related merchandise and as a result, sales of
the Company's products were declining significantly. When Racing
Champions revealed, on June 23, 1999, that it was expecting a per share
loss of $0.30 - 0.35 for its second fiscal quarter of 1999, Racing
Champions common stock dropped by 60%. Defendants attributed the loss to
poor sales, and the taking of $6.4 million restructuring charge in
connection with a corporate acquisition.
Contact: Stull, Stull and Brody, New York Tzivia Brody, Esq.
1-800-337-4983 e-mail: SSBNY@aol.com
ST. JOHN: Agrees to Settle Shareholder Lawsuit on Management-Led Buyout
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St. John Knits International Inc. (OTC: SJKI) Monday announced that it
has reached an agreement to settle a class action shareholders' lawsuit
arising from the $500 million management-led buyout last July.
Plaintiffs' counsel had alleged in a class action suit that the $30 per
share received by the shareholders in that transaction was inadequate.
The company disagrees with this contention and believes that at trial
its position would have been vindicated. However, in the interest of
eliminating the ongoing drain on management time and corporate
resources, the company has concluded that the settlement, as structured,
is the most prudent course of action.
The terms of the settlement agreement, which is subject to court
approval, calls for payment of $13.75 million to St. John's former
public shareholders and their attorneys. Nearly all of this payment will
be funded by St. John's insurance carriers. Additionally, in the event
of a sale, merger or public offering of the company, St. John has agreed
to provide the class of former shareholders with the opportunity to
receive a specified percentage of the proceeds from any such transaction
under certain circumstances.
St. John is a leading designer, manufacturer and retailer of high-end
women's clothing. The company also sells accessories, shoes, coats and
fragrances. The products, mostly made in the United States by St. John
itself, are sold in the company's own boutiques and specialty stores
such as Saks Fifth Avenue, Neiman Marcus and Nordstrom.
CONTACT: St. John Knits International Inc., Irvine Brian Timmons, Esq.,
949/495-7782 or 714/755-8161
SYBILL INC: Detroiters Hope Lawsuits Will Help Fight Odor, Clean up Air
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Daniel Pederson's two children are rarely allowed to play outside their
brick with the wrap-around porch in their southwest-side neighborhood.
The nuns who teach at Holy Redeemer High School on Vernor say a strong
odor, described as the smell of burned peanut oil, gives them headaches
when they leave the buildings. Recess at Beard Elementary School is no
longer a given now
that Principal Carlos Lopez regularly keeps students indoors because of
an odor that hangs in the air and makes students and teachers ill. "I
shouldn't have to put up with these smells," said Lopez, who lives about
four blocks from the school he runs.
As the quality of life has improved in southwest Detroit, the burned
peanut oil odor and dust pollution from heavy industry along the Detroit
River has tensified, residents said. Now a group of residents hope two
lawsuits making their way through Wayne County Circuit Court will clean
the air and maintain the viability of their neighborhoods.
The lawsuits are against Sybill Inc., an oil recycling company, and
Peerless Metals, which makes metal powders used in vehicle brakes. Wayne
County's Department of Environment has ordered Sybill to install
odor-control devices.
But the companies and residents not involved in the lawsuits argue that
the odors and dirt are not any different than they have ever been.
Instead, they say, more people have returned to the neighborhood and are
unaccustomed to living in an industrial area. "It has always been an
industrial area. I think lots of people have forgotten that," said
Stephen Kelley, a Detroit attorney who represents Sybill.
Wayne County Judge Kathleen McDonald in May declared the lawsuit against
Sybill a class action, meaning more than 20,000 residents can be
considered plaintiffs. Originally, 250 residents were named as
plaintiffs. McDonald ruled that all residents living in southwest
Detroit can reasonably be expected to have similar complaints about
Sybill because of their proximity to the plant. She did not rule on
whether Sybill is to blame for the problems.
Persistent complaints Residents have complained for years about the
smells they
believe come from Sybill and dust they think comes from the Peerless
plant.
The two plants three blocks apart just south of I-75 near Livernois are
in an area zoned for heavy industry. About three-quarters of a mile
away, just north of the expressway, is a neighborhood of modest, neatly
kept homes that sell for an average price of $52,000, according to the
Wayne County Recorder of Deeds. The grass is cut, and it is a rare block
that contains an abandoned building.
"What is happening to these people is unconscionable," said attorney
Peter Macuga, whose Detroit law firm is handling the cases against
Sybill and Peerless.
Macuga, when he argued to have the lawsuit against Sybill certified a
class action, said that because the plant is in an industrial area
doesn't mean it can't cause odor problems in an adjacent residential
area. Judge McDonald agreed with that argument when she certified the
lawsuit as a class action.
The lawsuits assert that Sybill has not done enough to control the odors
produced by its operation, and that Peerless Metals has not done enough
to
control the red dust at its facility. Peerless strikes back Thomas
Vincent, Peerless' attorney, has produced a videotape of the homes of
the 16 people who have sued his client. Not one house has a trace of
dust on it.
But most of the properties are run-down with broken windows and porches,
and the
surrounding neighborhood is scarred by litter and vandalism, conditions
not caused by Peerless, he said. "If people can't afford to paint their
homes and and fix their windows, I feel sorry for them," Vincent said.
"But if they're not going to clean up the garbage around their own
homes, I don't know how you can blame Peerless for ruining the
neighborhood."
Sybill and Peerless officials argue that they are being unfairly
targeted. Peerless has been in operation for 70 years, and Sybill has
operated for 40 years without problems from state and federal
environmental regulators. Combined, the two plants employ about 80
residents, many of them, according to attorneys for the companies,
living in the neighborhoods around the plants.
Sybill, county at odds Sybill has spent more than $1 million on special
equipment to control the odor problems, and this summer expects to spend
even more to install a hood on a holding tank. The company has been
cited twice in its 70-year history by Wayne County for pollution
problems. "We want to be good neighbors, but we don't want to put
ourselves out of business," said Kelley, Sybill's attorney.
Sybill, though, according to court records, has had a long-running
dispute with the Wayne County Department of Environment over the odors
it emits. In 1995, the
company and the county reached a court agreement in which Sybill would
install odor-control devices throughout their facility. Still over the
past three years, residents filed 169 complaints with the county because
of the odor, and county inspectors discovered that some of the
pollution-control systems were not working. In March, the county
environmental agency asked a judge to close Sybill because of the
problems. No decision has been made on that request.
Sybill's attorney countered by arguing that the complaints do not
constitute violations, primarily because the odor problems cannot be
pinpointed to Sybill
and they were never properly investigated.
Other companies in the area include Great Lakes Steel, a MichCon plant,
the city of Detroit's Mistersky Power Station, Bridgewater Interiors,
which makes car parts, and several smaller manufacturing and recycling
plants. "This is a very industrial area. Odors are part of this part of
the city," Kelley said.
'Smell is just terrible' Dan Pederson, 41, the lead plaintiff against
Sybill, writes books about finance and is a motivational speaker. He
became concerned last summer when his 4-year-old daughter and 7-year-old
son began getting sick
from an odor he believes emanates from Sybill.
Pederson, who has lived in the area for about 16 years, said he did not
take his children to the doctor because the children stopped complaining
of headaches and stopped coughing after the smell dissipated. He is
leading the legal fight against the odor because he wants to improve his
neighborhood, Pederson said.
"The smell is just horrible. I can't open my windows," said Pederson,
who tracked the smell to the Sybill plant. "This isn't about money. All
we want is the stench to stop."
The other plaintiffs joining Pederson in the lawsuit include six nuns
from the convent at Holy Redeemer Church, teachers and staff at Beard
Elementary School,
a lawyer, several ministers and Mexican immigrants.
No one denies southwest Detroit has gone through hard times. Drivers
along Fort Street find themselves in a canyon of long-abandoned
industrial buildings, warehouses and vacant storefronts, although that
is starting to change with the location of business in the area's
empowerment and renaissance zones.
Pollution threatens growth But agencies working to rebuild southwest
Detroit say the odors and other problems associated with the industrial
companies will stunt further growth. "There is a rebirth going on, but
the smell makes it hard," said Darcy O'Callaghan, community organizer
for Southwest Alliance for Neighborhoods Housing Corporation, a
non-profit housing development agency in the area.
People shy away from buying a home in a neighborhood, opening a store or
renting an apartment because of the problems associated with living so
close to industrial sites, she said.
So far, O'Callaghan said members of her organization have not had
problems selling their homes and finding tenants. "It's not happened
yet, but I just know that it will. I know people who have moved out of
the neighborhood because of the smell."
O'Callaghan said the odor problem would have been solved if it were
occurring in a wealthier area of Metro Detroit. "Because many of these
people are poor, they may be getting pushed around," she said. "If this
were Grosse Pointe, you know
this wouldn't be allowed to happen. No one would have allowed it to
happen." GRAPHIC: Residents protest outside SybillInc. on Military in
southwestDetroit. Neighbors havecomplained for years about odorsfrom the
plant. Sybill maintains ithas installed odor-controldevices.Moses Jones
is one of 75 peoplewho protested the air quality intheir southwest
Detroit. Joneshas lived near Sybill Inc. since1957.The constant smell
like burnedpeanut oil, and dust pollution hasprompted residents to file
alawsuit against two localcompanies."I can't open my windows,"
saysDaniel Pederson, a neighbor of Sybill Inc. (The Detroit News, June
12, 2000)
TOBACCO LITIGATION: Aust. Lawsuits on Passive Smoking May Increase
------------------------------------------------------------------
Queensland pubs, restaurants and cafes may soon be smoke-free zones.
State cabinet is to endorse wide-ranging bans on smoking indoors within
the next fortnight, Premier Peter Beattie told the ALP state conference.
Although Mr Beattie did not detail the extent of the the government's
pending smoking ban, he addressed the conference as it was considering a
smoking ban in all restaurants, cafes, casinos, clubs, hotels and indoor
sports centres. At Mr Beattie's request, the motion was deferred pending
the cabinet decision. Sunshine Coast doctor Ian Matthews had put the
motion before the conference, telling delegates the smoky pall in the
conference foyer was the ideal example of the public health risk of
passive smoking.
One elderly ALP volunteer selling raffle tickets in the fogged-up foyer
had developed difficulty breathing mid-way through the second day of the
conference, he said. Journalists had also suffered in the smoky
environment during hours spent locked out of the conference during
secret party discussions on policy. "Passive smoking is a widely
recognised health issue in the community," Dr Matthews said.
Outside the conference Dr Matthews said his motion had been prompted by
the increasing incidence of smoking-related health complaints among his
non-smoking patients. He predicted a dramatic increase in the number of
class action cases brought before the courts by people suffering the
effects of passive smoking. Mr Beattie told the conference Health
Minister Wendy Edmond was negotiating the detail of the ban with
Queensland's club industry. "What we're seeking to do is to try and
consult with the clubs and hotels to ensure that we achieve what we want
to achieve and we also have a workable model," he said. "If there wasn't
ongoing negotiations with clubs, this decision would have been made two
weeks ago." (AAP Newsfeed, June 12, 2000)
TOBACCO LITIGATION: CNN Coverage on Philip Morris CEO's Message to Jury
-----------------------------------------------------------------------
Broadcast on the Cable News Network on June 12, 2000
Highlight: When the defense begins its case in the landmark Florida
smokers trial, a top tobacco industry executive is expected to take the
stand. He and other CEOs will try to convince a jury not to level
punitive damages against big tobacco.
KYRA PHILLIPS, CNN ANCHOR: Now to another high-profile legal fight.
When the defense begins its case this hour in the landmark Florida
smokers trial, a top tobacco industry executive is expected to take the
stand. He and other CEOs will try to convince a jury not to level
punitive damages against big tobacco.
CNN's Susan Candiotti has the details.
SUSAN CANDIOTTI, CNN CORRESPONDENT (voice-over): The chief executive
officer of the largest tobacco company, Philip Morris, will deliver this
message to a Florida jury. In the words of his attorney:
DAN WEBB, PHILIP MORRIS ATTORNEY: These tobacco companies have
changed.
CANDIOTTI: It's a message those bringing the lawsuit dismiss
outright. So far, jurors have already awarded nearly $13 million in
compensatory damages against five tobacco companies in this, the first
class-action suit of its kind to go to trial.
Now, as the defense begins its arguments in the punitive damages stage,
Philip Morris' CEO will begin by arguing tobacco has learned its lesson;
for one thing, by paying 46 states, including Florida, $255 billion in
compensation for health costs associated with smoking.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Sometimes it's what you don't do that makes you
who you are.
(END VIDEO CLIP)
CANDIOTTI: Philip Morris has already been airing TV commercials
warning young people about smoking.
WEBB: When the jury hears that, they find out about the change, at
least we're convinced the jury will exercise the discretion they have,
to award zero in punitive damages.
CANDIOTTI: Not if the plaintiffs' lawyers can help it.
STANLEY ROSENBLATT, PLAINTIFFS' ATTORNEY: The evidence will show
that they have not done that at all, nor have they changed their ways in
any meaningful, substantive fashion.
CANDIOTTI: Last month, the plaintiffs' attorneys showed jurors
several cigarette ads in magazines that attract a youthful clientele.
That same month, Philip Morris announced it was suspending ads in
"Rolling Stone" and "Sports Illustrated."
This month, Philip Morris announced it will yank ads from up to 50
magazines with at least 15 percent of its readers under the age of 18.
(on camera): But will those kinds of changes move this jury? big tobacco
says it hopes so. Lawyers for up to a half-million Florida smokers are
banking on the jury seeing things their way.
Susan Candiotti, CNN, Miami.
(END VIDEOTAPE)
TOBACCO LITIGATION: Titans to Testify in Florida
------------------------------------------------
The hot seat for tobacco company executives could soon be on the witness
stand, not in the boardroom. In a bid to dissuade a Florida jury from
punishing their companies, tobacco industry titans were expected to
testify about what they see as ''enormous changes'' made in their
industry in recent years.
The panel was scheduled to hear testimony Monday from Philip Morris Inc.
CEO Michael Szymanczyk, the first of five executives expected to take
the stand on a potential multibillion-dollar punitive damage request by
300,000 to 500,000 sick Florida smokers. ''We're going to present
substantial evidence to show some enormous changes in these companies in
the last three years,'' said lead tobacco attorney Dan Webb. ''We're
going to show the jury why it is that punitive damages simply would not
be warranted in this case.''
The six-member jury previously awarded $12.7 million in compensatory
damages to three people in the nation's first smokers' class-action suit
to go to trial.
The expected appearance of the CEOs before the jury demonstrates the
importance of the case to the industry. Tobacco executives make
infrequent public appearances, primarily at corporate annual meetings,
and rarely testify under oath.
Smokers' witnesses estimated the companies could raise $150 billion to
$157 billion to pay a punitive verdict. Those figures would dwarf the
national punitive damages record of $3 billion, assessed against Texaco
in 1987.
The nation's five biggest cigarette makers, who are asking for no award
at all, don't want the jury to consider anything beyond their present
value because of the potential for borrowing and price increases to
inflate the verdict.
One witness representing smokers estimated the industry value at $150
billion. In a deposition May 10, Szymanczyk denied his company recruits
kids as customers despite two recent studies indicating more cigarette
advertising in magazines with high youth readership.
Philip Morris announced magazine ad cutbacks, a move seen by smokers'
attorney Stanley Rosenblatt as a ploy that jurors will see through.
Szymanczyk, who is expected to be on the stand at least a day, ''will
submit himself to cross-examination so the jury can hear the truth,''
Webb said.
The other CEOs set to testify are Andrew Schindler of R.J. Reynolds
Tobacco Co., Nicholas Brookes of Brown & Williamson Tobacco Corp.,
Martin Orlowsky of Lorillard Tobacco Co. and Bennett LeBow of Liggett
Group Inc.
Although the Philip Morris Web site cites an ''overwhelming scientific
and medical consensus that smoking causes'' disease, Szymanczyk said in
his deposition that the company has not adopted the same position. His
personal belief is ''smoking is bad for your health,'' but he refused to
be pinned down on specifics.
Most of the touted changes were accepted when cigarette makers settled
state lawsuits for $254 billion in 1997 and 1998. Cigarette billboards
came down, and companies pledged to end youth marketing, among other
things. But Circuit Judge Robert Kaye has made it clear that the
settlements were voluntary and the payments cannot be characterized as
punishment.
During the trial, smokers called nine witnesses, mostly public-health
experts who contend the industry has not changed its ways following
decades of misconduct. (AP Online, June 12, 2000)
UNICAPITAL CORP: Milberg Weiss Files Securities Complaint in Florida
--------------------------------------------------------------------
The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that
a class action lawsuit was filed on June 8, 2000, on behalf of
purchasers of the common stock of UniCapital Corporation Inc. (
"UniCapital" or the "Company") (NASDAQ: UCP) between May 14, 1998, and
May 15, 2000, inclusive. A copy of the complaint filed in this action is
available from the Court, or can be viewed on Milberg Weiss' website at:
http://www.milberg.com/unicapital/
The action, numbered 00-2054, is pending in the United States District
Court for the Southern District of Florida, Miami Division, located at
301 N. Miami Ave., Miami, FL, 33128, against defendants Unicapital,
Robert New
Contact: Milberg Weiss Bershad Hynes & Lerach, LLP, New York Steven G.
Schulman or Samuel H. Rudman, 800/320-5081 UniCapitalcase@.milbergNY.com
VARI-L COMPANY: Berman Devalerio Files Securities Lawsuit in Colorado
---------------------------------------------------------------------
Vari-L Company, Inc. (Nasdaq: VARL) was named as a defendant in a
shareholder class action filed in the United States District Court for
the District of Colorado. The action, brought by Berman, DeValerio &
Pease, LLP, www.bermanesq.com, seeks damages for violations of the
federal securities laws on behalf of all investors who purchased Vari-L
common stock between December 17, 1997 through and including May 17,
2000 (the "Class Period").
The lawsuit charges Vari-L and certain of its officers, with violations
of the federal securities laws by issuing materially false and
misleading financial statements. The Company, on May 17, 2000, revealed
that it would be restating its previously reported financial results for
the period ended December 31, 1997, and potentially other periods as
well. In addition, during the Class Period insiders sold massive amounts
of stock, reaping substantial proceeds as a result of the inflated value
of Vari-L's stock. After the Company's announcement, Vari-L shares fell
roughly $5 per share from their May 16 close of $16.188, to close at
$11.25 on May 22, 2000, a drop of roughly 35%, as the market fully
absorbed the impact of these disclosures.
Contact: Jennifer L. Finger or Chauncey D. Steele of Berman, DeValerio &
Pease LLP, 800-516-9926, bdplaw@bermanesq.com
VARI-L COMPANY: Schiffrin & Barroway Files Securities Lawsuit in CO
-------------------------------------------------------------------
The law firm of Schiffrin & Barroway, LLP give notice thatt a class
action lawsuit was filed in the United States District Court for the
District of Colorado on behalf of all purchasers of the common stock of
Vari-L Company, Inc. (Nasdaq: VARL) from December 17, 1997 through May
17, 2000, inclusive (the "Class Period").
The complaint charges Vari-L and certain of its officers and directors
with issuing false and misleading statements concerning the Company's
revenues, income and earnings during the Class Period. In addition,
during the Class Period, Vari-L insiders sold large blocks of Vari-L
common stock at artificially inflated prices.
Plaintiff seeks to recover damages on behalf of class members and is
represented by the law firm of Schiffrin & Barroway, LLP, who has
significant experience and expertise prosecuting class actions on behalf
of investors and shareholders. For more information on Schiffrin &
Barroway, please visit our website at www.sbclasslaw.com.
If you are a member of the class described above, you may, not later
than August 9, 2000, move the Court to serve as lead plaintiff of the
class, if you so choose. In order to serve as lead plaintiff, however,
you must meet certain legal requirements.
Contact: Schiffrin & Barroway, LLP Marc A. Topaz, Esq. Robert B. Weiser,
Esq. 1-888-299-7706 (toll free) or 1-610-667-7706 E-mail:
info@sbclasslaw.com
VISA, MASTERCARD: Federal Antitrust Suit Opens
----------------------------------------------
Credit card giants Visa and MasterCard were accused Monday of abusing
their dominance of the industry as a major antitrust case got underway
here.
Justice Department attorney Melvin Schwarz opened the government's case
by alluding to an apparent understanding between the two firms not to
attack each other in their advertising campaigns. Schwarz said the pact
between the two giants discouraged banks from offering competing cards,
such as American Express or Discover.
Federal Judge Barbara Jones opened the trial in the presence of
Assistant Attorney General Joel Klein, who heads the Justice
Department's antitrust division and spearheaded the case against
Microsoft.
Attorneys for Visa and Mastercard, for their part, said the case must be
considered within the context of all methods of payment, including
credit cards, checks and other systems.
The suit, filed by the US Justice Department, dates back to October 1998
when federal authorities contested the joint control by the two networks
by the same group of banks. The suit also mentions network rules that
limit banks' ability to offer competing credit cards, like American
Express and Discover.
Visa and Mastercard failed in a bid to have the suit thrown out of court
when a judge in the Southern District Court of New York decided the
trial should go forward.
According to the Justice Department, Visa and MasterCard have pursued
anti-competitive practices in the US market after having been forced to
abandon them in other markets, notably Europe and South America where
they were under pressure from antitrust authorities.
US authorities, fresh from an antitrust victory over software giant
Microsoft, also claim that their actions have limited the development of
new technologies in the credit card industry that would improve the
security of shopping over the Internet.
Schwarz alluded to the fact that Visa abandoned efforts to develop smart
card technology in its cards after Mastercard decided not to include
these systems.
The suit is separate from an eight billion dollar class-action suit
brought by retailers such as Wal-Mart, Sears Roebuck, Safeway, Circuit
City and several other smaller retailers. The retailers claim that the
networks are using their monopoly power with credit cards to advance
their debit cards, which carry higher fees.
That suit is due to go to court before a different New York judge in
November.
Visa and Mastercard hold about 75 percent of the credit and charge card
market, which had a total of 1.4 trillion dollars in payments last year.
In 1999, Visa payments totaled some 610 billion dollars and Mastercard
received 727 billion dollars in payments from its cards. (Agence France
Presse, June 12, 2000)
VISION TWENTY: Motion to Dismiss Securities Suits in FL under Judicial
Review
-----------------------------------------------------------------------------
Vision Twenty One Inc., one of its executive officers who is also a
director and two former officers are named as defendants in several
purported class action lawsuits filed in the United States District
Court for the middle District of Florida, Tampa Division.
The complaints allege, principally, that the Company and the other
defendants issued materially false and misleading statements related to
the Company's integration of its acquisitions, in violation of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. The plaintiffs seek to certify their complaints
as class actions on behalf of all purchasers of the Company's common
stock in the period between December 5, 1997 and November 5, 1998, and
seek an award of an unspecified amount of monetary damages to all of the
members of the purported class.
The purported class action lawsuits were as follows: (i) Tad McBride
against Vision Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch,
and Michael P. Block (filed on January 22, 1999); (ii) Robert Rosen v.
Vision Twenty-One, Inc., Theodore N. Gillette and Richard T. Welch
(filed on January 27, 1999); (iii) Charles Murray against Vision
Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch and Michael P.
Block (filed on January 29, 1999); and (iv) Sam Cipriano, on behalf of
himself and all others similarly situated v. Vision Twenty-One, Inc.,
Theodore N. Gillette, Richard T. Welch and Michael P. Block.
On April 20, 1999, pursuant to a motion and order, these complaints were
consolidated into one case captioned: Tad McBride, Plaintiff, v. Vision
Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch and Michael P.
Block (Case No. 99-138-CIV-T-25F), and one plaintiff's group was
appointed lead plaintiff by judicial order on May 6, 1999. This
uncertified consolidated class action seeks to hold the Company and one
of its officers who is also a director as well as two former officers
liable for alleged federal securities law violations based upon alleged
misstatements and omissions in analyst reports, trade journal articles,
press releases and filings with the Securities and Exchange Commission.
Pursuant to judicial orders, the lead plaintiffs filed an amended
consolidated complaint on August 14, 1999. On October 11, 1999, the lead
plaintiffs and Michael P. Block executed a stipulation dismissing
without prejudice the action against Mr. Block. The Defendants filed a
motion to dismiss the amended consolidated complaint on October 15,
1999. The lead plaintiffs served answering papers on December 3, 1999.
The motion to dismiss remains under judicial review.
WARNER-LAMBERT: Tentatively Sanctioned in Rezulin Case, Mealey Reports
----------------------------------------------------------------------
Judge Patricia Collins of the Superior Court of Los Angeles County on
May 30 tentatively sanctioned Warner-Lambert (NYSE: WLA) for its failure
to produce the new drug application for Rezulin, according to Mealey
Publications in its first issue of Mealey's Litigation Report: Diabetes
Drugs.
Sanctions totaled a mere $1,250 but the jurist at the May 30th hearing
ordered Warner-Lambert to produce the requested documents without
objection.
A source told Mealey Publications of King of Prussia, PA, that
Warner-Lambert had been employing delay and stall tactics in one of the
nation's older Rezulin actions that was filed in December 1998 in Los
Angeles.
New Complaint Filed
An amended complaint in the unfair competition and false advertising
case was filed adding named plaintiffs and a proposed class action. The
new filing by plaintiff California Disability Rights, Inc. is a strategy
to assert an alternative cause of action in the wake of the California
Supreme Court rulings on Section 17200 regarding the funding of
restitution funds. The high court indicated that class actions were the
proper vehicle for such recovery.
"For over one year, the parties in this case have discussed and
conferred regarding document demands served in March 1999," plaintiffs
noted in their May 3 memorandum in support of a motion to enforce
document production and request for sanctions. "Eventually parties reach
an agreement whereby the Rezulin IND/NDA would be produced for
inspection and copying in lieu of individual responses. In March of
2000, plaintiffs attempted to schedule dates for document review,
however, Warner-Lambert has rejected and canceled proposed review dates,
and failed to comply with the agreement to produce the (Rezulin
IND/NDA)."
Warner-Lambert estimated that the Rezulin IND/NDA took up at least 80
boxes, according to the plaintiffs and that it would require the
plaintiffs to have 4-5 people working full-time for at least one week.
The plaintiffs noted that "mere days" before the plaintiffs' attorneys
were to travel to where the documents were housed -- and after making
plane and hotel reservations and rented equipment and scheduled time --
Warner-Lambert "unilaterally canceled the production."
After the cancellation, Warner-Lambert refused requests to re-schedule
the production, plaintiffs noted.
Plaintiffs argued that Warner-Lambert could not properly use as a
justification to delay production pending petitions to coordinate
federal and California Rezulin cases. The plaintiffs noted that those
petitions do not apply to their case but to two personal injury claims.
(Mealey's Litigation Report)
WORKPLACE DISCRIMINATION: Employee Attitude Surveys May Help Plaintiffs
-----------------------------------------------------------------------
Employers frequently engage consultants to carry out employee attitude
surveys. In such surveys, employees may anonymously express their
opinions regarding a variety of subjects. Employees may be asked to
assess whether the company takes its equal employment opportunity (EEO)
obligations seriously, whether certain groups receive favorable
treatment, or whether they feel that they have been victims of unlawful
harassment or discrimination. Employees may also be asked about their
perceptions regarding opportunities for promotion or their level of
confidence and trust in management and coworkers.
Such surveys often collect demographic data concerning the respondents,
including their age, race, or gender.
Employers who commission these surveys should take note that their
results may be helpful to potential plaintiffs in a discrimination case.
The company's motivation in commissioning it may reveal management
concerns about unfair or discriminatory corporate practices. The
conclusion that a statistically significant number of minority employees
in comparison to non-minority employees perceive the workplace to be
unfair may be admissible in an action alleging individual or classwide
(systemic) discrimination. The company's response to the survey may
provide evidence of discriminatory or even retaliatory conduct.
This article discusses the manner in which these surveys have been found
admissible in discrimination lawsuits. A future article will provide
guidelines on how they may be properly shielded from discovery via the
attorney-client, attorney work-product, or critical self-analysis
privileges.
Types of Employment Surveys
There are generally two types of surveys used in employment litigation:
sampling and opinion surveys. Sampling generates data about a
population, such as demographics. An opinion survey measures the
attitudes, actions and opinions of a population. (See Manual for Complex
Litigation @ 21.493 (3d ed. 1997). In general, the compilation of
employee opinions may be of most utility to potential plaintiffs.
Plaintiffs may use sampling and other statistical models to establish
discrimination in disparate impact discrimination cases, in which a
neutral employment practice, without any intent to discriminate against
a protected group, has a negative disparate impact upon a protected
group. (See Albermarle Paper Co. v. Moody, 422 U.S. 405, 425-28 [1975];
Griggs v. Duke Power Co., 401 U.S. 424 [1971]). The trier of fact may
infer that a "longlasting and gross" disparity between the defendant's
workforce and the relevant labor market or between the number of men and
women in certain job classifications is due to a pattern and practice of
discrimination. (See Stender v. Lucky Stores Inc., 803 FSupp. 259, 322
[N.D. Cal. 1992]).
Statistics are also used to establish a prima facie case of classwide
intentional, or disparate treatment, discrimination. (See Teamsters v.
United States, 431 U.S. 324, 339 [1977]; McDonnell Douglas Corp. v.
Green, 411 U.S. 792, 805 [1973]). In disparate treatment cases,
plaintiffs can use population and workforce comparisons to show that the
minority population is not equally represented in the defendant's
employ, as it is present in the community. The Supreme Court has
established a rule that a disparity of two or three standard deviations
is sufficient to establish a prima facie case of disparate treatment
discrimination. (See Stender, 803 F. Supp. at 323). Moreover, statistics
can be used to prove that an employer's nondiscriminatory explanation
for its treatment of a plaintiff is a pretext for unlawful
discrimination.
Demographic statistics in a survey, which profile the race, ethnicity
and sex of the employees who responded, would be of limited use to
plaintiffs in a discrimination case unless they include comparative data
(concerning job applicants, for example) that would assist in proving
disparate impact or disparate treatment discrimination. However, coupled
with information regarding applicant flow or a particular job practice
that is alleged to have a disparate impact on minorities, demographic
data in a survey may provide a starting point for analysis.
Class Actions
Plaintiffs who are pursuing a putative class action may use survey
results at the class certification stage to establish the numerosity
(the class is so numerous that joinder of all members is impracticable),
commonality (there are questions of law or fact common to the class) and
typicality (the claims or defenses of the representative parties are
typical of the claims or defenses of the class) requirements of Rule 23
of the Federal Rules of Civil Procedure.
In a class action lawsuit, plaintiffs must establish that an aggrieved
class exists by showing that these are similarly situated employees.
(See Sheehan v. Purolator Inc., 103 F.R.D. 641, 648 [E.D.N.Y. 1984]).
Plaintiffs could point to survey results showing that a lesser
proportion of women (as compared to men), blacks (as compared to whites)
and Hispanics (as compared to whites) believe that the company treats
employees fairly. This could be viewed as satisfying the numerosity,
commonality and typicality requirements of Rule 23, at least at the
pre-merits class certification stage of an action.
An opinion survey was admitted as evidence of bias in at least one class
action. In Stender, a gender discrimination class action, the company
conducted an in-house diversity training session for its store managers.
During the training, the managers were asked to list stereotypes that
they had heard about women and minorities. These comments included that
women were not encouraged to be promoted, that women were afraid to work
at night, and that women do not have the drive to get ahead. The court
ordered defendant to produce the notes from the in-house diversity
training session, and relied on the notes as evidence that Lucky's
managers had discriminatory attitudes towards women; the court
considered the comments as evidence of sex bias.
Individual Actions
Surveys may be used in individual actions for the same substantive
purpose as in class actions - as evidence of unlawful discriminatory
attitudes or bias. The very fact that a company commissioned a survey,
and its motivation for doing so, may provide evidence that the company
itself was concerned that women and minority employees are unfairly
treated. A company's inclusion in the survey of racial, ethnic and
gender data may be sufficient for a trier of fact to draw an inference
that the company expected that its minority and women employees had such
perceptions. It may even be that the employees who commissioned the
survey shared this perception, and plaintiffs could seek depositions and
other discovery of those individuals to pursue their motivation in
commissioning it.
Together with other evidence, surveys may be used to establish a prima
facie case of discrimination, by shedding light on a defendant's intent
to discriminate. (See Troupin v. Metropolitan Life Insurance Co., 169
F.R.D. 547 [S.D.N.Y. 1996]). The employee responses to a survey may also
support a plaintiff's argument that a proffered legitimate,
non-discriminatory reason for an employment action is pretextual. In one
case, Townsend v. Washington Metropolitan Area Transit Auth., 746 FSupp.
178 (D.D.C. 1990), the court found that responses to survey were
evidence of a discriminatory atmosphere that eroded the credibility of
proffered legitimate, non-discriminatory reasons.
Scope of Discovery
The existence of the survey may affect discovery proceedings by giving
plaintiffs' counsel sufficient information to engage in broad-based
discovery of a larger portion of the workforce than would otherwise be
permitted. The standard for discovery is not limited to admissible
evidence, but extends to information "reasonably calculated to lead to
the discovery of admissible evidence" (F.R.C.P. 26 [6][1]). Thus, the
opinions reflected in the survey may be followed up and explored in
depositions, document requests, and interrogatories. For instance, in In
Re Woolworth Corp. Sec. Class Action Litig. , 94 Civ. 2217, 1996
WL306576 (S.D.N.Y. June 7, 1996), the court permitted plaintiffs to
depose the employees who participated in the investigation and use the
report in the depositions.
In addition, discovery concerning the survey's motivation and the
perceptions of the employees who commissioned it could lead to the
disclosure of past instances or complaints of discrimination and prior
efforts to address those complaints (or the absence of such efforts),
and their results.
Summary Judgment
The survey may provide sufficient evidence to permit a case to survive a
summary judgment motion, even if it is not enough standing alone to
prove that discrimination occurred. (See, e.g., In Headrick v. Hercules
Inc., 658 F2d 1088 [5th Cir. 1981]).
Any failure on the company's part to respond to the specific negative
comments may be introduced to establish its failure to respond to EEO
complaints. This possibility is especially noteworthy since recent
Supreme Court decisions instruct that an employer must respond to sexual
harassment complaints. These are Burlington v. Ellerth Indus., 1998 U.S.
Lexis 4217, (U.S. June 26, 1998) and Faragher v. City of Boca Raton,
1998 U.S. Lexis 4216 (U.S. June 26, 1998).
Moreover, in AFSCME v. State of Washington, 770 F2d 1401 (9th Cir.
1985), the defendant employer commissioned a study to determine whether
a wage disparity existed between employees in jobs predominantly held by
women and jobs predominantly held by men. It found a wage disparity of
about 20 percent, but the employer took no action in response to the
study. The plaintiffs' subsequent wage discrimination lawsuit was
grounded upon the defendant's own survey and its failure to correct the
disparity it found.
Employees who participated in a survey may claim that their response was
the basis for subsequent adverse employment decisions. (See, e.g., Reyes
v. Walt Disney World Co., 176 F.R.D. 654, 655 [M.D. Fla. 1998]).
However, if a survey is anonymous, this would be a difficult claim to
assert.
Admissibility
As a general rule, surveys may be admitted into evidence if they are
necessary to the prosecution or defense of the case, and scientifically
credible. The burden lies with the offeror to show that the survey was
conducted "in a scientifically acceptable manner and that the
conclusions are statistically acceptable." (Weinstein's Federal
Evidence, @ 901.11[3][a]). A company that commissions a survey could not
credibly claim that it was not conducted in a scientifically acceptable
manner.
If a plaintiff wishes to introduce the results of a survey as proof of
discrimination, the company could object that it is hearsay as it is
being offered for its truth. (See Pittsburg Press Club v. United States,
579 F.2d 751 [3d Cir. 1978]). However, it may not be hearsay at all: it
may constitute evidence of what people believe, but not the truth of
what they believe. (See Manual for Complex Litigation @ 21.493, 3d ed.
1997).
Finally, even if the survey were considered hearsay, f.r.e. 801(d)(2),
804(b)(3), 803(6) indicate that it may be admitted if the elements of
any exceptions to the hearsay rule are established, such as an admission
against interest, declaration against interest or business record. The
survey may also be admissible if it is the basis for an expert opinion.
(New York Law Journal, May 25, 2000)
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