/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000727.MBX C L A S S A C T I O N R E P O R T E R Thursday, July 27, 2000, Vol. 2, No. 145 Headlines AMERICAN FEDERATION: Ap Ct Upholds Dismissal of Artists’ ERISA Suit CAPROCK COMMUNICATIONS: Milberg Weiss Files Securities Suit in Texas CINAR CORP: Ernst & Young named in suit by U.S. holders: Audits cited CONSECO FINANCE: Arbitrator Awards SC Home Loan Customers $20 Mil DR.KOOP.COM INC: Milberg Weiss Announces Securities Suit in Texas ELBIT MEDICAL: Settlement for Claim over Elscint Sale Okayed in Tel Aviv FOOD FIRMS: Freeman, Freeman Files Sorbate Price-Fixing Suit HONEYWELL INTERNATIONAL: Kirby, McInerney Retained for Securities Suit HONEYWELL INTERNATIONAL: Milberg Weiss Files Securities Suit in NJ LABOR READY: Construction Unions Query Former CEO's Role in CDM Machines MCI/WORLDCOM: Girard & Green Files Suit over Billing after Disconnection MICROSOFT CORP: Asks Supreme Ct to Send Antitrust Case to Appeals Court MICROSOFT CORP: KY Judge Tosses out Monopoly Suit over Window 98 TAINTED BLOOD: Govts Appeal against Attorney Fees in Canadian Hep C Case TOBACCO LITIGATION: About 300 More Flight Attendants’ Suits Before Sept TOBACCO LITIGATION: Survey in CA Shows Smoking among Teens Has Declined TOTAL RENAL: Announces Settlement of Securities Lawsuit UNPLANNED EMISSIONS: Contribute to TX Pollution; Subject of Valero Suit WAR VICTIMS: Ethiopian Jews Seek Compensation from Italy WHITE HOUSE: Court Orders ARMS Search in Employees’ Suit over Privacy * SEC Rules Aim to Keep Brokerages on the Level ********* AMERICAN FEDERATION: Ap Ct Upholds Dismissal of Artists’ ERISA Suit ------------------------------------------------------------------- A district court properly dismissed artists' claims under the Employee Retriement Income Security Act for derivative delinquent contribution because only fiduciaries have standing under ERISA to sue on behalf of the plan for delinquent contributions, the U.S. Court of Appeals for the 11th Circuit held on June 29, in a matter of first impression. Moore v. American Federation of Television and Radio Artists, nos. 98-8895 and 98-9263. The district court did not abuse its discretion in denying the recording artists' motion for class certification in their claims for breach of fiduciary duty against union pension fund trustees and racketeering claims against record companies because each case of the named plaintiffs and putative class members differed and because there were no common questions of fact in the racketeering claims. (The National Law Journal, July 17, 2000) CAPROCK COMMUNICATIONS: Milberg Weiss Files Securities Suit in Texas -------------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/caprock/)announced on July 26 that a class action has been commenced in the United States District Court for the Northern District of Texas on behalf of purchasers of CapRock Communications Corp. ("CapRock") (Nasdaq:CPRK) common stock during the period between April 28, 2000 and July 6, 2000 (the "Class Period"), including those who purchased shares in CapRock's June 16, 2000 Secondary Offering. The complaint charges CapRock and its President and Chief Operating Officer, its Chairman and Chief Executive Officer and its Chief Financial Officer with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. CapRock owns and operates a scalable long-haul fiber network. The complaint alleges that defendants' false and misleading statements concerning the revenues to be derived from its dark fiber segment, which would result in a second quarter 2000 loss per share only of $0.08 and revenue of $70 million, artificially inflated the price of CapRock stock to a Class Period high of $36. CapRock's top officers knew but concealed that some $30 million of its projected $70 million in second quarter 2000 revenues was to be derived from a contract which, despite months of efforts, CapRock had been unable to have signed. The upsurge in CapRock's stock price caused by defendants' false and misleading statements allowed CapRock to sell 4.5 million shares of CapRock stock for proceeds of$83 million and enabled defendants to infuse CapRock with desperately needed capital to fund its operations. On July 6, 2000, days after CapRock's Secondary Offering was completed, CapRock revealed that it was in fact suffering a huge drop in revenues, and that its losses would be 800% greater than defendants had stated in the prior weeks, and exposed the problems CapRock had been experiencing during the Class Period with its dark fiber business. This announcement caused its stock price to drop to as low as $12 from its Class Period high of$36 on record volume of over 4 million shares on July 6, 2000, causing tens of millions of dollars in damages to members of the Class. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach, 800/449-4900 wsl@mwbhl.com CINAR CORP: Ernst & Young named in suit by U.S. holders: Audits cited --------------------------------------------------------------------- The failure of Ernst & Young LLP to adequately plan, staff, and execute audits of embattled Cinar Corp. makes it partially to blame for investor losses, according to a class-action suit filed against the Montreal-based animation company. Ernst & Young was named as a defendant in an amended class-action suit against Cinar that was filed last Friday with the U.S. District Court of the Eastern District of New York. According to court documents, the auditors did not design the audit in a manner likely to detect financial irregularities, and they failed to confirm the existence of Cinar's reported investments. The suit also maintains Ernst & Young did not verify Cinar's eligibility for government subsidies and tax credits. A Toronto-based spokeswoman for Ernst & Young declined to comment on the individual allegations, but maintained 'the case against us is totally without merit, and we will be defending ourselves strongly.' The nature of the claim against Ernst & Young centres on a secondary share offering made by Cinar in 1999, which includes financial statements on which the auditor issued 'unqualified opinions,' said Neil Selinger, a partner at Lowey Dannenberg Bemporad & Selinger, P.C., the lead counsel for the consolidated class action suit. Cinar has said it will have to restate its financial statements for 1997 and 1998, as well as for the first three quarters of 1999, owing to tax-fraud allegations, undisclosed related party transactions and unauthorized investments. 'Under [U.S. securities laws] an accountant is liable for any errors in the financial statements on which he's issued an opinion that is contained in a registration statement, unless the accountant firm can demonstrate that they could not have known of the misstatements,' explained Mr. Selinger. Cinar's well-publicized troubles began last fall, when it was accused of falsely attributing U.S. scripts to Canadian authors, in order to grab government subsidies and tax-credits. The company became further embroiled in scandal in March, when an internal audit committee discovered that US$ 122-million worth of company money was improperly invested with a trio of Bahamian financial firms. But while the U.S. suit alleges that Ernst & Young is at least partially liable for the financial misstatements arising from these events, the auditors will not be included in class action proceedings filed against Cinar in Quebec, said Paul Unterberg, lead counsel for the Quebec suit. 'We mulled over the idea of including the accountants, and we said to ourselves, 'Does an accountant's duty go to the extent of verifying the passport of the people for whom they're getting deductions as scriptwriters?' I don't think a Superior Court judge is going to say that Ernst & Young are supposed to check into the citizenship of the people for whom they're getting tax deductions,' said Mr. Unterberg, adding that the Canadian system differs substantially from the United States, where civil juries hear class action cases. Mr. Unterberg, along with lawyers representing Cinar, will meet in a Quebec court today to set a schedule for examinations relating to the class action. The two sides are currently trying to agree on a time for examining Barrie Usher, Cinar's recently appointed chief executive. Ernst & Young, meanwhile, is still scrambling to complete its audit of Cinar's books, in hopes the company will avoid being delisted by Nasdaq and the Toronto Stock Exchange, where its shares have been halted since the investment imbroglio was unleashed in March. Company officials met with Nasdaq in Washington on July 13 to discuss their status, and wrote last week to further clarify their financial position with respect to the audit. Cinar had originally targeted June 30 for the completion of its restatements, but that timeline has been pushed back while the company haggles with the federal and provincial governments over a settlement on the tax-credit issue. Sources close to the company said the federal deal will likely be in the neighbourhood of $15-million. Meanwhile, the company is hoping to receive a US$20-million payment on July 30 from Globe-X Management Ltd., one of the three Bahamian financial firms. Cinar has already collected US$62-million of the original US$122-million sum. (National Post (formerly The Financial Post), July 26, 2000) CONSECO FINANCE: Arbitrator Awards SC Home Loan Customers $20 Mil ----------------------------------------------------------------- Conseco Finance Inc. should pay $20.1 million to South Carolina customers for not telling them they could choose their own lawyers and insurance companies when getting loans, an arbitrator says. The case affects 3,739 South Carolina customers with home improvement or mobile home loans from what was then Green Tree Financial Corp. beginning in May 1993, Brad Simpson, one of the lawyers representing those who sued, said Tuesday. In addition to the $20.1 million, arbitrator Tom J. Ervin awarded nine law firms almost $7 million in fees and expenses, said Simpson and Steve Hamm, another lawyer. Hamm who is South Carolina's former consumer advocate, said it was the largest damage award ever under the state's consumer protection law. Conseco lawyer Herb Hamilton said the company would ask a judge not to approve the amount and, if not successful there, likely would appeal. Among other things, the company contends Ervin did not have jurisdiction to consider the class action, Hamilton said. Minnesota-based Green Tree, which was bought for $6 billion in 1998 by Indiana-base Conseco Inc., specializes in making high-risk loans that generally carry higher interest rates. South Carolina has no interest rate cap, but borrowers must be able to have their own lawyers review loan documents, Hamm said. That is so a borrower realizes he or she can lose the property if payments become overdue, he said. ''We had a bunch of people who didn't know they were giving a mortgage on their property,'' Hamm said. In many cases, there was no evidence a lawyer was ever used to close the loan, Simpson said. However, Hamilton said the law was ''very complex and to some extent confusing'' and that the company ''is only one of several consumer lenders who have had this same accusation made against them.'' In a 1995 case, customers of Jim Walter Homes were awarded $16 million. The latest arbitration cases alleged Green Tree never told customers of their rights and the company continued that even after an employee warned in September 1995 that it broke the law. Ervin, a former Circuit Court judge, awarded $5,000 each to the 3,163 people who took out mobile home or home improvement loans from May 28, 1993, to Sept. 25, 1995. Because the company failed to notify home improvement loan borrowers even after the internal warning, Ervin awarded the maximum $7,500 to 576 people who got those loans after Sept. 25, 1995, the lawyers said. Hamilton declined additional comment, saying he had not had time to read the two rulings. (AP Online, July 26, 2000) DR.KOOP.COM INC: Milberg Weiss Announces Securities Suit in Texas ----------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on July 20, 2000, on behalf of purchasers of the securities of Dr.koop.com Inc. (NASDAQ: KOOP) between June 8, 1999, and March 30, 2000, including all persons who purchased the common stock of Dr.koop.com pursuant to or traceable to the Company's initial public offering on June 8, 1999, or subsequently in the open market. 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/drkoop/ The action, numbered 100CA439-JN, is pending in the United States District Court for the Western District of Texas, Austin Division, located at 655 E. Durango Blvd., San Antonio, TX, 78206, against defendants Dr.koop.com, Susan Georgen-Saad (Chief Financial Officer), Donald Hackett (Chief Executive Officer and President), John F. Zaccaro (Vice Chairman of the Board), and Nancy Snyderman (Director). The Honorable James Nowlin is the Judge presiding over the case. The complaint charges that defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The complaint alleges that the prospectus (the "Prospectus") issued in connection with the IPO was materially false and misleading for several reasons. For example, the complaint alleges that the Prospectus highlighted the purported benefits the Company would derive from its relationship with HealthMagic Inc., a provider of Internet technology to health related businesses and that HealthMagic would continue to develop the Company's Personal Medical Records ("PMR") product, among other technologies. This statement was materially false and misleading, as alleged in the complaint, because it failed to disclose that the PMR product was in early stages of development and required extensive reworking before it could be commercially deployed. On March 30, 2000, the Company filed its Form 10-K for fiscal 1999 which revealed that the Company's relationship with HealthMagic was unsatisfactory and would be terminated, and that the Company's independent auditors raised substantial doubt about Dr.koop.com's ability to continue as a going concern. In response to these revelations, the price of Dr.koop.com common stock plunged by 41%, falling from $6 1/4 per share to 3 11/16 per share. Contact: Milberg Weiss Bershad Hynes & Lerach, LLP, New York Steven G. Schulman or Samuel H. Rudman, 800/320-5081 Email: drkoopcase@milbergNY.com Website: http://www.milberg.com ELBIT MEDICAL: Settlement for Claim over Elscint Sale Okayed in Tel Aviv ------------------------------------------------------------------------ Elbit Medical Imaging Ltd. (Nasdaq: EMITF) (EMI) announced on July 26 that on July 12, 2000, the District Court in Tel Aviv (Court) approved a Settlement Agreement with respect to a claim which was filed against EMI, Elscint Ltd. (NYSE: ELT), a subsidiary of EMI, and others on November 16, 1998, together with an application for the recognition of this claim as a class action. The Plaintiff's main allegations were that the respondents withheld information regarding negotiations allegedly conducted by Elscint for the sale of Elscint's principal businesses to third parties and had the plaintiff known of such transaction, the plaintiff would have exercised options of EMI which they held on September 1, 1998 (which have expired in the interim). On April 16, 2000, the parties signed a settlement agreement which provides that EMI will pay US$ 1,104,200 and that the claim will be recognized as a class action. However, it is anticipated that EMI will be required to pay approximately US$ 0.55 million only to the plaintiffs (other than to Elron Electronic Industry Ltd., which is expected to decline to be joined as a plaintiff to the claim). The settlement payment is covered by EMI's insurance policy. This settlement agreement was subject to the Court's approval, which was given on July 12, 2000. However, the court did not approve the amount of the expenses requested by plaintiffs, and this issue may be appealed by plaintiffs. FOOD FIRMS: Freeman, Freeman Files Sorbate Price-Fixing Suit ------------------------------------------------------------ CHICAGO'S Freeman, Freeman & Salzman P.C. has filed a price-fixing suit against Eastman Chemical Co., Hoechst A. G. and 21 other makers of the food preservative sorbates. The complaint was filed in federal court in Chicago on behalf of Dean Foods Co. and Ralston Purina Co. It comes on the heels of a settlement in a similar class action, filed last year in California, which three of the defendants, including the German company Hoechst, settled for $ 60 million. Dale Kleber, general counsel at Dean Foods, told the Chicago Tribune that Dean chose not to be a part of that class, saying. "We believe we can do better." In October 1998, Eastman pleaded guilty to fixing the price of sorbates and was fined $ 11 million by the Justice Department. The company, which has since halted its sorbate production, did not return phone calls. (The National Law Journal, July 17, 2000) HONEYWELL INTERNATIONAL: Kirby, McInerney Retained for Securities Suit ---------------------------------------------------------------------- The law firm of Kirby McInerney & Squire, LLP has been retained to bring a class action lawsuit on behalf of all purchasers of Honeywell International Inc. (NYSE: HON) common stock between December 20, 1999 and June 19, 2000. The action will charge Honeywell and certain of its officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by reason of material misrepresentations and omissions. The complaint will allege that, during the Class Period, Honeywell securities traded at artificially inflated prices because Honeywell knew, but did not publicly disclose, that its business was performing significantly worse than the company had led analysts and the public to believe. Throughout the class period, as the complaint alleges, Honeywell repeatedly assured analysts and investors that (i) its recent merger with Allied Signal was proceeding smoothly in operational terms and producing benefits in financial terms; and (ii) that Honeywell would meet the well-publicized quarterly earnings targets that it had set for itself. On June 19, however, Honeywell was forced by a massive and mysterious fall in its stock price into admitting what the complaint alleges it knew, or was reckless in not knowing, all along - that its true earnings and growth rate were not as high as the company had led investors to believe, and that significant stumbling blocks existed in operations. As a result of this revelation of Honeywell's true operational and financial state, shocked investors saw Honeywell's share price plummet more than 25% (more than $14 per share) during July 19 and July 20, 2000, from$48.50 to $34.25. Contact: KIRBY McINERNEY & SQUIRE, LLP Ira M. Press, Esq. Shan Anwar 830 Third Avenue 10th Floor New York, New York 10022 Telephone: (212) 317-2300 or Toll Free (888) 529-4787 E-Mail: sanwar@kmslaw.com HONEYWELL INTERNATIONAL: Milberg Weiss Files Securities Suit in NJ ------------------------------------------------------------------ The law firm of Milberg Weiss Bershad Hynes & Lerach LLP (http://www.milberg.com/honeywell/)announces that a class action lawsuit was filed on July 25, 2000, on behalf of purchasers of the stock of Honeywell International Inc. ("Honeywell" or the "Company") (NYSE:HON) between December 20, 1999 and June 19, 2000 (the "Class Period"). A copy of the complaint filed in this action is available from the Court in the office of the Clerk of the Court, Room 4015, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/honeywell. The case is pending in the United States District Court for the District of New Jersey, and has not yet been assigned to a judge. The address of the Courthouse is Martin Luther King, Jr. Federal Building and U.S. Courthouse, 50 Walnut Street, Newark, New Jersey 07101. The action seeks damages for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The defendants are Honeywell International Inc., Michael R. Bonsignore, Chief Executive Officer, Giannantonio Ferrari, President and Chief Operating Officer, Donald J. Redlinger, Senior Vice President-Human Resources, Robert D. Johnson, Executive Vice President, Chief Operating Officer-Aerospace Business, Richard F. Wallman, Senior Vice President and Chief Financial Officer, Peter M. Kreindler, Senior Vice President and General Counsel, James T. Porter, Senior Vice President-Information and Business Services. Plaintiff alleges that defendants knowingly or recklessly disseminated materially false and misleading statements and omissions that misrepresented the success of the merger of Honeywell and Allied Signal, Inc. Plaintiff alleges that the Allied/Honeywell merger was problem-ridden and not yielding operational synergies and millions in cost savings, and that the "new" Honeywell's business was not nearly as strong as represented and did not have nearly as strong prospects as forecast by defendants. Plaintiff further alleges that the misrepresentations and omissions by defendants influenced the views of securities analysts and fostered an unrealistically positive assessment of Honeywell and its business, prospects and operations. Plaintiff alleges that, as a result of such misinformation, Honeywell's stock traded at artificially inflated prices throughout the proposed Class Period. Plaintiff alleges that defendants' materially false and misleading statements, included, among others: On April 13, 2000 defendants represented that, "Honeywell is well-poised to meet its earnings and revenue commitments for 2000 and beyond," and "(w)e are clearly seeing the benefits of the Merger flowing through (to Honeywell)." On May 1, 2000 defendants represented that Honeywell would achieve EPS growth of at least 20% in 2000. On May 9, 2000 defendants represented that the Merger synergies and savings and Honeywell's EPS growth would accelerate as 2000 unfolded. The Private Securities Litigation Reform Act of 1995 (the "PSLRA") sets forth the following requirements, among others, for any person seeking to serve as a representative: Each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certification, which shall be personally signed by such plaintiff and filed with the complaint, that: (1) states that the plaintiff has reviewed the complaint and authorized its filing; (2) states that the plaintiff did not purchase the security that is the subject of the complaint at the direction of the plaintiff's counsel or in order to participate in any private action arising under this chapter; (3) states that the plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary; (4) sets forth all of the transactions of the plaintiff in the security that is the subject of the complaint during the class period specified in the complaint; (5) identifies any other action under this chapter, filed during the 3-year period preceding the date on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve as a representative party on behalf of a class; and (6) states that the plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond the plaintiff's pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4). 15 U.S.C. Section 78u-4(a)(2)(A)(i)-(iv). In addition, the PSLRA provides that the Court shall appoint as Lead Plaintiff the member or members of the class that the Court determines to be most capable of adequately representing the interests of class members. In determining the "most adequate plaintiff," the PSLRA provides that the Court shall adopt a rebuttable presumption that the most adequate plaintiff is the person or group that has either filed a complaint or made a motion for appointment as Lead Plaintiff, has the largest financial interest in the relief sought by the class, and otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure. 15 U.S.C. Section 78 u-4(a)(3)(iii). At the Lead Plaintiff selection stage, this latter requirement involves a preliminary showing that the proposed Lead Plaintiff's claims are typical of claims of the class members, and that the Lead Plaintiff will be an adequate representative of the class. Any member of the alleged class may seek to be appointed as Lead Plaintiff, even if that person has not filed a complaint. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach, 800/449-4900 wsl@mwbhl.com LABOR READY: Construction Unions Query Former CEO's Role in CDM Machines ------------------------------------------------------------------------ The Building and Construction Trades Department, AFL-CIO sent a letter to Richard L. King, CEO and President of Labor Ready, Inc. (NYSE: LRW), one of the nation's largest temporary employment agencies, demanding an explanation about its arrangement for the use of the patent on the company's "Cash Dispensing Machines." As a shareholder, the Building and Construction Trades Department wants to know why there has been no disclosure of payment or obligation to former CEO Glenn Welstad, his son Todd Welstad, and Keith Gilbert who invented the machine and assigned the patent to Labor Ready. The letter states, "Given Glenn Welstad's readiness to use the assets of the corporation for his personal benefit, several questions are raised by his role with respect to the CDM machines in the absence of any information about the transaction between the Welstads, Gilbert and Labor Ready in any of the company's disclosures." The cash machines were installed by Labor Ready to pay workers in cash at the end of each workday. The machines and the company's slogan, "Work Today, Paid Today" play a significant role in the company's recruitment of potential employees. This inquiry comes on the heels of a class-action lawsuit filed against Labor Ready in Georgia for allegedly illegally charging its employees for the use of its cash dispensing machines. Labor Ready charges workers a fee of $1.00 plus the change in their daily earnings to withdraw their pay -- the fees nationwide in 1999 generated $7.7 million in revenue for the company. Labor Ready is one of the largest and fastest growing temporary employment agencies in the country. It operates 839 offices in 49 states, Puerto Rico, Canada, and the United Kingdom. Labor Ready is a leader in the national trend away from full-time, permanent jobs towards part-time, temporary, and contract staffing strategies. Today nearly three in ten working Americans are employed in contingent or non-standard employment. The Building and Construction Trades Department is the umbrella organization for the 15 international building and construction trades unions in the United States and Canada, representing a total of 3 million members in construction and related industries. In April the unions launched the "Temp Workers Deserve a Permanent Voice @ Work" campaign to shed light on the abuse of temporary agency workers in the construction industry. MCI/WORLDCOM: Girard & Green Files Suit over Billing after Disconnection ------------------------------------------------------------------------ A class action lawsuit has been filed in California Superior Court in San Diego, on behalf of all customers billed by MCI/Worldcom for disconnected or transferred phone service. The class action alleges that MCI/Worldcom's practice of billing customers after they disconnected phone service violates the California Business and Professions Code. A similar, subsequent case has also been filed by the Attorney Generals for several states, including California, against MCI/Worldcom and other major long distance companies. The plaintiff in the class action is the non-profit consumer advocacy group Utility Consumers' Action Network (UCAN) that represents nearly 40,000 residential consumers in California on telephone issues. Like countless other small businesses in California, UCAN was improperly billed by MCI/Worldcom for local telephone service for months after UCAN transferred its phone lines to another telephone company. According to attorneys for UCAN, MCI/Worldcom's mis-billing scam is indicative of an on-going trend at MCI/Worldcom to overcharge and under-serve its customers. "MCI/Worldcom is an industry leader in massive billing fraud, illegal rate increases and shoddy customer service," says Charles Carbone, attorney for UCAN. UCAN is represented by the San Francisco law firm of Girard & Green, LLP, which has extensive experience in prosecuting consumer class actions and complex telecommunications litigation. Contact: Girard & Green, LLP Leslie R. Cuesta, 415/981-4800 lrc@classcounsel.com MICROSOFT CORP: Asks Supreme Ct to Send Antitrust Case to Appeals Court ----------------------------------------------------------------------- Microsoft Corp. asked the Supreme Court on Wednesday to let a federal appeals court take the next crack at a titanic antitrust fight that threatens to break the computer software giant in two. "The importance of these cases will not lie in how quickly they are resolved but in their long-term effects on consumers and this nation's economy," Microsoft's lawyers told the justices in an appeal. The 30-page appeal, filed Wednesday with a 312-page appendix, urged the court to avoid "the onerous task of sifting through a large and complex record and forgoing the many benefits of intermediate appellate review." "Indeed, the number of and nature of the errors below militate strongly in favor of review by the court of appeals," the appeal said. Microsoft contends in the appeal that U.S. District Judge Thomas Penfield Jackson wrongly concluded that it engaged in illegally anticompetitive conduct. The company also complains about Jackson's contacts with reporters, saying he should be disqualified if the case ever returned to the trial court level. The Justice Department, under an expediting agreement with Microsoft, has until Aug. 15 to respond to the company's Supreme Court appeal. Government lawyers want the nation's highest court to tackle the case directly, without first sending it to the U.S. Circuit Court of Appeals for the District of Columbia. The nine justices are not expected to say until September at the earliest whether they will grant direct review or send the case to the appeals court. The highest court's 2000-2001 term will not begin until Oct. 2. A federal law allows major antitrust disputes to skip the appeals court step and move from a trial court to the Supreme Court, but the justices make the decision. If the court chooses to grant direct review, Microsoft's lawyers said, it should consider eight separate questions. Among them is whether Microsoft's design of its Windows 95 and Windows 98 operating systems to include Web browsing functions constituted a tie-in violation of federal and state antitrust laws. The appeal also attacked Jackson's breakup remedy and his "extrajudicial communications with members of the press." His many interviews with reporters during and after the 78-day trial "raise serious questions about ... impartiality" and require that his ruling be reversed, Microsoft's lawyers said. Microsoft spokesman Jim Cullinan would not comment on that aspect of the appeal. "All of the issues and specifics will, of course, be raised at the appropriate time, in whatever court this case ends up in," he said. Jackson delayed the implementation of the various conduct restrictions he had imposed in his June 7 decision requiring Microsoft's breakup. Among those restrictions, Jackson ordered Microsoft to divulge to outside developers technical information about how its operating systems interact with its software. Those developers would be able to pick apart the computer code without cost to improve their understanding of it and make their own products. Microsoft also would no longer control what icons are on the Windows operating screen when a user buys a computer. A person buying a computer from a distributor such as Dell or Gateway would see a desktop that looked nothing like the usual Windows desktop. Those restrictions no longer loom in the company's immediate future. Under Jackson's breakup plan, Microsoft would be split into two companies. One would sell Windows, the operating system that runs most of the world's personal computers. The other would sell everything else the company produces, such as its Internet services and its lucrative Office software suite, which includes popular word processing and spreadsheet programs. Microsoft was sued by the Justice Department and 19 states. Also on Wednesday, a state judge in Kentucky dismissed a class-action lawsuit against Microsoft brought by consumers that alleged the company used its monopoly power to overcharge consumers for its Windows 98 operating system. The Kentucky court cited a law that only those consumer who purchase a product directly from the company can sue to recover antitrust damages. Microsoft sells the vast majority of its software through computer makers and retail stores. The case is Microsoft v. U.S., 00-139. (The Associated Press, July 26, 2000) MICROSOFT CORP: KY Judge Tosses out Monopoly Suit over Window 98 ---------------------------------------------------------------- A Jefferson Circuit judge, like state judges in four other states, has dismissed a class-action lawsuit alleging Microsoft used its monopoly power to overcharge consumers for its Windows 98 operating system. Judge Judith McDonald-Burkman ruled Tuesday that the plaintiffs did not purchase the product directly from Microsoft and therefore had no standing to sue the company. There have been similar decisions in Hawaii, Iowa, Nevada and Oregon. In granting Microsoft's motion to dismiss, McDonald-Burkman didn't formally address its fundamental contention: that the company overcharged for its product, thus injuring consumers. However, in a judicial aside, she said the argument didn't hold water. "Plaintiffs may feel that Microsoft's behavior has inhibited others from entering the market," she wrote. "Maybe so. The essence of that behavior has been predatory pricing to keep potential rivals out. Plaintiffs are the beneficiaries, not the victims." McDonald-Burkman also said, "Microsoft may have engaged in illegal monopolistic activity. But such findings are not an elixir of liability from whose cup all can drink." The Louisville suit was filed by Carey M. Arnold and Thomas C. Hectus, who said they were in effect overcharged when they bought a Microsoft operating system and a computer equipped with Microsoft's Windows 98 from third-party vendors. More than 140 class-action suits have been filed against the Redmond, Wash., company, most in the wake of a federal judge's finding last November that Microsoft violated antitrust regulations. While a number of the class-action suits have been dismissed, more than 130 remain, Microsoft spokesman Jim Cullinan said. Sixty are consolidated in a multi-district litigation process being coordinated in a federal court in Baltimore, and more than 30 California cases have been consolidated in San Francisco. "We think this Kentucky case and many of the others are important because they're building momentum, showing why these cases do not have any merit and why they're simply an effort by plaintiff attorneys to go after a successful company," Cullinan said. Microsoft was sued by the Justice Department and 19 states' attorneys general in 1995. Last month, U.S. District Judge Thomas Penfield Jackson ordered the company broken up, ruling that it had used illegal and unfair tactics against business rivals to sustain monopoly power for its operating system. That decision is being appealed. Microsoft filed a brief last Wednesday with the Supreme Court asking it to allow a lower court to hear its appeal of Jackson's ruling, rather than sending the case directly to the high court as the government has asked. (The Associated Press State & Local Wire, July 26, 2000) TAINTED BLOOD: Govts Appeal against Attorney Fees in Canadian Hep C Case ------------------------------------------------------------------------ Governments' appeals of a ruling setting lawyers'fees in a tainted-blood class action suit are motivated by "politics,"says the lead counsel for the plaintiffs. The federal and Ontario governments are appealing the decision of Superior Court Justice Warren Winkler, who last month approved $20 million in fees for a team of lawyers working for some of the 10,000 people who contracted Hepatitis C after receiving blood between 1986 and 1990. The federal and B.C. governments are appealing the judgment of B.C. Supreme Court Justice Kenneth Smith okaying $ 15 million for lawyers there. "People say it's a lot of money and yes, it is a lot of money," said Harvey Strosberg of Windsor, Ont. "But if you put the same amount of time into four different cases, you'd come up with the amount." The fees reflect the time lawyers spent winning the "best result" for the victims, said Strosberg, adding lawyers took the "highest risk" doing so. "All this does is make it more painful for the lawyers,"he said. Strosberg raised the possibility that the appeals were launched to throw roadblocks in the lawyers'way. "I think you have to ask the question of whether or not the government is trying to make it so difficult that nobody will ever want to sue them. I ask that question; I don't give an answer." Strosberg said that since the battle is strictly over costs, the governments have no automatic right of appeal and should have to file for leave to do so. If the government bids fail, B.C.'s Camp Church and Sutts Strosberg of Windsor will each get $15 million, with $5.5 million going to a group headed by Bonnie Tough of Blake Cassels in Ontario. Dozens of lawyers from other firms will share the pot. Strosberg's legal team included lawyers from Nova Scotia, Alberta and Saskatchewan. "We felt that the fee request was reasonable,"said Tough. "Justice Winkler approved the fee agreement." The fees include a $3-million advance approved in December. The payment stirred controversy because it came before any victims had been paid. The victims'compensation fund is now paying out. Each will get up to $159,000. The governments argued the victims were promised money in 1998, and that the lawyers played little role in securing the fund. But Strosberg noted the lawyers negotiated a $520-million increase in the money payable to the victims. Lawyers also convinced the governments to forgo the tax on the compensation, boosting the fund's value to $1.5 billion. In approving the lawyers'fees, both judges noted the lawyers took great risks by taking on the case. They noted the fees were small compared to most class action arrangements, in which lawyers typically take between 20 and 33 per cent of the settlement. In this case, lawyers'fees were between 2 and 4.2 per cent. The government refused Strosberg's request to give to the victims the 7 per cent GST it will collect on the $20 million in fees, he said, predicting that about $10 million will flow back to the governments as income tax. "I don't know what they've got on their minds but it isn't the interests of the class members, that's for sure,"he said. "There's no largesse when it comes out of their pocket." Currently only Ontario, Quebec and British Columbia have legislation permitting class action suits. Doug Mitchell, a Montreal lawyer whose practice includes defence of class action suits, said a growing number of large class action suits are being filed. He said calculating lawyers'fees in such cases is "tough." "There has to be some reward for the risk," he said. But he doesn't agree with applying a multiplier to the fee to reflect the risk involved. "The approach of using a multiplier of the hourly rate seems to me like the wrong approach,"he said. "If it's not based on the award and it's based on an hourly rate there's an incentive to just pad the hours at the end." Ontario courts are increasingly certifying classes of plaintiffs from across Canada, he said. This amounted to interference with the public policy of the provinces in which such suits are barred. "I don't think it's right, but that's the current state of the law." He said the tainted-blood award was larger than most class actions, but "by no means obscene"when compared with claims against tobacco companies in the U.S., where lawyers take a far larger chunk of settlements. Ontario Attorney General Jim Flaherty said lawyers "are entitled to reasonable legal fees for their work in this case, but our view is that $20 million is unwarranted." Ontario and Ottawa filed both a notice of appeal and a notice motion for leave to appeal. "It's our position that we have it as of right,"said federal Justice lawyer Michel Lapierre, who argued the fees issue before Justice Winkler. (THE LAWYERS WEEKLY, July 21, 2000) TOBACCO LITIGATION: About 300 More Flight Attendants’ Suits Before Sept -----------------------------------------------------------------------For 46 years Bland Lane traveled the world as a flight attendant with United Airlines, seeing more countries than most people dream about. But her passion for flying came with a price. Today, the 71-year-old Sonoma, Calif., woman suffers from chronic pulmonary problems. She has trouble breathing without medication, her voice always slightly hoarse. Lane is among hundreds of current and former flight attendants who are suing the tobacco industry in Miami-Dade Circuit Court, claiming the smoke she inhaled during flights caused her ailments. Her case is expected to be the first to go trial later this year. About 800 attendants have already filed suit; their lawyers anticipate filing another 300 or so before the September cutoff date. I am the point man, said Lane, who retired from her job with United Airlines on May 1, days before her 71st birthday. Lane had flown international routes since signing on with Pan Am in 1954, often spending 10, 12, even 14 hours in the air at a time. For more than 20 of those years the airlines allowed passengers to smoke. Lane, a non-smoker, says she suffered the consequences. It got to the point where after every trip I would come home with a terrible cough, said Lane. At first, after a day or two it would go away. But after a few years, it didnt go away any more. Eventually, she said, doctors put a name to what she had -- RADS, or Reactive Airway Disease Syndrome. Lanes age put her on lawyers radar screen for an expedited trial, said Miles McGrane of McGrane & Nosich, who along with Steven Hunter of Angones Hunter McClure Lynch & Williams, hope to try her case as early as October. Another attorney, Bill Hoppe of Hoppe & Stokes, also has moved for an expedited trial because his client is dying of cancer. The trials come on the heels of this months record $ 145 billion jury award to Florida smokers in their unrelated class-action suit against Big Tobacco. The flight attendants cases are the next chapter in a different battle over the effects of secondhand smoke, a fight that produced a $ 300 million settlement in 1997. That money was to be used strictly to fund research, however, and the flight attendants got no money. But under the settlement -- reached by attorneys Stanley and Susan Rosenblatt, who recently won the record verdict in the Florida smokers trial -- the flight attendants retained the right to sue individually for compensatory damages. The trials that will begin this fall are the first of those suits. McGrane, Hunter and Hoppe are among six lawyers who have sued on behalf of the flight attendants. Others are Abbey Kaplan of Kluger Peretz Kaplan & Berlin, Marvin Weinstein of Grover Weinstein & Trop and Joel Wolpe of Wolpe & Leibowitz. So far, about 30 suits have been scheduled for trial before different judges. Common issues and motions related to the interpretation of the settlement agreement will be handled by Judge Robert Kaye. Kaye presided over the original class-action suit filed by the flight attendants, and spent the past two years overseeing the class action filed by Florida smokers, known as the Engle case, which won a record $ 145 billion judgment. How that verdict might impact pending litigation is up for interpretation. Whatever sympathy the huge jury award might have produced for cigarette makers isn’t likely to help them with secondhand smoke cases, said Clark Freshman, a University of Miami law professor. That wont apply to cases involving passive smokers, said Freshman, because the backlash for smokers doesnt hold true for victims of passive smoking. Indeed, if a jury imposed a giant verdict in a case where the plaintiffs intentionally smoked, what might they do in cases where the plaintiffs blame other peoples smoke? In those cases, the person who is allegedly injured made no choice to expose themselves to a carcinogen, unlike the smoker who derived pleasure, said David Adelman, a tobacco industry analyst with Morgan Stanley in New York. It wasnt pleasurable to be exposed, there was no choice, there was no warning label. And until recently, there wasnt a lot of public awareness. On the other hand, said Adelman, There really is no authoritative scientific study that establishes secondhand smoke causes disease. Anthony Upshaw, of Adorno & Zeder in Miami, who represents defendant Brown and Williamson, concurs. You are talking about an entirely different science. Its apples and oranges, said Upshaw. If there is science that proves there is some effect from environmental tobacco smoke on a persons health, then Brown & Williamson will re-evaluate their position and take a hard look at it, just as they have in the past. Plaintiffs lawyer Hunter said the science is there and that the tobacco industry has gone into overdrive to prove that secondhand smoke doesnt cause health problems. They dispute it, deny it, complicate it and create doubt about it, Hunter said. And now it appears that the tobacco industry is trying to shift the blame, he said. In their answers to the plaintiffs interrogatories, Brown & Williamson, Lorillard Tobacco and Philip Morris, among others, suggest that the flight attendants knew secondhand smoke was harmful, but continued to expose themselves to it by continuing to work on smoking flights. But Hunter noted that Lane had more than 20 years invested in her career before anybody began linking secondhand smoke to flying. What right do they have to say, We want to sell cigarettes so our desire to profit by the sale of these is paramount to your desire to have a job? he asked. Said Lane: I loved flying. It was my life. It was my identity. I dont know what else I would do if I didnt fly. It never occurred to me to quit. (Miami Daily Business Review, July 25, 2000) TOBACCO LITIGATION: Survey in CA Shows Smoking among Teens Has Declined ----------------------------------------------------------------------- Is California's decade-long crusade against tobacco paying off? A state survey released earlier this month finds that smoking among California teenagers, whose moth-to-flame smoking habits have long troubled public health officials, has declined by more than one-third. Data from the state Department of Health Services shows that 6.9% of California youths ages 12 to 17 smoked in 1999, down from 10.7% in 1998. That's very good news since many kids who take up smoking to be cool later realize they are hooked and can't shake a habit that can prove to be lifelong and deadly. This kind of success has a million fathers. California's multi-pronged effort to cut smoking can rightfully claim some credit. Voter approval of Proposition 99 added a 25-cent-per-pack tax on cigarettes, generating millions annually for anti-tobacco efforts, including hard-hitting television ads. A tough state law now bars smoking in most public settings, and political jawboning, as well as litigation against the cigarette makers, including this month's $ 145-billion verdict in a Florida class-action case, has further damaged cigarettes' image. Another tax hike last year, 50 cents a pack imposed by Proposition 10, may have put the cost of cigarettes beyond the reach of many teenagers. Smoking among California adults too is less, falling just slightly in the past year from 18.4% to 18% but down significantly since the 1980s. Nationally, a fourth of adults smoke. Alas, the news is not all good. The health department survey found that while smoking is down among teens, it's up slightly among young adults, 18 to 24. This is the generation that grew up with Joe Camel cartoons and is now the focus of tobacco industry marketing, factors that may explain the rise. Also, these smokers might be thumbing their noses at those who have hectored them on the dangers of tobacco. In any event, the state's latest more-good-news-than-bad survey should at least prompt Gov. Gray Davis to continue funding the thoughtful, targeted efforts begun a decade ago to keep kids from smoking in the first place and to help those who want to quit. (Los Angeles Times, July 26, 2000) TOTAL RENAL: Announces Settlement of Securities Lawsuit ------------------------------------------------------- DaVita (Total Renal Care Holdings, Inc.) (NYSE: TRL) announced on July 25 that it has signed a Stipulation of Settlement with the plaintiffs in the consolidated securities class actions that were filed against Total Renal Care Holdings and several of its former officers in February 1999. Under the terms of this agreement, a total settlement fund of $25 million has been established. The Company has contributed $10.8 million and our insurance carriers have contributed the balance of the settlement fund. In addition, DaVita has agreed to implement corporate governance principles and procedures to ensure the accountability of DaVita's Board and management to its shareholders. The settlement is subject to preliminary approval by the United States District Court, notice to the members of the class, which consists of purchasers of the Company's common stock between March 11, 1997 and July 18, 1999, and final approval of the settlement by the Court at a hearing. Final approval is anticipated to take place in the fourth quarter of 2000. DaVita's General Counsel, Steve Udicious, stated that "while the defendants continue to deny any wrongdoing or liability in the securities class actions, we believe that the settlement is in the best interests of the Company and its stakeholders and represents yet another step in our efforts to put past issues behind us and to solidify our financial position going forward." The company will record a pre-tax charge of $10.8 million in its second quarter results related to this settlement. DaVita (Total Renal Care Holdings, Inc), based in Torrance, California, is the nation's second-largest provider of dialysis services for patients suffering from chronic kidney failure. The Company owns and operates kidney dialysis centers and home peritoneal dialysis programs domestically in 32 states, as well as Washington, D.C. It also provides acute hemodialysis services to inpatients at approximately 320 hospitals. As of April 30, 2000, DaVita operated 484 outpatient dialysis facilities serving over 40,000 patients, including 4,300 patients in 52 centers under management. UNPLANNED EMISSIONS: Contribute to TX Pollution; Subject of Valero Suit ----------------------------------------------------------------------- Unplanned emissions that exceed state permits for factories and refineries are contributing to Texas' pollution woes, according to a new report. Such excessive emissions, or "upsets," are the subject of a state district court lawsuit in Corpus Christi against Valero Energy Corp. And environmentalists are calling such emergency discharges a huge loophole. "The public thinks you get a permit and you shall not emit pollution beyond a certain amount, that it's a hard-and-fast amount," Jim Marston, director of the Austin office of the advocacy group Environmental Defense, told the Texas Journal of The Wall Street Journal in Wednesday's editions. Marston said many plant operators use regular emergency discharges to exceed their permitted emissions. The unplanned emissions or "upsets" sent at least 240 million pounds of pollutants into the air from plants and refineries in 1998, the last year for which a rough estimate based on state data can be made, according to the Journal. That amounted to about four percent of the total harmful pollutants, as classified by the state, allowed by regular permits. But environmental groups and the Texas Natural Resource Conservation Commission say figures of "off-the-books" pollution could be badly understated. Vice President Al Gore contends that Texas ranks No. 1 in industrial pollution. Texas Gov. George W. Bush, presumptive GOP presidential nominee, has been campaigning on his environmental record. Upset pollutants, unlike emissions normally released, are in an untreated form that poses a greater health threat than day-to-day emissions that undergo extensive filtering. Pam Giblin, an Austin lawyer, said some upset emissions should be considered when the state issues pollution permits. Not all upsets are unforeseen since plant equipment is often designed to burn off emissions when a certain pressure or capacity is reached, said Ms. Giblin, who represents a group of 50 companies including chemical plants, refineries and utilities. Executives of Valero and other companies say they have a financial incentive to minimize unplanned emissions, since they're linked with costly shutdowns. The TNRCC rarely punishes companies for abusing upset rules, and the agency says it has never adjusted an emissions permit because of excess unplanned pollution. It has been criticized for its emergency-discharge policies. The TNRCC is up for legislative review in January under the state's Sunset Act, a forum for lawmakers to reform state agencies. Neighbors who live about a mile from the Valero refinery are suing the company in a Corpus Christi court for health-and-property damage claims stemming from emissions, including sulfur oxide and other contaminants released in raw form through upsets. Plaintiffs' lawyers have asked a state district judge to certify the lawsuit as a class action for property owners and residents of about 400 homes near the plant who contend they have suffered respiratory and other health problems as well as property damage. (The Associated Press State & Local Wire, July 26, 2000) WAR VICTIMS: Ethiopian Jews Seek Compensation from Italy -------------------------------------------------------- A group of Ethiopian Jews will demonstrate outside the Italian Embassy in Tel Aviv in hopes of convincing Italian officials to admit to and compensate them for brutalities committed against their ancestors during the 1936-1941 Italian occupation of Ethiopia. Over 60 years later, descendants of the 34 Jewish men killed by Italian fascists on February 20, 1937 in the village of Gunda Merava are asking for $ 100 million in compensation from the Italian government. According to Michael Corinaldi, legal representative of the Ethiopian group, it has taken too long for Italian officials to recognize and respond to the concerns and demands of the group. "Our demonstration shows that this group is deserving of receiving a sincere answer from the embassy," Corinaldi said. "Until now, they have not related to this situation in a serious manner." The group collectively decided that a demonstration was the best way to attract the attention they want from Italian officials. Elimelech Teruneh, spokesman of the group, was two when his father and his brothers were murdered in Ethiopia. He has lived in Israel for over 27 years and says that he desperately wants a "direct answer" from the embassy. The group's first contact with Italian officials was not until 1988, as they originally thought too much time had passed for them to pursue the issue. In 1998, they presented officials with a detailed list of those murdered and their descendants, all of whom are now living here. From September 1998 until now, however, Italy has failed to respond conclusively. "Their answers are not good enough," said Corinaldi. If the demonstration fails to procure any positive development for the group, Corinaldi said the group will file a class action suit against Italy in either Israel or America. The Israeli government has not gotten involved in this issue, and the embassy would not comment on the demonstration. (The Jerusalem Post, July 26, 2000) WHITE HOUSE: Court Orders ARMS Search in Employees’ Suit over Privacy --------------------------------------------------------------------- U.S. District Judge Royce C. Lamberth in early June ordered the White House to conduct a keyword search for 33 individuals and 20 search terms for e-mail messages stored on the Automated Records Management System. The messages could become evidence in a lawsuit. The court ordered the White House to deliver the records within 20 days. The Executive Office of the President can limit the scope of the search to the White House Office portion of ARMS, which has 19 segments, the court order states. The White House has used ARMS, a keyword-searchable archive, since 1994, officials said. The U.S. District Court for the District of Columbia issued the preliminary search of e-mails in a ruling for Cara Alexander, et al. vs. FBI and John Michael Grimley, et al. vs. FBI--also known as Filegate. Judicial Watch, a conservative public interest law firm, is representing the plaintiffs in a class-action lawsuit filed by White House employees of the Bush and Reagan administrations who allege that their FBI files were wrongly accessed by the Clinton administration. The White House and FBI are being sued under the federal Privacy Act, and individual defendants Bernard Nussbaum, a former White House counsel, and former aids Craig Livingstone and Anthony Marceca are being sued for common-law tort of invasion of privacy, according to Judicial Watch. The court also ordered a search for messages about former White House employee Linda Tripp and former White House aide Kathleen Willey. EOP is not required to search accounts established for the receipt of citizen e-mail for the president and first lady via the Internet. The ruling only refers to searches for e-mail archived on ARMS. The court noted, "E-mails available on backup tapes and what search should be performed regarding the hard drives will be addressed later." Lost letters Two computer code errors caused ARMS' failure to archive some incoming e-mail messages. ARMS conducted a periodic scan of White House servers to create backup tapes meant for use in catastrophic system failure not for archival purposes, officials said [GCN, April 3, Page 1]. The White House awarded contracts to ECS Technology of Baltimore and SRA International Inc. of Arlington, Va., to reconstruct the e-mails from about 5,000 backup tapes, officials said. The contractors began work April 1; the process is to be completed in six to nine months, said Renato DiPentima, president of SRA's government-sector group. "We are on the job as a subcontractor to do work related to inventory of the tapes, converting tapes to magnetic media and developing software so a query can be done in a database," DiPentima said. Inventory of the backup tapes is almost complete, he said. The next step will be to create two duplicates of the original backup tapes--a working copy and a control copy, DiPentima said. The original computer tapes will be stored in the custody of Charles Easley, EOP security officer, according to court documents. Following the duplication process, which will take 180 days, the backup tapes will be converted to magnetic media to enable a search of the e-mails, DiPentima said. "We will take the records from the tape to disks and set up keys to search the information later. We will build a standalone database," he said. IAC-ACC-NO: 63296414 (Government Computer News, June 12, 2000) * SEC Rules Aim to Keep Brokerages on the Level ----------------------------------------------- Regulators are taking aim at sloppy or greedy stock brokerages that don't always try to get the best prices for investors who want to buy or sell stock. The Securities and Exchange Commission proposed a two-part rule Tuesday that would require: Brokers to reveal which market makers they use to execute trades and whether those market makers pay the brokerages for placing the orders. Market makers to post monthly reports on their Web sites that detail the quality of their trade execution -- that is, whether they are buying at the lowest available price and selling at the highest. Regulators are concerned that some brokers may be giving orders to market makers that pay them for orders, instead of routing the trades to the market centers that execute trades at the best price. The SEC says that 85% of the time investors don't get the best price on stocks traded on the Nasdaq stock market. That means, for example, if the investor misses a trade by the smallest increment of 6.25 cents, it costs the investor $ 62.50 on a 1,000-share order, which dwarfs the commissions most Internet brokers charge. The announcement of the proposed rules follows a $ 20 million settlement announced between discount brokerage Charles Schwab and a group of investors. Charles Schwab, the largest online brokerage, agreed to spend the money to educate investors and improve the way it processes buy and sell orders. In exchange, the investors agreed to drop the class-action lawsuit that accused the brokerage of not always routing buy and sell orders to market makers with the best prices and failing to disclose payments it received for the order flow. In a separate action, the SEC approved a plan to link the options markets of the American Stock Exchange, the Chicago Board Options Exchange and the International Securities Exchange. An option is the right to buy or sell a certain number of shares of a stock at a preset price. (USA TODAY, July 26, 2000) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. 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