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/raid1/www/Hosts/bankrupt/CAR_Public/000814.MBX C L A S S A C T I O N R E P O R T E R Monday, August 14, 2000, Vol. 2, No. 157 Headlines ABC NEWS: Organic Food Industry Groups Demand Firing Stossel BRIDGESTONE/FIRESTONE: Sets Aside $350M for Tire Recall; May Need More BRIDGESTONE-FIRESTONE, INC: Milberg Weiss Files Tire Purchasers' Suit CA PRIVATE: Tollway Co in Monopoly Suit Wants It Moved Out Of Riverside CHRISTIE'S: Ct Declares Drinks Veteran Anthony Tennant in Default ENGINEERING ANIMATION: Contests Securities Suit Filed Feb. 1999 in Iowa ENGINEERING ANIMATION: Securities Suit Filed Oct. 1999 Consolidated FIRESTONE: Fights to Preserve Image With Recall with 3-Part Strategy FIRST AMERICAN: FL Insurer Sued in PA Will Not Get Dismissal for Venue K-TEL: Stockholders' Suit Dismissed; Shares May Not Be Traded on NASDAQ LABOR READY: Trades Unions File SEC Complaint over 'Mature Offices' LOTTE HOTEL: Women Sue Seoul Hotel in First Class-Action Harassment Suit NANOPHASE TECHNOLOGIES: Reaches Agreement to Settle Securities Suits NATIONAL MAINTENANCE: Short Cressman Files Suit for Janitorial Workers NORTHBRIDGE EARTHQUAKE: Victims File Suit against Insurers PASMINCO LTD: To Return to Victorian Court in November in Smelter Case SIGMA DESIGNS: Announces Dismissal of Securities Lawsuit in California SMARTFORCE PUBLIC: Outcome of 1998 Securities Suits in CA Uncertain SMARTFORCE PUBLIC: Settles 1998 Derivative Suit in CA TELEGLOBE, INC: Schiffrin & Barroway Files Securities Lawsuit in NY UNITED AIRLINES: Consumers Sue over Flights Cancelled upon Labor Strife WALT DISNEY: Lawsuit Accuses of Violating Disabilities Act WISCONSIN, AMERITECH: Lawsuit Alleges of Illegal Tax Collection ********* ABC NEWS: Organic Food Industry Groups Demand Firing Stossel ------------------------------------------------------------ They claim Stossel's report on "20/20" about organic vegetables was unsubstantiated by tests when he said organics are more likely to contain deadly strains of E. coli bacteria than food raised with more traditional methods. Stossel was reprimanded by ABC for the report and his producer, David Fitzpatrick, was suspended without pay for a month. But the groups say it is not enough. If ABC does not fire Stossel, "than I will continue to make noise until he gets fired," vowed Kenneth Cook, president of the Environmental Working Group. "We also want a second retraction to air," during an all-important sweeps month when viewer levels are at their highest, Cook said. Stossel's report, which aired in February and was repeated last month, has caused nationwide sales of organic food to flop, the trade organizations contend. The industry groups told reporters they are considering a class-action lawsuit against the network. The food organizations say that Stossel's segment used flawed testing to report that dangerous levels of E. coli bacteria are more likely to be found on organic produce because they are grown in manure. The brouhaha was initially sparked when Stossel reported that tests had shown there was no pesticide residue on either the organic or inorganic produce. But the trade groups are now slamming the whole report. ABC has already said that the pesticide statement was wrong - but it has not yet said whether it will correct its claim about the greater likelihood of finding dangerous E. coli in organically grown food. Cook said that the newsmagazine used preliminary, "high-school" quality tests the kind that routinely reveal the presence of thousands of non-lethal strains of E. coli. Only a second, more expensive and thorough test could have revealed if deadly strains of E. coli were present in ABC's sample, OTA executive director Katherine Dimatteo said. "We have completed our review," ABC News said. "No further comment will be made." (The New York Post, August 11, 2000) BRIDGESTONE/FIRESTONE: Sets Aside $350M for Tire Recall; May Need More ---------------------------------------------------------------------- Stephanie Hack was heading west on I-90 after shopping at Woodfield mall when she felt the rear passenger tire of her 1997 Mercury Mountaineer blow out and the steering wheel go "haywire." The car flipped, and the 51-year-old grandmother was thrown 30 feet through the window on the driver's side. For the past four months, the Stockton, Ill., woman has been under the care of doctors and her family. She has had an operation on her shoulder and overcome a concussion and a broken pelvis, sacrum and vertebrae. In constant pain, she has difficulty walking and sitting for long periods and still suffers from numbness in her hands. And she has hired a lawyer. Injured drivers like Stephanie Hack--and others who may be injured or killed in the future--subject Bridgestone/Firestone Inc. to enormous financial liability, analysts and lawyers say. Firestone's parent company, Tokyo-based Bridgestone Corp., said it would set aside $350 million as an extraordinary loss to cover the cost of a massive recall aimed at replacing potentially faulty radial tires. But that money, Bridgestone executives said, covers only the cost of the recall and won't pay for any settlements or damages in lawsuits filed against the company. Firestone has scheduled the recall in phases, with consumers in warm-weather states receiving new tires first. Illinois residents, the company said, might have to wait until next summer for tires under the recall program. But Bridgestone/Firestone said it would replace customers' tires, as stocks permit, regardless of where they live so long as the customer goes into one of the company stores and requests an inspection or new tires. If necessary, the company will use competitors' brands, said spokeswoman Cynthia McCafferty. She added that Firestone is doubling production of its own tires to make more available to replace those the company recalled. "Anytime you're recalling 6.5 million tires, it's going to take time," McCafferty said. "It's a lot of people and a lot of cars, but we want to make sure our customers are satisfied." As for the company's legal liability, it is increased by two factors, lawyers suing Firestone contend. One concerns the phasing system under which Firestone intends to deliver the tires in the recall program. The other rests on the lawyers' assertions that the company has long known of the danger posed by the tires. Hack's attorney, Charles "Pat" Boyle, called the potential for Bridgestone/Firestone's liability "limitless," condemning the company for not immediately replacing all recalled tires. "They have taken the half step as it pertains to all of their vehicles in the northern part of the country," Boyle said. McCafferty, the Firestone spokeswoman, declined to comment on questions of the company's legal liability. A spokeswoman for the National Highway and Traffic Safety Administration, which is investigating 46 fatalities and 80 injuries in crashes involving the recalled brands of tires, said it's understandable that it will take Firestone a while to make tires available in all areas. "We're talking about a great number of tires," the spokeswoman, Liz Neblett, said. "I think it would be really difficult for Firestone to have that many tires on their shelf. According to the regulations, they have a certain amount of time to phase things." Meanwhile, another Bridgestone/Firestone spokesman defended the safety of the recalled tires so long as they are properly maintained. "The evidence is pretty clear that when properly maintained and inflated, the tires are among the safest on the road," said Bridgestone/Firestone spokesman Ken Fields. "We made a decision voluntarily and on a precautionary basis to recall these tires." An industry trade group, the International Tire and Rubber Association, echoes Fields' argument. "I know in my mind, having examined thousands of tires over the years, that all the blame can't be on the tires," said Marvin Bozarth, the group's executive director. "It may not be the case in all of these, but in some of them, I'm positive we're going to find problems with the tire that have nothing to do with the quality of the tire. It has to do with poor maintenance and abuse." Jay Halpern, a Coral Gables, Fla., lawyer representing clients in five accidents involving recalled Firestone tires, predicts that more accidents will occur in cars with the recalled tires. "Based on past statistics, I foresee that there will be other events involving this tire," Halpern said. Of 13 people involved in the accident cases Halpern is handling, he says, two were killed. Halpern, who has been suing tiremakers for more than a decade, said tire companies mount defenses that rely on the zealous backing of the product and attempt to place blame on the drivers. But the recall, he contends, "is going to make it difficult for Bridgestone/Firestone to take that approach in these cases." Sean Kane, who runs Strategic Safety, an Arlington, Va.-based consumer and research firm that investigates motor vehicle and product safety, agrees that Firestone faces considerable legal liability. Kane asserted that Ford Motor Co., which used the recalled tires in Explorers and other vehicles, and Bridgestone/Firestone became aware of the tires' "tread separation" problems in the United States in the early 1990s, when they were defendants in litigation concerning the recalled tires. Kane said his group uncovered a previous recall by Ford of the same tires in other countries and contends that the previous effort shows that both Ford and Firestone knew the product was dangerous. As for questions about Ford's potential liability, Halpern said trial attorneys will be scrutinizing what the two companies knew and when they knew it, looking at the recall of the tires in other countries as a measure. Depending on their strategies and specific cases, attorneys will choose which companies to sue, he added. Fields, the Firestone spokesman, denied charges that Bridgestone/Firestone waited too long to recall its product, saying the government's fact-finding process in the United States hasn't even been completed. It's too early to know, said attorney Halpern, whether Firestone will be subject to claims for punitive damages in lawsuits filed against it. "There is a level of proof that you have to achieve, and perhaps investigation into what Firestone knew about these tires will result in some claims for punitive damages, but that's something that has to be explored in cases, not something to make a claim for on Day 1," he said. Carlton Carl, spokesman for the Association of Trial Lawyers of America, also is hesitant to say whether Bridgestone/Firestone has left itself open to punitive damage claims. He said the question will be decided by judges and juries, adding that such claims are awarded rarely and only in cases of "egregious misconduct." Many in the legal community said it was too early to tell if a "super case," such as the one brought against the tobacco industry, will form for families of those killed or injured. Such a case is possible, Halpern said, but there are rigorous criteria to establish a class-action lawsuit. "It is not always enough to say each case involves a Firestone tire," he said. ATLA has a longstanding litigation group of attorneys that consults on common issues and situations in cases involving tires, and a group has formed around consumer complaints with the Bridgestone/Firestone tires. (Chicago Tribune, August 11, 2000) BRIDGESTONE-FIRESTONE, INC: Milberg Weiss Files Tire Purchasers' Suit --------------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on August 10, 2000, on behalf of all persons who incurred any costs or expenses in connection with their replacement of Firestone's (NASDAQ:BRDCF-news) (LI:BRD-news) (GR:BGT-news) (JP:5018-news) ATX, ATX II or Wilderness AT tires (the "Defective Tires"). 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/firestone/ The action, numbered 00-2514-II, is pending in the Chancery Court for Davidson County, Tennessee at Nashville. The complaint charges Firestone with breach of implied warranty of merchantability and related claims in connection with defective products manufactured and sold by Firestone and issued as standard equipment in new vehicles, including the Ford (NYSE:F-news) Explorer, the nation's top-selling sport utility vehicle. The complaint alleges that the defect -- as a consequence of which the treads of the automobile tires peel off their casing -- is prevalent in Firestone's ATX, ATX II and Wilderness AT brand tires. This tread separation, which the complaint alleges has long been denied by Firestone, makes the Defective Tires prone to bursting at high speeds, thereby causing serious and fatal accidents. Only after several large retailers, such as Sears Roebuck and Co., Montgomery Ward and Discount Tires, among others, refused to sell the Defective Tires, and following the National Highway Traffic Safety Administration's ("NHTSA") receipt of approximately 270 complaints about the Defective Tires and reports of approximately 46 deaths and 80 injuries, did Firestone finally announce, on August 9, 2000, that it would recall the Defective Tires. According to Firestone's August 9, 2000, recall announcement, however, the recall is partitioned into three phases and will take at least one year to complete: The first phase involves California, Arizona, Florida and Texas; the second phase extends the recall to Alabama, Georgia, Louisiana, Mississippi, Nevada, Oklahoma and Tennessee; and, the final phase involves tires in remaining states. The action seeks to recompense those individuals who purchased tires to replace the Defective Tires. Such purchases were made either prior to the recall during which point Firestone was denying that any defects existed with respect to these tires and offered no replacement -- or following the recall -- during which point consumers purchased replacement tires to ensure their safety and to avoid the substantial risks and delays that consumers were subjected to as a result of Firestone's failure to provide replacement tires in a timely manner. Contact: Milberg Weiss Bershad Hynes & Lerach LLP Keith M. Fleischman or Salvatore J. Graziano 800/320-5081 FirestoneCase@milbergNY.com http://www.milberg.com CA PRIVATE: Tollway Co in Monopoly Suit Wants It Moved Out Of Riverside -----------------------------------------------------------------------The operator of the 91 toll lanes has asked a judge to transfer to another venue a lawsuit alleging that the company engaged in unfair business practices. The company, California Private Transportation Co., said it could not receive a fair trial in Riverside County. The motion is in response to a lawsuit earlier this year by Richard D. Ackerman, a lawyer who commutes to Orange County from Corona. Ackerman has asked that his case, which seeks $ 100 million in damages, be certified as a class-action lawsuit to include residents of Corona who regularly use the Riverside Freeway. Ackerman's lawsuit contends that the state granted the company an illegal monopoly over private transportation in the Orange County-Riverside County corridor. California Private Transportation said it would be difficult to receive a fair trial in a county "when all of its citizens are either parties to or have some financial stake in the litigation." The company also contends that it has been "undeservedly vilified in the local press and by local officials." The motion includes copies of articles from the Los Angeles Times and the Riverside Press-Enterprise. At the company's request, a Superior Court judge in Riverside County has transferred to San Bernardino County a separate lawsuit brought by the Riverside County Transportation Commission. "We feel confident that the judge will once again agree the case is best heard outside of Riverside County," Greg Hulsizer, general manager of California Private Transportation, said. "That being said, we continue to think the lawsuit is completely without merit." Ackerman countered, "Every litigant is entitled to an impartial and fair proceeding. It doesn't matter what jurisdiction we're in, we'll be able to beat these guys." (Los Angeles Times, August 11, 2000) CHRISTIE'S: Ct Declares Drinks Veteran Anthony Tennant in Default ----------------------------------------------------------------- Sir Anthony Tennant, the man hired to be the respectable face of Guinness after the drinks group's share-support scandal, has found himself back in the headlines for the wrong reasons. A US federal court has declared Sir Anthony, a lofty patrician figure, who enjoys one of the best reputations in the City, to be in default for failing to respond to a legal complaint within an allotted time period. The ruling relates to his time as chairman of Christie's, the auction house - which, with its rival Sotheby's, is subject to a class action lawsuit alleging price fixing. When Sir Anthony failed to respond to a personal complaint filed on July 5 as part of the wider action, plaintiffs' lawyers asked the court to declare default status. Under the original class action lawsuit, Sir Anthony was named as one of six defendants and it was claimed he played a prominent role in the scandal, communicating with Alfred Tuubman, the chairman of Sotheby's, as part of a collusion to set common commissions on goods bought and sold at the auction houses. This latest ruling is a technicality that allows the plaintiffs' lawyers to ask the court to issue a judgment, and possibly declare damages against Sir Anthony without his defence. The lawyers are mulling whether or not they should push for a default judgment. Sir Anthony has refused to comment on the matter. Morgan Stanley Dean Witter, the US investment bank for which he works as a senior adviser, and outside whose offices he was reportedly served with the initial complaint, also refused to comment. The moves are an unwelcome development for a man whose CV reads like a City dream. Years as a leading figure in the drinks industry have been complemented by boardroom stints with groups such as Forte, the hotels group, and Arjo Wiggins Appleton, the papermaker, and he also served as a director of the London Stock Exchange. A member of a wealthy Scottish business clan, Sir Anthony's family were originally Ayrshire farmers who made a fortune when the first Lord Glennconner invented bleaching powder. He includes among his cousins Sir Iain Tennant, the former chairman of Grampian Television, and the current Lord Glennconner, the man who bought the island of Mustique and developed it as an exclusive holiday retreat. Sir Anthony began his career in advertising and marketing, where he sold the line "Schh . . .you know who" to Schweppes, the soft drinks company, and "Good food costs less at Sainsbury's" to the eponymous supermarket group. But his claim to corporate fame really started at Grand Metropolitan where he had transformed the IDV spirits subsidiary into a leading international liquor company. He launched a series of new products, including Bailey's Irish Cream and Malibu - which have both grown into global brands - and Le Piat d'Or, the wine. When he lost out in the race to become chief executive of Grand Met - the job that went to Allen (now Lord) Sheppard - Sir Anthony was seen as the perfect figure to rebuild Guinness's battered reputation. Outwardly bland and reserved, with a low-key, under-stated manner, he was the antidote to Ernest Saunders, his more flamboyant predecessor, who ended up in jail for his part in the Guinness/Distillers affair. He got to grips with developing the business, while others shielded him from the effects of the legal fall-out - and turned a demoralised and scandal-torn company into one of the world's most profitable drinks businesses. When he retired, Sir Anthony took up the job with Morgan Stanley and his only other current directorship, joining the board of French bank BNP Paribas. He also had a brush with bad publicity when he became one of a group of leading British businessmen criticised for the irresistible rise of executive pay. In 1993 he joined Christie's, at a time when the slump in the world art market was forcing deep-rooted changes at the staid auction houses. The view in New York was that Sir Anthony was brought in more for his business and social contacts than for his art expertise. For now the headlines are likely to continue. The case is not likely to be settled in the near term as the US government continues its separate criminal anti-trust investigation that has dragged on since 1997. (Financial Times (London), August 11, 2000) ENGINEERING ANIMATION: Contests Securities Suit Filed Feb. 1999 in Iowa ----------------------------------------------------------------------- In February 1999, actions were filed against Engineering Animation Inc. and certain of the Company�s current and former executive officers in the United States District Court for the Southern District of Iowa. These actions allege of violation of Sections 10(b) and 20(a) of, and Rule 10b-5 under, the Securities Exchange Act of 1934. The complaint alleges that the defendants made false or misleading statements of material fact about the company�s accounting for in-process research and development in connection with the Rosetta Technologies, Inc. and Sense8 Corporation acquisitions and its 1999 business prospects. The claims are now consolidated into one class action purporting to include individuals who purchased the common stock of Engineering Animation Inc. between February 19, 1998 and April 6, 1999. The court has appointed lead plaintiffs and co-lead counsel in the action. The court has granted in part and dismissed in part Engineering Animation�s motion to dismiss the plaintiffs' amended complaint. The Company tells investors it intends to oppose the action vigorously. ENGINEERING ANIMATION: Securities Suit Filed Oct. 1999 Consolidated ------------------------------------------------------------------- In October 1999, actions were filed against Engineering Animation Inc. and certain of the company�s current and former executive officers in the United States District Court for the Southern District of Iowa. These actions allege of violations of Sections 10(b) and 20(a) of, and Rule 10b-5 under, the Securities Exchange Act of 1934. The complaint alleges that the company made false or misleading statements of material fact about its financial results for the second quarter of 1999. These claims are now consolidated into one class action purporting to include individuals who purchased the company�s common stock between July 29, 1999, and October 1, 1999. The court has appointed lead plaintiffs and lead counsel in the action. Engineering Animation intends to oppose the action vigorously. FIRESTONE: Fights to Preserve Image With Recall with 3-Part Strategy -------------------------------------------------------------------- Faced with the prospect of consumers associating its tires with blowouts and death, Bridgestone/Firestone Inc. is attempting to pull off a three-part strategy with its massive tire recall: Calm consumers, maintain civil ties with its biggest partner, Ford Motor Co., and limit damage from lawsuits. The product liability side of the equation will sort itself out in the years ahead, litigation specialists say, with responsibility for the faulty tires perhaps ultimately shared, in some proportion, by Firestone and Ford. But it may be too late for Firestone's image in the marketplace, where consumers have long memories and the landscape is littered with brands that have been tainted by recalls or mishaps. "When someone says, 'Oh, you have new tires, what brand are they, are they Firestone?,' my bet is [they'll be] quite a few people who say they don't want that brand," said Stephen A. Greyser, professor of marketing and communications at Harvard Business School. "One certainly could make an argument that says Firestone was slow to respond, and did not take ownership, did not put the consumer front and center," said Greyser, an expert in crisis management. "They may have underestimated the importance of consumer confidence in terms of the reputation of the company." Firestone, owned by the Japanese parent company Bridgestone, issued the recall last Wednesday August 9 of 6.5 million radial ATX, radial ATX II, and Wilderness AT tires for 15-inch rims, most of them on Ford sport utility vehicles and pickup trucks. The action followed 50 lawsuits, 46 deaths, 80 injuries, and a federal investigation of treads peeling off tires on traveling vehicles, prompting rollovers and crashes. Officials from both Firestone and Ford say they acted as quickly as possible, but trial lawyers and consumer and safety advocates say the problem should have been addressed sooner, particularly after recalls of tires with similar problems in seven countries. "It's easy for a critic to parachute in and say they should be reacting to any death anywhere in the world. I'm not suggesting a knee-jerk reaction, but by the time the deaths get up to 46, somewhere between one and 46, that's the point where the company one would think would take steps," said Greyser. The recall will neither establish responsibility for Firestone nor extinguish future lawsuits, said Edwin Woodsome, partner at the Los Angeles law firm of Howrey, Simon, Arnold and White, who specializes in complex business litigation including product liability. "Certainly one of the byproducts of a recall is the hope you do head off future problems. But we've only seen the tip of the iceberg,," said Woodsome. Two national class-action suits have already been filed. The American Trial Lawyers Association of America has put together a working group so plaintiff attorneys can share information and possibly join forces. Several attorneys have complained that in the cases settled thus far, Firestone has insisted on a gag order so victims can not talk about their cases. "The recall helps them by making them look like they're trying to do the right thing, though it's part and parcel of damage control," said David Heinlein, attorney with the Boston firm of Heinlein & Beeler. After the first step of the recall, legal analysts say, there may be an apportionment of blame involving both Firestone and Ford. Ford's recommendation that tires be inflated to a lesser degree than Firestone could play into the analysis, for example. When tires are underinflated, there is more rubber on the road and heat builds up. "If you underinflate a tire, if there's a heavy load, and if you drive faster than the speed rating, the tire gets hot and can disintegrate," said Russ Evans, a representative of the International Tire Association, an informal trade group based in Farmington, Conn. Heat is used to attach the tread and can make the tread peel off, he said. In addition, Evans said Ford almost certainly helped design the recalled tires for specific use on its vehicles. "The tire is part of the suspension system, it affects traction and mileage," he said. "All the manufacturers have gotten into the tire design business." There have reportedly been behind-the-scenes tensions between Firestone and Ford on the inflation recommendations, but Ford is one of Firestone's biggest customers and Firestone wants to maintain future business. However, Firestone may not need to point fingers at Ford, because plaintiffs' lawyers will almost certainly seek to scutinize the full scope of liability, said Heinlein. "They'll do that work for them," he said. Even if Firestone can manage to stay on an even keel through the coming thicket of litigation, the company faces its greatest challenge in the rehabilitation of its brand name, marketing experts say. The recent recall is the second largest for tires in the United States; the largest, of 14.5 million tires, was in 1978 and was also by Firestone. That recall was government-ordered, and although regulators did not force this recall, Firestone officials are facing an investigation by the National Highway Traffic Safety Administration. At the same time, Firestone will have to assure consumers that only a small number of its products are at issue in the recall. "There are some things they can do in the future. They may come up with a process improvement or an improved tire, with third-party independent testers, or their own tests monitored by a third-party, to re-evoke consumer confidence," said Gesyer. 'I'm not suggesting the brand is dead, but they have to do some revitalization there." (The Boston Globe, August 11, 2000) FIRST AMERICAN: FL Insurer Sued in PA Will Not Get Dismissal for Venue ---------------------------------------------------------------------- A Florida title insurer sued in Philadelphia Common Pleas Court will not get the case against it dismissed on venue grounds, Judge Albert W. Sheppard ruled in Terra Equities v. First American Title Insurance Co.. "First American has cited a number of burdens that it urges make litigating in Pennsylvania vexatious and oppressive ... this court cannot conclude that [they] would serve as a bar to the plaintiffs' action," Sheppard wrote in the opinion written Aug. 2. First American agreed to insure Commerce Limited Partnership, a Pennsylvania entity, against title defects in a Florida property it leased in 1993. Terra Equities Inc., the lead plaintiff in the case, is part of the Commerce Partnership. In 1996, the lessor of the Florida property granted a stormwater-drainage easement to a third party without notice to Commerce. The following year, Commerce gave notice to the lessor of its intent to purchase the property. Closing was to take place one month later, in July 1997, but never took place because of the title encumbrance from the easement on the property.In 1998, Commerce sued the lessor and the holder of the easement in Florida's Circuit Court for the 9th Judicial District in Orange County. Commerce sought to quiet title, obtain damages and specific performance. Commerce notified First American of the suit in March 1998 and asked the insurer to pay the costs and fees associated with the litigation, pursuant to their earlier agreement. First American refused. Correspondence flowed between the two parties for the next 18 months, with no resolution. In March 2000, Terra Equities brought a separate suit against First American in the Philadelphia Court of Common Pleas, alleging bad faith and breach of contract. First American filed a petition to dismiss on June 15, citing forum non conveniens. Alternative Forum "Granting a petition to dismiss for forum non conveniens requires first, that there be an alternative forum open to the plaintiff," Sheppard wrote. Once that is established, he said, the burden falls to the defendant to prove the plaintiff's choice of forum is "vexatious" or "oppressive." If First American's petition were granted here, it could leave Terra without an alternative forum, the judge said, since the insurer's agreement to submit to Florida jurisdiction was, in his opinion, "illusory." "While Florida law permits a person to bring a civil claim against an insurer based on a failure to settle claims in good faith, a claimant is required to give the Florida Department of Insurance and the insurer 60 days' notice of the violation," said the judge. "This renders First American's offer to waive defenses [related to timeliness of the action] meaningless, since the 60-day waiting period would prevent the plaintiffs from reinstating the action within 45 days of dismissal." Still, Sheppard determined that under Florida statutory law and rules of civil procedure, the sunshine state could indeed constitute an alternative forum, even without a concession from First American to extend the waiting period. Forum Non Conveniens Test To sustain a motion to dismiss under forum non conveniens, a plaintiff must demonstrate "more than that that the chosen forum is merely inconvenient to him," said Sheppard, and that being forced to litigate in the plaintiff's forum is "vexatious and oppressive." The judge began his analysis by pointing out that "a plaintiff's choice of forum is given great weight and a defendant has the burden in asserting a challenge to the plaintiff's choice of venue. This burden is increased when a plaintiff has chosen to litigate in his or her home forum." Because Pennsylvania is Terra's home state, the court should give Terra's choice appropriate deference, he said.Beyond that, Sheppard said the "vexatious or oppressive" test must "provide a court with the names of witnesses who are to be called, a general statement of what their testimony will cover and what hardships the witnesses would suffer. First American did not do this, but rather merely supplied an affidavit stating that "most, if not all of the witnesses and evidence ... are located and reside in Florida"; that most, if not all First American witness-employees reside in Florida; and that transporting them all to Pennsylvania for trial "would be a considerable expense." Sheppard said these reasons just weren't good enough." First American has cited a number of burdens that it urges make litigating in Pennsylvania vexatious and oppressive ... which are not, in fact, burdens, but rather considerations that [are now irrelevant due to] the now-defunct 'public and private interests test,'" he wrote. Specifically, First American cited the location of the alleged offenses, the place of issuance and delivery of the insurance policy, and Florida's general interest in regulating insurance policies. "Because these factors have no bearing on whether Pennsylvania constitutes a vexatious and oppressive forum, they cannot be controlling," said Sheppard. The location of the property was irrelevant, he said, "because this is an action for breach of insurance contract and not a real estate dispute." Sheppard said the conflict-of-laws issue could not be cured by a transfer of the case to Florida, because the plaintiffs asserted the contract breach took place "at least in part" in Pennsylvania, and that all correspondence in the matter was addressed to Commerce's counsel in Philadelphia. Conflict-of-laws issues would inevitably come up in either state, the judge said. 'Actual Loss' In addition to its petition, First American also filed a demurrer, which failed the required burdens of proof "under either Florida or Pennsylvania law," Sheppard said."The defendant's primary argument is that the policy is an indemnification policy for which 'the plaintiff is bound to show actual loss sustained before there can be a recovery.' First American has asserted that, because Commerce cannot show actual loss, the plaintiffs are not entitled to recover under the policy."But in contrast to the narrow interpretation suggested by First American, Sheppard said, the term "actual loss" has been liberally construed by both the Florida and Pennsylvania courts. Sheppard cited several cases that stood for the proposition that "actual loss" occurs when there is liability because the covenant of the insurer has not been fulfilled. The only thing left then is to determine the dollar amount of that liability, Sheppard said."Applying the above guidelines it is difficult to conclude that Commerce has suffered no damage ... the preliminary objection on this ground should be overruled." No Suit to Defend First American also claimed that the policy did not require it to cover the cost of the lawsuit. Sheppard said the defendant's position in this regard was unpersuasive."Under Florida law, a company insuring title has 'a duty under its contract to cure the defects [in title] and its failure to do so entitles the [insured party] to damages.'"Although there is no Pennsylvania law on this precise issue, treatises recognize that a title insurer's duty to quiet title will arise when there [is] ... some indicia that the encumbrance with which the policyholder is concerned is a genuine cloud on his title,'" Sheppard said. And then he cited one of First American's own cases from 1981, suggesting First American had apparently not learned its lesson. "In ... Summonte v. First Am. Title Ins. Co., ... First American issued a title insurance policy with language almost identical to that used [here].In analyzing the language of that policy, the New Jersey [Superior] court concluded that 'after the company had received notice of the title defect ... and no litigation had commenced requiring a defense the insurer was obliged to remove the defect,'" Sheppard quoted. "In sum, this court cannot conclude that Pennsylvania law would serve as a bar to the plaintiffs' action," he said. (The Legal Intelligencer, August 11, 2000) K-TEL: Stockholders' Suit Dismissed; Shares May Not Be Traded on NASDAQ ----------------------------------------------------------------------- K-Tel's albums may not be sold in stores - and now its shares may not be traded on the Nasdaq. The music seller, whose shares have fallen 81 percent this year, was told by the Nasdaq National Market that the company's stock will be delisted at August 14's opening. Nasdaq requires that a company's total assets or minimum market capitalization add up to at least $50 million in order to be continually listed. K-Tel has a market value of $18.7 million - based on August 10's closing price of $1.06. The stock traded as low as $1 - a 52-week low. The news on August 10 was only the latest of a string of problems for the maker of such cult-favorite compilations as "Hooked on Disco," "Kooky Kountry" and "Dumb Ditties" that are sold through television ads and wholesalers. There was briefly some good news in in 1998, when K-Tel launched an online music store offering 250,000 titles. The Web venture caused K-Tel stock to skyrocket from $4 to $40 - a 900 percent jump. But the happy tune didn't play for long, as the company's stock crashed as Nasdaq continualy warned that K-Tel might be delisted. In May, the Minneapolis-based recorded-music seller submitted a plan to comply with Nasdaq's requirements - but the stock exchange rejected it. The company has applied to list its shares on the Nasdaq SmallCap market. As a result of the company's poor performance on Wall Street, K-Tel was hit with a rash of stockholder lawsuits, which were aggregated into one big class-action suit. That case, however, was just dismissed by the court, leaving K-Tel execs free to concentrate on executing a turnaround plan. Founder and Chairman Philip Kives has already begun making drastic changes, shutting down its money-losing German unit in July and cutting 35 jobs in its U.S. business in June. The company reported a third-quarter loss of $5.6 million - up from $4.7 million last year. (The New York Post, August 11, 2000) LABOR READY: Trades Unions File SEC Complaint over 'Mature Offices' ------------------------------------------------------------------- Attorneys for the Building and Construction Trades Department (BCTD) AFL-CIO, have filed a complaint with the Securities and Exchange Commission (SEC) charging one of the nation's biggest temporary employment agencies with making "seriously misleading statements" to the SEC and to investors in the publicly-held company. The complaint alleges that Labor Ready, Inc. (NYSE: LRW) -- which operates 839 offices in 49 states, Puerto Rico, Canada and the United Kingdom -- has continually reported that its "more mature" offices are showing increased revenues, when exactly the opposite may be true. "The company has repeatedly claimed in its 10Qs and 10Ks (SEC reports) that it had continued increases in revenues from mature dispatch offices," the complaint says. "However, admissions to the contrary were made by the company's Chief Financial Officer Joe Sambataro in an investors Internet conference call on 6/22/00 and 7/19/00." The complaint cites transcripts of Sambataro saying that sales at offices three years and older have "declined year over year by five percent" while sales at offices open two years or less have grown at 10 percent, and two years and older at only 1.4 percent. "It (Labor Ready) has continuously announced in 10K filings and elsewhere that a key element of its strategy is to increase its number of offices, claiming the temporary help industry was fragmented, but economies of scale were available," the complaint says. This previously unmentioned data, the Sambataro statement, "indicates that maturation of offices actually means their sales decline -- the exact opposite of the impression given by the Company's previous 10Ks and 10Qs." The complaint, which was filed on August 10th by attorneys Richard G. McCracken and Andrew J. Kahn of San Francisco-based Davis, Cowell & Bowe, asks the SEC to require the company to file amended 10Ks and 10Qs, to provide corrective information to its investors "by means reasonably calculated to reach all existing and potential investors, and to "make whole" investors who bought stock in reliance upon the misleading statements. On July 6, attorneys for the BCTD demanded that Labor Ready CEO and President Richard L. King explain to investors whether the company has made payments and is obligated in the future to a former CEO, his son and an associate who invented the lucrative cash dispensing machines used by the company. So far, there has been no reply. Earlier in the month, the BCTD announced its support for a class-action lawsuit filed against Labor Ready in Georgia for allegedly illegally charging employees for using the machines. The Building and Construction Trades Department (BCTD) AFL-CIO is the umbrella organization for 15 international building and construction trades unions in the United States and Canada, representing a total of 1.5 million members in the construction industry. In April, the unions launched a campaign called "Temp Workers Deserve a Permanent Voice@Work" to shed light on abuses of temp agency workers in the construction industry. LOTTE HOTEL: Women Sue Seoul Hotel in First Class-Action Harassment Suit ------------------------------------------------------------------------ Emphatically declaring war on sexual harassment, 270 female union members from a Seoul hotel have filed South Korea's first class-action lawsuit seeking damages from their bosses. The women asked Seoul District Court to award them US$ 1.6 million for harm allegedly inflicted by the Lotte Hotel and a handful of its executives. "If an individual speaks out on sexual harassment, that person risks additional problems at the workplace and social complications," a union spokesman said. "The most effective way to call attention to sexual harassment is with group action." The suit alleged that hotel management refused to co-operate with the women, who complained about regularly enduring "degrading" behaviour from their superiors. The 480 instances of sexual harassment cited include suggestive remarks, being exposed to graphic Internet sex sites and physical contact. The most frequent targets - attractive young women - were forced to sit next to their male superiors, who treated them like salon girls, the suit alleged. The men apparently touched their waists, hands and knees. And at dinner parties, they allegedly groped and fondled the women and ordered them to pour drinks and dance. About 70 per cent of female union employees at Lotte Hotel were subjected to sexual harassment, the suit alleged. "Sexual harassment has always been a fixture in Korean society but now there are more opportunities for the women to take loud action," said Park Yeon-suk, a spokeswoman for the Korean Sexual Violence Consultation Centre (KSVC). A commonly accepted concept of sexual harassment has only recently been adopted and much of the male workforce is resisting, Ms Park says. Equal employment legislation enacted last year prohibits any behaviour in the workplace that causes women to feel degraded. However, accusations must follow a lengthy course designed to keep suits out of court. Businesses are encouraged to settle disputes and are held responsible if the accusations persist. If a defendant is found guilty, the company is subject to a three million won (HK$ 21,000) fine. According to the KSVC, enhanced awareness of their rights is compelling women to lodge formal complaints, of which there were 586 last year, up 72 per cent on 304 in 1998. "Every year, women will feel more brave about taking a strong stand against the sexual harassment," Ms Park said. "The fear of providing proof and losing job status is going away." (South China Morning Post, August 11, 2000) NANOPHASE TECHNOLOGIES: Reaches Agreement to Settle Securities Suits -------------------------------------------------------------------- Nanophase Technologies Corp. of Burr Ridge said last Thursday August 10 it has reached an agreement in principle to settle for $4 million five consolidated securities class actions filed against it, several former officers and the underwriters of the company's initial public offering. The company said the settlement is not an admission of liability by any party. (Chicago Tribune, August 11, 2000) NATIONAL MAINTENANCE: Short Cressman Files Suit for Janitorial Workers ---------------------------------------------------------------------- A class action lawsuit has been commenced by Short Cressman & Burgess, the Law Offices of Lawrence Glosser and Keller Rohrback L.L.P. (www.SeattleClassAction.com) on behalf of janitorial workers who purchased "franchises" from National Maintenance Contractors, Inc., ("NMC") to clean commercial buildings in the greater Seattle-Tacoma, Spokane, Washington and other areas (the "Class"). The complaint alleges that NMC, National Maintenance Franchise Corporation, and certain of their top officers and directors violated the Fair Labor Standard Act, Washington Wage Statutes, and other employment laws. Though plaintiffs and members of the Class were independent contractors, NMC allegedly manipulated the manner and degree of control the Class had in relation to all work and services performed, including: scheduling all work, setting hours of the work, directing the location where the work was to be performed, controlling all finances, setting minimum job requirements, and directing what equipment and supplies were to be used. It is alleged that defendants designed these "franchises" to avoid the legal requirements under the Fair Labor Standards Act and other employment laws requiring compensation for overtime work, minimum wage, sick leave and generally all the legal responsibility of an employer. In addition, NMC misled plaintiffs and other members of the Class with respect to monthly income, the place of work, the nature of the work and rights regarding termination, in order to entice the Class to purchase "franchises". Contact: Short Cressman & Burgess P.L.L.C. Samuel Chung, 206/682-3333 SChung@scblaw.com NORTHBRIDGE EARTHQUAKE: Victims File Suit against Insurers ---------------------------------------------------------- A class-action lawsuit was filed last Thursday August 10 on behalf of Northridge earthquake victims who said they were wronged by their insurance companies. The suit--filed by attorney William Audet of San Jose in Los Angeles Superior Court--was filed against four insurance companies and former state Insurance Commissioner Chuck Quackenbush. The four companies are: Allstate, Farmers Home Mutual, State Farm and 21st Century. Audet said the plaintiffs now live in Camarillo and Lancaster but could not say where they lived at the time of the earthquake. The suit alleges that the insurance companies and Quackenbush conspired to keep policyholders from getting a fair settlement of their claims. Several similar suits have been filed by Los Angeles-based lawyers, including Howard Snyder, who said he believes his cases filed in April were the first. One of them, Sherman vs. Allstate, has already been granted class-action status by the court. "The earliest filed case, by court file number, gets the class-action status," Snyder said. Defendants can ask that separate, similar cases filed against them be folded into the court-named class-action suit. Audet, who is seeking additional people to join his lawsuit, said he is prepared to go it alone or join the earlier filed suits. "Whichever gets the maximum dollar amount for the people in our suit," he said. (Los Angeles Times, August 11, 2000) PASMINCO LTD: To Return to Victorian Court in November in Smelter Case ---------------------------------------------------------------------- Lead and zinc miner Pasminco Ltd will return to the Victorian Supreme Court in November for a hearing relating to its smelter operations in New South Wales and South Australia. Pasminco has applied to dismiss proceedings which which relate to a class action involving its Cockle Creek and Port Pirie smelter. "The company is questioning the validity of the Court rules that relate to group proceedings - or class actions - and the appropriateness of a Victorian court to make a judgement in a matter where the applicants do not reside in the State," the company said in a statement last Friday August 11. "Pasminco also maintains that even if the rules are valid, it cannot be established that people in Cockle Creek and Port Pirie have experienced the similar circumstances necessary to establish a class action." The Federal Court has already dismissed the matter but the action was reactivated in the new jurisdiction just days later. More than 1,000 plaintiffs allege that lead emissions from the two smelters have lead to health problems in the towns. Pasminco said its approach to the court was aimed at protecting its reputation and record of enviromental achievement. "Pasminco operates these facilities under stringent environmental and public health regulations," the company said. "The claims by the applicants relate to alleged impacts on health, nuisance and reduced property values resulting from emissions from the Pasminco smelters. "Pasminco accepts that it has responsibilities in relation to the environment and community health wherever it operates, however it does not believe a class action is the appropriate way to deal with the individual issues raised by the claimants." The company said residents were be better advised to approach it individually to have their concerns addressed. The matter will be heard on November 2. Pasminco shares were a cent lower to 99 cents at 1150 AEST. (AAP NEWSFEED, August 11, 2000, Friday) SIGMA DESIGNS: Announces Dismissal of Securities Lawsuit in California ---------------------------------------------------------------------- Sigma Designs(R) (Nasdaq:SIGM) in the industry of digital video decoder solutions, announced on August 10 that the Federal District Court for the Northern District of California, San Jose Division, dismissed, with prejudice, the securities fraud class action complaint filed against the Company and certain of its officers and directors. Finding that the amended complaint failed to state a claim, the court entered judgment in favor of defendants on July 10, 2000. The plaintiffs have determined not to appeal the dismissal, which therefore became final. SMARTFORCE PUBLIC: Outcome of 1998 Securities Suits in CA Uncertain ------------------------------------------------------------------- Since the end of the third quarter of 1998, purported class action lawsuits were filed in United States District Court for the Northern District of California and the Superior Court of California for the County of San Mateo against the Company, CBT USA and certain of the Company's former and current officers and directors alleging violation of the federal securities laws. The complaints allege that the defendants misrepresented and/or omitted to state material facts regarding the Company's business and financial condition and prospects during the class periods in order to artificially inflate and maintain the price of the Company's ADSs, and misrepresented and/or omitted to state material facts in the registration statement and prospectus issued in connection with the merger with ForeFront, artificially inflating the price of the Company's ADSs. The Company believes that these actions are without merit and intends to vigorously defend itself against these claims. Although the outcome of these actions cannot presently be determined, an adverse resolution of these matters could have a material adverse effect on the Company's financial position and results of operations. SMARTFORCE PUBLIC: Settles 1998 Derivative Suit in CA ----------------------------------------------------- On October 29, 1998, a derivative complaint was filed in the Superior Court of California for the County of San Mateo against several present and former officers and directors of the Company alleging that these persons violated various duties to the Company. The derivative complaint also names the Company as a nominal defendant. The derivative complaint is predicated on the factual allegations contained in the class action complaints discussed above. No demand was previously made to the Company's Board of Directors or shareholders concerning the allegations of the derivative complaint. The parties reached a settlement of the derivative litigation, involving the implementation of certain policies and procedures by the company and the payment of attorneys' fees to plaintiff's counsel. On July 31, 2000, the San Mateo County Superior Court dismissed the derivative action with prejudice. TELEGLOBE, INC: Schiffrin & Barroway Files Securities Lawsuit in NY ------------------------------------------------------------------- A class action lawsuit was filed in the United States District Court for the Southern District of New York on behalf of all purchasers of the common stock of Teleglobe, Inc. (NYSE: TGO) from February 11, 1999 through July 29, 1999 inclusive (the "Class Period"). The complaint charges Teleglobe and certain of its officers and directors with issuing false and misleading statements concerning the Company's business and financial condition. Contact: Schiffrin & Barroway, LLP Marc A. Topaz, Esq. Robert B. Weiser, Esq. 888/299-7706 (toll free) or 610/667-7706 E-mail: info@sbclasslaw.com UNITED AIRLINES: Consumers Sue over Flights Cancelled upon Labor Strife ----------------------------------------------------------------------- Thousands of angry ticket holders inconvenienced by labor strife that canceled thousands of flights at United Airlines are part of a class-action suit seeking to force the airline to stop selling seats on flights unlikely to take off. Attorney Tom Zimmerman Jr. said the suit seeks compensation for ticket holders. "We're also filing for an injunction to stop United from selling tickets for flights that it knows will be canceled," Zimmerman said. "The class action complaint seeks compensation for damages based upon United Airlines' consumer fraud, deceptive fraud practices and breach of contract." He said United deliberately concealed from the public the fact that it was engaged in difficult negotiations with the pilots' union that were likely to result in service slowdowns so that passengers would not book flights on competing carriers. The suit was filed in Cook County Circuit Court as representatives of United and pilots met in the Chicago area with Tansportation Secretary Rodney Slater. Sen. Richard Durbin, D-Ill., huddled with both sides for 45 minutes to discuss the contract negotiations, but little progress was reported. The 10,500 pilots have been calling in sick and refusing to work overtime since their contract expired in April grounding thousands of flights this summer. The dispute grounded 133 flights last Thursday August 10 and United Chairman and Chief Executive Officer James Goodwin said the airline stands to lose $150 million in the second quarter because of the canceled flights. United has pulled 4,800 flights from its late summer and fall schedule to improve on-time performance and is hiring 1,300 pilots. Goodwin called the situation unacceptable but said the delays and cancellations likely would continue. "I have to tell you that the labor situation has contributed to flight cancellations and delays," he said. 'Yesterday today and most likely tomorrow." The Chicago Sun-Times said United plans to add spare aircraft in hub cities to make sure it has enough planes and crews available to fly delegates to the Democratic National Convention in Los Angeles. United paid $500,000 to be the official airline of the Democratic convention and part of the Los Angeles Host Committee. (United Press International, August 11, 2000) WALT DISNEY: Lawsuit Accuses of Violating Disabilities Act ---------------------------------------------------------- Walt Disney Co. was accused in lawsuits of failing to make its theme parks and its cruise ships accessible to disabled consumers as required by federal law. A disabled advocacy group contends Disney is violating the Americans With Disabilities Act by failing to add wheelchair-accessible ramps, doorways and toilets to its Disney World complex and two ships. The suits, which seek class-action status, target Orlando, Fla.-based Walt Disney World, associated hotel resorts, Disney/MGM Studios theme park and cruise liners Disney Magic and Disney Wonder. Passed in 1990, the federal law bans discrimination against the disabled and requires businesses to make their facilities more accessible. "We aren't seeking monetary damages in the suit," said Lance Richard, a Stuart, Fla., attorney representing a wheelchair-bound Disney visitor. "We've identified problems that we want to see fixed. Once they are fixed, we'll go away." Disney officials weren't immediately available for comment on the suits, filed last month in federal court in Orlando. (Los Angeles Times, August 11, 2000) WISCONSIN, AMERITECH: Lawsuit Alleges of Illegal Tax Collection --------------------------------------------------------------- A lawsuit filed August 10 accuses the Wisconsin Department of Revenue and Ameritech of illegally collecting sales taxes on certain phone services for the past nine years. The suit, filed in Milwaukee County Circuit Court, seeks certification as a class action, which would mean all Ameritech customers in Wisconsin could share in any damages that are paid. Milwaukee attorney Jeffrey Purnell said the amount of disputed sales taxes could total millions of dollars. Purnell and Milwaukee attorney Robert Gegios are representing Milwaukee residents Stephen Butcher, Anthony Coffaro and Randy Meicher. Gegios declined to say what prompted the lawsuit, which also seeks refunds and an order stopping certain tax collections. Ameritech spokesman David Pacholczyk said he could not comment on the lawsuit because he had not seen it. A Department of Revenue spokesman could not immediately be reached for comment by the Milwaukee Journal Sentinel newspaper. (The Associated Press State & Local Wire, August 11, 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. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. 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