/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000821.MBX C L A S S A C T I O N R E P O R T E R Monday, August 21, 2000, Vol. 2, No. 162 Headlines BRIDGESTONE/FIRESTONE INC: Lawsuit in Illinois Seeks Fast Payment BRIDGESTONE/FIRESTONE: Punitives of $100M Awarded to Former Mechanic CALIFORNIA SOFTWARE: Cauley & Geller Files Securities Suit in California CALIFORNIA SOFTWARE: Milberg Weiss Files Securities Fraud Suit in CA DETROIT FLOODS: Cities May Pay Homeowners' Claims with Higher Taxes ERON MORTGAGE: Scam Victims Get Supreme Court Hearing in Canada FIRESTOEN: Ford Shows Frustration with Pace of Tire Recall FIRESTONE: Emergency Hearing for Florida Tire Owners Canceled GEORGIA POWER: Appoints Diversity Executive in the Face of Lawsuit HMOs: Humana Makes Case for Dismissal; Patients Seek Change in Practice INMATES LITIGATION: Florida Accused of Using Pepper Spray Wantonly MISSOURI: Taxpayers May Get Bigger Hancock Refunds MONY GROUP: 1 Claim in Goshen Case Re Insurance Policies in 80s Remains MONY GROUP: Policyholders Sue in New York for Membership Interest NATIONWIDE LIFE: Contests Ohio Lawsuit over Deferred Annuity Contracts NBTY, INC: Finkelstein Thompson Files Securities Fraud Suit in New York NY CITY: Class Certified for Abrupt Transfer of Nursing Home Residents RECORDING COMPANIES: Might Have Cheated Consumers; Agrees to End MAP SANTA MONICA: CA Town Told to Comply With Ban on Fees at ATM U.S., PHILIPPINES: $103B Sought for Hazardous Waste at Old Military Base UNITED AIRLINES: To Waive Changing Flights Penalties to Soothe Customers ********* BRIDGESTONE/FIRESTONE INC: Lawsuit in Illinois Seeks Fast Payment ----------------------------------------------------------------- A lawsuit has been filed against Bridgestone/Firestone Inc. seeking fast payment for Illinois owners of defective Firestone tires so they can be replaced immediately. The lawsuit, filed in Peoria County Circuit Court on Thursday, alleges Firestone violated its tire warranties and violated the Illinois Consumer Fraud and Deceptive Business Practices Act. Firestone's offer to replace the defective tires by paying its customers a $ 100 reimbursement, is too limited, the lawsuit says, because it applies only to certain tires and sets time limits. All tire customers need "an immediate cash payment," so the faulty tires can be replaced from any manufacturer, it says. Or they should be reimbursed if they already have bought new tires. Phased recalls also will take too long and expose drivers to danger, the lawsuit says. Nashville, Tenn.-based Bridgestone/Firestone earlier this month recalled all P235/75R15-size radial ATX and ATX II tires and Wilderness AT tires of the same size made at its plant in Decatur. Most of the 6.5 million tires are on Ford vehicles, notably the Explorer sport utility vehicle. Most of the complaints about the tires involved tread separation that sometimes caused blowouts and rollovers. Attorneys who filed the lawsuit include Art Greenberg, whose 6-year-old granddaughter and son-in-law died in a June 18 accident in Texas attributed to a faulty Firestone tire. His daughter, Nina Dunavan, 39, is recovering from the accident, which has left his family devastated, Greenberg said. The Texas accident has nothing to do with the Peoria lawsuit, Greenberg said, but has heightened his concern about the Firestone tire recall. The lead plaintiff in the lawsuit is Esther Siewert-Sitzmor. Dan Cusak, an attorney handling the case, said he is looking for additional plaintiffs. Cusak said he owns two vehicles with the defective tires, but did not want to sue on his own behalf. He plans to replace his tires immediately, he said, and advises others to do likewise. (The Associated Press State & Local Wire, August 18, 2000) BRIDGESTONE/FIRESTONE: Punitives of $100M Awarded to Former Mechanic -------------------------------------------------------------------- A Missouri jury has awarded $ 105 million to a former mechanic who became permanently disabled when the rim of a tire he was inflating exploded. Dorman v. Bridgestone/ Firestone Inc., No. 962-07052 (Mo. Cir. Ct. St. Louis City May 23). The plaintiff was injured when the tire rim's side base separated from the rim itself while the plaintiff was inflating the tire using a pressure that was within the manufacturer's specifications. The force of the explosion caused the plaintiff to suffer multiple fractures and brain injuries. Represented by Jeffrey Lowe of St. Louis' Simon, Lowe & Passa-nante, he sued the tire maker, alleging that the multipiece rim was dangerous and defective. He also brought charges of failure to warn, and produced documentation that the defendant knew of the defect in the rim but continued to manufacture it. The defendant, represented by Robert Horn of Kansas City, Mo.'s Horn, Aylward & Bandy and by Thomas Stewart of St. Louis' Holloran & Stewart, moved for summary judgment, arguing that the side ring had been discarded after the accident and that the plaintiff could thus not prove that the defendant manufactured the ring that injured him; the trial court granted the motion. An appellate court reversed and remanded, finding that the plaintiff had produced sufficient evidence from which a jury could reasonably determine that the defendant manufactured the rim. (Product Liability Law & Strategy, July 2000) CALIFORNIA SOFTWARE: Cauley & Geller Files Securities Suit in California ------------------------------------------------------------------------ The law firm of Cauley & Geller LLP announced on August 18 that a class action lawsuit has been filed in the United States District Court for the Central District of California on behalf of purchasers of California Software Corp. (NASDAQ:CAWC - news and CAWC.OB - news) publicly traded securities during the period between Feb. 9, 2000 and Aug. 6, 2000 (the "Class Period"). The complaint charges California Software and certain of its officers and directors with violations of the Securities Exchange Act of 1934. California Software describes itself as the international leading provider of IBM Midrange migration software solutions marketed under the brand name BABY. These products support the migration of IBM AS/400 screens and applications into PC-LAN business environment and has more than 100,000 installations in 56 countries. The complaint alleges that in early 2000, the insiders sought to inflate California Software's stock price so they could: (a) complete a $9 million private placement to fund the Company's operations, planned acquisitions and to inflate the book value of defendants' shares; (b) obtain listing on NASDAQ and the American Stock Exchange in order to legitimize the Company and the shares defendants were peddling; and (c) use the Company's shares as currency to fund the acquisition of Hotel Information Systems Inc. in a stock-for-stock acquisition. The complaint further alleges that to portray the Company as a financially viable company, during the Class Period the individual defendants caused California Software to issue false financial results and make false statements about its results and demand for its new products, including its BABY product, causing its stock to trade at artificially inflated levels. Then on Aug. 7, 2000, California Software admitted that its fiscal 1999 and first quarter 2000 results had been false, that its previously reported revenues had been improperly recognized. On these shocking disclosures, California Software's stock trading dropped to $1-1/32 on Aug. 9, 2000 after trading at $14-3/8 months earlier. Contact: CAULEY & GELLER LLP Sue Null, 888/551-9944 info@classlawyer.com CALIFORNIA SOFTWARE: Milberg Weiss Files Securities Fraud Suit in CA -------------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/calsoftware/)announced on August 17 that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of California Software Corp. (NASDAQ:CAWC and CAWC.OB) publicly traded securities during the period between Feb. 9, 2000 and Aug. 6, 2000 (the "Class Period"). The complaint charges California Software and certain of its officers and directors with violations of the Securities Exchange Act of 1934. California Software describes itself as the international leading provider of IBM Midrange migration software solutions marketed under the brand name BABY. These products support the migration of IBM AS/400 screens and applications into PC-LAN business environment and has more than 100,000 installations in 56 countries. The complaint alleges that in early 2000, the insiders sought to inflate California Software's stock price so they could: (a) complete a $9 million private placement to fund the Company's operations, planned acquisitions and to inflate the book value of defendants' shares; (b) obtain listing on NASDAQ and the American Stock Exchange in order to legitimize the Company and the shares defendants were peddling; and (c) use the Company's shares as currency to fund the acquisition of Hotel Information Systems Inc. in a stock-for-stock acquisition. The complaint further alleges that to portray the Company as a financially viable company, during the Class Period the individual defendants caused California Software to issue false financial results and make false statements about its results and demand for its new products, including its BABY product, causing its stock to trade at artificially inflated levels. Then on Aug. 7, 2000, California Software admitted that its fiscal 1999 and first quarter 2000 results had been false, that its previously reported revenues had been improperly recognized. On these shocking disclosures, California Software's stock trading dropped to $1-1/32 on August 9, 2000 after trading at $14-3/8 months earlier. Contact: Milberg Weiss William Lerach, 800/449-4900 wsl@mwbhl.com DETROIT FLOODS: Cities May Pay Homeowners' Claims with Higher Taxes ------------------------------------------------------------------- Metro Detroit residents worried about their basements filling up with storm water soon may have other worries: higher property taxes or sewer fees. That's because cities across Metro Detroit that battle storm runoff could get stuck paying millions of dollars in flood claims -- about $1 million each so far this year for Inkster, Garden City and Warren -- now that the state's largest insurer of local governments has decided to stop coverage for those losses. The cost of homeowners' claims and lawsuit settlements may have to be passed on to residents through higher taxes and water or sewer fees, city officials warn. Trenton resident Tracey Duda doesn't care who pays the claims, as long as she doesn't have to. Duda, 28, had to throw out a computer system, entertainment center and two sofas when three feet of sewage seeped into her finished basement in June. "It's not fair that they are using our basements as a retention center," said Duda, who with other Trenton residents has filed a lawsuit against the city for flood damage. It is Metro Detroit's aging infrastructure, in part, that's to blame for persistent basement and street flooding throughout the region every time there is heavy rain. The problem is only going to get worse as more land is developed and there are fewer open spaces to soak up excess rain water. Meanwhile, in many Metro Detroit communities the most obvious solution -- to rebuild their overloaded sewer systems -- is too expensive. But city officials argue it's Mother Nature who's to blame, not municipalities. "If a city inspects your house and says that everything is OK, and then a tornado comes and blows the roof off, you wouldn't blame the city for the damage," said Dearborn Heights Mayoral Assistant Kurt Heise. "We don't have a problem if it's our fault, but when there's a storm that overtaxes the system, it's somewhat unfair to put the blame on us." The Michigan Municipal Liability League reversed its policy of covering cities' basement damage claims because the cost is becoming prohibitive, said Frank Murphy, the league's director of risk management. "We're seeing a blizzard of claims every time it rains and it's hard," said Murphy, who added that at least five $1-million lawsuits are pending across the state. He expects that number to climb over the next few years. Settlements Total $15M In the two past years, basement-flooding settlements in Metro Detroit suburbs have totaled $15 million, estimated Steve Liddle, of the Detroit firm Macuga, Swartz and Liddle, which has represented thousands of people suing Dearborn Heights, Grosse Pointe Woods, Warren, Inkster and other cities over flooding. Some of the recent lawsuit settlements include: In June, Dearborn Heights paid $3.25 million to 150 residents who claimed severe basement flood damage following a February 1998 storm that dumped 4 inches of rain in a few hours. The city is insured by the Michigan Municipal Management Risk Management Authority, which plans to continue covering flood damage until at least next year. But the company is considering dropping the coverage if lawsuits continue to increase, Heise said. Risk Management Authority representatives could not be reached for comment. That June storm also caused damage in Inkster and Garden City, where nearly 200 residents filed and won class-action lawsuits for $800,000 and $1.4 million respectively. Communities insured by the municipal league will continue to have basement flooding coverage until the end of their policies. Then they can pay extra for $ 75,000 to cover claims. That's not nearly enough to cover the large lawsuits popping up, Heise said. "It will eventually get to a point where no insurance provider will cover basement flooding and municipalities will have to take lawsuit settlements out of their general fund or put it on property owners' taxes," Heise said. Chuck Hersey of the Southeastern Michigan Council of Governorments thinks communities such as Fraser will be caught in a "virtual Catch-22" -- either facing state fines for illegally discharging sewage into waterways or costly lawsuits when that sewage finds its way into residential basements. Either way, he said, the taxpayer may end up paying. "This is something that needs to be stopped before it trickles down to the taxpayers," he said. Some Move Away Jeanne Jones is so tired of basement flooding in her Farmington Hills community that she is selling her home and moving to Livingston County, where she'll have a septic tank. Jones, a car dealership owner, also is part of a class-action lawsuit against Farmington Hills. A judge ruled in in favor of the plaintiffs, but the city is appealing that decision. After sewage flooded her basement, Jones said she had to replace thousands of dollars in damaged items. "It is good that some cities now have to pay for it because it is their responsibility to take care of their residents, not the residents' (responsibility)," she said. But officials of Michigan municipalities argue that basement flooding from heavy rains -- an act of nature -- shouldn't be cities' responsibilities. The Michigan Supreme Court in April disagreed, siding with homeowners. But the court ruling did not not address claims involving acts of nature. Given the court ruling, municipalities and insurers are lobbying state lawmakers for a law that would relieve them of responsibility for basement flooding damages after such downpours. Legislators, including state Sen. George Hart, D-Dearborn Heights, aren't making any promises. Cities in Hart's district are among the worst for flooding in Metro Detroit. He said he would have to examine carefully any legislation. The only solution is to rebuild sewer systems from the ground up, contends Liddle, the attorney representing homeowners. "There are problems of inflow and infrastructure of the system which means their sewers have holes in them," he argued. "They're trying to blame this on an act of God, but there is no way that 4 inches of rain equals 8 or 10 feet of sewage in someone's basement. They think private citizens should pay for having to clean up feces, urine and anything else found in water in their basement and they're wrong. Pricey Settlements Some Metro Detroit cities have paid out big bucks for basement flooding lawsuits: * Dearborn Heights: 156 residents awarded $3.25 million. * Warren: 175 residents awarded $1.575 million. * Garden City: 98 residents awarded $1.39 million. * Grosse Point Woods: 44 residents awarded $1 million. * Inkster: 103 residents awarded $835,000. * Redford: 22 residents settled for $203,000. Source: Law firm of Macuga, Swartz and Liddle ERON MORTGAGE: Scam Victims Get Supreme Court Hearing in Canada --------------------------------------------------------------- The Supreme Court of Canada is giving investors who lost $ 222-million in a massive mortgage scam the chance to argue the B.C. government should cover their losses. The high court on August 17 granted investors in Eron Mortgage Corp. leave to appeal a lower-court ruling that tossed out their class-action lawsuit against the B.C. registrar of mortgage brokers. The decision by Canada's highest court keeps alive the hope of 3,350 investors that they'll get their retirement nest eggs back. Lawyers on both sides say the court will also clarify just how much responsibility Canada's regulators have to protect individual investors. (National Post (formerly The Financial Post), August 18, 2000) FIRESTOEN: Ford Shows Frustration with Pace of Tire Recall ---------------------------------------------------------- Ford Motor Co. executives last Thursday August 17 expressed frustration with the pace of the Firestone tire recall, as Texas officials investigated the latest death of a Ford Explorer passenger killed when a tire on the sport-utility vehicle blew. Ford Chief Executive Jac Nasser said the automaker, whose Explorer is cited in most of the accidents in a federal investigation, was mulling several steps to speed up the replacement of millions of tires. Nasser said in an interview with USA Today that Bridgestone/Firestone Inc.'s promise to have the recall finished by next spring was "unacceptable," and Ford would consider paying for rental cars and taking other steps for Ford customers too worried to wait until dealers can get replacements. Texas officials, meantime, were investigating the death of Gary Haas, 42, a Tampa heart surgeon, killed when the right rear tire of the 1996 Ford Explorer he was riding in blew. The accident is similar to dozens of others linked to the Explorer and the Firestone tires under investigation by the National Highway Traffic Safety Administration. Firestone said last Thursday it would continue to repay customers who have recalled tires replaced at stores other than Firestone or Ford dealers, lifting the deadline it set a day earlier. Firestone had offered to reimburse customers up to $100 per wheel for tires replaced outside the Ford-Firestone network between Aug. 9 -- when the recall was announced -- and when Bridgestone/Firestone ran newspaper ads explaining the recall. But Bridgestone/Firestone executive vice president Gary Crigger said Thursday that reimbursements would continue indefinitely. "We are continually evolving this process," said Christine Karbowiak, Bridgestone/Firestone vice president of public affairs. "It is a very large recall. We are identifying improvements along the way." Crigger and Karbowiak said Bridgestone/Firestone's decision had nothing to do with a restraining order a Kentucky judge released late August 16 evening telling the company to lift the deadline. The order had been requested from lawyers representing two owners of recalled tires who weren't able to get replacement tires. Karbowiak said the company had not been aware of the order when it made the decision to lift the deadline. The NHTSA has reports of at least 62 deaths, more than 100 injuries and 779 complaints linked to failures of the recalled tires. According to data released by NHTSA, 484 of the 779 complaints involved the Explorer. Lobbyists for Ford continued meetings with congressional staff members in Washington to try to head off hearings on the tires. "We are in the preliminary phases of what may become a full blown investigation," Ken Johnson, a spokesman for Rep. Billy Tauzin (R-La.), the chairman of the House subcommittee on consumer protection, said. Separately, two SUV owners filed a lawsuit in Cook County Circuit Court on August 17 accusing Bridgestone/Firestone of negligence and fraud and alleging that the tire manufacturer knowingly sold unsafe tires. The plaintiffs' vehicles are both outfitted with Firestone P235/75R15 Wilderness AT tires. The lawsuit seeks class-action status on behalf of everyone in Illinois who purchased Firestone P235/75R15 Wilderness AT tires, Firestone P235/75R15 radial ATX or radial ATX II tires. Among other things, the suit says every consumer who purchased the tires should receive a new set of tires, a full refund for the tires or a credit toward the purchase of new tires. (Chicago Tribune, August 18, 2000) FIRESTONE: Emergency Hearing for Florida Tire Owners Canceled ------------------------------------------------------------- An attempt to get a speedy hearing Friday on a lawsuit that would cover all Florida motorists with recalled Firestone tires was thwarted when the company moved the case from state to federal court. Attorneys for the tire owners asked a federal judge to immediately send it back to state court, but U.S. District Judge Paul Huck had a full calendar and it was uncertain when he would have time to review the request. The case was filed as a class-action, with the attorneys hoping a state trial judge would let it represent all Florida motorists involved. Circuit Judge Philip Bloom had scheduled an emergency hearing Friday on a request to force Nashville-based Bridgestone/Firestone Inc. to pay to replace recalled tired with non-Firestone brands, but the session was canceled based on the change in courts. "It was definitely to be expected that Firestone would remove" the case to federal court, said attorney Greg Glasser, who filed a competing lawsuit and showed up for the canceled hearing. "My off-the-cuff view of it would be that it'll stay in federal court." Parties in lawsuits are allowed to switch cases to federal court when they raise federal legal questions. The other side can ask to send a case back, but a decision on that question normally follows a series of court filings over a period of weeks. Attorney Hugh Whiting, representing Bridgestone/Firestone, said, "We will pursue what should be an appropriate process with the appropriate courts." Tire owners asked for an emergency order to force Firestone to issue vouchers for new tires, allowing replacements with competitors' tires at Firestone's expense up front. Firestone has said it will reimburse customers $100 per tire for tires replaced outside its network, but consumers have been asked to take the old tires to Firestone stores and apply for reimbursements. The National Highway Traffic Safety Administration is investigating 62 deaths and 100 injuries that could be linked to the 6.5 million tires now being recalled. The agency has received more than 750 complaints. On the Net: Bridgestone/Firestone: www.firestone.com (The Associated Press State & Local Wire, August 18, 2000) GEORGIA POWER: Appoints Diversity Executive in the Face of Lawsuit ------------------------------------------------------------------ Georgia Power Co. has named a vice president for diversity action, three weeks after three employees sued the utility claiming racial discrimination, which was reported in the CAR. Jim Davis will fill the new position and will continue to serve as the utility's senior vice president for corporate relations. He will report directly to David Ratcliffe, chief executive of Georgia Power. "It's good that the company is finally admitting it has problems," said Steven J. Rossenwasser, an attorney for the employees. "But internal changes without external oversight aren't good enough. The company can't be trusted to change itself." The lawsuit against Georgia Power, the state's largest utility, and Southern Co., its parent, claims the company systematically discriminates against African-American workers. About 1,800 of Georgia Power's 8,700 workers are African-American, and lawyers for the plaintiffs are seeking class-action status. The suit was filed July 27 in Fulton County Superior Court by three Georgia Power employees, and four more workers have joined since then. Georgia Power reacted quickly after the suit was filed. Ratcliffe promised employees "swift and effective action" against racial discrimination and named Juanita Baranco, one of Georgia Power's three African-American board members, to co-chair a diversity council with him. "Jim Davis will help find where our diversity problems are," John Sell, a Georgia Power spokesman, said. "Once the problems are identified, we'll devise solutions to identify them." Davis joined Georgia Power in 1972 after earning a bachelor's degree from Claflin College in South Carolina and a master's degree from Georgia Tech. He serves on numerous volunteer boards and received the Atlanta Urban League's 1999 community service award. Rossenwasser, a lawyer at Bondurant, Mixson & Elmore, the firm representing the Georgia Power employees, said the changes announced so far are inadequate. Rossenwasser, whose firm also represents employees who sued Coca-Cola for racial discrimination, said Georgia Power's actions "fail to address compensation" he believes current and former employees are owed. "The company can't ignore the fact it owes African-Americans for past discrimination," he said. Other Georgia companies including Coca-Cola, Home Depot and Waffle House face racial discrimination claims. (The Atlanta Journal and Constitution, August 18, 2000) HMOs: Humana Makes Case for Dismissal; Patients Seek Change in Practice ----------------------------------------------------------------------- A Miami federal judge could decide whether to dismiss a massive, class-action lawsuit against Humanas health maintenance organization filed on behalf of millions of patients nationwide. Humanas motion to dismiss the case, along with several other actions expected August 17, are the most recent developments in the nations latest big class action, following the suits on Big Tobacco. Dozens of lawyers, including David Boies, who helped win a verdict to break up Microsoft, and Richard Scruggs, best known for fighting Big Tobacco, will appear before U.S. District Judge Federico Moreno as they take on Humana and the nations HMOs. A number of class-action suits against Humana were consolidated this year under Moreno. And plaintiffs -- represented by some 40 law firms from around the country -- have added six other HMOs to their case. They are awaiting word from the Federal Judicial Panel on Multidistrict Litigation on the additional consolidations. The lawsuits, filed on behalf of a potential 80 million subscribers, seek nothing less than to change the way HMOs do business -- the same way Big Tobacco lawsuits sought to alter the way cigarettes are marketed and sold. They allege that HMOs secretly provided financial incentives to doctors to steer patients to cost-cutting treatments. Moreno will hold three hearings on the topic. He will hear a motion from a Broward ophthalmologist who is joined by the Broward County Medical Association in a lawsuit against Humana. Dr. Seth Cutler alleges that Humanas reimbursement practices have hurt the doctors and their ability to provide medical care to their patients. He is seeking to remand the suit to state court. Also, Moreno will hear a bevy of requests from two other defendants, Foundation Health Systems and Pacificare Health Systems. The requests include returning their cases to Mississippi court, where rulings have been more favorable to them; dismissing their cases; and remitting the case for arbitration. But lawyers say the most significant action of the day comes at 9:30 a.m., when lawyers for Humana will argue for a dismissal of the entire class-action case. Moreno, who has promised litigators a speedy ruling, could make a ruling on the spot. Humanas plea for dismissal centers on the argument that no injury has occurred to a patient -- that the case merely states that an injury could occur because of Humanas cost-cutting practices. The company, along with the other HMOs, will waste no time bringing up a recent victory for HMOs in the courts. Lawyers for Humana, the law firm OMelveny & Myers of Washington, D.C., and Adorno & Zeder of Miami, have already sent Moreno a copy of a ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia. The court upheld a lower court dismissal of a complaint against Aetna that had sought class-action status and had alleged violations of the Racketeer Influenced and Corrupt Organizations Act (a significant part of the Miami cases). That case alleged Aetna attracted potential customers by saying it was dedicated to quality medical care, then encouraged systemwide cost-cutting. Furthermore, in June the U.S. Supreme Court ruled that patients cant sue HMOs in federal court for restricting medical care out of cost concerns because thats precisely why HMOs were created. The anti-HMO lawyers in Miami, aware of the impact the most recent case could have on their own, sent a 10-page brief to Moreno laying out how their case is different. Our case is broader, said Sid Backstrom, an associate of Scruggs, adding that his case alleges extortion of doctors and that Humana took money under false pretenses, among other charges. Are the anti-HMO lawyers concerned about the fact that the courts have ruled in favor of HMOs of late? I wouldnt say were worried, said Backstrom. Obviously you want every ruling to go your way. (Broward Daily Business Review, August 17, 2000) INMATES LITIGATION: Florida Accused of Using Pepper Spray Wantonly ------------------------------------------------------------------ Corrections officials deny any abuses, saying the spray is vital for order and guards' protection. Soon after his appointment as head of Florida's prison system last year, Michael Moore decreed that more prison officers should be equipped with pepper spray to subdue unruly inmates. Now inmates are claiming that officers too often douse them indiscriminately and use the painful chemicals for punishment, instead of preventing violence. The complaints have come from prisons throughout the state but have reached a peak at Florida State Prison, where 17 inmates are protesting with a hunger strike that began a week ago. "The horror being inflicted on prisoners is on fast-forward again. Prisoners are being terrorized with mace on a level that is equal to chemical warfare," Florida State Prison inmate Sylvester Shuler wrote in a letter. The Times in recent days has received at least five such letters, either directly from inmates or through anxious inmate relatives and friends. The letters allege that abuse of inmates has recently spiked at Florida State Prison, especially with the use of chemicals. Department of Corrections officials dismissed the hunger strike as "a publicity stunt" and strongly denied any mistreatment of inmates at Florida State Prison or excessive use of pepper spray in the prison system. "We use chemical agents to avoid the need for hands-on force. We have prevented some injuries, I'm sure," said Director of Institutions Stan Czerniak. "It is a very, very dangerous environment in there. Our officers are assaulted on a fairly regular basis." At Florida State Prison, known for housing the "worst of the worst" inmates, officers have used pepper spray and tear gas on inmates 119 times in the past six months. Comparative numbers were not immediately available, but Corrections spokesman C.J. Drake said that as chemical use at Florida State Prison increased over the past year, assaults by inmates have dropped. "There's a correlation there," Drake said. Pepper spray can cause painful burning, eye irritation, choking and vomiting. It has become standard issue for officers in many law enforcement agencies, though law enforcement in the United Kingdom won't use it because of health concerns. Some inmate advocates question whether it's often unnecessarily used. Amnesty International, the human rights group, wants an independent national review of how law enforcement agencies use pepper spray, saying that it's often misused. Florida prisons use both pepper spray and tear gas on inmates. Officials say they use the chemicals most often on inmates who already are locked up in disciplinary confinement, because those are the ones who most frequently act up. "These are the people who are locked up in their cells 24 hours a day, seven days a week. They'll yell and scream or kick their cell because they want something. The (officers) use the spray just to shut them up," said Miami attorney Peter Siegel, who is handling a class action lawsuit over Florida's confinement practices. "Rather than using it as a matter of last resort when all else fails, they use it as a matter of first resort to punish them," Siegel said. Czerniak said even inmates locked in the cells can't be allowed to be unruly, or the behavior will spread to other cells. In most cases, he said, inmates are warned repeatedly to behave or else risk getting sprayed. Usually, officers must get permission from medical staffers and supervisors before using pepper spray, and even then the inmate is given a chance to comply with orders and avoid the chemicals. As of August 17 afternoon, 17 inmates were on the hunger strike, receiving water and being offered meals three times a day. The number of strikers has shifted several times, with a high of 31, since the strike started Aug. 10. Authorities did not know what prompted the strike, though it began the same day the Department reported using pepper spray to subdue an inmate who bit an officer while being escorted from the law library. Also, two different inmates wrote the St. Petersburg parents of Florida State Prison inmate Troy Hall, claiming that on Aug. 8 they saw officers repeatedly spray him with chemicals and beat him while he was handcuffed. Prison officials denied that, and found no records of force being used against Hall on Aug. 8. Florida State Prison has been under intense scrutiny since the July, 1999 death of inmate Frank Valdes, for which four officers are awaiting trial on second degree murder charges. (St. Petersburg Times, August 18, 2000) MISSOURI: Taxpayers May Get Bigger Hancock Refunds -------------------------------------------------- Missouri taxpayers could receive an additional $500 million in refunds from the state depending on the outcome of a lawsuit over how the state calculates revenue. Lawyers for business groups and taxpayers said during the evidence phase of the class-action lawsuit that more should be included in those calculations. The attorneys argued before Cole County Circuit Court Judge Thomas Brown that the state failed to consider tax credits to companies and individuals. Further, the attorneys say a Missouri Supreme Court ruling last year on a state conservation sales tax opened the door for additional refunds. If the lawsuit is successful, about $300 million more in refunds would come from the addition of tax credits and about $240 million would be generated from the conservation sales tax. The lawsuit was filed against the state, the Missouri Department of Revenue, which collects taxes and issues refunds, and the state Office of Administration. "We think the Supreme Court has ruled on this," Jim Owen, an attorney for the plaintiffs, said during a break in the hearing. "We are representing taxpayers." State Budget Director Mark Ward said he doesn't believe taxpayers are entitled to additional refunds. The lawsuit was filed against the state, the Missouri Department of Revenue, which collects taxes and issues refunds, and the state Office of Administration. (The Associated Press State & Local Wire, August 18, 2000) MONY GROUP: 1 Claim in Goshen Case Re Insurance Policies in 80s Remains -----------------------------------------------------------------------Since late 1995 a number of purported class actions were commenced in various state and federal courts against the Company alleging that the Company engaged in deceptive sales practices in connection with the sale of whole and universal life insurance policies from the early 1980s through the mid 1990s. Although the claims asserted in each case are not identical, they seek substantially the same relief under essentially the same theories of recovery (i.e., breach of contract, fraud, negligent misrepresentation, negligent supervision and training, breach of fiduciary duty, unjust enrichment and violation of state insurance and/or deceptive business practice laws). Plaintiffs in these cases (including the Goshen case) seek primarily equitable relief (e.g., reformation, specific performance, mandatory injunctive relief prohibiting the Company from canceling policies for failure to make required premium payments, imposition of a constructive trust and creation of a claims resolution facility to adjudicate any individual issues remaining after resolution of all class-wide issues) as opposed to compensatory damages, although they also seek compensatory damages in unspecified amounts. The Company has answered the complaints in each action, (except for one being voluntarily held in abeyance), has denied any wrongdoing and has asserted numerous affirmative defenses. On June 7, 1996, the New York State Supreme Court certified one of those cases the Goshen v. The Mutual Life Insurance Company of New York and MONY Life Insurance Company of America, the Goshen case, being the first of the aforementioned class actions filed, as a nationwide class consisting of all persons or entities who have, or at the time of the policy's termination had, an ownership interest in a whole or universal life insurance policy issued by the Company and sold on an alleged "vanishing premium" basis during the period January 1, 1982 to December 31, 1995. On March 27, 1997, the Company filed a motion to dismiss or, alternatively, for summary judgment on all counts of the complaint. All of the other putative class actions have been consolidated and transferred by the Judicial Panel on Multidistrict Litigation to the United States District Court for the District of Massachusetts, or are being voluntarily held in abeyance pending the outcome of the Goshen case. On October 21, 1997, the New York State Supreme Court granted the Company's motion for summary judgment and dismissed all claims filed in the Goshen case against the Company on the merits. On December 20, 1999, the New York State Court of Appeals affirmed the dismissal of all but one of the claims in the Goshen case (a claim under New York's General Business Law), which has been remanded back to the New York State Supreme Court for further proceedings consistent with the opinion. The Company intends to defend itself vigorously against the sole remaining claim. The Company tells investors there can be no assurance that the present litigation relating to sales practices will not have a material adverse effect on the Company. MONY GROUP: Policyholders Sue in New York for Membership Interest ----------------------------------------------------------------- On March 27, 2000, the MONY Group and MONY Life Insurance Company were served with a complaint in an action entitled Calvin Chatlos, M.D. and Alvin H. Clement, On Behalf of Themselves And All Others Similarly Situated v. The MONY Life Insurance Company, The MONY Group Inc., And Neil Levin, Superintendent, New York Insurance Department, filed in the Supreme Court of the State of New York, County of New York. The action purports to be a class action on behalf of all persons or entities who had an ownership interest in one or more in-force life insurance policies issued by MONY Life Insurance Company as of November 16, 1998. Plaintiffs seek a declaratory judgment that the New York Superintendent of Insurance and the Company violated Section 7312 of the New York Insurance Law in connection with its demutualization. Plaintiffs also allege that the Company breached its contractual obligations and alleged fiduciary duties to its policyholders in connection with the demutualization. Plaintiffs seek damages against the Company for wrongfully denying them a fair and equitable amount for their membership interests. The Company tells investors it believes that the claims are without merit and intends to defend itself vigorously. NATIONWIDE LIFE: Contests Ohio Lawsuit over Deferred Annuity Contracts ---------------------------------------------------------------------- On October 29, 1998, the Company was named in a lawsuit filed in Ohio state court related to the sale of deferred annuity products for use as investments in tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company). On May 3, 1999, the complaint was amended to, among other things, add Marcus Shore as a second plaintiff. The amended complaint is brought as a class action on behalf of all persons who purchased individual deferred annuity contracts or participated in group annuity contracts sold by the Company and the other named Company affiliates which were used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. No class has been certified. On June 11, 1999, the Company and the other named defendants filed a motion to dismiss the amended complaint. On March 8, 2000, the court denied the motion to dismiss the amended complaint filed by the Company and other named defendants. The Company intends to defend this lawsuit vigorously. NBTY, INC: Finkelstein Thompson Files Securities Fraud Suit in New York ----------------------------------------------------------------------- Finkelstein, Thompson & Loughran has commenced a class action lawsuit on behalf of purchasers of the securities of NBTY, Inc. (Nasdaq: NBTY) between January 27, 2000, and June 15, 2000, inclusive (the "Class period"). The action is pending in the United States District Court for the Eastern District of New York against defendants NBTY, Scott A. Rudolph (Chairman, President and Chief Executive Officer), William Shanahan (Vice President), Glenn Cohen (Director), Harvey Kamil (Executive Vice President, Chief Financial Officer and Secretary) and Arthur Rudolph (Director). The complaint charges that defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by failing to disclose certain known adverse factors to the market between January 27, 2000 and June 15, 2000. For example, as alleged in the complaint, by the start of the Class Period, NBTY was being adversely affected by several undisclosed adverse factors including: (i) that sales at the Company's Vitamin World stores were declining as demand for nutritional supplements was weakening, and contrary to defendants' Class Period representations, the Company was not immune to negative industry-wide trends; (ii) that the Company's financial results were being negatively impacted by fluctuations in the value of the British Pound; and (iii) that the Company did not derive any meaningful benefit from its "vertical integration" efforts -- acquisitions of nutritional supplement companies in different segments of the supplement business. On June 15, 2000, the Company announced that while it was too early to assess total sales for its Vitamin World operations for the full third quarter of June 30, 2000, same-store sales for the two months of April and May were up 2% -- as compared to 11% for the same period in the prior year. The Company also noted that "the weakness in the pound sterling is currently expected to have a negative impact upon (its) financial statement arising out of the operation of its Holland & Barrett stores in the United Kingdom." In response to these announcements, the price of NBTY common stock declined, precipitously falling 36% from $11.06125 per share to $7.06125 per share. Contact: Donald J. Enright or Shannon P. Keniry, 888-333-4409, or 202-337-8000, or email: contact@ftllaw.com, both of Finkelstein, Thompson & Loughran NY CITY: Class Certified for Abrupt Transfer of Nursing Home Residents ---------------------------------------------------------------------- A federal district judge has granted class certification in a lawsuit brought by the former residents of a nursing home operated by the city of New York who were summarily evacuated, without prior notice, from the home due to a purported emergency. Brown et al. v. Giuliani, as Mayor of New York City et al., No. 98 Civ. 7743 (VM) (S.D.N.Y., June 29, 2000). U.S. District Judge Victor Marrero also rejected, in part, a motion to dismiss filed by defendant Antonia Novello, the commissioner of the New York State Department of Health. Two former residents of Neponsit Health Care Center, a nursing home operated by the New York City Health and Hospitals Corp. in a building owned by the city of New York, filed the class action lawsuit following the transfer of all the residents from the home in September 1998 to other facilities. HHC and the city claim that the emergency evacuation was required due to structural defects in the building, which jeopardized the safety of the residents and precluded any prior notice of the transfers. HHC later permanently closed the facility. Following an investigation, the Health Care Financing Administration concluded that the claimed structural defects did not warrant an emergency evacuation and issued fines against HHC. The lawsuit was filed against Mayor Rudolph Giuliani, HHC Chairman Luis Marcos and Commissioner Novello. In a prior ruling, the district court ordered that DOH be joined as necessary party to the litigation after finding that federal and state Medicaid laws require DOH to give notice and conduct hearings for patients prior to their transfer from a facility like Neponsit. The court also directed DOH to send letters advising the former Neponsit residents of their right to a hearing. Commissioner Novello filed a motion to dismiss the two claims against her for an order to hold hearings regarding the transfers, and for damages arising from violations of the plaintiffs' rights under federal law and the Due Process Clause of the U.S. Constitution. Novello argued that the first claim is moot, and the second claim is precluded because it improperly seeks monetary damages against her for constitutional violations under 42 U.S.C. @ 1983. Judge Marrero agreed that the damages claim should be dismissed because Section 1983 bars damages claims against state agencies and state officials. A state official can only be sued under Section 1983 if the official is sued in her personal or individual capacity, he said. The suit here, he said, is brought against Novello in her official capacity as evidenced by the fact that should the plaintiffs prevail, it would be the state and not Novello personally who would be liable for the damages. As to Novello's motion to dismiss the claim seeking to compel her to hold hearings, Judge Marrero denied it on the grounds that the motion was "premature." Novello argued that the claim was moot because DOH had agreed to hold the hearings and had sent notices to the former residents. Judge Marrero, however, found that the issue was not moot because DOH had not yet held the hearings nor was there any guarantee that they would hold the hearings in compliance state and federal laws. Judge Morrero granted the plaintiffs' motion for class certification. The proposed class, comprising of all 282 individuals who resided at Neponsit at the time of the evacuation, met all of the requirements under Fed. R. Civ. P. 23, he said. The claims of the proposed class arose out of the same experience -- the evacuation -- and are based on the same legal theories, he said. He rejected the defendants contention that class certificationis an unnecessary "mere formality" because they would treat the class members the same based on the outcome of the case. The doctrine of stare decisis may not protect the class members who are elderly and disabled and may not survive the completion of the litigation, Judge Morrero said. (Nursing Home Litigation Reporter, July 27, 2000) RECORDING COMPANIES: Might Have Cheated Consumers; Agrees to End MAP -------------------------------------------------------------------- The Federal Trade Commission has declared the end of the $17 compact disc. On May 10 the FTC announced that it had reached separate agreements with the recording industry's five largest companies that will put a stop to minimum advertised price (MAP) programs. The agreements end a two-year industrywide investigation. The FTC says that the companies, which control 85 percent of U.S. CD sales, might have cheated consumers out of as much as $480 million when they ended the price war of the mid-nineties by requiring discount retailers like Target and Wal-Mart to advertise CDs at or above MAPs in exchange for substantial advertising money. The restrictions applied even to advertising paid for entirely by the retailers. The companies have agreed not to enter into MAP agreements in the future, though they will pay no fines and did not admit to any wrongdoing. For the Federal Trade Commission (Washington, D.C.) in-house: Assistant Director - anticompetitive practices, William Lanning; lead attorneys James Frost and Karin Richards, and staff attorneys June Casalmir, Kent Cox, Jeffrey Goodman, Geoffrey Green, Veronica Kayne, Kristin Malmberg, and Karen Mills. For Bertelsmann Music Group, Inc. (New York) in-house: Vice president-legal and business affairs Denis Kellman and director-legal and business affairs Deirdre McDonald. Mayer, brown & platt (chicago): Robert Bloch, Scott Perlman, and associate Michael Lackey, Jr. (Mayer, Brown9 s team is located in the firm9s D.C. office.) The firm is BMG's regular outside counsel. For Emi Music Distribution (New York) in-house: Vice president - Legal & Business Affairs Dina Hellerstein. Weil, Gotshal & Manges (New York): Irving Scher and associate August Horvath. The firm is EMI9s regular outside counsel. for sony coRporation of america (new york) rosenman & colin (new york): H. Paul Burak, James Calder, Lisa Weiss, and associate Jennifer Brewster Arlin. Rosenman's lawyers represented Sony in antitrust discussions with the FTC over a potential merger between The Columbia House Company, which the company jointly owns with Time Warner Inc., and CDNow Inc. For Time Warner Inc. (New York) in-house: Vice president and associate general counsel Edward Weiss, Warner Music Group general counsel David Johnson, and Warner Music Group Vice President and Associate General Counsel Paul Robinson. Cravath, Swaine & moore (new York): Robert Joffe and associate Gary Bornstein. Cravath9s attorneys represented Time Warner in the Columbia House- CDNow antitrust talks. For Sony And Time Warner Cleary, Gottlieb, Steen & Hamilton (New York): George Cary and associate Patricia McDermott. Cary and McDermott work in the firm9s Washington, D.C., office. They represented both companies in the unsuccessful Columbia House-CDNow deal. For Universal Music And Video Distribution (New York) in-house: MCA Records Inc. attorney Harvey Geller. munger, tolles & olson (los angeles): Glenn Pomerantz and associates David Rosenzweig and Sean Gates. The firm is Universal's regular outside counsel. FTC v. BMG, EMI, Sony, Time Warner, and Universal (The American Lawyer, July 2000) SANTA MONICA: CA Town Told to Comply With Ban on Fees at ATM ------------------------------------------------------------ A federal judge demanded August 17 that Santa Monica, Calif., leaders comply with his June order that suspended the city's ordinance prohibiting banks from charging fees at automated teller machines. Bank of America and Wells Fargo have not opened their ATMs to outside customers despite U.S. District Court Judge Vaughn Walker's order nullifying Santa Monica's ordinance banning the fees. Instead of dropping the surcharges, those banks prohibited customers who do not bank with them from using their machines. The council adopted an ordinance last year outlawing the fees, which range as high as $2.50 a transaction. The banks do not charge such fees to their own customers. The legal tussle erupted after Santa Monica passed a resolution suspending the ordinance last month. But the banks, citing various legal precedents, said the council had to pass an ordinance, not a resolution, for the fee ban to become legally abolished. Without such passage, the banks could become subject to private, class-action suits that could cost them millions, the banks' attorneys said. Walker gave the council until Nov. 2 to pass an ordinance instead of a resolution, and held off on a possible contempt-of-court order pending the council's action. Santa Monica's attorney Marsha Jones Moutrie said she would pass along Walker's wishes to the council, but said she did not have the authority to order the council to take any action. The 9th U.S. Circuit Court of Appeals has agreed to review Walker's order that suspended the ordinance in a case widely watched by the banking industry. Walker said the National Banking Act allows the federal government, not states and local governments, to mandate banking laws. San Francisco voters approved a similar ordinance in November. But it never took effect and was not involved in the decision. (AP Online, August 18, 2000) U.S., PHILIPPINES: $103B Sought for Hazardous Waste at Old Military Base ------------------------------------------------------------------------ More than 100 people filed suit last Friday August 18 against the United States and the Philippines, seeking $103 billion in damages for deaths and illnesses they say were caused by hazardous waste at former American military bases. The suit seeks $1.1 billion from the Philippine government for allegedly failing to enforce environmental laws and $102 billion from the United States for illnesses near Clark Air Base and Subic Bay Naval Base. It lists 122 plaintiffs who live near the former bases, used for decades by the U.S. military until it left in 1992. ''We have two kinds of victims in this toxic waste contamination. One is the environment and the other is the human victims,'' said Alex Lacson, a Filipino attorney who filed the class-action suit. Merli Baldonado, executive director of the left-wing Task Force on Bases Cleanup, said more than 100 people living near contaminated areas have died, mainly from cancer, since 1996. Baldonado said close to 300 others are suffering from diseases linked to the presence of nitrates, mercury, lead, chromium and cadmium in contaminated areas. Philippine Health Secretary Alberto Romualdez has confirmed toxic contamination in at least 16 places in Clark and 10 in Subic, but so far a direct link to cases of cancer and other diseases among people living near the areas has not been established. U.S. Embassy spokesman Tom Skipper said he could not comment before seeing a copy of the lawsuit. U.S. officials have offered to help solve the Philippines' environmental problems, but insisted Washington has no legal obligation to clean up toxic wastes left at the former bases. (AP Online, August 18, 2000) UNITED AIRLINES: To Waive Changing Flights Penalties to Soothe Customers ------------------------------------------------------------------------ Attempting to control damage caused by labor problems that led to four months of flight delays and cancellations, United Airlines says it will waive penalties for passengers changing flights and give away more frequent flier miles. United is in contract negotiations with the Air Line Pilots Association and its machinists. UAL Corp., United's parent, said it would fall short of third-quarter earnings projections announced last month. UAL stock has dropped 23 percent since April. A union spokesman said negotiators had made progress on scheduling pilots of smaller planes and on job security issues. The airline faces several lawsuits, the latest by a woman who accused United of breach of contract. A class-action suit filed in Chicago seeks damages for thousands of passengers. United canceled 230 of the 2,400 flights it operates daily around the world on August 17 because of rainy weather on the east coast and in the Midwest. The airline has canceled nearly 6,000 flights since its 10,500 pilots began refusing overtime after their contract expired in July 12. The pilots deny they are engaged in an organized job action. "This summer has been an extremely difficult one for United's customers and employees," said United's senior vice president-marketing Graham Atkinson. "Our overwhelming priority at this point is restoring the airline's reliability to acceptable levels." Recognizing what travelers have had to endure, United is trying to build goodwill by doubling frequent flier miles for Mileage Plus Premier members who fly 25,000 to 50,000 miles a year. The airline also will not levy the usual $75 service charge for changing or canceling a flight for customers ticketed for travel before September 30. Travel must be completed by March 31, 2001. (United Press International, August 18, 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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