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/raid1/www/Hosts/bankrupt/CAR_Public/000911.MBX C L A S S A C T I O N R E P O R T E R Monday, September 11 2000, Vol. 2, No. 176 Headlines ACE INA: PA Lawyer Charges Insurer of Workplace Racial Discrimination ARAKIS ENERGY: Proposes Settlement Fund of $24 Mil for Securities Suit BRIDGESTONE/FIRESTONE: DOJ Considers Criminal/Civil Laws Re Tire Defect BRIDGESTONE/FIRESTONE: Firestone's PR Firm Resigns BRIDGESTONE/FIRESTONE: Reports Reveal Longer History of Quality Problems CDnow, INC: Spector, Roseman Files Securities Suit in Pennsylvania COUNTY BANK: Ct Says High-Interest Loans Borrowed Entitled to Discovery FIRESTONE: Tire Defect Suits May Get into One and Assigned to Illinois FORD MOTOR: Says Tire Recall Should Cut into Revenues, Increase Costs GEORGIA POWER: Fires Plaintiff in Employment Racial Discrimination Suit HMOs: CT Files Suit Seeking Reforms for Patients Benefits HOLOCAUST VICTIMS: Cases against French Banks Survive Dismissal in NY INMATES LITIGATION: Those Who Suffered Most in Attica Riot Got $125,000 J.C. NICHOLS: Judge OKs Lawsuit over 1998 Highwoods Properties Merger LOS ANGELES POLICE: Civil Rights Lawyers Say Cops Singled Them out MITSUBISHI MOTORS: Co. President to Step Down for Auto Defects Scandal NEW HAMPSHIRE: Property Tax Will Go to Trial in October RIDGEWOOD CORP: Reductions of Attorney Fees Lacks Support, 3rd Cir Rules SCHOLASTIC CORP: Investors Appeal against NY Securities Suit Dismissal TOBACCO LITIGATION: 1500 Flight Attendants’ Suits Expected by Deadline TOBACCO LITIGATION: Religious Groups Gain Presence at Board With Stock WAL-MART STORES: Ordered to Stop Selling Foods for Less Than Cost * Study Shows Federal Securities Class Actions Drop; GAAP Cases Increase ********* ACE INA: PA Lawyer Charges Insurer of Workplace Racial Discrimination --------------------------------------------------------------------- A Philadelphia lawyer is taking the lead in a class action accusing a major insurer of widespread, systemic discrimination against its African-American employees. Alberta Byrd Brennan, a lawyer who lives in Wynnewood, retained another Philadelphia lawyer, Alan Epstein of Spector Gadon & Rosen, to represent her in a suit against ACE INA Holdings, which bought all of CIGNA's domestic property and casualty operations in July 1999. Epstein filed the suit on May 30. Since then, he said, more African Americans who handle claims for ACE have come forward with similar stories of racial bias that affected their earnings, promotions and job opportunities. On September 7, he moved to amend the complaint to propose a class of plaintiffs, including six more plaintiffs in the case caption.All seven of the named plaintiffs are African-American women who live in Pennsylvania, New Jersey or Delaware. Two are lawyers, and three are paralegals; all of them are (or were) claims handlers for ACE or its predecessor companies. Epstein said that Brennan, before she brought her own complaint to the Equal Employment Opportunity Commission, had undertaken a statistical analysis of disparities in treatment between black and white workers in her own department. That made the case ideal for class action, he said, because it put the company on notice that systemic bias was alleged. The amended complaint proposes a class comprising "all present and former black clerical, administrative, professional, and managerial employees of the Defendant Companies [ACE INA Holdings Inc. and its subsidiaries Insurance Company of North America, Brandywine Holdings, and Century Indemnity] who have been employed by the Defendant Companies from 1990 to date." The complaint estimates that the class has 800 to 1,000 members. It alleges that the defendants failed to pay black employees the same salaries as white employees with similar education, experience, skill and backgrounds; that the companies failed to promote black employees as frequently as similarly situated white workers who performedcomparably; that the companies gave white workers better raises than black workers; and that the company "failed to adequately investigate, respond to, and remedy internal complaints of racial discrimination." The complaint outlines each plaintiff's story. Several report watching white employees with educational backgrounds and experience comparable to their own start out at higher salary grades. Most have tales of lower raises and less frequent promotions. The account of Brennan's experience, however, is the most complete particularly because of its statistical survey of her department. For instance, Brennan alleges that in 1994, the average salary increase for black employees in her department was approximately 1.62 percent, while the average salary increase for white employees in the department was approximately 4.54 percent. In 1994 and 1995, she claims, "the average time that white employees in the department remained at their salary grades before they were promoted was two years ... however, the average time that the black employees in the department remained in their salary grade before they were promoted was approximately three years." Brennan says her complaints to management about the situation were never properly addressed. Lisa Hicks, vice president for communications at Hicks, said ACE does not comment on matters in litigation. However, she said that the company "is proud to be an affirmative action and equal opportunity employer and is fully committed to a diverse workforce." "ACE takes all employee matters very seriously," she said. (The Legal Intelligencer, September 8, 2000) ARAKIS ENERGY: Proposes Settlement Fund of $24 Mil for Securities Suit ---------------------------------------------------------------------- The following press release is being issued by The Garden City Group, Inc.: Purchasers of Arakis Energy Corp. common stock on the NASDAQ between July 6, 1995, and August 21, 1995, may be eligible to participate in a pending class action settlement case with a proposed settlement of up to $ 24,000,000. In addition, all purchasers of call options on Arakis common stock and all sellers of put options on Arakis common stock during that time period also may be eligible to participate in the proceeds of the settlement. This lawsuit has been certified by the Court as a class action on behalf of a Class of all persons and entities who purchased Arakis common stock on the NASDAQ between July 6, 1995, and August 21, 1995, inclusive (the "Class Period") and on behalf of all persons and entities who purchased publicly traded call options on Arakis common stock or who sold publicly traded put options on Arakis common stock during the same Class Period excluding defendants and related entities (the "Class"). The Court has scheduled a hearing before the Honorable United States District Judge Allyne R. Ross on February 5, 2001, at 10:00 a.m. in the United States Courthouse, 225 Cadman Plaza East, Brooklyn, NY 11201, to determine whether to approve the proposed settlement of up to $24 million and whether to grant plaintiffs' application for an award of attorneys' fees and reimbursement of expenses. BRIDGESTONE/FIRESTONE: DOJ Considers Criminal/Civil Laws Re Tire Defect ----------------------------------------------------------------------- The Justice Department is considering whether any criminal or civil laws apply to the Bridgestone/Firestone tires case, Attorney General Janet Reno announced. The development came a day after the head of the Japanese company apologized to a congressional committee for problems with tires linked to 88 deaths in the US, saying he would decide in a few days whether to recall more tires. In addition, Ford Motor Co. chairman Jacques Nasser promised his company would now notify US officials if it makes safety changes in overseas markets. Sen. John McCain (R) of Arizona planned to hold more hearings before his Senate Commerce Committee shortly. (The Christian Science Monitor, September 8, 2000) BRIDGESTONE/FIRESTONE: Firestone's PR Firm Resigns -------------------------------------------------- The public relations firm handling damage control for Bridgestone/Firestone Inc. over allegations that defective tires caused dozens of fatal wrecks has resigned. Fleishman-Hillard International Communications Inc. of St. Louis, the nation's largest public relations firm, was hired two months ago to answer reporters' questions and to advise the Nashville, Tenn.-based tire company on how to handle the burgeoning crisis. Bridgestone/Firestone has been criticized for failing to respond quickly to reports linking its tires to hundreds of accidents, many of them fatal, in the U.S. and other countries. (AP Online, September 8, 2000) BRIDGESTONE/FIRESTONE: Reports Reveal Longer History of Quality Problems ------------------------------------------------------------------------ New reports of September 8 indicated Bridgestone/Firestone should have been concerned about tire quality long before executives have so far admitted. CBS News reported the company's Tire Adjustment Data gave indications tires were defective at rates significantly higher than considered acceptable, adding that the information shows the problems were evident as early as 1992. A review of the tire data showed total return rates of between 3 and 7 percent, with several categories of tires manufactured at an Illinois plant having total return rates as high as 10 percent. Total return rates consist of the number of tires that are later found to have defects. Tires manufactured by Firestone are given serial numbers that allow the company to track them from the moment they leave the factory. CBS reported total return rates should be less than 1 percent, with anything above 2 percent considered "a giant red flag." Bridgestone/Firestone officials were not available to comment but Ford Motor Co. officials have said they were unaware of any significant problem in the tires that were being put on their vehicles as standard equipment. "Ford did not know. I'll repeat that. Ford did not know that until we virtually pried the data out of Firestone's hand," Ford CEO Jacques Nasser told a congressional panel. Bridgestone/Firestone recalled 6.5 million ATX, ATX II and Wilderness AT tires last month. Many of those were on light trucks and sport utility vehicles made by Ford. The National Highway Transit Safety Agency has warned that another 1.4 million Firestone tires also should be replaced although no recall has been issued for them. The federal agency has logged more than 1,400 complaints involving tires, many on Ford Explorers. At least 88 deaths and 250 injuries in the United States are being blamed on auto accidents connected to the tires. The agency also is asking for a significant increase in its budget, which it says will allow it to better monitor highway safety, reducing the likelihood of future tire problems. But the agency is unlikely to see its budget increased by a requested 25 percent to $500 million. Many of the accidents were connected to tire blowouts, which led British tire expert R.J. "Rex" Grogan to testify in East St. Louis, Ill., it would have cost Firestone less than $1 per tire to prevent the blowouts. Grogan said manufacturing the tires with nylon overbelts -- which cost as little as 15 cents each -- could have prevented the problem. He testified in a court hearing September 6 that determined he will be allowed as an expert witness in connection with a lawsuit filed on behalf of a Southern Illinois man. About 40 such lawsuits have been filed across the United States and some attorneys would like to have all of them consolidated into a single class action suit against the tiremaker. The Judicial Panel for Multi-District Litigation will decide in late October or early November whether the cases will be merged. Members of Congress held hearings earlier this month, and two senators are sponsoring bills meant to force companies to tell the federal government when there are concerns about safety. Sen. Arlen Specter, R-Pa., proposed criminal penalties for corporate executives of companies that withhold safety information. (United Press International, September 8, 2000) CDnow, INC: Spector, Roseman Files Securities Suit in Pennsylvania ------------------------------------------------------------------ Spector, Roseman & Kodroff, P.C. on September 7 announced that a class action lawsuit has been commenced in the United States District Court for the Eastern District of Pennsylvania on behalf of all persons who purchased CDnow, Inc.("CDNW") common stock from January 28, 2000 through March 28, 2000 and who were damaged thereby. In addition, claims are brought on behalf of all owners of CDnow common stock on July 26, 2000 and their successors in interest, until the August 22, 2000 close of the tender offer for CDnow by Bertelsmann, Inc. The class action Complaint charges that CDnow and certain of its officers and directors violated the federal securities laws. Specifically, the Complaint alleges that on July 13, 1999, CDnow (an online retailer of pre-recorded music), Time Warner and Sony Corporation of America announced that they had entered into a merger agreement on the previous day, pursuant to which they would combine the businesses of CDnow and Columbia House, a club-based retailer of music and videos that is equally owned by Sony and Time Warner. On March 13, 2000, it was announced that Sony, Time Warner and CDnow had mutually agreed to terminate the merger. Thereafter, CDnow made repeated statements to the news media about the merger termination, including that the merger termination was the result of Columbia House's poor financial condition and that the merger termination was positive for CDnow. The Complaint further alleges that defendants failed to reveal that, on or before January 28, 2000, CDnow's outside auditor advised CDnow management of its "substantial doubt about [CDnow's] ability to continue as a going concern, that this "going concern" qualification would impede the merger with Columbia House and that CDnow could not survive without a merger partner. In its July 26, 2000 Form 14D-9, in connection with the tender offer for CDnow made by Bertelsmann, CDnow also failed to disclose the same material information. The auditor's "going concern" qualification was first disclosed in CDnow's Form 10-K file with the SEC on March 28, 2000. Plaintiffs seek to recover damages on behalf of themselves and all others similarly situated, excluding the defendants and their affiliates. Contact: Spector, Roseman & Kodroff, P.C. Robert M. Roseman, 888/844-5862 classaction@spectorandroseman.com COUNTY BANK: Ct Says High-Interest Loans Borrowed Entitled to Discovery ----------------------------------------------------------------------- Defendant bank made several $ 200 loans to plaintiff. It charged interest of $ 70 on these loans, which were due in about two weeks. These "payday loans" are emergency loans made for the time between a borrower's paydays. Plaintiff sought to bring a class action for alleged violations of, among other things, the usury laws and the Minority Credit Discrimination Law. Bank moved to compel arbitration, as the loan note and disclosure statement contained an arbitration clause. Plaintiff cross-moved for an order penalizing defendant for failure to make disclosure. Noting that an arbitration clause governed by the Federal Arbitration Act can be set aside on sufficient grounds such as unconscionability, the court found that plaintiff demonstrated entitlement to the discovery sought. Bank's motion to compel arbitration was denied without prejudice to renewal. IA PART 17 Justice Kitzes HAYES v. COUNTY BANK QDS:52703045 - Defendant County Bank has moved for an order, inter alia, compelling arbitration of the plaintiff's claims. Plaintiff Patricia Hayes has cross-moved for an order penalizing the defendant for failure to make disclosure. On December 8, 1998, defendant County Bank, which operates under the banking laws of the State of Delaware, made an unsecured loan to plaintiff Patricia Hayes, a resident of Queens, New York, in the amount of two hundred dollars ($ 200), taking back a note. On December 28, 1998, April 20, 1999, May 4, 1999, May 11, 1999, June 9, 1999, June 28, 1999, July 7, 1999, and July 20, 1999, the defendant made similar loans to the plaintiff. The defendant charged $ 70 interest on these $ 200 loans, which were due in about two weeks and which are generally known as "payday loans," because they are emergency loans made for the period of time between the borrower's paydays. The plaintiff alleges that the nine loans made to her bear annual interest rates of 638.75%, 912.50%, 1,596.95%, 1,825.05%, 912.50%, 851.75%, 1825.05%, 912.55% and 912.55%. Although the plaintiff received disclosure statements showing these annual percentage rates of interest, she still agreed to the transactions. The plaintiff asserts that the defendant "targets minority persons of low income through an extensive media campaign * * *." The plaintiff alleges that she responded to radio advertising offering short term cash loans "until your next pay check," and that the advertising did not inform her of the magnitude of the interest rates. The plaintiff called a toll-free number, received documents from the defendant by facsimile transmission, she signed them, and she sent them by facsimile transmission back to the defendant in Delaware. The plaintiff also signed a loan note and disclosure statement (one paper) containing the following clause: "ARBITRATION: You and we agree that any claim, dispute, or controversy between us, any claim by either of us against the other * * and any claim arising from or relating to this Note, no matter by whom or against whom made, including the validity of this note and of this agreement to arbitrate disputes as well as claims alleging fraud or misrepresentation, shall be resolved by binding arbitration by and under the Code of Procedure of the National Arbitration Forum ("NAF") in effect at the time the claim is filed. * * This arbitration agreement is made pursuant to a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. Section 1-16. Judgment upon the award may be entered by any party in any court having jurisdiction." The arbitration clause in five of the notes contains an additional provision: "Your arbitration fees will be waived by the NAF in the event you cannot afford to pay them * * *." The notes contain a notice beneath the arbitration clause which reads: "YOU AND WE WOULD HAVE HAD A RIGHT OR OPPORTUNITY TO LITIGATE DISPUTES THROUGH A COURT BUT HAVE AGREED INSTEAD TO RESOLVE DISPUTES THROUGH BINDING ARBITRATION." The complaint alleges that the defendant "did not advise nor discuss with plaintiff the consequences and legal ramifications of the subject arbitration clause, nor that it would be utilized by defendant to deprive plaintiff and the Class she represents of significant statutory and common law protections, including the class action remedy." Indeed, the plaintiff is seeking to bring in this forum a class action on behalf of herself and others similarly situated asserting various claims, including the first for violation of the Minority Credit Discrimination Law (Executive Law @ 296-a), the second for violation of her constitutional rights under Article 1, section 11 of the New York State Constitution, the third for violation of the civil usury laws (General Obligations Law @@ 5-501 and 5-111 and Banking Law @ 14-a), the fourth for violation of the criminal usury laws (Penal Law @@ 190.20 and 190.40), the fifth for rescission on the ground of unconscionability, the sixth for false advertising in violation of General Business Law @ 350, the seventh for unfair and deceptive business practices in violation of General Business Law @ 349, the eighth for unjust enrichment, and the ninth for a declaration that the arbitration clause is void. The notes signed by the plaintiff provide that the arbitration clause is governed by the Federal Arbitration Act ("FAA") (9 USC @ 1 et seq.). Section 2 of the FAA, "Validity, Irrevocability, and Enforcement of Agreements to Arbitrate," provides: "A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." ( See, Dean Witter Reynolds, Inc. v. Byrd, 470 US 213; Crespo v. 160 West End Avenue Owners Corp., 253 AD2d 28.) A party may assert general contract defenses such as fraud to avoid enforcement of an arbitration agreement. (Southland Corp. v. Keating, 465 US 1.) Under the FAA, reference is made to state law to determine whether generally applicable contract defenses such as fraud, duress, or unconscionability are available to invalidate arbitration agreements. (See, Doctor's Assoc. Inc. v. Casarotto, 517 US 681; Lozada v. Dale Baker Oldsmobile, Inc., 91 F Supp 2d 1087.) "It is well established under both CPLR 7503 and 9 USC @ 4 that a party may resist enforcement of an agreement to arbitrate on any basis that could provide a defense to or grounds for the revocation of any contract, including fraud, unconscionability, duress, overreaching conduct, violation of public policy, or lack of contractual capacity * * *." (Matter of Teleserve Systems, Inc., 230 AD2d 585, 592.) Courts of other jurisdictions have refused to enforce arbitration clauses in credit agreements on the grounds of, inter alia, unconscionability or public policy. In Williams v. Aetna Finance Co. (700 NE2d 859 [1998]), the Supreme Court of Ohio held that an arbitration clause in an agreement for a home equity loan was unconscionable and unenforceable because of the unfairness of the fees and procedures pertaining to arbitration, because the arbitration clause was found in an agreement having some aspects of an adhesion contract, and because the arbitration clause itself appeared to be adhesive in nature. In Patterson v. ITT Consumer Financial Corp. (14 Cal App 4th 1659 [Cal App 1st Dist, 1993]), individuals who borrowed money from finance companies brought a class action based, inter alia, on alleged violations of the California Consumer Legal Remedies Act, and defendant ITT petitioned to compel arbitration pursuant to an arbitration clause in the loan agreements requiring arbitration before NAF. In denying the petition to compel arbitration, the court stated: "While NAF's rules and fees might be fairly applied to business entities or sophisticated investors and to claims for substantial dollar amounts, those same procedures become oppressive when applied to unsophisticated borrowers of limited means in disputes over small claims." (Patterson v. ITT Consumer Financial Corp., supra.) The court concluded that the arbitration clause was unconscionable and unenforceable. In Aetna Finance Company v. McGhee (1993 WL 944559 [n.o.r.] [Court of Common Pleas of Ohio, 1993]), enforcement of a clause requiring arbitration of disputes before NAF was denied on the ground of unconscionability in view of NAF rules, procedures, and fees. Moreover, it was not clear to the court whether the arbitrations were conducted before genuinely neutral officials or before those who depended on the lender for a "large volume" of their business. In Baron v. Best Buy Co., Inc. (75 F Supp 2d 1368 [USDC SD Florida, 1999]), the defendant lenders moved to compel arbitration before NAF of a class action alleging, inter alia, violations of TILA, but the court denied their motion on the ground that the arbitration clause was unenforceable and unconscionable. The court concluded, inter alia, that the arbitrator had not been shown to be efficient, inexpensive, and neutral. In Johnson v. Tele-Cash, Inc. (82 F Supp 2d 264 [USDC Del, 1999]), a borrower brought a class action against lenders, including County Bank, charging violations of the Truth in Lending Act ("TILA") (15 USC @ 1601 et seq.) and Electronic Funds Transfer Act ("EFTA") (15 USC @ 1693 et seq.) by, inter alia, failing to inform him of high interest rates for short term loans. The court held, inter alia, that the arbitration clause in the loan agreement was not unconscionable under Delaware law, but the arbitration clause contained in the note could not be enforced in regard to class claims under TILA and under EFTA because enforcement would contravene legislative policy to encourage class actions under TILA and under EFTA. In Lozada v. Dale Baker Oldsmobile, Inc. (91 F Supp 2d 1087 [USDC WD Michigan, 2000]), automobile buyers brought a class action against the seller and assignee of retail installment sales contracts, alleging, inter alia, violations of TILA. The court denied enforcement of an arbitration clause in the credit agreements on the grounds of procedural and substantive unconscionability. The court concluded, inter alia, "[because] the arbitration agreement prohibits the pursuit of class relief, it impermissibly waives a state statutory remedy." On March 3, 2000, the plaintiff served a demand for document discovery on the defendant which the defendant refused to answer. The discovery sought by the plaintiff pertains to matters such as the impartiality of NAF, the relationship between NAF and the defendant, and defendant's alleged conduct inconsistent with the bona fides of the arbitration clause. "It is well settled that there shall be full disclosure of all evidence, or information leading to evidence, that is material and necessary in the prosecution or defense of an action regardless of the burden of proof * * *." (In re Matthews, 266 AD2d 290; Northway Eng'g v. Felix Indus., 77 NY2d 332.) In view of the authority reviewed above establishing that an arbitration clause governed by the FAA may be set aside on sufficient grounds such as unconscionability, the court finds that the plaintiff has demonstrated her entitlement to the discovery sought from the defendant. Accordingly, the plaintiff's cross motion concerning discovery is granted to the extent that the defendant shall answer the plaintiff's demand for document discovery served on March 3, 2000 within 20 days after the service of a copy of the order to be entered hereon with notice of entry. The defendant's motion to compel arbitration is denied without prejudice to renewal upon a showing that it has answered the discovery demand. (New York Law Journal, August 29, 2000) FIRESTONE: Tire Defect Suits May Get into One and Assigned to Illinois ---------------------------------------------------------------------- East St. Louis could become the focal point of class-action lawsuits pending across the country against Firestone. About 40 such lawsuits have been filed nationwide against the besieged tire manufacturer, and some attorneys involved are asking a federal panel to have the cases consolidated and assigned to the Southern District of Illinois. Meanwhile, U.S. District Judge David R. Herndon on September 7 admitted British tire authority R.J. "Rex" Grogan as an expert witness in the class-action consumer lawsuit filed on behalf of Troy resident Gary Gustafson and 149 other Firestone customers. Grogan testified that tread-belt separation plaguing Firestone's ATX, ATX II and Wilderness AT tires could be prevented if they were manufactured with nylon overbelts costing between 15 cents and $ 1 per tire. Herndon said Grogan seemed to contradict himself at times during testimony -- saying he considered any tire defective that lacked a nylon overbelt, then saying he did not. In the U.S., nylon overbelts are generally found on high-performance tires, but not on all tires. Herndon said the Gustafson case had better be based on more than the overbelt issue. "I can't imagine it's that simple, that that's all the case is about," he said. Herndon set Sept. 20 and 21 as dates for hearings with two other expert witnesses for the case, both former employees of Firestone involved in the design and in the testing of tires. He set Oct. 16 as a hearing date on a request for a preliminary injunction. The injunction would expand and make immediate Firestone's recall of 6.5 million tires to include some 1.4 million tires identified in a recent National Highway Transportation Safety Administration consumer advisory report. The hearing is expected to last at least three days. Meanwhile, the Judicial Panel for Multi-District Litigation is expected to decide in late October or early November whether the cases should be consolidated and in which district. "There's an obvious economy that comes about," said legal expert Patrick Cotter, a former federal prosecutor who practices both criminal and civil litigation in Chicago. "It also avoids the situation where you get different federal courts coming up with different rulings on the same issues." East St. Louis already has the Gustafson case and another consumer class-action case, filed Aug. 29 on behalf of an Alton woman and a Collinsville woman who bought Firestone tires. Neither lawsuit concerns personal injury. "I think there's a lot to be said for combining all these cases into one," Herndon said during a scheduling conference. "I don't know who they'll be assigning it to, but I think that would be the best way to handle it." Jonathan Selbin, one of the attorneys representing Gustafson, said they and attorneys in other Firestone cases want the cases assigned to the Southern District of Illinois. "They've looked at the landscape and they see this case is going to move quick and this case will be the focal point and they want to coordinate with us," Selbin said. "There are only a handful of experts and we have three of the top experts committed to this case." In addition, the Center for Auto Safety, a consumer advocacy group founded by Ralph Nader in 1970, has asked to join the Gustafson case. (Belleville News-Democrat, September 8, 2000) FORD MOTOR: Says Tire Recall Should Cut into Revenues, Increase Costs --------------------------------------------------------------------- Ford Motor Company acknowledged that replacing 6.5 million potentially defective Firestone tires on some of its vehicle models would likely cut into revenues and increase costs. In a filing with the Securities and Exchange Commission, the company said it had also suspended production of four models at two plants for two weeks in order to divert 70,000 replacement tires for use in the recall. "Although we expect these actions to reduce revenues and increase costs, it is too early to assess their overall financial impact in the second half of 2000," Ford said. The company estimated that as of September 6 it had replaced 30 percent of the affected Firestone tires, most of which had been installed as original equipment on Ford's Explorer, Mountaineer and Ranger models as well as on Mazda's Navajo and B series models. The latter two models are manufactured by Ford and sold to Mazda. Firestone announced the recall on August 9 following reports that the tires tended to come apart at high speeds and, according to US safety regulators, may have contributed to the deaths of 88 people in dozens of accidents in the United States. In Detroit Ford spokeswoman Karen Hampton said the "impact on the company's bottom line for the financial year (calendar year 2000) is not expected to be material." "We'll have a better idea when we announce third quarter earnings on October 18," she added. Ford also told the SEC that it was facing 63 personal injury lawsuits and 35 class action lawsuits, which it said sought to expand the recall to include other tires and to compensate consumers for replacement costs. Several of the complaints seek punitive damages as well, according to Ford. Ford stock was trading at 26 dollars at midday last Friday September 8, down 11.86 percent from August 9. (Agence France Presse, September 8, 2000) GEORGIA POWER: Fires Plaintiff in Employment Racial Discrimination Suit ----------------------------------------------------------------------- Georgia Power Co. has fired a longtime African-American employee who filed a racial discrimination suit against the utility. Her attorneys charged September 7 the firing was retaliation for the lawsuit. In a motion filed in U.S. District Court, the attorneys allege that Sarah Jean Harris, a 21-year veteran of the utility, was unlawfully terminated this month, 36 days after she and two other employees sued the utility. The motion seeks to have Harris reinstated with "back pay, front pay, compensatory and punitive damages.'' Todd Terrell, a spokesman for the company, confirmed Harris had been terminated. But her dismissal had "absolutely nothing to do with the pending lawsuit"and was related to her job performance, he said. The lawsuit, filed July 27, alleges the utility and its parent, Southern Co. , foster a "pattern of discriminating against African-Americans'' who work there and show "reckless indifference'' to a racially hostile workplace. Since then, four more employees of Georgia Power and other Southern Co. subsidiaries have joined the lawsuit. The plaintiffs are seeking class-action status to represent 2,100 African-American employees. According to September 7's motion, Harris was dismissed from her position as a customer service representative in Georgia Power's engineering and operations department despite a series of favorable performance evaluations as late as last month. She was informed by two Caucasian supervisors on Sept. 1 that she was being terminated "because of her performance and because she was supposedly recently seen making copies at the Duluth Operating Headquarters on a Saturday,'' it said. The motion said her performance evaluations, letters of commendation and awards --- a number of which were submitted to the court --- clearly demonstrate she was performing "at or above her job requirements" at the time of her dismissal. The alleged claim that she was making copies "is absolutely false ... and a pretext.'' Terrell did not confirm any particular complaints about Harris' performance. But he said she had in October 1999 been "placed on the final level of discipline under Georgia Power's progressive discipline process as a result of her job performance.'' She was told at that time that "any performance problems during the following 12 months would result in her termination,'' he said. Harris' complaint said she had been "unfairly placed on positive discipline'' in October 1999, but "because of problems related to job responsibilities that were performed by other employees and that were outside her job functions.'' (The Atlanta Journal and Constitution, September 8, 2000) HMOs: CT Files Suit Seeking Reforms for Patients Benefits --------------------------------------------------------- Attorney General Richard Blumenthal filed a federal class-action lawsuit on September 7 against four major health insurers, charging the companies continually put profits over patients. The suit, apparently the first one of its kind, demands no money but seeks sweeping reforms of the industry. Blumenthal sued the state affiliates of Anthem Blue Cross and Blue Shield, Cigna HealthCare, Oxford Health Plans and Physicians Health Services and their respective parent companies. The insurers cover nearly 2 million people in the state. (AP Online, September 8, 2000) HOLOCAUST VICTIMS: Cases against French Banks Survive Dismissal in NY --------------------------------------------------------------------- Lieff, Cabraser, Heimann & Bernstein is one of plaintiffs' counsel in two related Holocaust-era cases against French Banks pending a United States District Court for the Eastern District of New York before Judge Sterling Johnson. Judge Johnson on September 7 issued a landmark decision denying the defendants' motions to dismiss this Holocaust-era litigation. This is the first major class action case involving Nazi-era claims in which a United States federal court has rejected defendants' motions to dismiss the claims. Chase Manhattan Bank, a United States bank, was one of the defendants in the case, and its motions to dismiss were rejected along with the motions filed by the French Banks. Chase is accused of having engaged in misconduct and of having profited from atrocities committed during the Holocaust in France. "This is a significant decision that will have a substantial and beneficial impact on the ability of Holocaust victims to pursue private claims in the United States arising out of the misconduct of private entities during and since World War II," said Lieff, Cabraser, Heimann & Bernstein, New York and San Francisco partner Morris A. Ratner. "The Court's decision will strengthen the claims of other victims of human rights abuses who have suffered at the hands of private entities," Ratner said. "The message is clear: private corporations that take advantage of human rights victims during times of social unrest or turmoil cannot later hide from the law or evade responsibility for their actions." "This decision rejecting the French Banks and Chase Manhattan's motions to dismiss will assist in the ongoing efforts to achieve justice for Holocaust victims, in particular for victims of atrocities perpetrated in France," Ratner said. There is a similar case against various French banks and Chase Manhattan Bank pending in San Francisco Superior Court, under California's Unfair Competition Act. The case is pending before the Honorable Stuart Pollak. The Court in that case is scheduled to hear argument on motions to dismiss on September 8, 2000. Lieff, Cabraser, Heimann & Bernstein partner Morris Ratner is also one of the settlement class counsel responsible for the $1.25 billion Swiss banks settlement of Holocaust claims pending in front of Judge Edward Korman in the Eastern District of New York, and is one of the negotiators of and signatories to the recent $5 billion settlement of Nazi-era claims involving German companies and the German government. Contact: Lieff, Cabraser, Heimann & Bernstein, LLP Morris A. Ratner, 415/956-1000 INMATES LITIGATION: Those Who Suffered Most in Attica Riot Got $125,000 ----------------------------------------------------------------------- Western District Judge Michael A. Telesca announced late August how an $ 8 million settlement will be divided among inmates brutalized by corrections officers following the deadly 1971 Attica prison riots. The largest share any of the 502 former inmates or their families will receive from the settlement plan devised by Judge Telesca in Rochester is $ 125,000. That amount goes to those who suffered the most horrific abuse after the violent retaking of the maximum-security prison. The families of inmates slain during the retaking will receive $ 25,000 each, under the ruling. "The events of the morning of Sept. 13, 1971, left indelible impressions upon each of the plaintiffs after having been subjected to indignities and unwarranted brutal treatment," Judge Telesca wrote in his decision. "Although they have left Attica, Attica has not left them." In agreeing to settle the 26-year-old class-action lawsuit earlier this year, the State admitted no wrongdoing and agreed to pay the inmates $ 8 million and their lawyers $ 4 million in legal fees and costs. (New York Law Journal, August 29, 2000) J.C. NICHOLS: Judge OKs Lawsuit over 1998 Highwoods Properties Merger --------------------------------------------------------------------- A federal judge has cleared the way for disgruntled J.C. Nichols shareholders to pursue securities fraud claims against the company. In a 122-page opinion, U.S. District Judge Kathryn Vratil refused to dismiss a variety of securities fraud allegations stemming from Nichols' 1998 merger with Highwoods Properties Inc. of Raleigh, N.C. The class-action lawsuit, originally filed by Nichols shareholder John Flake, alleges that the $65-a-share merger price was inadequate and that Nichols tried to prevent shareholders from entering into more-favorable deals for their stock. "Viewed in the light most favorable to plaintiff, the record suggests that defendants coerced shareholders to approve the Highwoods transaction by misleading proxy materials," Vratil wrote. At the same time, Vratil threw out claims by the plaintiffs that Nichols and Highwoods violated federal law by making misleading statements and omissions in their communications to members of Nichols' employee stock ownership plan. "We're awfully happy she threw out the majority of the claims," said Michael J. Thompson, a lawyer for Nichols and Highwoods. "She dismissed all the claims of impropriety with regard to the beneficiaries of the ESOP. The few things that remain, compared with what was dismissed, are relatively minor." A lawyer for the plaintiffs, however, called Vratil's ruling a "vindication of the approach we've been advocating on behalf of the class for two years." "Nichols shareholders were misled and defrauded into approving the Highwoods transaction," said the lawyer, Sam Logan. "We welcome the opportunity to present all the facts to a jury." The case is scheduled to go to trial Jan. 16 in federal court in Kansas City, Kan. Vratil last year certified the lawsuit as a class action on behalf of Nichols shareholders and members of the ESOP. The class could have as many as 600 members, ranging from former Nichols executives to one-time maids and maintenance workers at old Nichols-owned hotels and other properties. Vratil's decision came after Nichols and Highwoods filed a summary judgment motion in April seeking to have the lawsuit thrown out. The companies said that the "business judgment" rule shielded them from liability and that Nichols' board of directors was under no legal obligation to auction off the company to the highest bidder. "The plaintiffs' remaining claims focus on whether there was any rational basis for believing that the price received by the shareholders wasn't fair. And the plaintiffs have no evidence that the price they received was not fair," Thompson said. Flake, who died in April and has been replaced as a plaintiff by his estate, originally sued in state court. The case was moved to federal court in late 1998 after Flake amended the complaint to include federal securities violations and other claims. Besides Nichols and Highwoods, the suit names as defendants Nichols' directors at the time of the Highwoods deal. The suit is an outgrowth of developments in 1994 and 1995, when Nichols turned down a takeover bid from Allen & Co., a New York investment banking firm. Allen then sued Nichols, exposing insider transactions that allegedly benefited Nichols chief Lynn McCarthy and other top Nichols officials at the expense of company shareholders. The Allen suit triggered additional litigation against McCarthy and by the ESOP against Nichols. McCarthy - along with former Nichols chief financial officer Walter Janes and former Nichols general counsel Charles Schleicher - was ousted in mid-1995 and the suits were settled. Nearly five years after their ouster, McCarthy, Janes and Schleicher were indicted by a federal grand jury in Kansas City on criminal charges stemming from the litigation. The three, who have entered not-guilty pleas, are scheduled to be tried next spring. In 1996, with a revamped board and management, Nichols authorized an 80-for-1 stock split to boost the stock's liquidity. Soon afterward, the company - owner of the Country Club Plaza and a rich assortment of other residential, commercial and industrial properties was besieged by would-be bidders seeking to acquire the stock. Nichols responded by adopting a series of defensive measures designed to ward off hostile-takeover attempts. At the heart of the Flake lawsuit is the plaintiffs' contention that a 1998 proxy statement misleadingly urged Nichols shareholders to approve the merger with Highwoods because other parties were only casually interested in Nichols. In fact, the plaintiffs say, the company received numerous expressions of interest in its stock, some at considerably higher prices than the one offered by Highwoods. Among them, they say, was a $75-per-share offer from Intell Management Investment Co. of New York that Nichols never bothered to pursue. Although Vratil rejected many of the plaintiffs' claims of misrepresentation, she declined to dismiss other allegations that the proxy was misleading in material respects. Vratil ruled that the allegations raised fact questions for a jury to decide. Vratil wrote: "A reasonable jury could find that after defendants entered into the Highwoods agreement, they made material misrepresentations and omissions in the proxy materials, and thus induced (Nichols) shareholders to approve the Highwoods transaction.' Barry Brady, senior vice president of Highwoods and its top official in Kansas City, said Nichols was "pleased" with Vratil's decision "in that she ruled in our favor on many of our motions." "As for the others, I guess we'll go to the jury, and that's OK," he said. "We're still confident in our position. We hoped for more and got about what we expected. We'll proceed and go to trial." (The Kansas City Star, September 8, 2000) LOS ANGELES POLICE: Civil Rights Lawyers Say Cops Singled Them out ------------------------------------------------------------------ Some civil rights attorneys allege that they got more than they bargained for during the Democratic National Convention in Los Angeles -- namely, rubber bullets, baton beatings and black eyes. And they allege that the police singled them out because of the green National Lawyers Guild hats they wore as they observed, noted and sometimes photographed police conduct during the four days of demonstrations. The lawyers also allege that others observing the police were singled out for attacks, including the five journalists who now are plaintiffs in a federal civil rights lawsuit against the city and several police officials. The ACLU Foundation of Southern California filed Crespo v. The City of Los Angeles, No. 08869, in U.S. District Court for the Central District of California on Aug. 21, the third case filed by the organization in connection with the Los Angeles protests. An LAPD spokesman said that the pending lawsuit precludes any public comment from the department. But police officials earlier denied that journalists had been singled out and apologized publicly to any who might have been caught in the melee. The Crespo suit, however, alleges that no demonstrators were near the plaintiffs when they were attacked. Before the convention, the ACLU persuaded a federal judge to order that a protest zone be opened near the convention center, rather than in the remote area initially designated by the city. Then the lawyers won an injunction against the LAPD to quit harassing demonstrators at their headquarters. The protests were "a critical test to see whether a discredited police department could discharge its duties without violating individuals' civil rights," said Michael Small, chief counsel for the foundation. "The department failed in that charge and then turned on those who were documenting that failure." Members of the Lawyers Guild have defended protesters arrested in Seattle, Washington, D.C., Philadelphia and Los Angeles and have trained legal observers to amass evidence. The ACLU, working with the guild and other civil rights lawyers, has sued both Seattle and Los Angeles. Attorneys for the Partnership for Civil Justice Inc., in Washington, D.C., the ACLU and the Lawyers Guild on July 27 filed a class action against the District of Columbia, the United States and seven other local and federal agencies. In Los Angeles, about 250 legal observers, mostly attorneys and law students, gathered evidence and, in some cases, were allegedly attacked by the police. The lawyers said that they expect more civil rights lawsuits. "The city can look forward to years of litigation as the result of the LAPD's misdeeds at this convention," said Dan Tokaji, staff attorney for the ACLU of Southern California. He alleged, "[at] least 150 people were injured, mostly peaceful protesters, observers and journalists. The police fired rubber bullets indiscriminately into a crowd in which protesters, observers and media were trying to leave. . . . " Among those injured were Professor Karl Manheim, of Loyola Law School, and civil rights attorneys Robert Myers, formerly Santa Monica's city attorney, and Carol Sobel. "I still have black eyes," said Ms. Sobel, a solo practitioner who previously was senior staff counsel for the ACLU of Southern California. "I was there wearing a green hat as a legal observer and was across the street and a block away, diagonally, from where they were shooting when I was hit between the eyes." James Lafferty, executive director of the Los Angeles chapter of the National Lawyers Guild, said that legal observers intervened between the police and departing demonstrators, urging restraint on the first night of the convention. Mr. Lafferty was among the injured when officers allegedly ignored their pleas and fired rubber bullets. "Six to eight observers were shot that night in unprovoked violence with horses and truncheons," he alleged. Video Evidence Collected The guild has collected hundreds of pieces of evidence, including declarations and video, of alleged police efforts to chill the protests, he said. Contrary to denials by the LAPD, the evidence includes affidavits from observers who allegedly overheard police orders to shoot news reporters. During the six months before the time limit for filing, the lawyers will decide their next move. The Lawyers Guild's annual convention, to be held in Boston on Nov. 2-5, will address the subject of handling protests. Also, Katya Komisaruk, the Oakland, Calif., attorney who founded the Mid-night Special Law Collective to help activists, has represented about 40 jailed protesters in L.A. who negotiated a plea bargain in which their misdemeanor charges were reduced to infractions. Although only the 40 remained jailed intentionally to practice civil disobedience, the deal applies to the nearly 200 people arrested during the demonstrations. (The National Law Journal, September 4, 2000) MITSUBISHI MOTORS: Co. President to Step Down for Auto Defects Scandal ---------------------------------------------------------------------- Mitsubishi Motors Corp. picked a new president in an attempt to clean up its image shattered by a two-decade cover-up of auto defects. Mitsubishi Motors President Katsuhiko Kawasoe announced he will step down effective Nov. 1 to take responsibility for the scandal that has resulted in a recall of 620,000 vehicles and a police investigation. Takashi Sonobe, chairman of Mitsubishi Motors' U.S. manufacturing and sales operations, was chosen as Kawasoe's successor. Meanwhile, government regulators on September 8 filed a criminal complaint against the company for the cover-up. (AP Online, September 8, 2000) NEW HAMPSHIRE: Property Tax Will Go to Trial in October ------------------------------------------------------- New Hampshire faces a constitutional challenge to its latest property tax -- its third attempt to fund education since 1997. The class-action suit, filed last December, will go to trial Oct. 16 in Rockingham Superior County Court At issue is the controversial property tax system that New Hampshire enacted this year to raise the $879 million needed to provide an "adequate education" to all students, as mandated by the state's Supreme Court in the 1997 Claremont II decision. Under the new system, each student is entitled to $4,220. Each property owner is taxed at $6.60 per thousand dollars by the state. At the state level the money is divided and remitted based on the number of students in each town, making richer towns "donors" and poorer towns "receivers." The state gives the receiver towns the extra tax revenues in the form of education grants. The Legislature enacted the current property tax to tide the state over until 2003, when the tax legislation will sunset. Portsmouth Mayor Evelyn Sirrell, the complainant, asserts that the current taxation methods violate the state constitution because the assessments are not "administered in a manner that is equal in valuation and uniform in rate throughout the state." The suit claims that property in many towns have not been assessed in more than five years, as the plaintiff believes the constitution mandates. The New Hampshire Department of Revenue does not require an assessment every five years. In addition to questioning the constitutionality of the taxation process, Sirrell and her fellow-aggrieved also maintain that the receiver towns do not always use the grants for education. Thomas Clossen, Sirrell's lawyer, said, "If the state is going to step in here and take this taxation problem then there has to be some sort of accountability to the donor towns." The state has counter-filed, claiming that accountability has been addressed under the Claremont II decision and thus that portion of the claim should be eliminated. The state intends to tackle the question of constitutionality by revisiting the colonial language in the state constitution, said Anne Edwards, an assistant attorney general for the state. No matter what happens in this case, the state's General Court will introduce new tax legislation to address education-funding in January, after the gubernatorial elections, according to Senate President and Finance Committee chairwoman Beverly Hollingsworth. "Somebody will have to initiate something because we have a deficit right now," said Hollingsworth. "We have to get something in place so we can begin collecting revenues before the legislation expires." (The Bond Buyer, September 8, 2000) RIDGEWOOD CORP: Reductions of Attorney Fees Lacks Support, 3rd Cir Rules ------------------------------------------------------------------------ The district court abused its discretion when it reduced the $ 3.16 million fee requested by plaintiffs' counsel to $ 1.71 million without supporting its fee award with an analysis of each of the fee award factors. Vacated. Following the settlement of a complicated and lengthy class action arising out of failed oil and gas investments, plaintiffs' counsel submitted a fee application for $ 3.16 million. The district court, in a brief statement, instead awarded only $ 1.71 million in fees. Plaintiffs' counsel appealed, contending that the district court abused its discretion in not awarding them their requested fee. In common-fund cases, district courts are required to consider seven different factors in determining the size of a fee award, the Third Circuit observed. These factors include the size of the fund created and the number of persons benefited, the complexity and duration of the litigation and the amount of time devoted to the case by counsel. Here, the court noted that "[t]he problem in this case is that the [d]istrict [c]ourt dealt with the fee-award issue in a cursory and conclusory fashion." In addition, the court determined, "when the [district] [c]ourt did reference the fee-award factors in its opinions, it neither engaged those factors nor explained its reasoning." Because the district court failed to analyze and explain its application of the fee-award factors in reducing the fee request submitted by plaintiffs' counsel, the district court abused its discretion, the court concluded. Therefore, the court vacated the fee award and remanded the case. Gunter v. Ridgewood Energy Corp., PICS Case No. 00-1544 (3d Cir. July 27, 2000) Becker, C.J. (11 pages). (Pennsylvania Law Weekly, September 11, 2000) SCHOLASTIC CORP: Investors Appeal against NY Securities Suit Dismissal ---------------------------------------------------------------------- Three purported class action complaints were filed in the United States District for the Southern District of New York against the Company and certain officers seeking, among other remedies, damages resulting from defendants' alleged violations of federal securities laws. The complaints were consolidated. The Consolidated Amended Class Action Complaint (the "Complaint") was served and filed on August 13, 1997. The Complaint was styled as a class action, In RE SCHOLASTIC CORPORATION SECURITIES LITIGATION, 97 CIV.II 2447 (JFK), on behalf of all persons who purchased Company common stock from December 10, 1996 through February 20, 1997. The Complaint alleged, among other things, violations of Sections 10(b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, resulting from purportedly materially false and misleading statements to the investing public concerning the financial condition of the Company. Specifically, the Complaint alleged misstatements and omissions by the Company pertaining to adverse sales and returns of its popular GOOSEBUMPS book series prior to the Company's interim earnings announcement on February 20, 1997. On January 26, 2000, an order was entered granting the Company's motion to dismiss plaintiffs' Second Amended Consolidated Complaint without leave to further amend the complaint. Previously, on December 14, 1998, an order was entered granting the Company's motion to dismiss plaintiffs' First Amended Consolidated Complaint, with leave to amend the complaint. In dismissing both complaints, which alleged substantially similar claims, the court held that plaintiffs failed to state a claim upon which relief can be granted. Plaintiffs have appealed the most recent dismissal. The Company continues to believe that the litigation is without merit and will continue to vigorously defend against it. TOBACCO LITIGATION: 1500 Flight Attendants’ Suits Expected by Deadline ---------------------------------------------------------------------- Miami Attorneys for flight attendants suing Big Tobacco bombarded the Miami-Dade Circuit Court clerk with hundreds of lawsuits in a last-ditch effort to meet a filing deadline set for September 7. On two recent days alone, the clerk's office logged more than 700 new filings on behalf of flight attendants who claim that the secondhand smoke they inhaled from passengers who lit up caused them to become ill. Hundreds more were expected. The clerk's in-box last Wednesday September 6 afternoon was piled high with mostly tobacco-related legislation. One clerk said that with the filing deadline, they just can't wait to see what happens. The lawsuits are the outgrowth of a deal struck nearly three years ago by Miami attorney Stanley Rosenblatt, who filed a class action lawsuit against cigarette makers on behalf of flight attendants around the United States. The suit settled, and while the flight attendants got no money, they were given the right to file individual lawsuits against tobacco companies. The agreement set the filing deadline for last Thursday Sept. 7, 2000. Key to their ability to bring their cases was the tobacco industry's agreement to waive the statute of limitations on individual claims, viewed by many observers as a significant concession. The suits started trickling in earlier this year after Rosenblatt put together a group of Miami lawyers willing to take the cases. By March, some 600 cases had been filed, and lawyers expected that as many as 1,500 would be filed by the deadline. "We had seven people working on these cases" on Labor Day, said Evelyn Jaume, secretary to Steve Hunter, one of the attorneys handling the litigation. Jaume said her database showed close to 1,000 cases had been filed by September 6, adding that the file wasn't up to date. Miami attorney Miles McGrane has had a legal assistant devoted solely to working on flight-attendant cases. "Every day we get five or six Federal Express envelopes," McGrane said. The envelopes contain questionnaires that the attorneys sent out to see if they were candidates for litigation. "It's been pretty nuts." "We are watching the clock," said Stuart Silver of Kluger Peretz Kaplan & Berlin, who is working on the cases along with Abbey Kaplan and two paralegals. "We have a good system set up here, but we are certainly getting a lot of last-minute calls." Each of the law offices handling the suits have between 300 and 450 cases. "Last Thursday our office took the position that we would not take any more clients," McGrane said. Philip Gerson, a Miami lawyer brought in to handle the suits filed by Joel Wolpe of Miami's Wolpe & Leibowitz, who bowed out of the case for personal reasons, is handling the overflow of last-minute cases, McGrane said. Despite the deluge, it's business as usual at the clerk's office, said McGrane. "We haven't heard a single complaint from anyone." Neither the clerk of the courts nor the court administrator was available for comment. This story originally appeared in the Miami Daily Business Review. (The Legal Intelligencer, September 8, 2000) TOBACCO LITIGATION: Religious Groups Gain Presence at Board With Stock ---------------------------------------------------------------------- When Rev. Michael Crosby attends the annual meeting of Philip Morris shareholders, he recalls the image of John the Baptist, his voice crying out in the wilderness. "There are some people there who would just love to see you go away," said Crosby, a Capuchin Franciscan friar from Milwaukee who has been attending Philip Morris meetings as a stockholder for the last 20 years. "Sometimes people will say, 'If you don't like the stock, sell it and go back to church.' " But Crosby has no intention of selling. Since 1980, Crosby and the Midwest Capuchin Franciscans have owned a piece of Philip Morris for the specific purpose of having a voice within the company. Crosby calls it "buying a pulpit." He has used that pulpit to urge Philip Morris to change its ways. Crosby feels less alone at Philip Morris meetings these days. Increasingly, religious groups are able to dominate the agenda at corporations' annual meetings, offering a bevy of social justice proposals on the environment, Third World debt, nuclear power and other issues. This year, General Electric, Wal-Mart, Merck pharmaceuticals, ExxonMobil and many other corporations were confronted with shareholder resolutions offered by religious orders. Diane Bratcher, a spokeswoman with the Interfaith Center on Corporate Responsibility, which coordinates many such resolutions, said her organization has grown to 275 member groups with $110 billion of investments. They represent Catholic, Protestant and Jewish denominations, though some city and union pension funds are also affiliated, she said. "We've grown significantly in the last 30 years, and the growth has been steady," Bratcher said. The interfaith center began with a Protestant bent, but most of its growth has come from Catholic orders, Bratcher said. About 200 of its member organizations are Catholic, she said. "Because of the securities rules, it's easy to get a company's attention," Bratcher said. "They have to address a shareholder's resolution." Winning a shareholder vote is another story. Crosby said there has never been an Interfaith Center resolution that achieved a majority vote from stockholders when the company's board of directors opposed it. "Quite frankly it's a victory when we get 3 percent," said Cathy Rowan, coordinator of corporate social responsibility for the Maryknoll Sisters in Maryknoll, N.Y. In some cases a 3 percent vote is what a group needs under Securities and Exchange Commission rules to offer the same proposal next year. Still, there are victories. Several years ago, 3M's board of directors agreed to an Interfaith Center proposal to limit tobacco advertising on billboards owned by a subsidiary. And Philip Morris directors agreed to a proposal from Crosby to support legislation to put tobacco behind the counter where it would be less accessible to minors. Philip Morris attorneys used that as evidence to defend itself in the recent smokers' class-action suit in Florida, saying it showed the company had changed its ways. In rebuttal testimony, Crosby characterized Philip Morris' acceptance of his request as "a baby step." "You can't be co-opted," he said. "If we say anything positive, they'll use it." Philip Morris spokesman Nick Rolli declined to comment. Maryknoll was one of four religious groups to offer shareholder proposals at this year's annual meeting of General Electric shareholders in Richmond. Proposals dealt with a variety of issues, from executive pay to arms exports. The Maryknoll Sisters were concerned with pollution of the Hudson River, saying that GE had a responsibility to clean up 1.3 million pounds of chemicals it dumped there from 1947 to 1977. Louise Binns, a GE spokeswoman, said the company treats all shareholder proposals seriously. "We don't really make any distinctions between religious investors and non-religious investors," she said. Often, said Bratcher, a religious order will have a specific issue it wishes to pursue--executive pay, for example. The order examines policies of the corporations it already owns. If it feels an improvement can be made, it will lobby for a change, using shareholder resolutions only if informal discussions aren't successful. "It's a question of strategies," Rowan said. "It's hard in this world to remain totally on the outside. ... What we're doing as people of faith is trying to walk on some common ground." Or, as Crosby put it, "We're admonished to go into the whole world and bring the values of the Gospel. And that includes the corporate world." (Chicago Tribune, September 8, 2000) WAL-MART STORES: Ordered to Stop Selling Foods for Less Than Cost ----------------------------------------------------------------- U.S. retailer Wal-Mart and two German discount supermarket chains have been ordered by German authorities to quit regularly selling basic foods such as milk and butter for less than cost. Wal-Mart said it would comply. Wal-Mart Stores Inc., the Bentonville, Ark.-based retailer which entered the German market in 1997, triggered a price war in late June which soon drew in the German-based store operators Aldi and Lidl. But the German Cartel Office said the price war threatens the survival of smaller stores that a policy of regularly selling basic foodstuffs for less than cost could force smaller rivals out of business and pave the way for higher prices in the future. (AP Online, September 8, 2000) * Study Shows Federal Securities Class Actions Drop; GAAP Cases Increase ------------------------------------------------------------------------ Federal securities fraud class action filings fell by 14% in 1999, reversing a three-year trend of annual increases, according to the recently released PricewaterhouseCoopers 1999 Securities Litigation Study. This drop occurred despite the 1998 enactment of the Securities Litigation Uniform Standards Act, which made federal court the exclusive jurisdiction for most securities class action litigation. The legislation was intended to eliminate frivolous securities class actions in state courts. The study also shows that for the first time since the 1995 Private Securities Litigation Reform Act (PSLRA) was enacted, the number of cases filed alleging violations of generally accepted accounting principles (GAAP) exceeded the number of those that did not. In 1995, before the PSLRA, accounting cases made up about 25% of all cases filed but 53% of all federal securities class action lawsuits. ''The tactic of class action plaintiffs and their counsel to allege GAAP violations has clearly become an established and pronounced trend,'' said Harvey Kelly, New York-based partner of Price-waterhouseCoopers' Securities Litigation practice. Other significant findings in the study include: -- The high-tech sector continued to experience the most securities litigation in 1999. The computer services, computer hardware and software, and telecommunications industries accounted for a combined 37% of new cases filed. -- The banking and brokerage industries experienced a decline in securities litigation, down to less than 10% in 1999 from nearly 25% in 1998. -- Some 55% of new securities litigation cases involving accounting issues alleged that companies employed improper revenue recognition techniques, down from 73% in 1998. Of the cases filed in 1999, 40% asserted asset overstatements. (Managing the General Ledger, September 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. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *