/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000914.MBX C L A S S A C T I O N R E P O R T E R Thursday, September 14, 2000, Vol. 2, No. 179 Headlines AMERICAN FAMILY: Sweepstakes Suit Results in Settlement and Reforms BOONE COUNTY: Judge Rules Lawsuit Covers All Female Students in District BOSTON SCIENTIFIC: Investors Allege in MA of Misrepresentation of Recall BOSTON SCIENTIFIC: DOJ Investigates on NIR ON(R) Ranger(TM) Recalled BRIDGESTONE CORP: A- Long-Term S&P Credit Rating Still on CreditWatch DELTA FINANCIAL: 1998 NY Suit Alleges of TILA and HOEPA Violations DELTA FINANCIAL: Borrowers Say Processing Fees Are Improperly Charged DELTA FINANCIAL: Changes in Lending Practices Part of Settlement DELTA FINANCIAL: Defends Securities Suit Filed in NY over IPO in 1996 DELTA FINANCIAL: Faces NY Suit Filed in April on Fees for Mortgage Loans DELTA FINANCIAL: Lawsuit Says Amounts in Escrow Accounts Exceed Limits E.COLI: Judge in Canada Wants People Most Affected to Be Heard FIRESTONE, FORD: Analysts Tell of Hurt on Earnings FIRESTONE, FORS: KS Couple in Narrow Escape from Tire Peeling File Suit FORD MOTOR: Board Discussed Dangerous Stalls; Denies Knowing Problem HOLLYWOOD: Lawyers Consider Lawsuit Using FTC Finding on Violent Films NEW YORK: Welfare Recipients Suit for Tax Refunds Time Barred SAFEGUARD HEALTH: Announces Dismissal of Stockholder Litigation TRAVELERS PROPERTY: Case over Annuities from Injury Settlement Dismissed W.R. GRACE: Book Companies Resolve False Claims Charges WAR VICTIMS: Bosnian Refugee to Testify in U.S. Court Karadzic WAR VICTIMS: Disabled Veterans’ Lawsuit in Canada Will Proceed WASATCH CONSTRUCTORS: Bankrupt Trucker Company Seeks to Recover Money * Shakeout of U.S. e-Commerce Companies May Provide Examples for Canada ********* AMERICAN FAMILY: Sweepstakes Suit Results in Settlement and Reforms ------------------------------------------------------------------- A Tampa woman will receive more than $ 1,000 as part of a settlement with American Family Publishers. A 79-year-old Tampa woman who poured hundreds of dollars into American Family Publishers sweepstakes will share in a $ 32-million class-action settlement approved in New Jersey last week, her lawyers said Monday. Ina Brown received AFP mailings in 1997 telling her that either she or one other person had won millions, said her attorney, Guy Burns of Tampa. The settlement, as well as reforms obtained by state and federal officials, means that "the days of outlandish sweepstakes claims and promises are over," Burns said. Mrs. Brown will get back several hundred dollars she spent on magazines in hopes of winning the sweepstakes, Burns said. She also will receive $ 1,000 for serving as one of a half-dozen lead plaintiffs in the nationwide class-action lawsuit. Burns and members of his firm, Johnson, Blakely, Pope, Bokor, Ruppel & Burns, and more than 30 other lawyers throughout the country who worked with them, will split an award of $ 8.7-million for fees and costs. The total value of the settlement, with all costs included, is nearly $ 50-million. Investigations of AFP began after the St. Petersburg Times reported in 1997 that a dozen people flew to Tampa to collect sweepstakes prizes they mistakenly thought they had won. One was 88-year-old Richard Lusk of California, who also is a plaintiff in the suit. He and the others who made the trip to Tampa have already been reimbursed for their travel expenses. The trips prompted a storm of criticism of AFP, Publishers Clearing House, and other direct-mail marketers that use sweepstakes. Dozens of law firms nationwide received complaints and filed lawsuits, which were consolidated in federal court in New Jersey. AFP subsequently declared bankruptcy there. More than 140,000 people, who received AFP mailings between 1992 and 1999, qualified for refunds that will average about $ 500. Claimants' attorneys say that's about 90 cents on the dollar, an unusually high recovery rate. Also as part of the settlement, $ 1-million has been set aside for a sweepstakes. The court in New Jersey will supervise a drawing for 10 prizes of $ 100,000. The refund qualifiers will be in the sweepstakes pool. In agreeing to the terms, AFP denies liability, and says it is settling to put the matter behind it. (St. Petersburg Times, September 12, 2000) BOONE COUNTY: Judge Rules Lawsuit Covers All Female Students in District ------------------------------------------------------------------------ A federal judge has given class-action certification to a lawsuit that alleges the Boone County school district is not providing girls with the same athletic opportunities as boys. U.S. District Judge William O. Bertelsman ruled Monday that all female students in the district should be included in the lawsuit involving three sets of Boone County parents. Boone County is the first school district in the Cincinnati area to be charged with Title IX violations. "We're very pleased. This was a big step," said Kimberly Egan, one of the parents, of the judge's ruling. The parents involved in the suit have four daughters who play softball, basketball and volleyball for Boone County schools. In their lawsuit, the parents contend inequalities exist in funding, team travel, equipment and supplies, quality of coaching, scheduling of games and practice times, provision of locker rooms, medical and training services and publicity. Bertelsman expanded the lawsuit to include ""all present and future female students enrolled at Boone County Schools who participate, seek to participate, or are deterred from participating in interscholastic and other school-sponsored athletics at Boone County Schools." He also promised to visit Boone County facilities to determine whether inequities exist. A ruling in favor of the class represented in the lawsuit could force Boone County schools to reassess the way athletic funds and programs are handled. A ruling could also stand as a precedent for other high school cases. The parents are seeking a trial, attorneys' fees, and for Bertelsman to declare that Boone County schools have engaged in discrimination on the basis of gender. They want him to issue a permanent injunction restraining the district from future discrimination. "We've always said this is not just about our daughters," Egan said. "This was the judge validating that." Title IX is the federal law prohibiting gender discrimination in education programs and activities, including athletics, at any school receiving federal money. The Office for Civil Rights in the U.S. Department of Education enforces the 28-year-old legislation. District superintendent Bryan Blavatt disputes the claims. He said Boone County's strong athletics program and record of nurturing female athletes who eventually play college sports speak for themselves. "Most of this is in the hands of the attorney," he said. "The quality of the girls' programs and female athletics is a source of great pride for us. I just regret that this will take up so much time and energy and resources from all the citizens of Boone County when, in fact, I honestly believe we have made every effort to work with these folks." (The Associated Press State & Local Wire, September 13, 2000) BOSTON SCIENTIFIC: Investors Allege in MA of Misrepresentation of Recall ------------------------------------------------------------------------ Beginning November 4, 1998, a number of shareholders of the Company, on behalf of themselves and all others similarly situated, filed purported stockholders' class action suits in the U.S. District Court for the District of Massachusetts alleging that the Company and certain of its officers violated certain sections of the Securities Exchange Act of 1934. The complaints principally alleged that as a result of certain accounting irregularities involving the improper recognition of revenue by the Company's subsidiary in Japan, the Company's previously issued financial statements were materially false and misleading. In August 1999, lead plaintiffs and lead counsel filed a purported consolidated class action complaint adding allegations that the Company issued false and misleading statements with respect to the launch of its NIR ON(R) Ranger(TM) with Sox(TM) coronary stent delivery system and the system's subsequent recall. The Company and its officers have filed a motion to dismiss the consolidated complaint. The Plaintiffs have opposed the Company's motion to dismiss the consolidated complaint. BOSTON SCIENTIFIC: DOJ Investigates on NIR ON(R) Ranger(TM) Recalled -------------------------------------------------------------------- The Company is aware that the U.S. Department of Justice is conducting an investigation of matters that include the Company's NIR ON(R) Ranger(TM) with Sox(TM) coronary stent delivery system which was voluntarily recalled by the Company in October 1998 following reports of balloon leaks. The Company is cooperating fully in the investigation. BRIDGESTONE CORP: A- Long-Term S&P Credit Rating Still on CreditWatch --------------------------------------------------------------------- Standard & Poor's Corp said its A- long-term corporate rating on Bridgestone Corp remains on CreditWatch with negative implications. S&P said it affirmed its A-2 short-term corporate credit rating on Bridgestone and its commercial paper rating on Bridgestone/Firestone Inc. The short-term ratings are not on CreditWatch. The rating agency said it will assess risks that the product recall could extend to tyres of other sizes, the degree to which the negative publicity surrounding Firestone tyres might degrade the Bridgestone/Firestone brand in general, the situation for North American replacement tyre sales over the medium term, the effect on Bridgestone/Firestone's relationship with Ford Motor Co in the OEM (original equipment manufacturing) tyre business and its implications for other OEM business in North America, and the risk of large contingent liabilities emerging from possible class-action lawsuits. S&P said these risks are somewhat offset by the Bridgestone group's conservative financial profile, and strong earnings and cash flow generation, particularly in Japan. It added the product recall incident has not substantially affected Bridgestone in Japan, adding that the company's strong financial profile should help the group weather the negative financial impact from the product recall and the loss of replacement tyre sales, at least in the immediate future. (AFX - Asia, September 13, 2000) DELTA FINANCIAL: 1998 NY Suit Alleges of TILA and HOEPA Violations ------------------------------------------------------------------ The Company's lending practices have been the subject of several lawsuits styled as class actions and of investigations by various regulatory agencies including the New York State Banking Department (the "NYSBD"), the Office of the Attorney General of the State of New York (the "NYOAG") and the United States Department of Justice (the "DOJ"). In or about November 1998, the Company received notice that it had been named in a lawsuit filed in the United States District Court for the Eastern District of New York. In December 1998, plaintiffs filed an amended complaint alleging that the Company had violated the Home Equity and Ownership Protection Act ("HOEPA"), the Truth in Lending Act ("TILA") and New York State General Business Laws s.349. The complaint seeks (a) certification of a class of plaintiffs, (b) declaratory judgment permitting rescission, (c) unspecified actual, statutory, treble and punitive damages (including attorneys' fees), (d) certain injunctive relief, and (e) declaratory judgment declaring the loan transactions as void and unconscionable. On December 7, 1998, plaintiff filed a motion seeking a temporary restraining order and preliminary injunction, enjoining Delta from conducting foreclosure sales on 11 properties. The District Court Judge ruled that in order to consider such a motion, plaintiff must move to intervene on behalf of these 11 borrowers. Thereafter, plaintiff moved to intervene on behalf of 3 of these 11 borrowers and sought the injunctive relief on their behalf. The Company opposed the motions. On December 14, 1998, the District Court Judge granted the motion to intervene and on December 23, 1998, the District Court Judge issued a preliminary injunction enjoining the Company from proceeding with the foreclosure sales of the three intervenors' properties. The Company has filed a motion for reconsideration of the December 23, 1998 order. In January 1999, the Company filed an answer to plaintiffs' first amended complaint. In July 1999, plaintiffs were granted leave, on consent, to file a second amended complaint. In August 1999, plaintiffs filed a second amended complaint that, among other things, added additional parties but contained the same causes of action alleged in the first amended complaint. In September 1999, the Company filed a motion to dismiss the complaint, which was opposed by plaintiffs and, in June 2000, was denied in part and granted in part by the Court. Also in September 1999, plaintiffs filed a motion for class certification, which was opposed by Delta in February 2000, and is now fully briefed and filed pending hearing. In or about October 1999, plaintiffs filed a motion seeking an order preventing the Company, its attorneys and/or the NYSBD from issuing notices to certain of Delta's borrowers, in accordance with a settlement agreement entered into by and between the Company and the NYSBD. In or about October 1999 and November 1999, respectively, Delta and the NYSBD submitted opposition to plaintiffs' motion. In March 2000, the Court issued an order that permits Delta to issue an approved form of the notice. The Company believes that it has meritorious defenses and intends to defend this suit, but cannot estimate with a ny certainty its ultimate legal or financial liability, if any, with respect to the alleged claims. DELTA FINANCIAL: Borrowers Say Processing Fees Are Improperly Charged --------------------------------------------------------------------- In or about March 1999, the Company received notice that it had been named in a lawsuit filed in the Supreme Court of the State of New York, New York County, alleging that Delta had improperly charged certain borrowers processing fees. The complaint seeks (a) certification of a class of plaintiffs, (b) an accounting, and (c) unspecified compensatory and punitive damages (including attorneys' fees), based upon alleged (i) unjust enrichment, (ii) fraud, and (iii) deceptive trade practices. In April 1999, the Company filed an answer to the complaint. In August 1999, plaintiffs filed a motion for class certification, which the Company opposed in July 2000 and the motion is now submitted. In September 1999, the Company filed a motion to dismiss the complaint, which was opposed by plaintiffs, and in February 2000, the Court denied the motion to dismiss. In April 1999, the Company filed a motion to change venue and Plaintiff's opposed the motion. In July 1999, the Court denied the motion to change venue. The Company appealed and in March 2000, the Appellate Court granted Delta's appeal to change venue from New York County to Nassau County. The Company believes that it has meritorious defenses and intends to defend this suit, but cannot estimate with any certainty its ultimate legal or financial liability, if any, with respect to the alleged claims. DELTA FINANCIAL: Changes in Lending Practices Part of Settlement ---------------------------------------------------------------- In or about August 1999, the NYOAG filed a lawsuit against the Company alleging violations of (a) RESPA (by paying yield spread premiums), (b) HOEPA and TILA, (c) ECOA, (d) New York Executive Lawss.296-a, and (e) New York Executive Lawss. 63(12). In September 1999, Delta and the NYOAG settled the lawsuit, as part of a global settlement by and among Delta, the NYOAG and the NYSBD, evidenced by that certain (a) Remediation Agreement by and between Delta and the NYSBD, dated as of September 17, 1999 and (b) Stipulated Order on Consent by and among Delta, Delta Financial and the NYOAG, dated as of September 17, 1999. As part of the Settlement, Delta will, among other things, implement agreed upon changes to its lending practices; provide reduced loan payments aggregating $7.25 million to certain borrowers identified by the NYSBD; and create a fund of approximately $4.75 million to be financed by the grant of 525,000 shares of Delta Financial's common stock valued at a constant assumed priced of $9.10 per share, which approximates book value. The proceeds of the fund will be used, for among other things, to pay borrowers and for a variety of consumer educational and counseling programs. As a result, the NYOAG lawsuit has been dismissed as against the Company. The Remediation Agreement and Stipulated Order on Consent supersede the Company's previously announced settlements with the NYSBD and NYOAG. In March 2000, the Company finalized a settlement agreement with the United States Department of Justice, the Federal Trade Commission and the Department of Housing and Urban Renewal, to complete the global settlementit had reached with the NYSBD and NYOAG. The Federal agreement mandates some additional compliance efforts for Delta, but it does not require any additional financial commitment. DELTA FINANCIAL: Defends Securities Suit Filed in NY over IPO in 1996 --------------------------------------------------------------------- In November 1999, the Company received notice that it had been named in a lawsuit filed in the United States District Court for the Eastern District of New York, seeking certification as a class action and alleging violations of the federal securities laws in connection with the Company's initial public offering in 1996 and its reports subsequently filed with the Securities and Exchange Commission. The complaint alleges that the scope of the violations alleged recently in the consumer lawsuits and regulatory actions indicate a pervasive pattern of action and risk that should have been more thoroughly disclosed to investors in the Company's common stock. In May 2000, the Court consolidated this case and several other lawsuits that purportedly contain the same or similar allegations. The Company believes that it has meritorious defenses and intends to defend these suits, but has not answered yet and cannot estimate with any certainty its ultimate legal or financial liability, if any, with respect to the alleged claims. DELTA FINANCIAL: Faces NY Suit Filed in April on Fees for Mortgage Loans ------------------------------------------------------------------------ In or about April 2000, the Company received notice that it had been named in a lawsuit filed in the Supreme Court of the State of New York, Nassau County, alleging that the Company has improperly charged and collected from borrowers certain fees when they paid off their mortgage loans with Delta. The complaint seeks (a) certification of a class of plaintiffs, (b) declaratory relief finding that the payoff statements used include unauthorized charges and are deceptive and unfair, (c) injunctive relief, and (d) unspecified compensatory, statutory and punitive damages (including legal fees), based upon alleged violations of Real Property Law 274-a, unfair and deceptive practices, money had and received and unjust enrichment, and conversion. The Company answered the complaint in June 2000. The Company believes that it has meritorious defenses and intends to defend this suit, but cannot estimate with any certainty its ultimate legal or financial liability, if any, with respect to the alleged claims. DELTA FINANCIAL: Lawsuit Says Amounts in Escrow Accounts Exceed Limits ---------------------------------------------------------------------- In or about July 1999, the Company received notice that it had been named in a lawsuit filed in the United States District Court for the Western District of New York, alleging that amounts collected and maintained by it in certain borrowers' tax and insurance escrow accounts exceeded certain statutory (RESPA) and/or contractual (the respective borrowers' mortgage agreements) ceilings. The complaint seeks (a) certification of a class of plaintiffs, (b) declaratory relief finding that the Company's practices violate applicable statutes and/or the mortgage agreements, (c) injunctive relief, and (d) unspecified compensatory and punitive damages (including attorneys' fees). In October 1999, the Company filed a motion to dismiss the complaint. In or about November 1999, the case was transferred to the United States District Court for the Northern District of Illinois. In February 2000, the plaintiff opposed the Company's motion to dismiss. In March 2000, the Court granted the Company's motion to dismiss in part, and denied it in part. The Company believes that it has meritorious defenses and intends to defend this suit, but cannot estimate with any certainty its ultimate legal or financial liability, if any, with respect to the alleged claims. E.COLI: Judge in Canada Wants People Most Affected to Be Heard -------------------------------------------------------------- The judge looking into the contamination of Walkerton's water supply made it clear in a ruling on September12 he wants to be sure the people most affected are heard. "Given the tragedy the residents have suffered, their interests must be represented," Mr. Justice Dennis O'Connor wrote in granting legal status to three disparate residents' groups. "Their voices must be heard, even if those voices deliver somewhat different messages." The three local groups - Concerned Walkerton Citizens, the Walkerton Community Foundation and the "injured victims" (mostly the proposed class-action plaintiffs) - were all formed in response to last May's E. coli outbreak that caused six deaths and made 2,000 people ill. They will put forward the perspective of those who have suffered, O'Connor said. By contrast, five individuals - including an inmate at Millbrook Detention Centre - who claimed standing on the basis of personal suffering were turned down. Those granted individual standing were people with key roles in events leading to the tragedy - "in the eye of the storm," as O'Connor put it. Chief among them are Public Utilities Commission manager Stan Koebel and Dr. Murray McQuigge, the medical officer of health who on a hunch imposed a boil- water advisory, then went public with his view that officials had covered up the E. coli contamination. O'Connor refused an application filed by the Ontario New Democratic Party, which claimed involvement because of allegations by Premier Mike Harris that their policies were implicated in the tainted water. "It is, in my view, generally undesirable to use public inquiries to have political parties advance their positions," O'Connor wrote. In a telephone interview, NDP leader Howard Hampton said he thought the party could have contributed useful information. However, he welcomed O'Connor's statement that the party had no allegations of wrongdoing to answer. Among others refused status were the town's chief administrative officer, Richard Radford, six utility employees, two health unit employees, and a dozen present and past members of Brockton council. Six parties got full standing on all issues. Standing limited to issues affecting them was granted to 14 groups and individuals in Part 1 of the inquiry, which will consist of formal hearings in Walkerton set to start Oct. 16. Full standing at Part 1 involves advance notice of documents and anticipated evidence, a seat at the lawyers' table, and the opportunity to suggest and cross-examine witnesses and make closing submissions. O'Connor had various recommendations on funding issues, which must be approved by the Attorney General's ministry. O'Connor refused to grant separate standing in Part 1 to several organizations. Instead, he ordered ad hoc coalitions - one made up of three unions, one involving two health agencies, and another composed of three environmental groupings, which in turn represent many more groups. Thirty parties have been granted limited standing in Part 2, in which an expert panel will commission study papers on policy issues, which will then be the subject of public submissions and meetings. Those granted standing at Part 2 may make submissions, including responses to the commissioned papers, and participate in the public meetings. (The Toronto Star, September 13, 2000) FIRESTONE, FORD: Analysts Tell of Hurt on Earnings -------------------------------------------------- The Firestone tire recall and Ford Motor Co.'s reaction to the furor are inflicting pain on the automaker's earnings, its stock price and those of its key parts suppliers, analysts say. That pain could increase, say industry insiders, if Ford's 3-week shutdown at three plants that make Ranger pickups and Explorers sport-utilities stretches into more weeks. Those plants, in Minnesota, Missouri and New Jersey, have been idled by Ford so that tires that would have been used on new vehicles built there can instead replace the 6.5 million recalled Firestone tires. So far, 2 million of the recalled 15-inch ATX, ATXII and Wilderness AT tires have been replaced. The 3-week shutdown has cost Ford about $ 200 million in earnings, auto analysts estimated. Most analysts have reduced their third-quarter earnings forecasts by about 10 cents per share for Ford, down to 53 cents per share. Each additional week that those three plants are idled could cost the world's second-largest automaker about $ 50 million in profits or 3 cents per share, say analysts. "On top of that $ 200 million, there will be other recall costs, I'm sure," said David Healy, auto analyst at Burnham Securities in New York. "We haven't got much guidance yet from Ford on how their earnings will look." A Ford spokesperson said the company still hasn't calculated the impact of the recall and idled plants on third-quarter earnings. If the company is to miss its quarterly expectations significantly, it must inform Wall Street in advance. "We will worry about costs later. Right now we are just acting to get tires out for customers," said Della DiPietro, Ford director of manufacturing and purchasing communications. "That's our priority." DePietro said no decision has been made about idling the plants longer, but added, "We are looking at it on a week-by-week basis." The 3-week shutdown trimmed production of about 23,500 Rangers and 15,400 Explorers. DiPietro said Ford will make up most of that Ranger production in the fourth quarter, but Explorer production will not be made up. Nick Harrod, chairman for the skilled trades segment of United Auto Workers Local 879 at Ford's St. Paul, Minn., truck plant, told the St. Paul Pioneer Press his workers have been told there's a "real possibility" the shutdown will last until Sept. 25. The idling of the plants has a significant trickle-down effect by cutting expected earnings at key Ford suppliers such as Lear Corp., Visteon Corp. and ArvinMeritor Inc. For those suppliers, which in turn have to idle their plants and lay off workers, this shutdown is much like a strike. "It's similar to a strike because the suppliers don't know day-to-day when they'll be back up and running," said Michael Robinet, director of forecasting at CSM Worldwide Inc., a Northville automotive consulting firm. "This kind of interruption to the suppliers is expensive because they have all that parts inventory on their balance sheet, plus they have to lay off people and in this tight job market those people may just go find a job somewhere else," he said. Southfield-based Lear makes door panels and seats for the Ranger and Explorer, while Visteon makes various interior parts and ArvinMeritor makes exhaust systems. Dearborn-based Visteon is likely to be the hardest hit, as it supplies nearly $ 3,000 in parts on each Explorer and $ 2,500 on each Ranger, say analysts. Lear, which supplies seats on the Explorer, has about $ 1,350 in content on that sport-utility. Lear has idled its production plant in St. Louis in response to Ford's shutdown, laying off about 300 workers. Other suppliers that have cut earnings projections or have seen analysts cut them include Toledo-based Dana Corp., Rochester Hills-based Dura Automotive Systems Corp. and Cleveland-based TRW Inc. These suppliers are also under pressure due to an a weak euro, which hurts European operations, and slower sales of heavy-duty trucks and replacement parts. (Detroit Free Press, September 13, 2000) FIRESTONE, FORS: KS Couple in Narrow Escape from Tire Peeling File Suit ----------------------------------------------------------------------- An Olathe couple who barely escaped a wreck when the tread on their 16-inch Firestone tire peeled off in July has filed a lawsuit in Johnson County District Court that seeks to have the case declared a class action on behalf of other Kansans. The lawsuit is the second in recent days filed against Bridgestone/Firestone Inc. and Ford Motor Co. in the Kansas City area. The first lawsuit was filed Friday in Jackson County Circuit Court. What makes this case different, however, is that it involves a Firestone tire - a 16-inch Wilderness Tire that was placed on the couple's Ford Explorer - that is not part of a massive Aug. 9 recall. Kelly T. And Kathleen R. McMasters of Olathe filed the lawsuit as Congress continues to hear testimony about whether to expand the recall to include more tires consumer advocates say are faulty. The lawsuit also names Olathe Ford Inc., where the couple bought the Explorer used, and Tires Plus Co. in Olathe, where the lawsuit states they bought the tires new. The McMasters were driving with their daughter on July 29 when their Ford Explorer careened out of control after a rear tire blew out near Clinton, Mo., according to the lawsuit. The Explorer veered across other lanes of traffic and ended up on the shoulder. Attorneys for the McMasters claim that Firestone and Ford have known about the additional defects for years. They are seeking to have a judge force a much bigger recall. Firestone is recalling mainly 15-inch tire models. The Missouri and Kansas lawsuits seek to have the recall expanded to include all 14-inch, 16-inch and 16.5 inch tires. "While Ford and Firestone talk about safety, 16-inch tires continue to fail and cause wrecks," said Steve Bough, a lawyer with the Overland Park law firm of Shamberg, Johnson & Bergman. Bough said the law firm wants to talk with more people who have experienced problems with all models of Firestone tires. Bough said the McMasters took their damaged tire to Olathe Ford, where they were charged to have the tire replaced. The lawsuit claims the tire companies and the local dealerships violated state law by suppressing information about allegedly defective tires. Bough expects more cases to be filed involving nonrecall tires. "We believe these cases will proceed on a state-by-state basis," he said. "Until Ford and Firestone think of these cases as a safety issue rather than a profit issue, people will continue to have wrecks." (The Kansas City Star, September 13, 2000) FORD MOTOR: Board Discussed Dangerous Stalls; Denies Knowing Problem -------------------------------------------------------------------- When thousands of car owners complained in the 1980s and 1990s that their Fords unexpectedly stalled, often on highways and while making left turns across oncoming traffic, top company executives repeatedly assured regulators that there was no way to know what might be causing the problem. But throughout the period, Ford Motor Co. documents show, the company's engineers, safety officials and even its board were aware of growing problems with one particular part -- a computerized ignition system attached to the engine's distributor -- that would shut the engine down if it got too hot. Even as federal investigators opened and closed five investigations based on Ford's assurances that it knew of no particular defect, the company never provided regulators with more than a dozen documents that would have shed light on the problem. On the same day in 1986 when the regulators closed their second investigation based on Ford's assurances that there was nothing defective to warrant a recall, members of the company's board meeting in a private session discussed the rising number of service complaints about the part, according to Ford documents. Also that day, Ford officials prepared a memo raising questions about the company's plan to continue attaching the system, known as a thick film ignition, or TFI module, to the engine in a future model in light of the problems and complaints. Neither the notes from the board meeting nor the Ford memo was ever provided to federal investigators. Ford continued to deny there were problems for the next nine years, in spite of repeated internal company studies, consumer complaints, numerous reports of deadly and other serious accidents, wrongful death and personal injury lawsuits and warranty claims that topped 40% in some years. The company, which denies the defect has caused any fatal accidents, has settled at least four lawsuits involving serious injuries and at least four deaths. A study prepared for the plaintiffs in one case asserts that the drivers of the 22 million cars equipped with the ignition system faced a 9% greater chance of being in a fatal crash. Ford contests that finding, but stopped putting ignitions on distributors after the 1995 model year. The company's handling of complaints about the ignition system -- detailed in court papers, as well as interviews with witnesses, safety experts, government officials and lawyers -- has taken on new significance in light of the recall of 6.5 million Firestone tires after dozens of deadly crashes involving Ford Explorers. In recent days, documents have emerged showing that the companies were aware of problems with Explorers equipped with the tires several years before the recall. Congressional investigators are now examining whether the ignition case is part of a broader pattern in which Ford misled regulators by failing to disclose what its engineers and safety experts know of possible defects. Alan Kam, a recently retired official at the National Highway Traffic Safety Administration, said in his 21 years as the agency's top lawyer for defects and enforcement issues, he had never seen a greater deception perpetuated on the government by an auto company. 'When I looked at this material I was astonished,' said Mr. Kam, who has been retained as an expert witness for the victims and is preparing an affidavit outlining his views that will be filed in a case in Tennessee. 'Ford Motor Co. had obfuscated the existence of the TFI module problems even though it had problems on a massive basis,' he said. 'They had concealed signs of failures that were occurring at an astronomical level, at a figure far beyond any measure I have seen before. They were telling the agency they didn't know what was causing stalling, while they were doing extensive studies showing they knew what was causing the stalling.' The ignition cases have been described in news reports. But Mr. Kam's involvement in the case and many of the Ford internal documents congressional investigators are now studying have not been previously disclosed. Two weeks ago, a state court judge in California concluded in a tentative decision in a class-action lawsuit involving the ignition system that Ford had engaged in a huge corporate cover-up, concealing from both regulators and consumers a design flaw affecting 22 million cars produced between 1983 and 1995, almost 15 million of which remain on the road. If, as expected, he makes the decision final in the next few weeks, the judge will become the first in U.S. history to order an auto recall. Such a ruling combined with other damages could cost Ford as much as US$3.5-billion in California alone. Cases are also pending in five other states, and like the tire recall, Ford faces the prospect of action outside the United States, where tens of millions of autos are on the roads with the ignition part affixed to the distributor. Ford executives and lawyers say they intend to appeal the ignition case if the judge's decision becomes final. They said the judge had no basis for reaching his conclusions of cover-up and liability and exceeded his authority by ordering a recall. Ford executives said the only similarity between the ignition and tire cases is that company officials did nothing improper and took necessary steps to correct any problems. Warren Platt, a Ford lawyer, said that in the tire case, Ford was under no legal obligation to report on problems being encountered abroad. And in the ignition case, he said, the company's position is that there were many possible causes of cars stalling on the road beyond problems with the ignition module. 'The frequency of the stalls caused by a TFI failure were not nearly as large as a number of other factors,' he said. 'NHTSA looked at the adequacy of our filings and with the exception of seven documents that Ford didn't produce, it found that we produced all that was required. It's hard to argue that Ford has been less than forthcoming.' (National Post (formerly The Financial Post), September 13, 2000) HOLLYWOOD: Lawyers Consider Lawsuit Using FTC Finding on Violent Films ---------------------------------------------------------------------- Lawyers for the parents of three girls murdered in Paducah, Ky., are considering a national class-action lawsuit using a Federal Trade Commission finding that Hollywood targets children in marketing violent movies and videos. "I think that we have some very big bullets for our guns. The FTC report is just tailor-made for what we've been saying," said Michael Breen of Bowling Green, Ky. "This is kind of like the embryonic days of tobacco litigation. They started out as individual lawsuits, too," added co-counsel John B. Thompson of Coral Gables, Fla., who has been active on issues involving rap music and two children's suicides linked to a "South Park" TV episode. "You can't buy off a parent whose child is dead," Mr. Thompson said. But a lawyer who worked on class-action lawsuits against "Big Tobacco" disputed that strategy - despite marketing parallels to the now-banned Joe Camel advertisements. "There is a possibility you could get a court that would be receptive to that argument in a single case. I can't imagine you could get a court that would be receptive to that as a class action," said Daniel G. Abel, who helps manage class-action lawsuits on guns and tobacco for New Orleans superlawyer Wendell H. Gauthier. "The tobacco industry was forced to discontinue its use of Joe Camel because it obviously targeted kids. Well, Hollywood has a Joe Camel problem of its own aggressive marketing of adult material to underage children," said Robert Knight of the Family Research Council. On May 28, 1997, the FTC charged R.J. Reynolds Co. with "unfair trade practice" for the Joe Camel ads targeted at children, but later dismissed the charge after RJR agreed with state attorneys general to no longer use the ads. Mr. Breen said a legal concept called "comparative fault" allows juries to set damages and then apportion blame among various parties, including the killer. A jury could leave the entertainment industry partially liable for a share of large judgments. "There's nothing theoretical about victims," Mr. Breen said. "There are a half million incidents of school violence a month, in primary and secondary schools and 10 percent involve serious crimes such as rape, robbery, assault or weapons. If even a percentage of those is entertainment-induced, then by all means you have the makings of an action that could seek class relief." He said FTC data released Monday "shows correlation between seeing violent images on computer, TV or movie screen and violent conduct on the part of the viewer." Mr. Abel didn't see it as clearly. "There's a substantial difference between somebody who's been shot and someone who is emotionally injured after seeing an ad. A court would have to find a connection between the cause and effect. That is complex, and it sparks First Amendment issues," Mr. Abel said. Mr. Breen and Mr. Thompson are part of the legal team seeking $130 million from some of the biggest entertainment companies - among them Time Warner, Nintendo and Sega - for the families of Jessica James, Kayce Steger and Nicole Hadley, who were killed at school when Michael Carneal, 14, opened fire on their prayer group Dec. 1, 1997. The Paducah case is one of two notable lawsuits taking on the entertainment industry. In Louisiana, Lonnie Byers is moving ahead with his lawsuit against Time Warner, killer Sarah Edmondson and her prominent parents. He is the widower of shop clerk Patsy Ann Byers, who was paralyzed after being shot during a 1995 crime spree by Ben Darras and Sarah Edmondson. Mrs. Byers later died of cancer. Edmondson said she and Darras, both 18, started killing after watching a video of "Natural Born Killers" and then watched the movie six times a day during their multistate rampage. Producer/director Oliver Stone testified at a two-day deposition session in July after industry lawyers failed to have the U.S. Supreme Court throw out the case. A three-judge Louisiana Court of Appeal panel said the accusation that the movie incited the shooting that paralyzed Mrs. Byers nullified the First Amendment defense Time Warner raised, and said Mr. Byers was within his rights to charge that the producers intended to incite viewers. Other appeals courts have upheld more than a dozen murder prosecutions in which "Natural Born Killers" was cited as a motivating factor. Mr. Byers' lawyer, Randolph A. Piedrahita of Baton Rouge, La., who helped take Mr. Stone's deposition, said he was seeking information on the FTC report but that he couldn't predict its effect on any class-action strategy. "You're asking a tough question, but I have no comment right now," he said, expressing caution about discussing the case out of court. Another lawyer in that case, Joseph H. Simpson of Amite, La., denied trying to censor Hollywood's creativity. "But we feel something should be done about the violence on television and movies. Hopefully the industry will come to its senses," he said. Mr. Breen said the Kentucky lawsuit accusations parallel the Federal Trade Commission findings. "The FTC found that these people are targeting a juvenile audience with these products and that violence begets violence," he said. "I think in light of the FTC report we may have undervalued the case by asking $130 million, of which $ 100 million would be punitive damages." Best-selling author John Grisham said he encouraged the lawsuit that brought Mr. Stone and Time Warner into court because an old friend was killed by the same people the day before they shot Mrs. Byers. "Oliver Stone is saying murder is cool and fun, murder is a high, murder is a drug to be used at will. The more you kill, the cooler you are," Mr. Grisham said in a newspaper interview. "Natural Born Killers" also was implicated in the Paducah shooting along with violent video games of the genre indicted by the FTC Monday, games with names like Doom and Quake. In a separate state case in August, the Paducah parents won a $42 million settlement from the killer, which they consider "symbolic" if uncollectible. Their federal lawsuit against the industry was dismissed April 6 by senior U.S. District Judge Edward H. Johnstone, who summarily dismissed the case in April, in part on grounds that entertainment defendants couldn't have foreseen the effects their movies and videos would have on children. "This was a tragic situation but . . . tragedies such as this simply defy rational explanation and courts should not pretend otherwise," the judge said. "We're going to get that judge reversed and when we're back up running, we're going to have the subpoena power the FTC did not have," Mr. Thompson said. "Others who want to file lawsuits are going to be watching us and you're going to see a lot of them following us." An advocate in disputes involving rapper Ice T and the 2 Live Crew obscenity case, Mr. Thompson represents parents of two children who he claims hanged themselves after watching the same episode of "South Park." (The Washington Times, September 13, 2000) NEW YORK: Welfare Recipients Suit for Tax Refunds Time Barred ------------------------------------------------------------- In a defeat for public assistance recipients, the Appellate Division, First Department, dismissed a class-action suit alleging that the State improperly confiscated tax refunds. Reversing a ruling by New York Supreme Court Justice Sheila Abdus-Salaam, the appeals court dismissed the taxpayers' suit as time-barred because it was filed more than four months after the recipients received collection notices. The ruling in Butler v. Wing, 2472, involves former welfare recipients whose income tax refunds were confiscated to offset alleged overpayments made by the State. Plaintiffs charged they were not given adequate notice of the overpayments or the opportunity to contest them. The plaintiffs asked the court to issue a declaratory judgment stating that procedures used by the State did not comport with the statute authorizing confiscation, State Tax Law @ 171-f(3). The statute of limitations on this type of declaratory judgment action is three years. The State, however, argued that the statute of limitations was actually only four months since the case could have been brought under Article 78 of the Civil Practice Law and Rules. That statute requires that cases be brought within four months of the triggering event. The Appellate Division unanimously ruled against the plaintiffs, holding that their claims were "cognizable" under Article 78, and therefore governed by the four-month time limit. "Since plaintiffs failed to commence an Article 78 proceeding within four months of receipt of the... notices, plaintiffs' claims are untimely and the complaint should have been dismissed," wrote the court. Plaintiffs here had filed suit on Sept. 2, 1997, seeking class certification for everyone whose income tax refunds were seized by the State to offset alleged government overpayments. In addition to declaratory judgment, the plaintiffs asked for refunds of the amounts seized, as well as injunctive relief. Justice Abdus-Salaam ruled for the plaintiffs, finding that the tax department's notices were defective in several respects: the notices sent did not inform recipients that they might forfeit their tax refunds; recipients were not given an opportunity to challenge the alleged overpayments in person at a hearing; and recipients were limited in their reasons for challenging the government's records. Although Justice Abdus-Salaam's factual findings were limited to the named plaintiffs, who were former welfare recipients, she certified a much broader class that included thousands of people whose refunds were seized by any state agency for reasons such as unpaid school loans or hospital bills. The appellate panel consisted of Justices Joseph Sullivan, Eugene Nardelli, Angela Mazzarelli, Richard Wallach and David Friedman. Plaintiffs were represented by Jane Greengold Stevens, a professor at Brooklyn Law School, and Constance Carden, of the New York Legal Assistance Group. The State was represented by Assistant Attorney General August Fietkau. (New York Law Journal, September 1, 2000) SAFEGUARD HEALTH: Announces Dismissal of Stockholder Litigation --------------------------------------------------------------- SafeGuard Health Enterprises, Inc. (OTC BB: SFGD) on September 13 announced that the stockholder class action lawsuit filed against the Company in December 1999 which alleged violations of certain securities laws was dismissed with prejudice as to all defendants on September 12, 2000, by the Federal District Court for the failure by the Plaintiffs to state a claim. The Motion to Dismiss was granted after Plaintiffs had filed a first amended complaint. The Plaintiffs have thirty days to file a Notice of Appeal. SafeGuard provides managed care dental plans, PPO/indemnity dental plans, vision benefit plans, administrative services, and preferred provider organization services. The Company serves a total of approximately 900,000 members in 20 states and the District of Columbia. TRAVELERS PROPERTY: Case over Annuities from Injury Settlement Dismissed ------------------------------------------------------------------------ Because annuity recipients did not allege an injury to their business or property, the Connecticut Superior Court dismissed a class action RICO suit against an insurance company which issued annuities in connection with the settlement of personal injury actions. (Macomber, et al. v. Travelers Property Casualty Corp., et al., No. X03CV 990496761S (Conn. Super. Ct. 7/11/00).) Lisa Macomber entered into a structured settlement with Travelers Property Casualty Corp. upon settling a personal injury action. Travelers Property provided an annuity owned by the Travelers Indemnity Co. and issued by Travelers Life and Annuity Co., with a present value of 15,000. Kathryn Huaman, as custodian for Joshua Adickes, also entered into a structured settlement with Travelers Property, and received an annuity with a present value of 6,667. Structured settlements have been used in the insurance industry since the 1970s to settle personal injury, workers' compensation and other claims against insureds. These settlements, involving periodic payments over time, are usually funded with an annuity purchased by the settling insurance company from a life insurance company. The life insurance company usually pays a 4 percent commission to the broker who arranged for the annuity. Macomber and Huaman, on behalf of other annuity recipients, sued Travelers Property and others, alleging damages because Travelers Property failed to disclose it received a portion of a 4 percent commission on the annuities. The annuity recipients alleged that Travelers Property would direct a broker to purchase an annuity to fund a settlement and the broker would "rebate" some of the commission paid by the life insurance company to Travelers Property. Macomber and Huaman first filed the same suit in U.S. District Court for the District of Connecticut. The District Court dismissed these companion suits because the claimants "could not allege any legally cognizable injury arising from the structured settlements of their personal injury claims." Instead of amending their federal complaints, Macomber and Huaman filed the same claims in the Connecticut Superior Court. Another purported class action member in the state court litigation previously filed an identical case in the District Court. Judge Warren William Eginton similarly dismissed that suit because the claimant could not allege any "legally cognizable injury." Counsel for Macomber also previously filed suit in New Jersey state court, alleging identical claims to those asserted in this case. The New Jersey Superior Court dismissed that litigation because the claimants received exactly what they had bargained for and had not been damaged in any way. (Civil RICO Report, September 7, 2000) W.R. GRACE: Book Companies Resolve False Claims Charges ------------------------------------------------------- False claims allegations arising from the supply of books to schools, libraries and government agencies have been resolved by W.R. Grace & Co. and its former subsidiary, Baker & Taylor Inc., the Department of Justice has announced. Relators Robert Costa and Ronald Thornburg filed a qui tam suit against the companies asserting that they defrauded the federal government in direct book sales. The states of Arkansas, California, Connecticut, Florida, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Missouri, Nevada, New Mexico, North Carolina, Oklahoma, Tennessee, Texas, Vermont and Wisconsin joined the suit as co-plaintiffs, seeking damages for schools and libraries as a result of alleged overcharges paid with federal funds. Baker & Taylor was alleged to have violated the False Claims Act, 31 U.S.C. @ 3729 et seq., when it failed to provide agreed-upon trade discounts of 40 percent to its institutional customers. The company allegedly misclassified trade titles as non-trade in order to avoid the full discounts, and then provided full trade discounts to retailers on the same books. Under the terms of the recent settlement, W.R. Grace and Baker & Taylor will jointly pay $12.5 million to the co-plaintiff states, and W.R. Grace will pay $3 million to the federal government. Baker & Taylor previously paid the United States $3 million to resolve the government's claims. (Government Contract Litigation Reporter, August 17, 2000) WAR VICTIMS: Bosnian Refugee to Testify in U.S. Court Karadzic -------------------------------------------------------------- A Bosnian refugee living in Salt Lake City is scheduled to testify this week against the architect of Bosnia's war. Kemal Mehinovic, an ethnic Muslim who was held prisoner by the Serbs for 2 1/2 years, is one of two-dozen plaintiffs seeking a civil judgment against former Bosnian Serb leader Radovan Karadzic. Karadzic is considered largely responsible for the brutal campaign of "ethnic cleansing" against non-Serbs during the 1992-95 war in Bosnia-Herzegovina. He has been indicted in The Hague with war crimes and crimes against humanity. Still at large, Karadzic is also the defendant in a lawsuit in U.S. District Court in New York City that accuses him of violating the Alien Tort Claims Act, a 1789 federal statute that gives non-U.S. citizens the right to sue in U.S. courts for damages suffered in violations of international laws. Mehinovic and 21 other Bosnians allege that Karadzic directed rebel Serb forces in a campaign of terror against ethnic Muslims and Croats after the multiethnic state of Bosnia declared independence from the Serb-led Yugoslavia. The campaign consisted of driving non-Serbs from their homes, violating women in "rape camps" and imprisoning men, who were tortured and forced to work as slaves for the Serb cause, according to the charges against Karadzic. Mehinovic was arrested by Serb police in May 1992 at his home in Bosanski Samac, a small city in extreme northern Bosnia. He was first held in the local police station for several months before being transferred to a prison camp in Batkovic in northeastern Bosnia near the Serbian border. For the next 29 months, Kemal, now 44 years old, was subjected to mental and physical abuse at the hands of his Serb captors. His testimony against Karadzic is considered key in the civil lawsuit, which wass expected to begin on September 12 in New York. "He's a really important witness because of what he went through, the intensity of it and the range of what happened: the concentration camps, the torture and the forced labor," said Jennifer Green, an attorney for the New York-based Center for Constitutional Rights, which is prosecuting the civil case against Karadzic. Mehinovic will also testify that he saw Karadzic rallying his troops in the Serb stronghold of Bijeljina near Batkovic. This week's trial against Karadzic won't be the first. In August, a federal court jury in Manhattan found Karadzic guilty of torture and awarded $ 745 million to 11 women who were victims of Serb rape camps. The plaintiffs will likely never recover any of the judgment, but that's not the point, said Shawn Roberts, legal director of the San Francisco-based Center for Justice and Accountability. Given the lack of justice to date in Bosnia and The Hague, a verdict in a U.S. court gives some degree of relief to the victims. In addition, the verdicts send a message that torturers are not welcome in the United States, Roberts said. He is representing Mehinovic in a similar civil action against a Serb refugee living in Atlanta. That case, in which Mehinovic accuses the Serb of being one of his torturers during the war, has yet to go to trial. (The Salt Lake Tribune, September 12, 2000) WAR VICTIMS: Disabled Veterans’ Lawsuit in Canada Will Proceed -------------------------------------------------------------- The Honorable Mr. Justice John H. Brockenshire, of the Superior Court of Justice has ruled that a Motion for Summary Judgment -- brought forward by the plaintiffs as part of a Class Action Lawsuit against the federal government, on behalf of disabled veterans - can proceed. In doing so, Justice Brockenshire ruled against a Motion brought by the federal government requesting a 6-month adjournment in proceedings. The Motion for Summary Judgment is a request that the Court grant judgment rather than proceed to trial. The Class Action lawsuit, certified by Justice Brockenshire in the Superior Court of Justice in October 1999, asserts that the government failed in its duty as a trustee on behalf of veterans who were disabled in the service of their country. As a result of their injuries, these veterans were subsequently declared incompetent and were unable to manage their financial affairs. Under legislation provided expressly for that purpose, the federal government administered these veterans' financial affairs, amassing their monies in the government's own treasury -- the Consolidated Revenue Fund. During the course of its investigation the legal team also discovered that the federal government not only failed to pay interest to disabled veterans, but upon the death of those veterans the government would, in many cases, confiscate their accumulated pensions and other monies - regardless of whether or not the veterans had estates or heirs that were entitled to that money under law. In his ruling, Justice Brockenshire noted that further delay would be harmful to members of the Class, many of whom are elderly. He also autioned the government against arguing that 'there might be further evidence that might turn up', noting that further information - which the government had argued was necessary but would take more time - would not be material to the core case issues which are constitutional and legal in nature. The Judge also ordered the federal government to pay costs to the plaintiff in the sum of $7,500. 'We are very pleased with the Judge's ruling. In denying the Government's Motion for adjournment, he has given us the green light to proceed with the key issues of the government's failure to pay interest. He has also sent a strong signal to the government that further delay is not in the interest of these veterans, most of whom are elderly," said legal team member Raymond Colautti, Partner, Raphael Partners, Barristers and Solicitors, Windsor, Ontario. The other members of the legal team are Mr. David Greenaway (Partner, Raphael Partners) and Mr. Peter Sengbusch, London, Ontario. "We intend to prove that the government, by its own admission, acted as a trustee to these veterans -- in some cases, to the point of micro-managing their daily affairs. We also intend to prove that they failed in their most basic duty in the capacity as a trustee when they neglected to properly manage the funds of these incapacitated veterans, many of whom were institutionalized for the majority of their lives. Finally, we intend to prove that in 1990 when the federal government realized that it had created a huge liability, it passed legislation preventing veterans and their families from recovering the unpaid interest they were due," said Greenaway. "It is particularly odious in a country that believes in the right of due process, that a government would prevent its own citizens from making a claim to recover their own property,' he added. The legal team representing the veterans has elected to bring forward the Summary Judgment Motion as result of the fact that the evidence in the lawsuit is entirely documentary and all of it emanates from the Federal Government. "The Motion for Summary Judgment asserts that there are no genuine issues requiring a full-blown trial. The facts we have amassed in preparation for these legal proceedings provide a historical record and bona fide proof that over the last 25 years, various federal governments have undertaken exhaustive studies as to whether or not to pay interest on these accounts under their administration. Senior officials were aware, and the Auditor General in his 1985 and 1986 reports was highly critical of the government for not having paid interest on the growing principle which at that time was $53 million," said Mr. Sengbusch. "Their failure to act is not only shocking, it is an outrageous act of negligence against a group of Canadians who sacrificed their lives for our country," he added. In terms of the legal proceedings, prior to hearing the arguments on the Summary Judgment Motion, the Court will address a jurisdictional Motion brought by the Federal Government on September 12. The federal government will argue that the lawsuit should be argued in Federal Court of Canada as opposed to the Ontario Superior Court of Justice. "The federal government has taken the position that this lawsuit should proceed in the Federal Court of Canada. Raising the issue of jurisdiction is simply a further delaying tactic which the Crown is deploying to avoid addressing the issue of non-payment of interest. We look forward to responding to their arguments and to getting on with the core aspects of the lawsuit,' the legal team said. 'As administrators, the Department of Veterans Affairs had a trust responsibility to act in the best interest of these veterans. That duty included the obligation to prudently invest these monies such that they would realize a reasonable rate of return. By virtue of their disabilities and infirmities, these veterans should not have been denied what is the basic right of all Canadians who faithfully entrust their financial dealings to a third party,' the team noted. (Canada NewsWire, September 13, 2000) WASATCH CONSTRUCTORS: Bankrupt Trucker Company Seeks to Recover Money --------------------------------------------------------------------- A lawsuit alleges that the primary contractor and a chief subcontractor on the I-15 reconstruction project shortchanged truckers and a dispatcher extorted gifts from them. Jakeco Enterprises filed the suit, which seeks unspecified damages, in U.S. Bankruptcy Court. The Heber City trucking company filed for bankruptcy during the I-15 overhaul. It hopes the suit becomes a class action and recovers money for more than 100 truckers and trucking companies that have worked on the project. The suit alleges Wasatch Constructors and its primary dirt supplier, Ralph Smith Co. of West Bountiful, shortchanging haulers and that a Smith dispatcher demanded gifts and cash before doling out work to truckers. "It's bull," said Richard Haskill, the dispatcher. Haskill, who was quoted in a copyright story in The Salt Lake Tribune, said he never asked for bribes when assigning subcontracted trucks to haul fill for I-15 embankments. The suit alleges that Wasatch skirted legal weight limits and full payment to the truckers by overloading their trucks and paying only for the legal limit - less than what they were hauling. Wasatch and Ralph Smith Co. called the lawsuit frivolous. Doug Smith, owner of Ralph Smith Co., said trucking companies that spent too much on new equipment expecting a bonanza from the I-15 work now are trying to recoup losses by attacking the firms that have prospered. Smith denied that trucks were loaded with more dirt than the truckers were paid to haul. Smith said Wasatch pays him based on the number of tons he supplies to the job site. "When I get paid by the ton, what would be my motive to short the trucks?" he said. The lawsuit alleges Wasatch employees working at a quarry at Point of the Mountain saw to it that the trucks were overloaded and the truckers underpaid. They weighed only the first truckload of the day and kept it under the legal limit of 29,000 pounds, according to Jakeco's lawsuit. Subsequent loads were heavier and were not weighed, the plaintiff contends. "As a result, (truckers) were damaged by not being paid for the weight of materials actually being transported and exposure to liabilities associated with being over the legal weight," according to the suit. The excess weight also caused premature wear on equipment, Jakeco contends. (The Associated Press State & Local Wire, September 13, 2000) * Shakeout of U.S. e-Commerce Companies May Provide Examples for Canada ----------------------------------------------------------------------- As the downturn in the market for technology stocks takes hold, the shakeout of e-commerce companies in the U.S. has provided examples of privacy problems that may soon arise in Canada as the federal Personal Information Protection and Electronic Documents Act (the Personal Information Act) comes into force on Jan. 1, 2001. For many in the retail sector, a significant part of their goodwill is now represented by information that they collect on their customers and their shopping preferences. The Personal Information Act will now generally require that personal information can only be collected, used, and disclosed with the informed consent of the person about whom the information is collected, and require the development of enforceable privacy policies and procedures for both online and offline collections of data. Such policies should be drafted carefully to avoid liability for misrepresentations and to ensure the transferability of the information on the sale of the business. Application Part I of the Personal Information Act applies to every organization that collects, uses or discloses personal information in the course of commercial activities, except where this occurs only within a province (with certain exceptions). It also applies to information collected about employees in connection with a federal work, undertaking or business. Quebec has had a similar law in place since 1994, and in July, Ontario released a consultation paper for a proposed privacy act. Comments are due by Sept. 15, 2000. In the United States, there are no personal information protection laws of general application. Instead, the e-commerce industry has relied on self-regulation, assisted by privacy certification groups such as TRUSTe. But in May the FTC reversed itself and stated that because self-regulation was not providing adequate protection, it would recommend that Congress enact privacy legislation. Toysmart.com, a retailer of educational toys controlled by the Walt Disney Company, developed a TRUSTe approved privacy policy and collected information about its customers'families and shopping preferences. Its privacy policy asserted that: Personal information voluntarily submitted by visitors to our site, such as name, address, billing information and shopping preferences is never shared with a third party....When you register with Toysmart.com, you can rest assured that your information will never be shared with a third party. Difficulties started when Toysmart.com announced that it would be ceasing operations and, on June 8, 2000, advertised its "databases and customer lists,"thought to hold information on 190,000 customers, for sale. The creditors then petitioned it into bankruptcy, and later the FTC sought an injunction to stop the sale of the information, based on Toysmart.com's privacy policy and s. 5 of the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices in or affecting commerce. Toysmart.com managed to negotiate a settlement with the FTC whereby the information could be transferred to a "Qualified Buyer," being an entity in a related market that expressly agreed to be Toysmart's successor-in-interest to the information. The settlement was opposed by 43 states on the grounds that each person on the list should consent to the transfer of their information. The bankruptcy judge rejected the settlement as premature, as a buyer had not yet been determined. Before the FTC intervention there were several bids of not less than $ 100,000. After the intervention there were only two bids, for $50,000 and $ 15,491. Toysmart owes $20 million. More recently, when APBnews.com went into bankruptcy, the one bidder backed out after due diligence. The APBnews privacy statement was silent on the transfer of information to third parties, but did specify uses. Breaches of privacy policies in the United States, such as the failure to identify processing by subcontractors, have also led to class action lawsuits. Remedies While Canada's Personal Information Act contains provisions regarding remedies, it does not appear that these are intended to be the only remedies. Specifically s. 13 (2)(b) provides that the Privacy Commissioner is not required to prepare a report if she is satisfied that "...the complaint could more appropriately be dealt with, initially or completely, by means of a procedure provided for under the laws of Canada, ... , or the laws of a province; ..." If the matter is taken to the Federal Court (which does not yet allow class proceedings) the remedies may include damages for humiliation. Complainants may therefore also have the option of using the misleading advertising provisions of the Competition Act. If it can be shown that the breach of the privacy statement was made "knowingly or recklessly," the complainants will have a private right of action for damages and costs under s. 36, in addition to a common law action for breach of contract. These rights can be exercised as class proceedings, which are now permitted in Ontario, Quebec and British Columbia. What are the damages for humiliation in a privacy matter? Plaintiff counsel may suggest Aubrey v. editions Vice-Versa Inc., [1998], 1 S.C.R. 591 as a standard, as the single plaintiff was awarded $2,000 for moral damages for simple breach of her privacy rights in Quebec. Although the Supreme Court thought that this number was high, it did not interfere. The application of numbers in this range to a customer list should motivate class action counsel. Privacy statements Well-drafted privacy statements and policies should allow for the transfer of information and avoid misrepresentations as to use. However, a broad successors and assigns clause may not be effective. Under the Personal Information Act, information must be used for specified purposes that are stated in a manner that the individual can reasonably understand. Broad or vague purposes may be invalid. For an example of the use of such a provision, and some of the problems in drafting a consent, see the report of Quebec's Commission d'access d'information in X c. Banque Nationale du Canada, [1996], C.A.I. 410. If a customer list is considered a significant asset, counsel will now have to review a vendor's privacy statements to ensure that the list and information can indeed be transferred. Paul Jones practises franchising, marketing and trademark law at Miller Thomson llp in Toronto. He recently presented a paper on privacy law at the Annual Meeting of the Canadian Corporate Counsel Association in Halifax. (The Lawyers Weekly, September 15, 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 * * *