/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/001101.MBX C L A S S A C T I O N R E P O R T E R Wednesday, November 1, 2000, Vol. 2, No. 213 Headlines AMERICAN BANK: ABNH Announces Court's Preliminary Approval of Settlement AMERICAN GENERAL: Insurer Faces Employee Gender Discrimination Lawsuit ARKANSAS: Testimony On School Funding Ends, Ruling Still Months Away ASBESTOS LITIGATION: NY Judge Refuses to Certify Union Health Suit BIOMATRIX INC: Reports on NJ Lawsuits over Disclosure on Product Synvisc CBRL GROUP: Reports on OT Pay Suit against Subsidiary Cracker Barrel DONALDSON, LUFKIN: 2d Cir. Reinstates 1994 Rickel IPO Class Claims EDISON INTERNATIONAL: Douglas A. Ames Files Securities Suit Vs. CA Co. ENVISION DEVELOPMENT: Lowey Dannenberg Files Securities Suit in NY FIRESTONE, FORD: CA Complaint Charges of Acting in Concert HOLOCAUST VICTIMS: Smaller German Firms Snub Struggling Slave Labor Fund INMATES LITIGATION: Halt to Jailing Non-Criminal Mental Patients Ordered LSU: Judge Sends Parties To Mediation In Gender Equality Case MICROSTRATEGY INC: Settles Securities Case But Employment Suit Drags On OFFICE DEPOT: Survives Charges of Misleading Customers about Prices PENTAGON: Lawyer Wins Class Status For Enlistment Bonus Lawsuit SOTHEBY'S HOLDINGS: S.D.N.Y. Dismisses Fraud Suit Against Subsidiary SOTHEBY'S, CHRISTIE'S: NY Times Tells Details of Settlement SOUTH DAKOTA: Deal May Alter Youth Justice in State Training School TOBACCO LITIGATION: BAT Investigated Over Alleged Smuggling Ring * Canadian Judge Proposes Attorneys Pay Fees When Suits Lost * Journal Says New Bill Allows Terror Victims To Sue In U.S. ********* AMERICAN BANK: ABNH Announces Court's Preliminary Approval of Settlement ------------------------------------------------------------------------ American Bank Note Holographics, Inc. ("ABNH" or the "Company", OTC Bulletin Board: ABHH) announced on October 30 that the United States District Court for the Southern District of New York has preliminarily approved the settlement of the consolidated securities class actions against the Company and all other defendants, including the Company's former parent, American Banknote Corporation ("ABN"), certain former officers and directors of the Company, certain current and former officers and directors of ABN and the Company's former independent auditors, Deloitte & Touche LLP, named in the actions entitled, In re American Bank Note Holographics, Inc. Securities Litigation and In re American Banknote Corporation Securities Litigation filed in the United States District Court for the Southern District of New York (the "Court"). The Court directed that notice be given to a conditionally certified class of stockholders of the Company's common stock. The Court's Order does not constitute an expression of opinion on the merits of the claims asserted in the class actions and does not constitute an expression of its opinion as to the fairness or adequacy of the terms of the settlement. The Court set a hearing for December 15, 2000 to consider final approval of the proposed settlement. The settlement remains subject to the approval of the Bankruptcy Court for the Southern District of New York in which the Chapter 11 case of the Company's former parent, ABN is pending. The proposed settlement of the class action litigation provides for a release of all claims that the plaintiffs and class members in each action have and may have against the Company and the other defendants. The proposed settlement calls for a cash payment of$14,850,000, of which amount the Company's and ABN's insurance carrier is funding $12,500,000, and the remaining $2,350,000 will be contributed by defendant Deloitte & Touche LLP. The Company will have no cash payment obligation with respect to the settlement. In connection with the settlement, the Company will issue 1,460,000 shares of the Company's Common Stock, as well as warrants to purchase 863,647 shares of the Company's Common Stock at an exercise price of$6.00 per share. The warrants will be exercisable for a 30 month period commencing with final settlement approval by the Court. ABN will also issue certain of its securities as part of the settlement. American Bank Note Holographics is a world leader in the origination, production and marketing of mass-produced holograms. The Company's products are used primarily for security applications such as counterfeiting protection and authentication of transaction cards, identification cards, documents of value, and consumer and industrial products, as well as for packaging and promotional applications. This news release includes forward-looking statements that involve risks and uncertainties. Although the Company believes such statements are reasonable, they can make no assurance that such statements will prove to be correct. Such statements are subject to certain factors which may cause results to differ materially from the forward-looking statements, including but not limited to, the outcome of pending shareholder litigation; competition in the market for holograms; retaining and attracting key employees; and changes in business conditions which might impact customers and suppliers. The Company undertakes no obligation to publicly release results of any of these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected results. AMERICAN GENERAL: Insurer Faces Employee Gender Discrimination Lawsuit---------------------------------------------------------------------- A woman has filed a lawsuit against an insurance giant in an Aiken County court, joining dozens of other blacks in the state suing the company for allegedly charging higher premiums to minorities for decades. Beatrice Freeman, of McCormick County, filed the lawsuit, naming the defendants as American General Life and Accident Insurance Co., and insurance agent Henry H. Grantham, an Aiken County resident. The suit claims the company began its unfair trade practices and discrimination in the 1940s and has continued them to the present. According to the suit, American General trained insurance agents to go door to door and market the policies as burial protection. The agents would ''manipulate the emotions of prospective policyholders by playing on a sense of shame in leaving their loved ones without funds to pay for a funeral at the time of their death,'' the suit states. A recent investigation showed that between 1940 and 1980, American General and several of its subsidiary companies overcharged 1.2 million of its predominantly poor, black customers, including 62,000 South Carolinians. But investigators say black policyholders continued to be charged the base rates on old policies after the insurance industry abandoned racially discriminatory pricing on new sales. ''These companies were still charging African-Americans the 'Negro' rates of the '40s and '50s. They never changed the policy,'' said Columbia attorney J.P. Strom Jr., who is representing Ms. Freeman and dozens of similar plaintiffs. ''It's illegal, and these companies should be punished.'' Mr. Strom said the insurance agents commonly collected the premiums on a weekly or monthly basis. ''They went around door to door collecting premiums, anywhere from 50 cents to $ 1 a week from these poor, hard-working people,'' he said. ''It's just outrageous. What happens is they make so much money off these things, it's all profit. People have already paid the face value of their insurance policy, and they are continuing to collect.'' American General has since agreed to pay more than $ 200 million to settle state investigations and a class-action lawsuit alleging racial discrimination. Ms. Freeman's case is being handled outside of the class-action suit, Mr. Strom said. ''We are going to ask a jury in Aiken County to award the appropriate damages to her,'' he said. Mr. Strom's law firm, Strom & Young, is filing 50 similar suits in the state this year, the attorney said. A lawsuit represents one point of view. The defendants have 30 days to respond. (The Augusta Chronicle, October 26, 2000) ARKANSAS: Testimony On School Funding Ends, Ruling Still Months Away-------------------------------------------------------------------- Testimony concluded Monday in a lawsuit challenging Arkansas' method for funding schools, but it may be months before Pulaski County Chancery Judge Collins Kilgore decides whether the state distributes education money fairly. He also is to rule on whether the state's $1.7 billion school budget is enough to provide Arkansas children an adequate education. Estimates on how much more the state would have to spend on public education if the state loses the case have ranged from $400 million to nearly $1 billion. Besides raising taxes, the state would have few options for raising that kind of money. "If the judge does rule in our favor ... it's going to be a substantial increase in the state's participation in education," said state Sen. Bill Lewellen, D-Marianna. "Whether that's going to include a tax increase or whether the Legislature and the governor will find the funds in other means, that will be their decision." The parties in the case have 45 days after receiving a transcript of the six-week proceeding to submit final briefs. The transcript is not expected to be distributed until mid-December, which could push Kilgore's ruling into the middle of the 2001 General Assembly. The Legislature convenes Jan. 8. "What's at stake is the future of where we're going in educating our children in this state, as to whether or not they're going to get an education to be able to compete in this world," said Lewellen, who heads a team of lawyers representing the Lake View School District in eastern Arkansas. Lake View is lead plaintiff in a class-action lawsuit that contends the state has done too little to comply with a 6-year-old court order to eliminate wide disparities between wealthy and poor school districts in funding available to educate students. The 1994 order declared the school funding formula unconstitutional. In 1995, the Legislature created a system that funds schools on a per-student basis. In the 1995 and 1997 sessions, lawmakers poured at least $130 million more money into public education. In 1996, voters approved a constitutional amendment requiring a 25-mill minimum local property tax levy devoted to maintaining and operating schools. Lawyers representing the state and more than two dozen individual school districts argue that, with those changes, the state complied with the 1994 court order. Lawyers from the attorney general's office asked Kilgore on Monday to throw out the case, arguing that a ruling against the state would be tantamount to ordering a tax increase. Such an action, they said, would violate the separation of powers doctrine and would amount to judicial intrusion into the sole province of the Legislature. The judge denied the motion. Assistant Attorney General Brian Brooks declined comment after the hearing. Mitch Llewellyn, a lawyer representing nearly two dozen school districts seeking to maintain the current funding system, did not immediately return a message seeking comment. Kilgore ruled before the trial that he would judge the funding formula using statistical measures, as well as definitions - established in a landmark Kentucky education lawsuit - of an efficient education system. Arkansas law does not define an efficient education system, but the Kentucky case defined it as one in which the tax leverage is spread evenly, the necessary resources are available throughout the state to provide an adequate education and the system is properly managed. A key issue in the Arkansas case is what authority the judge has to order changes if he rules the state's education funding system is inequitable, inadequate or both. "What can the judge do about it? That's what the fundamental debate is going to be in the filings," lawyer David Matthews of Lowell said. The former state House member represents the Bentonville and Rogers school districts, which argue the existing funding system is equitable but that overall education spending is inadequate. Both Lewellen and Matthews contend Kilgore has wide discretion in ordering the Legislature to create a constitutionally adequate system. "Implicit in that is going to be an order that they do a for real investigation into what is adequate," Matthews said. "That's where the rub may come. That may require the Legislature to deal with qualities of efficiency that may or may not exist within the 310 school districts." School officials in many communities have feared the prospect of wholesale school consolidation since the school funding challenge began in 1992. (The Associated Press State & Local Wire, October 31, 2000) ASBESTOS LITIGATION: NY Judge Refuses to Certify Union Health Suit ------------------------------------------------------------------ U.S. District Judge Jack B. Weinstein in the Eastern District of New York has denied the motion of union health care funds to certify a class action against the tobacco industry in the funds' lawsuit to recover the costs of health care for their members. The judge said the plaintiffs had not shown that the case is manageable as a class action. National Asbestos Workers' Medical Fund v. Philip Morris Inc. et al., No. 98 CV 1492, (E.D.N.Y., Sept. 20, 2000); see Asbestos LR, Nov. 20. 1998, P. 9. The ruling allows the plaintiffs to designate one member of the proposed class to have its contentions tried. At the completion of that trial, the order says, the parties will be in a better position to address manageability and other requirements for certification. Judge Weinstein says that if the plaintiff chosen for trial is included as a plaintiff in any other tobacco action pending before the Eastern District Court which has been brought on theories not pressed in the instant case, the court would entertain a motion for severance and consolidation. "All tobacco non-punitive damage claims relating to the plaintiff should be tried together if that is practicable," the court ruled. The trust funds brought the action on behalf of a proposed class of approximately 4,000 similarly situated trust funds, all of which provide health care benefits to union workers in the building trades. They assert several causes of action, including alleged violations of the federal Racketeer Influenced and Corrupt Organizations Act, federal common-law claims for unjust enrichment, indemnity and breach of assumed duty. The defendants in the case are the major tobacco manufacturers, The Council for Tobacco Research-U.S.A. and the Tobacco Institute Inc. The funds are represented by Donald J. Capuano and James R. O'Connell of O'Donoghue & O'Donoghue in Washington, D.C.; Melvyn I. Weiss of Milberg Weiss Bershad Hynes & Lerach in New York; and Mary Beth Harmon, Kenneth David Pack, H. Russell Smouse, John C.M. Angelos, Peter G. Angelos, R. Bruce McElhone, E. David Hoskins and Joshua J. Kassner of the Law Offices of Peter G. Angelos in Baltimore. Philip Morris is represented by Barbara Robbins, Steven M. Barna, Ben Germana, Peter C. Hein and Stephen R. Blacklochs of Wachtell, Lipton, Rosen & Katz in New York, and Thomas John Quigley of Winston & Strawn in New York. R.J. Reynolds Tobacco Co. is represented by Theodore Grossman and Steven C. Bennett of Jones, Day, Reavis & Pogue in New York. Brown & Williamson Tobacco Corp. is represented by Michelle H. Browdy, Robert F. Huff Jr., Elli Liebenstein and Douglas G. Smith of Kirkland & Ellis in Chicago. British American Tobacco Co. is represented by Steven M. McCormick of Kirkland & Ellis. Lorillard Tobacco Co. is represented by William L. Allinder, Donald J. Kemna, Craig E. Proctor and John James Baroni of Shook, Hardy & Bacon in Kansas City, Mo. The Council for Tobacco Research-U.S.A. and the Tobacco Institute are represented by Anne E. Cohen and Harry Zirlin of Debevoise & Plimpton in New York. (Asbestos Litigation Reporter, September 28, 2000) BIOMATRIX INC: Reports on NJ Lawsuits over Disclosure on Product Synvisc ------------------------------------------------------------------------ On July 21, and August 7, 15, and 30, 2000, class action lawsuits requesting unspecified damages were filed in the United States District Court for the District of New Jersey against Biomatrix and two of its officers and directors, Endre A. Balazs and Rory B. Riggs. In these actions, the plaintiffs seek to certify a class of all persons or entities who purchased or otherwise acquired Biomatrix common stock during the period between July 20, 1999 and April 25, 2000. The plaintiffs allege, amongst other things, that the defendants failed to accurately disclose information related to Biomatrix's product Synvisc during the period between July 20, 1999 and April 25, 2000, and assert causes of action under the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under that Act. We disagree with these claims and believe that information related to Synvisc was properly disclosed. Biomatrix intends to defend these actions vigorously. Under the certificate of incorporation of Biomatrix, officers and directors of Biomatrix are entitled to indemnification for such claims from Biomatrix to the full extent permitted by Delaware law. The Company is presently unable to predict the ultimate outcome of these cases or whether they would have a material impact on the results of operations, financial position or cash flows of Biomatrix. CBRL GROUP: Reports on OT Pay Suit against Subsidiary Cracker Barrel -------------------------------------------------------------------- The Company's Cracker Barrel Old Country Store, Inc. subsidiary is involved in two lawsuits, filed in the U.S. District Court for the Northern District of Georgia, Rome Division, which are not ordinary routine litigation incidental to its business. Serena McDermott and Jennifer Gentry v. Cracker Barrel Old Country Store, Inc., a collective action under the federal Fair Labor Standards Act ("FLSA"), was served on Cracker Barrel on May 3, 1999. Kelvis Rhodes, Maria Stokes et al. v. Cracker Barrel Old Country Store, Inc., filed under Title VII of the Civil Rights Act of 1964 and Section 1 of the Civil Rights Act of 1866, was served on Cracker Barrel on September 15, 1999. The McDermott case is styled a collective action and alleges that certain tipped hourly employees were required to perform non-serving duties without being paid the minimum wage or overtime compensation for that work. The McDermott case seeks recovery of unpaid wages and overtime wages related to those claims. The Rhodes case seeks certification as a class action, a declaratory judgment to redress an alleged systemic pattern and practice of racial discrimination in employment opportunities, an order to effect certain hiring and promotion goals and back pay and other monetary damages. Cracker Barrel Old Country Store, Inc. believes it has substantial defenses to the claims made, and it is defending each of these cases vigorously. In March 2000 the court granted the plaintiffs' motion in the McDermott case to send notice to a provisional class of plaintiffs (servers and all second-shift hourly employees). The number of notices to be sent has not been determined. The parties are engaged in mediation, currently focused on the FLSA claims, but the mediation process is confidential and the parties cannot comment on the process or the status of their discussions. Because only limited discovery has occurred to date, neither the likelihood of an unfavorable outcome nor the amount of ultimate liability, if any, with respect to these cases can be determined at this time. Accordingly, no provision for any potential liability has been made in the consolidated financial statements of the Company. DONALDSON, LUFKIN: 2d Cir. Reinstates 1994 Rickel IPO Class Claims ------------------------------------------------------------------ The Second Circuit overturned a New York federal judge's orders dismissing a securities fraud class action stemming from the 1994 initial public offering of Rickel Home Centers. In reinstating the suit, the panel found that the trial judge erred in rejecting the bid of the original plaintiff's son to intervene as class representative, and by imposing sanctions against the original plaintiff pursuant to Fed. R. Civ. P. 11 without entering an order to show cause. Baffa et al. v. Donaldson, Lufkin & Jenrette Securities Corp. et al. No. 99-7607 (2d Cir., Aug 25, 2000). Soon after Rickel made its IPO in October 1995, Robert Baffa purchased shares for his then-minor son Brett and placed them into an account pursuant to the Uniform Gifts to Minors Act. Baffa sold the shares at a loss after the stock's subsequent decline in value. Baffa brought the instant litigation in the Southern District of New York in January 1996, naming various officers and directors of Rickel, as well as Donaldson, Lufkin & Jenrette Securities Corp., EOS Partners L.P. and General Electric Capital Corp., which between them controlled the bulk of Rickel common stock at the time of the IPO. The gravamen of Baffa's complaint was that the defendants failed to disclose in the Rickel prospectus four financial indicators (net sales, gross profit, EBIDTA and operating income loss after debt expense) that reflected a decline in business during the third quarter of 1994. Baffa asserted that the factors indicating Rickel's third quarter performance could be deduced from its April 1995 Form 10-K filing. The defendants argued for dismissal, asserting that the figures cited by Baffa were nowhere to be found in Rickel's 1995 10-K. The defense propounded interrogatories requesting the source of Baffa's statistics, and the plaintiff admitted in a September 1997 filing that the figures that he set forth in the complaint should be modified. In November 1997, U.S. District Judge Constance Baker Motley refused the defense dismissal motion, but sua sponte held that Baffa should be sanctioned for the defendants' attorneys' fees with respect to their efforts to obtain the figures relied upon by the plaintiff. The parties agreed the following February to a sum of $45,000. In April 1998, the judge rejected Baffa's bid for class certification, finding him an atypical representative because of the sanction and because of his lack of standing, as his son Brett had by then reached his majority and was now the shareholder. Brett Baffa then sought to intervene as class representative, as did Mary Dorflinger, a Dallas broker who had purchased Rickel shares over 1995 and 1996. Judge Motley denied the motions for intervention in April 1999. In its review, the U.S. Court of Appeals for the Second Circuit preliminarily found that the trial judge had abused her discretion in imposing the sanctions against Baffa on her own initiative without entering an order to show cause. The lower court "thus denied Baffa notice and opportunity to respond," the panel found. The appellate court did agree with the conclusion that Robert Baffa lacked standing to act as class representative. " U pon attaining eighteen years of age, Brett received indefeasibly vested title to the property, and his father retained no interest in the account," wrote the panel. "We find no basis in New York law for concluding that the custodian retains any power to continue administration of the account beyond the time the owner reaches the age of majority." The Second Circuit also found that Judge Motley acted within her discretion in rejecting Dorflinger's intervention bid, noting the movant's "status as a professional broker and the defenses to which she is subject." However, the panel rejected the lower court's reasoning in refusing Brett Baffa's intervention motion because of a perceived lack of knowledge regarding the suit. "The Supreme Court in Surowitz v. Hilton Hotels Corp., 383 U.S. 363, 370-374 (1966), expressly disapproved of attacks on the adequacy of a class representative based on the representative's ignorance," wrote the Second Circuit. "Although Brett was only eighteen, and had only recently completed the process of taking over the <> account, he understood the nature of his proposed role in the litigation and demonstrated his willingness to carry it forward." The appellants are represented by I. Stephen Rabin and Jacqueline Sailer of Rabin & Peckel in New York. The defendant appellees are represented by Stephen A. Radin and Andrew Liebhafsky of Weil, Gotshal & Manges; Thomas J. Hall and Brian A. Miller of Chadbourne & Parker; and William E. Wurtz and Benjamin S. Kaminetzky of Davis Polk & Wardwell, all in New York. (Securities Litigation & Regulation Reporter, September 27, 2000) EDISON INTERNATIONAL: Douglas A. Ames Files Securities Suit Vs. CA Co. ---------------------------------------------------------------------- A securities fraud class-action lawsuit has been commenced on behalf of purchasers of the publicly-traded common stock of Edison International (NYSE: EIX) (Edison). Named as defendants in the Complaint are Edison International and its wholly owned electric utility subsidiary, Southern California Edison Company. The Complaint charges defendants with violations of the Securities Act of 1934 and Rule 10(b)(5) promulgated thereunder. The Complaint alleges securities fraud by Edison by its massive overreporting, up to the staggering amount of $2.358 billion, of revenue on Edison's financial statements for the second and third quarters of the year Its wholly owned subsidiary, So. Cal. Edison, has been purchasing electricity at double or triple the price it can sell it for under a rate freeze required under California's electricity deregulation law. Edison essentially accounted for this $2.358 billion in "undercollections" as revenue on its income and balance sheets, even though this amount has not been billed by Edison to its customers and is not billable by Edison under state law. Edison reported stronger-than-expected earnings of $606 million ($ 606,000,000) for the nine-month period ending September 30, 2000. As charged in the Complaint, Edison, the parent company, has actually sustained a nine-month net loss of One Billion, Seven Hundred Fifty-Two Million ($1.75 billion). In booking phantom revenue, the Complaint alleges that Edison grossly deviated from Generally Accepted Accounting Practices ("GAAP") and applicable Financial Accounting Standards. These standards require, at a minimum, that to record this $2.358 billion as an asset and revenue, it must be "probable" that the entirety of the amount be approved by the California Legislature and regulators. This $2.358 billion would have to be retroactively charged to its customers for this past summer of 2000. Edison has already been rejected in its attempts to recover these funds from the California Legislature and the California Public Utilities Commission. Further, Edison would not be able to recover this $2.358 billion from its customers under the most basic principles of contract law and the free marketplace under deregulation. Edison could not retroactively add to its customers' bills up to $2.4 billion for the past summer's electricity use, when the customers were charged a stated rate and paid on a stated rate. Also, the customers would have conserved electricity, if it had been known that the effective rates were double or triple that shown on Edison's invoices. Contact: Douglas A. Ames, or Jacqui Parry, 714-536-7244, both of Law Offices of Douglas A. Ames ENVISION DEVELOPMENT: Lowey Dannenberg Files Securities Suit in NY ------------------------------------------------------------------ Syed Abbas Ali Shah, Ronald Keusch, and Alan Nathan have filed a complaint against Envision Development Corp. ("Envision")(AMEX:EDV) in the United States District Court for the Southern District of New York on behalf of a class consisting of all former shareholders of LiQ, Inc. ("LiQ"), whose shares of LiQ common stock were exchanged for shares of Envision common stock, pursuant to an Agreement and Plan of Merger on May 8, 2000. The complaint charges Envision, Andrew L. Evans, Evan's investment vehicle, San Francisco-based Zero.net, certain other companies affiliated with Evans, and certain officers and directors of LiQ with making material misrepresentations and omitting to disclose material facts to the former LiQ shareholders in connection with their exchange of LiQ shares for shares of Envision in violation of sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Plaintiffs seek to rescind the exchange of LiQ stock, and/or recover damages. Plaintiffs allege that Envision was a public company in name only, in that it was secretly controlled and manipulated by Andrew Evans, a convicted felon and securities law recidivist, whose name never appeared in any SEC report filed by Envision. Shortly after the Merger, plaintiffs learned that Evans, personally and through his subordinates at Zero.net, personally controlled every facet of Envision's operations. Among other allegations, in April 2000, Evans, through Zero.net, issued a sham "commitment" of funding for Envision's operations through May 2000, solely to obtain an unqualified opinion from Envision's auditors for Envision's Form 10-K due the next day. Envision disclosed the valueless commitment in its 10-K to maintain it$70 per share stock price which enabled it to acquire LiQ for stock with a market value of $45 million. The market price of that stock these days, in less than six months after the closing, has dropped less than $4 per share, giving LiQ shareholders less than $2.5 million in value. Furthermore, that stock will soon be de-listed by the American Stock Exchange, and Envision will be a "bulletin-board" company. The class period is a single day, May 8, 2000. Contact: Lowey Dannenberg Bemporad & Selinger, P.C., White Plains Richard W. Cohen, Esq. Telephone: (914) 997-0500 Fax: (914) 997-0035 e-mail: ldbs@westnet.com FIRESTONE, FORD: CA Complaint Charges of Acting in Concert ---------------------------------------------------------- In a personal injury complaint filed in California state court, plaintiff Jeffrey Albom contends that Bridgestone/Firestone Inc. and Ford Motor Co. acted in concert in putting the Explorer sport-utility vehicle on the road with defective Firestone tires. Albom's wife and three-week-old daughter were injured in a tread-separation accident. Albom et al. v. Bridgestone/Firestone Inc. et al., No. 414052, complaint filed (Cal. Super. Ct., San Mateo County, Aug. 29, 2000). "The defendants' concern for profits has created a public safety nightmare because of product defects in Ford Explorers with Bridgestone-Firestone tires which causes tires to blow out and the Explorers to roll over and kill and injure hundreds of people," the plaintiff maintains. Albom says Ford knew the Explorer was prone to rollover and that Firestone knew its ATX, ATX II and Wilderness tires were defective. The plaintiff's family was riding in a 1998 Explorer with Wilderness tires when the accident occurred. Firestone and Ford are charged with strict liability, failure to warn, breach of express and implied warranties, and negligence. The complaint also mentions the production problems at Firestone's plant in Decatur, Ill. "Ford has released data indicating that the highest rates of defects in Bridgestone/Firestone tires were those of the Wilderness tires produced at the Decatur plant in the mid-1990s. 'In almost every model year, Decatur showed up having incidents of separation higher than other plants,'" the plaintiff quotes a Ford engineering executive as having recently told The Chicago Tribune. The complaint also states, "A former supervisor at Firestone has told the press that rubber stock may have dried out because of strikes during the 1990s and then been used by replacement workers." Albom says Ford is also to blame for his family's injuries because the automaker's recommended tire pressure of 26 pounds per square inch -- a figure allegedly arrived at to reduce the vehicle's propensity to roll over -- results in overheating of the tires and eventual failure. Firestone recommended 30 pounds of pressure. The complaint observes that while Ford recommended a lower pressure than the tire maker, the Explorer owner's manual warned drivers to follow the auto maker's recommendation and stated, "Driving on tires with too little air pressure is dangerous. Your tires will get overheated. This can cause a sudden tire failure that could lead to serious personal injury or death." Albom is represented by Frank M. Pitre of Cotchett, Pitre & Simon in Burlingame, Calif. (Tire Defect Report: Special Supplement To Automotive Litigation, Reporter, September 26, 2000) HOLOCAUST VICTIMS: Smaller German Firms Snub Struggling Slave Labor Fund ------------------------------------------------------------------------ The smaller companies that form the backbone of Germany's economy are not prepared to pitch in the 1.7 billion marks (dlrs 730 million) still to be raised for a national foundation to compensate Nazi-era slave laborers, an industry group warned. Large companies such as DaimlerChrysler and Deutsche Bank set up the fund with government backing earlier this year, but corporate donations have slowed to a trickle with the total well short of the promised 5 billion marks (dlrs 2.2 billion). According to the 150,000-member federal association that represents small- and medium-sized businesses, appeals to smaller firms to pay more will continue to fall on deaf ears. Many companies are concerned that legal experts and administrators will siphon off too much of the money, the association said. Others insist working conditions in their firms were better than in the large factories marshaled to keep the Nazi war machine running in World War II. Some firms maintain good relations with former forced laborers, the association argued, saying ''so-called victims get a tear in their eye when they think about the good old days as a worker in a Germany family firm.'' Firms snubbing the fund which Chancellor Gerhard Schroeder's government has pledged to back with a further 5 billion marks (dlrs 2.2 billion) have said international companies keen to end the threat of class-action suits in the United States must make up the gap. Government and industry are waiting for class-action lawsuits in the United States which had prompted the creation of the fund last year to be dismissed before money flows to victims. Payments had originally been slated to begin this year, although officials have said it will likely be delayed. The industry foundation has insisted it will reach its target and that the current shortfall won't delay payments to survivors. More than 1 million people, mostly non-Jews from eastern Europe, stand to receive compensation. (AP Worldstream, October 30, 2000) INMATES LITIGATION: Halt to Jailing Non-Criminal Mental Patients Ordered ------------------------------------------------------------------------ A federal judge has ordered state law enforcement officials to stop jailing former Hawaii State Hospital patients when they are arrested for violating conditions of their release. Chief U.S. District Judge David Ezra said people acquitted of crimes by reason of insanity can't be jailed for non-criminal indiscretions after they are treated at the mental hospital and released. Ezra oversaw nearly a decade of federal supervision of the Kaneohe facility. A new class-action lawsuit said the state, over the past decade, has routinely arrested people for violating conditions of their release. Instead of returning them to the hospital, the lawsuit alleges, the former patients are thrown into the general prison population at Oahu Community Correctional Center. Ezra said unless there are new allegations of violence, former patients can't be held in lockup longer than 48 hours. His temporary restraining order remains in effect until a Nov. 9 hearing. State officials said it will take time to get word of the order to all sheriffs and county prosecutors, but authorities will try. (The Associated Press State & Local Wire, October 31, 2000) LSU: Judge Sends Parties To Mediation In Gender Equality Case ------------------------------------------------------------- A U.S. district court judge has sent LSU and the five plaintiffs' attorneys in a gender equality case to mediation to see if the two parties can settle out of court and end the six-year litigation. "We're trying to expedite this case to an end," said Tom Krebs, a Birmingham-based lawyer representing the plaintiffs. In January, the U.S. 5th Circuit Court unanimously ruled that LSU was "motivated by chauvinist notions" and "fashioned a grossly discriminatory athletics system." The ruling was the result of complaints from three women's soccer players and two softball players about the unavailability of their sports at the state's largest university. The suit was filed in 1994 before LSU started both programs. Because the circuit court found that LSU discriminated with intent, the plaintiffs were allowed to seek damages. The appellate court's decision was upheld on appeal in June, and the case was sent back to district court so the complaint could be certified as a class-action lawsuit. Certification of the class would open LSU up to hundreds more complaints and a much larger financial punishment. During a recent status conference with U.S. District Judge Rebecca Doherty, the two parties and the judge agreed to explore mediation. "That's about where we're at," said Nancy Rafuse, an Atlanta-based lawyer and Krebs' co-counsel. Doherty set February as a deadline for selecting a mediator. This will be the second mediation the parties have attempted. The 5th Circuit Court also forced the parties to attempt mediation, which was unsuccessful. LSU attorney Mike Pharis said the parties previously had an informal attempt to settle out of court. The lawsuit accuses LSU of violating 1972's Title IX of the Education Amendment Act. Title IX guarantees equal access and opportunity to participate in the benefits of intercollegiate athletics, specifically scholarships. Three soccer players filed a complaint against LSU and two softball players were added in 1995. (The Associated Press State & Local Wire, October 31, 2000) MICROSTRATEGY INC: Settles Securities Case But Employment Suit Drags On ----------------------------------------------------------------------- With the $ 113.7 million settlement of a securities fraud class action last week, the leaders of MicroStrategy Inc. hope they have put a heap of trouble behind them. But the company's legal woes are far from settled. The unusual accord, announced Oct. 24, postpones the payout of cash and stock to plaintiffs until 2005. So while the deal may have spared Vienna- based MicroStrategy some short-term pain, it assures that the case will shadow the business software company for years to come. The class action is also not the only hard-fought case facing MicroStrategy, which has seen its stock value fall far in the past few months. An executive's discrimination complaint, filed around the same time the stock troubles surfaced, has quickly cost the company around $ 500,000 in attorney fees. While the case involving former MicroStrategy human resources executive Betty Lauricia may not prove as central to the company's long-term health, it has already led to litigation in three different courts. Between the class action and the employment case, it may be a while before MicroStrategy puts a tumultuous and litigious 2000 behind it. Five-Year Plan The stock fraud litigation began in March, when the company announced it had overstated quarterly revenues and profits over the past three years. Stockholder suits quickly followed in the U.S. District Court for the Eastern District of Virginia as well as a derivatives complaint in Delaware, as the company's shares plummeted to one-tenth their previous value. In addition, the Securities and Exchange Commission launched an investigation following the restatement of earnings. Last week, the company announced an unusual settlement of the two civil matters. It will issue notes to shareholders for $ 80.5 million in cash and distribute shares of company stock, some of it coming directly from company executives, guaranteed to be worth $ 16.5 million. While the money won't be paid out completely until 2005, the company will make interim payments of $ 3 million every six months. The lead plaintiffs counsel, from New York's Milberg, Weiss, Bershad, Hynes & Lerach, declined comment on the settlement. But veterans of securities class actions say the company's saga is far from over. Several issues remain to be resolved, including court approval of the settlement and attorney fees. Counsel have not submitted the terms of the deal or their fee requests to the courts in Delaware or Alexandria. In addition, the class action litigation is still continuing against PricewaterhouseCoopers, which served as MicroStrategy's outside adviser on its accounting practices. The issue that has caught the attention of class action lawyers, though, is the delayed payment schedule. "It is relatively unusual to see payments stretched over such a protracted period of time," says Joseph Grundfest, a former Securities and Exchange Commission member who is now a professor at Stanford Law School. "But the company is in a difficult financial position, and you can't get blood from a stone." MicroStrategy General Counsel Jonathan Klein looks at the settlement in a positive light, saying the class members "have a strong incentive for us to do well and for our stock to go up." But Grundfest characterizes the class members' position as a "gamble," noting that the deal essentially makes them creditors of the company. Grundfest also says that "a wide variety of legal and ethical issues" could surface if the plaintiffs' lawyers are paid earlier-or with a different mix of promissory notes and stock-than the stockholders they represent. In most stock fraud suits resolved with both cash and stock, attorney fees are paid out in the same proportion as the total settlement, says a local lawyer who specializes in stock fraud suits and who is not involved in this case. Typically, this attorney says, legal fees comprise about 20 to 30 percent of the total settlement. Other class action lawyers say it would be highly unusual if the attorneys agreed to wait five years to receive all their fees. Trouble on the Job On the employment front, Betty Lauricia's case against MicroStrategy does not appear close to a resolution. Lauricia, 47, alleged in a complaint before the Equal Employment Opportunity Commission that MicroStrategy discriminated against her on the basis of sex and age when the company passed her by and chose someone younger for a promotion. She also claims MicroStrategy gave her only a fraction of the stock options offered to a male employee in a similar job. According to court files, Lauricia gave notice to MicroStrategy of the EEOC complaint on March 13. The next day, she was put on administrative leave after a meeting with Klein and MicroStrategy's outside employment counsel, David Shaffer, a partner in the D.C office of Thelen Reid & Priest. Then, on March 16, MicroStrategy sued Lauricia and her lawyer, Alexandria solo Claude Convisser. The complaint sought a declaratory judgment that MicroStrategy did not act illegally when it put Lauricia on administrative leave and asked for an emergency injunction blocking release of what the company termed trade secrets in her possession. While Klein refused to comment on what Lauricia allegedly took, in technology circles plans for future growth, new products and even employee salaries are often closely held. On April 24, Judge Leonie Brinkema dismissed MicroStrategy's suit. Brinkema's dismissal is on appeal to the 4th Circuit. MicroStrategy has since filed a motion to withdraw the appeal, as it filed similar claims in federal court in June. A few days after Brinkema ruled, MicroStrategy's lawyers went to Circuit Court in Alexandria with the trade secret claims. Chief Judge Donald Haddock ruled that the documents in question could not be made public and ordered a sheriff to retrieve them from Convisser's office. That case is on hold pending action on the 4th Circuit appeal. In May, the EEOC sent Lauricia a right-to-sue letter stating that the commission found it reasonable to conclude that MicroStrategy put her on leave and "filed suit against (Lauricia) in retaliation . . . in an attempt to produce a chilling effect to deter future allegations of employment discrimination." She filed a federal retaliation complaint in June, but not before MicroStrategy filed a second case in the Eastern District seeking a finding that it had not violated federal employment statutes in the Lauricia matter. The company added new allegations against Lauricia and Convisser of conspiracy to injure MicroStrategy's business reputation. Convisser is no longer a defendant to those claims, but they are still pending against Lauricia. Brinkema consolidated the cases, and on Sept. 13, U.S. District Judge T.S. Ellis III ruled on several elements of the case. From his comments, it is clear that MicroStrategy's litigation plan has not gone over well at the Rocket Docket. In his opinion denying MicroStrategy's motion to dismiss Lauricia's suit on the grounds that she is bound by an arbitration agreement, Ellis wrote that " MicroStrategy has been remarkably aggressive in pursuing litigation against plaintiff, resulting in the discovery of information unobtainable in arbitration and causing unnecessary delay and expense." Ellis concluded that MicroStrategy itself "waived its right to invoke arbitration" and rejected a related argument that Lauricia had failed to exhaust her administrative remedies with the EEOC. Immediately following Ellis' decision, MicroStrategy filed an interlocutory appeal to the 4th Circuit. That appeal is pending and no briefing schedule has been set. But it appears that after all this, including approximately $ 400,000 in fees paid to Thelen Reid and $ 70,000 to Alexandria's Young, Goldman & Van Beek, MicroStrategy would like to resolve the matter out of court. "We certainly believe that the questions involving Lauricia's employment and termination can be resolved through arbitration," says Klein. But Convisser says he has never seen indications that his opponent is ready to negotiate. "In seven months, I have briefed 52 separate motions and made 25 separate court appearances," he says. "MicroStrategy has never made any kind of settlement offer." (Legal Times, October 30, 2000) OFFICE DEPOT: Survives Charges of Misleading Customers about Prices ------------------------------------------------------------------- Office Depot has won the final round of a lawsuit that had charged the office-supply giant of misleading customers about the prices for its catalog merchandise. The U.S. Supreme Court struck down a class-action suit filed by a Miami woman that centered on a $ 2.30 price dispute and sought $ 10 million in punitive damages. The justices upheld a lower court's decision that the claim, filed on behalf of 39,000 customers, fell short of the $ 75,000 per-plaintiff minimum required for many lawsuits in federal court. Office Depot, based in Delray Beach, urged the justices to reject the appeal without a hearing. A spokeswoman for Office Depot said the company has a policy of not commenting on litigation. The lawsuit was filed in 1997 by Cheryl Cohen, a Miami customer who claimed she was deceived by catalog advertisements touting its prices as the lowest available. Cohen said the ads misled her into assuming the catalog prices were as low as those charged in the chain's retail stores. Cohen, who bought a printer cartridge and a package of file folder labels from the catalog for $ 28.98, said she discovered later that she would have paid $ 2.30 less had she bought the supplies from an Office Depot store. Office Depot publishes a catalog once or twice a year and guarantees free delivery. It also offers a 155 percent "low price" guarantee, meaning it will match a lower price found elsewhere, plus credit the customer with 55 percent of the difference. (The Miami Herald, October 31, 2000) PENTAGON: Lawyer Wins Class Status For Enlistment Bonus Lawsuit --------------------------------------------------------------- A lawsuit that accuses the Pentagon of illegally taking back enlistment bonuses from people kicked out for being overweight or failing fitness standards is now a federal class-action lawsuit. The decision by a federal judge in Washington expands the scope of a lawsuit originally filed on behalf of three plaintiffs in 1998 in Maine. Lawyer Michael Feldman said that he expects thousands of military personnel who were forced out of the military to qualify for the lawsuit. Between 1992 and 1995, 20,000 people were discharged for obesity from the Army, Navy, Marines and Air Force, he said. Many of those people lost all or part of their signing bonuses, Feldman said. "I know there are thousands of people in the United States and abroad who will be involved," Feldman said from his Brunswick office. The lawsuit does not take the military to task for booting personnel for being overweight or failing fitness standards, even when the standards were changed after someone entered the service. But those who were dismissed should not have to pay back enlistment or re-enlistment bonuses, the lawyer contends. "The military can discharge these people anytime they want. That's none of our business. But they can't recoup bonuses," he said. Judge Eric Bruggink from the U.S Court of Federal Claims granted the class-action request after plaintiffs agreed that Coast Guard personnel or military personnel dismissed for misconduct would not be part of the lawsuit. None of the original plaintiffs were dismissed for misconduct. All left the military with honorable discharges. The money at stake can be significant - upward of $15,000 or $20,000 for many of the plaintiffs, Feldman said. In the past, the Pentagon has declined to comment, deferring questions to the Justice Department. The lawyer handling the case for the government did not immediately return a message left at his office. Each branch of the military has its own weight requirements and fitness guidelines. For example, the Navy has the right to discharge sailors who fail fitness tests three times in a four-year period. One of the plaintiffs, Roger Sablone Jr., joined the Navy when there was no weight requirement. Later, a 225-pound standard was put in effect for someone 6-foot-2; later, it dropped to 215, then 211, he said. After a five-year stint aboard a nuclear submarine, he failed physical training tests in 1996 and 1997 before being dismissed at 240 pounds. Sablone, of Homestead, Fla., expected to receive a severance package that included money from unused leave. But he ended up receiving a check for $1,700 after the Navy subtracted $9,200 in bonus money. Feldman and lawyers for the government must now come to an agreement on how to notify potential members of the class. In his ruling dated Oct. 25, Bruggink gave both parties a month to file a report. (The Associated Press State & Local Wire, October 30, 2000) SOTHEBY'S HOLDINGS: S.D.N.Y. Dismisses Fraud Suit Against Subsidiary --------------------------------------------------------------------Federal court in New York has dismissed the securities fraud class action against Sotheby's Inc., a subsidiary of Sotheby's Holdings Inc., and certain financial officers of the renowned auction house. However, the court refused to dismiss the charges that the parent company, its chairman and CEO failed to disclose the alleged antitrust conspiracy that led to the litigation. In re Sotheby's Holdings Inc. Securities Litigation, No. 00-1041 (S.D.N.Y., Aug. 21, 2000); see Securities Litigation & Regulation Reporter, March 22, 2000, P. 8. Sotheby's is one of the world's largest auction houses selling fine arts, antiques and collectibles. In 1999, the company had aggregate sales of approximately $2.259 billion. The shareholder plaintiffs alleged that the Sotheby's, along with current and former executives, misrepresented material facts in their public filings regarding "intense" competition in the industry and its commission rates, which affected the bottom line. The suit followed charges by the U.S. Department of Justice that Sotheby's had conspired with its main competitor, Christie's International, to fix rates charged both buyers and sellers. In February of this year, the government disclosed that Christie's was given "conditional amnesty" for its cooperation in the investigation. Sotheby's and Christie's allegedly agreed to increase the buyer's premium charges for their services in the early 1990s. A few years later, the two houses instituted identical changes to their seller's commission policy, changing from a flat commission to a variable one based on the sale price of the items. The shareholder complaint alleges that Sotheby's touted the positive impact of the new commission structure based on its higher auction sales and increased revenues. However, the real cause of the increased profits was the illegal collusion, say the shareholders, which was not revealed by the auction house. The defendants moved for dismissal, asserting they did not have a duty to disclose the uncharged illegal conduct. In addition, Sotheby's argued that the plaintiffs did not allege any misleading statements made by the subsidiary, and that the charges against it should be dismissed because federal securities law does not allow for aiding and abetting liability. The plaintiffs countered that the financial information included in the SEC filings was available to those in senior positions who are presumed to be knowledgeable about the practices of the company, and that Sotheby's endorsed the reports. U.S. District Judge Denise Cote disagreed, concluding that the shareholders had failed to allege any act or omission on the part of the subsidiary itself because the complaint treated the two organizations as one. The court also held that the allegations against the financial officers were insufficient to satisfy the requirements of a Section 10b-5 action, and dismissed the claims against them without prejudice. "There are no allegations of the scienter of the Financial Officer Defendants apart from conclusory allegations regarding the individual Defendants as a group," stated the court. The complaint did not allege that the officers had any specific knowledge of the conspiracy or that documents were made available to them, which could show a failure to disclose on their part. The boilerplate allegations that they knew or should have known of the fraud based on their executive position is insufficient to prove intent, Judge Cote held. Nevertheless, the court ruled that the allegations against Chairman A. Alfred Taubman and President and CEO Diana D. Brooks are sufficient to withstand dismissal, in part, because they signed the SEC filings at issue. In addition, the complaint alleges that they were both directly involved in arranging the illegal price-fixing agreement. Both Taubman and Brooks resigned their respective positions soon after the government's investigation into Sotheby's business practices became public. (Editor's Note: After this case was decided, Sotheby's Holdings agreed to pay $70 million to settle the class action suit. ) The shareholder plaintiffs are represented by Sherrie R. Savett and Gary E. Cantor of Berger & Montague in Philadelphia; Daniel W. Krasner, Fred Taylor Isquith and Michael Jaffe of Wolf Haldenstein Adler Freeman & Herz in New York. Sotheby's Holdings Inc., Sotheby's Inc. and the financial officer defendants are represented by Greg A. Danilow, Timothy E. Hoeffner, Jonathan Margolis and Timothy A. Greensfelder of Weil, Gotshal & Manges in New York. (Securities Litigation & Regulation Reporter, September 27, 2000) SOTHEBY'S, CHRISTIE'S: NY Times Tells Details of Settlement ----------------------------------------------------------- A $512 million formal settlement of the class-action lawsuit against Sotheby's and Christie's lays out for the first time how the proceeds are to be divided among the more than 100,000 customers who said they were cheated by price-fixing and other collusion by the auction houses, according to Sotheby's court papers. The settlement, awaited since Sept. 22 and filed in Federal District Court in Manhattan, provides for the money -- minus unspecified lawyers' fees and administrative expenses -- to be distributed "pro rata based upon each class member's alleged overcharges" on domestic transactions. The calculations would take into account sellers' commissions paid on auction sales from Sept. 1, 1997, through Feb. 7, 2000, and purchase fees paid by buyers from Jan. 1, 1993, through Feb. 7, 2000. About 80 percent of the disbursements would be in cash, the agreement specifies, with the remaining 20 percent in the form of discount certificates to offset the price of seller's commissions and certain other charges. The certificates will be good for at least five years and could be turned into other credits. Under the settlement, $100 million of each company's $256 million will be distributed within 30 days of preliminary approval of the settlement by Judge Lewis A. Kaplan, and an additional $106 million will be distributed within 30 days of the judge's final approval. Also within 30 days of final approval, each company will offer customers covered by the case $50 million in the form of the seller's discount certificates. Customers covered under the class action can still opt out of the settlement, and if too many do so -- the number is not being made public -- Sotheby's and Christie's could pull out of the agreement. A Christie's spokesman said the Christie's settlement had also been given to the judge, but the auction house declined to make the papers available. Lawyers said that both sets of papers were generally comparable, although in Sotheby's case, $156 million of the $256 million is to be contributed by its former chairman, A. Alfred Taubman, as part of his settlement with the company. (The New York Times, October 31, 2000) SOUTH DAKOTA: Deal May Alter Youth Justice in State Training School ------------------------------------------------------------------- Lawyers for the state and a Washington, D.C.-based advocacy group told a federal judge they are discussing a settlement in a lawsuit to change practices at the State Training School. It was the first time either side has publicly acknowledged the chances of a settlement, the Sioux Falls Argus Leader reported. The details of the possible settlement are confidential. The lawyers and U.S. District Judge Lawrence Piersol talked about it in a telephone conference call. The Youth Law Center sued State Training School Superintendent Owen Spurrell and Corrections Secretary Jeff Bloomberg in February over conditions at the training school in Plankinton, claiming the school's practices were abusive. The lawsuit was filed on behalf of six juveniles. The judge later made it a class action case, meaning all current and future inmates at the school and prison are covered. "Our hope is we will be able to work out a final agreement on this by the end of the week," said Mark Soler, Youth Law Center president. During Monday's brief hearing, the state's lawyers, James McMahon and James Moore of Sioux Falls, agreed they have engaged in serious settlement talks this past week. Another hearing will be held Nov. 6. They said Gov. Bill Janklow is aware of the talks. It was not clear Monday whether terms of a South Dakota settlement would be public. The agency likely will not accept any settlement that doesn't reflect major change, said Debra Vargas of the Center for Juvenile and Criminal Justice in San Francisco. The law center wouldn't even discuss settling unless the state was admitting wrongdoing, she said. "They will not drop the ball and concede. They're for the kids," Vargas said. "They will not settle if they're not getting what they want, and what they want is real change." The suit asked Piersol for an injunction to change practices at the school, such as the use of restraints, pepper spray and solitary confinement for teen-agers in the juvenile prison and training school. The lawyers are not seeking monetary damages. In other states, the law center has won settlements including significant changes, including: The award of damages to nine juveniles and a limit on the use of restraints and drugs in South Carolina. 100 new teachers and educational administrators and improved education in the California system. The closing of a training school and major changes in two others in Florida. In South Dakota, the Youth Law Center lawsuit was filed seven months after Gina Score, 14, of Canton, died after a forced run at the girls' boot camp, which was at the State Training School at the time. "I do have faith in the executive branch that they will enter into the negotiations for settlement based on all of the facts and exercise good judgment," said state Rep. Roger Hunt, R-Brandon. The state didn't wait for a lawsuit to make changes after Score's death, he said. "We're going to have to wait for time to pass and have a better understanding of the real impact of those changes," Hunt said. State Rep. Pat Haley, D-Huron, said he supports the Youth Law Center yet hopes a settlement won't prevent the public from learning more about the corrections system. (The Associated Press State & Local Wire, October 31, 2000) TOBACCO LITIGATION: BAT Investigated Over Alleged Smuggling Ring ---------------------------------------------------------------- THE Department of Trade and Industry launched an inquiry into an alleged Pounds 500 million smuggling ring within British American Tobacco (BAT), the cigarette company. Stephen Byers, the Secretary of State for Trade and Industry, ordered the investigation after the findings of a Department of Health select committee inquiry into the tobacco industry. Mr Byers said: "I have given careful consideration to the unanimous recommendation of the select committee that the DTI should investigate the allegations of BAT's involvement in smuggling. "I have decided to appoint investigators to look into this and to report back to me as soon as possible." Three DTI staff raided Globe House, BAT's London headquarters, where they served the company with a section 447 notice, which allows the Secretary of State access to all company documents. The order permits the removal and interrogation of all company directors by the Secretary of State and his staff, which would include Kenneth Clarke, the former Chancellor, who is non executive deputy chairman of BAT. BAT is accused of encouraging the trade in smuggled cigarettes by exporting huge volumes to small markets. In Andorra, for example, UK tobacco exports rose from 13 million cigarettes in 1993 to 1.5 billion in 1997 - vastly more than Andorra's population of 63,000 could conceivably consume. It is estimated that the UK loses more than Pounds 2.5 billion a year in tax revenues because of tobacco smuggling. ASH, the British anti-smoking lobby, suggests that between Pounds 300 million and Pounds 500 million of BAT's revenue is derived from smuggled tobacco. Yesterday, the association called for the resignation of the company's entire board. The lobby claims to have documents suggesting that two BAT executives discussed revenues from sales described as DNP - duty not paid - which it is alleged they knew came from the black market. If evidence of smuggling is found by the DTI, ASH will campaign for BAT to be prosecuted under the Criminal Justice (Terrorism and Conspiracy) Act 1998. The law enables UK organisations to be prosecuted for conspiring to break the law in other jurisdictions. Allegations of smuggling at BAT go back to 1995 when a broker's note circulating in the City highlighted positive earnings growth for BAT despite anti-smoking lobbies in Britain and America damaging domestic sales. The note suggested that BAT sales would remain strong thanks to "unconventional" markets in the Far East. The latest allegations came to light during a class action against a division of BAT in Minnesota. The US Court ordered that documents relating to BAT's global trading network be deposited for public scrutiny in 1998. ASH has called for the investigation to be extended to Gallaher and Imperial Tobacco, BAT's two UK rivals. BAT, which denies all the allegations against it, said the company is disappointed that the information about a supposedly confidential inquiry has been made public by the Secretary of State. "It is unfortunate that this matter has been made public but the company still intends to co-operate fully with the DTI and any other agency involved in the matter." (The Times (London), October 31, 2000) * Canadian Judge Proposes Attorneys Pay Fees When Suits Lost ------------------------------------------------------------ One of Canada's top judges has proposed that the same lawyers who make large amounts of money when they win class action lawsuits should also have to pay when they lose. "If you lose, why shouldn't you have to pay the costs?" Justice Warren Winkler of the Ontario Superior Court wondered during a panel discussion at the Canadian Bar Association's annual convention. "The other side had to go there and defend themselves. You're the one who's going to get $ 15 million at the end of the day if you win," Justice Winkler said, referring to Vancouver lawyer J.J. Camp, who recently received $ 15 million in legal fees for representing hepatitis C victims in a British Columbia class action. $ 20 Million Payment Justice Winkler himself in June approved $ 20 million in payments to Ontario attorneys involved in negotiating a $ 1.2 billion deal with the federal and provincial governments for their clients who contracted the liver disease through tainted blood in the country's supply during the late 1980s. It was his colleague, Justice Kerry Smith of the British Columbia Supreme Court, who awarded the $ 15 million to Camp the same month. The fees amounted to 4.6 percent of the total compensation package. Camp challenged Justice Winkler at the convention, strongly suggesting that Ontario adopt a class action law similar to that in British Columbia. Losing lawyers there are only required to pay when their lawsuits are found to be frivolous, while in Ontario, they pay regardless. Ontario 'Wrong' "I feel very strongly about this, I think Ontario has got it absolutely wrong," Camp said, asserting that punishing the losing lawyers could develop "a huge obstacle and potentially a barrier" to class actions since attorneys would be reluctant to take the risk. Rodney Haley, another British Columbia attorney, presented a paper at the convention on developments in class actions which estimates that most result in settlements for the victims while few have been struck down by the courts. To date, class actions are only allowed in British Columbia, Ontario and Quebec. Halifax lawyer Dawna Ring criticized the other provinces for not allowing class actions. "Most people can't afford to gamble their mortgage for a case they don't know if they will win," Ring said. "Before class actions, people couldn't get into the court system." (Mealey's Attorney Fees, September, 2000) * Journal Says New Bill Allows Terror Victims To Sue In U.S. ------------------------------------------------------------ Daily What's a fair price for seven years in hell? How about $ 41.2 million, plus interest? That's what Terry Anderson will get. In 1985, Hezbollah thugs, acting for Iran, grabbed him in Beirut. His captors seized 18 Americans in all. They killed one. The new Justice for Victims of Terrorism Act will give some comfort. The Beirut captives will share $ 213 million. The kin of 20-year-old Alisa Flatow, killed by a 1995 Hezbollah bomb in Israel, will get $ 22 million. The families of three Cuban-American pilots shot down near Cuba will share $ 50 million. The cash will come from rogue-state assets seized by the U.S. Treasury. The new law augments the 1996 Anti-Terrorism Act. That older law gave American victims the right to sue terrorist-sponsoring nations in U.S. courts, but left no way to collect. The new law lets plaintiffs go after defendants' funds frozen by the U.S. Worthy as the new law is, it sends a wake-up call not only to tyrants but to corporate boardrooms in the U.S. and abroad. What's the connection? American law is trending toward punishment of tyranny and those who support or profit from it. That includes U.S. and foreign companies, human-rights lawyers say. Related U.S. laws are forcing major companies - foreign and domestic - into American courtrooms to account for their treatment of prisoners, peasants and dissidents. One is the Alien Tort Claims Act. Passed in 1789 by the first Congress, it lets foreigners sue in U.S. federal courts for crimes committed abroad. These crimes must be seen as violating international law. Nigerians have launched a class action in California against Chevron, alleging that the company conspired with their country's army and police. The suit charges Chevron with complicity in "summary execution, torture and unlawful arrest and detention" to suppress "peaceful protests about Chevron's environmental practices on plaintiffs' land." Nigerians also are suing Royal Dutch Shell for similar charges. Burmese citizens are suing Unocal. They claim the oil company and Burma's ruling junta enslaved workers to build a pipeline. Human-rights lawyers say U.S. courts are moving from punishing tyrants to punishing firms that work with tyrants. They say such cases send a warning to the boardroom: don't buddy up to corrupt, brutal regimes. A newer law has rattled Japanese companies in the U.S. California passed a law in 1999 that gives World War II slave laborers until 2010 to sue Axis companies that exploited them. Since Germany and Austria have negotiated $ 7 billion settlements, the law hits Japan. Two classes of people are suing Japanese giants Mitsui, Mitsubishi, Nippon Steel, Ishihara, Sumitomo, Daiwa and others in U.S. courts. Americans who were prisoner-of-war slaves of these firms are invoking the California law. Chinese, Koreans, Filipinos and other non-Americans are applying the Alien Tort Claims Act as well as the California law. The Japanese firms say California lacks jurisdiction. Human-rights lawyers say the companies' large holdings in the state bring them under California law. The Japanese firms also argue that a 1951 treaty absolves them. Lawyers for U.S. POWs say the treaty may shield Japan's government but not the companies that profited from enslaved and abused Americans. The cases are embroiled in complex appeals. Dave Casey, a San Diego lawyer representing POWs, believes the Japanese firms will settle rather than go to trial. "If an American jury heard about these atrocities, there would be heavy penalties," he said. Japanese officials have made veiled threats over laws such as California's. Rhode Island has a similar bill awaiting passage. In May, Yuzo Yoshioka, Japanese consul in Boston, sent a warning to the state's senate finance committee. He said that Japanese companies "might be forced to withdraw from this country." But legal experts say Japanese companies are too heavily invested in the U.S. to make good on the threat. Another law, the 1991 U.S. Torture Victims Protection Act, gives victims or kin the right to sue not just the perpetrators but also those who gave the orders or failed to stop the crime. The New York-based Lawyers Committee for Human Rights is suing two former El Salvadoran generals in Florida. The committee says that the pair should pay for the murders of four U.S. nuns by Salvadoran troops in 1980. The four laws are linked, said Rob Varenick of the committee, by enforcing the principle that "people up the chain of command in institutions may be held liable for acts on which they may not have left their fingerprints." He said, "This derives from some basic considerations: in the country of origin the act cannot be properly tried because governments or courts are unwilling or unable to act." He said pushing American legal jurisdiction beyond U.S. borders is "consistent with the way the business world is working." In the case of rogue-state defendants, the U.S. government can use seized assets to compensate some victims. And lawyers expect foreign corporations to pay rather than leave the U.S. But what about international criminals? The record is not good. Robert Swift, a Philadelphia human-rights lawyer, won a $ 2 billion judgment against the estate of Ferdinand Marcos, the late Philippine dictator. "It took over a decade. We litigated every issue," Swift said. (Investor's Business Daily, October 31, 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 * * *