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/raid1/www/Hosts/bankrupt/CAR_Public/010118.MBX C L A S S A C T I O N R E P O R T E R Thursday, January 18, 2001, Vol. 3, No. 13 Headlines ART MODELL: Cleveland Fans Will Contest Former Browns Owner in Ohio Ct. AURORA FOODS: Settles Shareholder Lawsuits in CA Re Former Management COCA-COLA: Employees Face Decision, To Take Or Not Take Race Bias Pact DRKOOP.COM: Struggling Health Web Site Closes TX Operations; Moves to CA ENGLISH-ONLY: The NY Times Presents Interrelated Issues in Sandoval Case FLEMINGTON PHARMACEUTICAL: Announces Settlement of Securities Suit in NJ INDIANA CABLE: Ruling Denies Late-Fee Refund; Appeal Planned INFINITY BROADCASTING: Reports on Suits & Events Re Viacom Proposal INMATES LITIGATION: Parole Backlog Cleared; Advocates Point to Loopholes J.C. NICHOLS: Opts To Settle Lawsuit Re 1998 Acquisition By Highwoods LIFESCAN INC: J&J Subsidiary to Pay $60M Penalties In Blood Meter Case LINCOLN PARK: Students' Action against Searches Granted Class Status MAD CRAB: Ohio Court Certifies Class of Food Poisoning Victims NEFF CORP.: Announces Shareholder Lawsuits Concerning URI Proposal PHILIPS INTERNATIONAL: Amended Complaint Re Liquidation Filed in MD PRI AUTOMATION: Schiffrin & Barroway Files Securities Suit in MA SEMPRA, EL PASO: Documents and Notes Led to Energy Collusion Suits SIMON TRANSPORTATION: Utah District Ct Dismisses Securities Lawsuit TERAYON COMMUNICATION: Consolidated Securities Complaints Filed in CA VERIZON: Cohen Milstein Files Securities Suit in District of Columbia WEAPONS CONTRACTORS: Lawsuits Claim Radiation Effects & Discrimination ********* ART MODELL: Cleveland Fans Will Contest Former Browns Owner in Ohio Ct. ----------------------------------------------------------------------- Bitter Cleveland fans might still get a chance for some payback against former Browns owner Art Modell, even if his Baltimore Ravens win the Super Bowl. A lawsuit brought by 1995 Browns season-ticket holders, who claim Modell lied to them when he moved the old Cleveland franchise to Baltimore, will go to trial on March 19. The fans are seeking $6.4 million in damages, which might just be enough to ease Clevelanders' pain if the team that used to be their own beats the New York Giants and wins the NFL title. Modell's attorneys argued in Cuyahoga County Common Pleas Court on Tuesday that the case shouldn't get that far. They told Judge Kenneth Callahan the case should be thrown out before it goes to trial. After an hour-long hearing, Callahan did not say when he would rule on their request. Season-ticket holders originally sued Modell on the same day - Nov. 6, 1995 - that he announced he was moving his Browns to Baltimore. The case has been kicking around the legal system ever since. The Browns fans accuse Modell of misleading them by saying publicly he would never move the team while he was privately arranging to bolt from Cleveland. Modell also deprived fans of the right of first refusal to buy 1996 season tickets, the lawsuit says. The class-action suit is on behalf of 11,000 Cleveland season-ticket holders for 1995, who controlled about 39,000 seats at the old Cleveland Municipal Stadium. Having the chance to keep good seats for upcoming years is a big part of the reason to get season tickets in the first place, said Michael Saltzman, a season-ticket holder for 29 years, who had 40-yard line seats when Modell left. Saltzman bought season tickets for the new Browns, who returned to the NFL in 1999 under the ownership of former Modell partner Al Lerner, but they're on the 20. "I think he (Modell) committed fraud," said Saltzman, who watched Tuesday's hearing. Ravens lawyers told Callahan it's clear Modell and others indicated the Browns could move if negotiations on a new stadium or renovations fell through. "We clearly don't think there was any fraud by Mr. Modell," Modell attorney Mark Gately said after the hearing. "We think the evidence shows that." Gately also denied 1995 season-ticket holders had first rights to season tickets the following year. He called the fans' request for punitive damages "outrageous." He said the season-ticket holders were using laws meant for much more serious cases, such as when people are exposed to asbestos, to try to win money for football seats. (The Associated Press, January 17, 2001) AURORA FOODS: Settles Shareholder Lawsuits in CA Re Former Management --------------------------------------------------------------------- Aurora Foods Inc. (NYSE: AOR) announced on January 16 it has reached a preliminary agreement to settle the securities class action and derivative lawsuits pending against the Company and its former management team in the US District Court in the Northern District of California. These actions were commenced in the wake of Aurora's disclosure on February 18, 2000, of accounting irregularities at the Company and the resignation of the Company's former senior management team. Under terms of the agreement, Aurora will pay the class members $26 million in cash and $10 million in common stock. Separately, the Company has entered into a preliminary agreement with certain members of former management to transfer between approximately 3 million and 3.6 million shares of Aurora common stock to the Company, in consideration for a resolution of any civil claims that the Company may have, and partially conditioned upon future events and circumstances. The cash component of the settlement with the Company's shareholders will be funded entirely by the Company's insurance. With respect to the stock component of the settlement, the stock received from former management would be sufficient, at current share prices, to satisfy Aurora's obligation without issuing additional shares. The actual number of shares needed to fund this component will be based on average share prices determined at later dates. In addition, the Company has agreed to continue to implement certain remedial measures, including the adoption of an audit committee charter, the reorganization of its finance department, the establishment of an internal audit function and the institution of a compliance program, as consideration for resolution of the derivative litigation. COCA-COLA: Employees Face Decision, To Take Or Not Take Race Bias Pact ---------------------------------------------------------------------- It's decision time for some 2,000 current and former Coca-Cola workers covered by a record $ 192.5 million racial discrimination settlement. Coca-Cola mailed court-approved notices Tuesday to salaried African- American employees in the United States who worked for the company any time between April 22, 1995, and June 14, 2000. Members of the class-action case have until March 19 to decide on one of four basic options: -- To agree to the terms, which provide an average of about $ 40,000 for each class member. A formula, partly based on a class member's length of service and pay, has been developed. -- To accept a partial settlement averaging about $ 28,000. Class members who think they have strong evidence they were discriminated against in a prior promotion decision can then take their promotion case to a U.S. magistrate judge in an expedited procedure. -- To "opt out" of the settlement, allowing the person to file an individual suit for monetary damages. Already pending is a separate lawsuit by four former African-American employees. -- To file an objection to the settlement but remain part of the class. If the settlement is approved, those who object are part of it and cannot opt out. A "fairness hearing" before U.S. District Judge Richard Story has been set for May 29. Story will consider evidence about whether the settlement is fair and reasonable before deciding whether to give it final approval. Coca-Cola has the right to declare the settlement void if more than 200 class members opt out. Company spokesman Ben Deutsch, however, said "this is a right but not an obligation. We will evaluate this situation if and when it becomes a reality." (The Atlanta Journal and Constitution, January 17, 2001) DRKOOP.COM: Struggling Health Web Site Closes TX Operations; Moves to CA ------------------------------------------------------------------------ The struggling health Web site co-founded by the former U.S. surgeon general C. Evererett Koop of Hanover, N.H., is closing its Texas headquarters, laying off 45 workers and moving to Santa Monica, Calif. Drkoop.com president Ed Cespedes said in a statement that closing its Austin operations will reduce overhead costs "and put our people near where our clients and strategic partners are located." The company's medical content development, the thrust of its business, is in Santa Monica. Drkoop.com plans to expand its business beyond just a content-based Web site by partnering with other companies to sell technology, health content and hosting services and health management, Cespedes said. Cespedes would not provide further details of those plans. Analysts long have said that the company had to expand its business to stay alive. The closure and lack of specifics about future plans show the Web company is still in critical condition, said Claudine Singer, senior health care analyst for Jupiter Research. "What the company needs to demonstrate is a clear-cut strategy to turn its fortunes around, and none is in evidence. It's great to strive for cost efficiencies but that alone does not a business model make," she said. Cespedes said only "a certain number" of the 100 Austin-based employees will be offered transfers to California or Philadelphia, where the company announced some of its sales and business development operations will be located. The move will reduce the company's monthly cash expenses to less than $1 million, down from a high of $8 million per month last March, the company said. The shutdown is the latest ailment in the company's troubled 2-year history. Last month, drkoop.com announced it was scrambling to keep from losing its listing on the Nasdaq Stock Market. Company officials proposed to its board a reverse stock split that would increase share value to above the $1 minimum by decreasing the number of shares outstanding. Nasdaq can delist companies whose stock price falls below $1 for 30 straight trading days. Drkoop faces being bumped off the board as early as February. On Tuesday, drkoop.com rose 9.4 cents, or 23 percent, to close at 50 cents per share on the Nasdaq Stock Market. When it went public in July 1999, drkoop.com stock sold as high as $45. It has been below $1 since Oct. 18, when shares closed at 90.6 cents. Several shareholders sought class-action status in a lawsuit claiming the company made false promises when it went public. The lawsuit is still pending. In April, officials announced the company only had enough cash to survive until August. The announcement came after the company disclosed in March that its auditors had cast doubt on its ability to remain in business. The company laid off a third of its work force in August and hired a new management team. The company was co-founded in 1999 by Koop, U.S. surgeon general from 1982 to 1989. Koop now heads the Koop Institute at Dartmouth College. (The Associated Press State & Local Wire, January 17, 2001) ENGLISH-ONLY: The NY Times Presents Interrelated Issues in Sandoval Case ------------------------------------------------------------------------ In his final appearance representing the government before the Supreme Court, Solicitor General Seth P. Waxman urged the justices not to repudiate more than 25 years of legal precedents that have permitted individuals to sue states to prevent violations of federal civil rights regulations, the New York Times reports. The Clinton administration was aligned against Alabama in a complex case with significant implications for both federalism and civil rights enforcement, the report says. The case began four years ago as a dispute over Alabama's newly enacted requirement that people applying for driver's licenses demonstrate proficiency in English, the only such requirement in the country. A federal appeals court's ruling last year that the language requirement violated federal antidiscrimination regulations turned the case into a rallying point for the English-only movement. According to the New York Times, there was no mention in the courtroom of the English-only issue or, indeed, any of the facts of the class-action lawsuit, brought against the state on behalf of immigrants who could not demonstrate English proficiency at the required 10th-grade level. The focus of the justices' interest was entirely on the legal questions raised by the case and on the implications of accepting Alabama's argument that the lower courts should never have permitted the lawsuit to proceed in the first place. Yesterday, the CAR included a report on the case under the heading "Lawyers Urge Supreme Court to Focus on Right to Sue in Anti-Bias Case." The New York Times says that there are several interrelated issues in the case, Alexander v. Sandoval, No. 99-1908. -- The first is whether the lower federal courts have correctly ruled, in cases going back to the 1960's, that individuals may sue states under Title VI of the Civil Rights Act of 1964, a law that prohibits recipients of federal grants from discriminating on the basis of race or national origin. -- A second issue is whether, even if private suits are generally permissible under Title VI, they can be brought for violations of regulations that federal agencies have issued to implement the law and that go beyond the statute itself. -- A further issue lying under the surface of the case is whether agencies can issue regulations that carry federal enforcement authority further than Congress has explicitly authorized; in the case of Title VI, the statute itself prohibits only intentional discrimination, while regulations to implement it issued by the Departments of Justice and Transportation also bar actions that have a discriminatory effect, without requiring proof of intent. Not so many years ago, the answer from the Supreme Court to all these questions would indisputably have been yes. But today, each issue resonates with a different aspect of the court's renewed debate over states' rights and Congressional authority, and the outcome is far from certain. Jeffrey S. Sutton, arguing Alabama's appeal, told the justices that in ruling against the state, the United States Court of Appeals for the 11th Circuit had ignored the fact that "states are not run-of-the-mill civil defendants" but rather are "co-equal sovereigns." Permitting such lawsuits "alters the federal-state balance," Mr. Sutton said. Mr. Sutton, formerly Ohio's solicitor general, is now in private practice and is also representing Alabama in a major federalism case under the Americans With Disabilities Act. That case was argued before the court in October and is awaiting decision. The first prong of Mr. Sutton's argument on January 17 was that in enacting Title VI, Congress never explicitly granted a "private right of action" to individuals to sue states or anyone else. The law was passed under Congress's spending power, and the sanction it provides is the cutoff of federal money to a program that is misusing its federal grant to support discriminatory policies. "When you alter the federal-state balance, Congress has to be unmistakable about what it's doing," Mr. Sutton said. Justice Stephen G. Breyer told him, "You're reading a lot of complications into a silence." The second prong of Mr. Sutton's argument was that even if there is an implied right to sue under Title VI, that right does not extend as far as regulations that prohibit more than intentional discrimination. In challenging this argument, Solicitor General Waxman told the justices that it ran counter to the court's "completely unbroken practice of enforcing obligations equally whether they arise under statutes or regulations." Mr. Waxman said that to accept Alabama's position would be to "drive a wedge right through the heart of this court's cases that hold that substantive regulations mandated by statute have the force of law." Section 602 of Title VI requires "each federal department and agency" affected by the law to issue regulations "which shall be consistent with achievement of the objectives of the statute." A separate federal law generally known as Title IX, which bars sex discrimination in education programs that receive federal money, was based on Title VI and would also be affected by the court's ruling in this case. Mr. Waxman told the court that the case had "very, very broad ramifications" beyond the civil rights laws for enforcing "regulatory obligations against the states," for example, under the federal Medicare statute and regulations. The case has drawn many friend-of-the-court briefs that alert the court to implications for current lawsuits over land use, school financing and academic standards for college athletes. The lead plaintiff in the case, Martha Sandoval, represented at the court on January 17 by Eric Schnapper, is a permanent resident who came to the United States from Mexico in 1987. She knows enough English to read road signs but does not read English at the high school level required to pass Alabama's test. (The New York Times, January 17, 2001) FLEMINGTON PHARMACEUTICAL: Announces Settlement of Securities Suit in NJ ------------------------------------------------------------------------Flemington Pharmaceutical Corp. (OTCBB: "FLEM" "FLEMW") announced that it has settled a class action lawsuit filed against it and two of its Officers and Directors in 1998. The Company previously had announced that on November 8, 2000 the United States District Court for the District of New Jersey had denied the plaintiff's Motion for Class Certification. At the time of the settlement, the Company had pending a Motion for Summary Judgment. The Company's President, Dr. Harry A. Dugger III said, of the settlement: "While I and our attorneys believe the Company ultimately would have prevailed in this litigation, it is in the best interest of the Company and its shareholders to put this matter behind us. The lawsuit has been dismissed with prejudice. While the settlement agreement requires that the exact terms remain confidential, I think I can safely say that I consider the terms of settlement to be highly advantageous to the Company." Flemington is engaged in the development of novel drug delivery systems for presently marketed prescription and over-the-counter drugs. The novel delivery systems include lingual sprays and soft gelatin bite capsules. The Company believes these delivery systems offer (I) improved drug safety by reducing the required dosage, therefore reducing side effects; (ii) improved dosage reliability; (iii) improved patient convenience and compliance; and (iv) enhanced dosage reliability. The Company plans to develop such products through collaborative arrangements with major pharmaceutical companies. INDIANA CABLE: Ruling Denies Late-Fee Refund; Appeal Planned ------------------------------------------------------------ The Indiana Court of Appeals has handed Indiana cable customers a partial defeat in their bid to recoup past late fees. In an opinion released Tuesday by Judge Carr Darden, the court ruled that Time Warner Cable subscribers do not have the right to compensation for past late fees. But the court also returned the case to the Marion County courts to determine whether the company needs the late fees to cover its costs. A group of Indianapolis customers sued Time Warner in 1998 for allegedly overcharging those who pay their bills late. Irwin Levin, an Indianapolis lawyer representing plaintiffs Kelly J. Whiteman and Jean Wilson, is seeking class-action status for all of Time Warner's Indiana customers. He said he plans to appeal the court's late fees decision to the Indiana Supreme Court. "This is a very anti-consumer doctrine," Levin said. "Any time you pay for anything, and you find out that you shouldn't have paid the money - but you paid it voluntarily - you can't get it back." Time Warner said the late fee covers expenses the company incurs when customers don't pay promptly. A Marion Superior Court will soon hear statistical evidence that the cable company already charges its customers more than enough to make ends meet - and that its $4.65 late fee is unwarranted. The company isn't worried about its case. "We feel very confident that our position was correct, is correct, and will be correct," said Buz Nesbit, Time Warner's division president. (The Associated Press State & Local Wire, January 17, 2001) INFINITY BROADCASTING: Reports on Suits & Events Re Viacom Proposal ------------------------------------------------------------------- In August 2000, at least sixteen putative class action lawsuits were filed against Infinity, members of Infinity's board of directors, and Viacom in the Court of Chancery of the State of Delaware and the Supreme Court of the State of New York. Details of certain of these lawsuits have been previously reported in the CAR. On August 31, 2000, the Court of Chancery of the State of Delaware issued an Order consolidating the eleven actions filed in that state. On October 5, 2000, Viacom provided to counsel representing plaintiffs in the consolidated stockholder litigation in Delaware confidential due diligence information and financial analyses concerning the proposed merger. Events Related to Viacom Proposal On October 6, 2000, representatives of Bear Stearns, Deutsche Banc Alex. Brown and Skadden Arps met with representatives of Viacom, Goldman Sachs and Shearman & Sterling to discuss the special committee's views regarding the Viacom proposal and the exchange ratio proposed by Viacom. After a lengthy discussion, the special committee's co-financial advisors informed Viacom and Goldman Sachs of the special committee's view that the exchange ratio to be paid by Viacom would need to be increased for the special committee to recommend the proposed transaction. In response, representatives of Viacom expressed the view that the exchange ratio of 0.564 of a share of Viacom Class B common stock per share of Infinity Class A common stock, as indicated in the Viacom proposal, represented full and fair value for the shares of Infinity Class A common stock. Representatives of Viacom and Goldman Sachs then engaged in discussions with the special committee's legal and co-financial advisors regarding the available Wall Street research analyst estimates, and adjustments thereto, considered by the special committee and its co-financial advisors in evaluating the Viacom proposal. Representatives of Viacom then invited the special committee's co-financial advisors to continue their discussions with representatives of Goldman Sachs regarding such estimates and adjustments thereto. On October 8, 2000, the special committee held a meeting to discuss with its legal and co-financial advisors the outcome of the October 6th discussions with Viacom and Goldman Sachs and to formulate a response to those discussions. From October 8, 2000 through October 16, 2000, representatives of Bear Stearns and Deutsche Banc Alex. Brown held a number of discussions with representatives of Viacom and Goldman Sachs. On October 16, 2000, the special committee again met with its legal and co- financial advisors to review the recent discussions between representatives of Bear Stearns and Deutsche Banc Alex. Brown and representatives of Viacom and Goldman Sachs. The co-financial advisors informed the special committee that, while they had several discussions with representatives of Goldman Sachs and Viacom, the co-financial advisors still believed that an exchange ratio in excess of that proposed in the Viacom proposal was appropriate and that Viacom had not as yet revised its offer. Following this discussion, representatives of Viacom and Goldman Sachs joined the meeting telephonically to discuss the special committee's views on the Viacom proposal. The special committee informed senior executives of Viacom that the exchange ratio proposed by Viacom would need to be increased for the special committee to recommend the transaction. The senior executives of Viacom stated that Viacom would not be willing to agree to an increase in the exchange ratio. At the conclusion of this teleconference, the special committee directed its co-financial advisors to again meet with representatives of Goldman Sachs. On October 16, 2000, representatives of Skadden Arps provided additional comments regarding the draft merger agreement to representatives of Shearman & Sterling. During the morning and early afternoon of October 17, 2000, representatives of Bear Stearns and Deutsche Banc Alex. Brown again held discussions with representatives of Viacom and Goldman Sachs. Later in that day, the special committee held discussions with its legal and co-financial advisors to review their conversations with representatives of Viacom and Goldman Sachs. The co- financial advisors informed the special committee that, although some progress had been made, no agreement had as yet been reached regarding the exchange ratio to be paid by Viacom. At the conclusion of this meeting, the special committee directed its co-financial advisors to inform Viacom that, in light of the discussions that had occurred over the previous several days, the special committee would be willing to consider less of an increase in the exchange ratio than it had previously considered, but that Viacom would nevertheless need to increase the exchange ratio for the special committee to recommend the proposed transaction. During the morning of October 23, 2000, the special committee again met with its legal and co-financial advisors to review the recent discussions between representatives of Bear Stearns and Deutsche Banc Alex. Brown and representatives of Goldman Sachs. At that meeting, the co-financial advisors informed the special committee that although the parties had made substantial progress, there still remained some disagreements regarding the appropriate adjustments to the available Wall Street research analyst estimates considered by the special committee and its co-financial advisors in evaluating the Viacom proposal. At the conclusion of the meeting, the special committee determined to meet directly with senior executives of Viacom in an effort to resolve this impasse. Following the special committee meeting, representatives of Bear Stearns and Deutsche Banc Alex. Brown contacted representatives of Goldman Sachs and established a meeting between the special committee and representatives of Viacom to be held later that day. Early in the evening on October 23, 2000, the special committee met with its legal and co-financial advisors to prepare for the scheduled meeting between the special committee and representatives of Viacom. Immediately thereafter, the members of the special committee met with senior executives of Viacom, including Mr. Karmazin, and reiterated their view that the exchange ratio to be paid by Viacom would need to be increased for the special committee to recommend the proposed transaction. Senior executives of Viacom again expressed the view that the exchange ratio initially proposed by Viacom was full and fair. Messrs. Karmazin, Gordon and Sherman then engaged in substantial discussions, at the conclusion of which Mr. Karmazin indicated that he would be willing to seek approval from the Viacom board to make a proposal for an exchange ratio of 0.592 of a share of Viacom Class B common stock per share of Infinity Class A common stock, subject to the special committee's willingness to recommend a transaction to the Infinity board of directors based on such an exchange ratio and the finalization of the terms of the merger agreement. Messrs. Gordon and Sherman indicated that they would be willing to recommend such a transaction, subject to the ability of the special committee's co-financial advisors to render opinions as to the fairness of the improved exchange ratio from a financial point of view to the Infinity public stockholders and the finalization of the terms of the merger agreement. On October 24, 2000, at a special telephonic meeting of the Viacom board of directors, senior executives of Viacom presented to the board the current status of discussions regarding the proposed merger. After discussion and deliberation, the Viacom board authorized senior management to continue discussions with the special committee of the Infinity board. From October 24th through October 30th, representatives of Shearman & Sterling and counsel representing plaintiffs in the consolidated stockholder litigation brought against Infinity, its directors and Viacom in connection with the proposed merger held discussions and conducted negotiations regarding the proposed merger and the possible settlement of such litigation. On October 25, 2000, representatives of Shearman & Sterling, Goldman Sachs, Fried, Frank, Harris, Shriver & Jacobson, counsel to Goldman Sachs, and Morris, Nichols, Arsht & Tunnell, special counsel to Viacom, met with counsel representing plaintiffs in the consolidated stockholder litigation brought against Infinity, its directors and Viacom in connection with the proposed merger, and representatives of W.L. Ross & Co., financial advisor to those plaintiffs. At this meeting, plaintiffs' counsel expressed the view that the consideration to be paid by Viacom pursuant to the original Viacom proposal was inadequate. On October 26, 2000, representatives of Skadden Arps, Bear Stearns and Deutsche Banc Alex. Brown met with representatives of W.L. Ross and counsel representing plaintiffs in the consolidated stockholder litigation. Again, plaintiffs' counsel expressed the view that the initially proposed exchange ratio was inadequate. On October 27, 2000, however, after reviewing additional information and giving further consideration to the revised terms of the Viacom proposal, plaintiffs' counsel and their financial advisors informed representatives of Shearman & Sterling and Skadden Arps that the plaintiffs would be willing to settle the consolidated stockholder litigation on the basis of the increased exchange ratio negotiated by the special committee. During the period from October 28, 2000 through October 30, 2000, representatives of Skadden Arps and the special committee finalized the terms of the merger agreement with representatives of Shearman & Sterling and Viacom. On October 30, 2000, representatives of Shearman & Sterling and counsel representing plaintiffs in the consolidated stockholder litigation reached an agreement in principle on the terms of a settlement of the litigation. Later in the day on October 30, 2000, senior executives of Viacom met with members of the special committee and made a revised offer from Viacom at an exchange ratio of 0.592 of a share of Viacom Class B common stock per share of Infinity Class A common stock. On October 30, 2000, the special committee met with representatives of Bear Stearns, Deutsche Banc Alex. Brown and Skadden Arps. At the October 30th special committee meeting, representatives of Bear Stearns and Deutsche Banc Alex. Brown each orally advised the special committee that the exchange ratio of 0.592 of a share of Viacom Class B common stock to be paid to the holders of outstanding Infinity Class A common stock in the merger was fair to such holders, other than Viacom and its affiliates, from a financial point of view, which opinions were subsequently confirmed in writing. The special committee then unanimously determined that the merger was fair to, and in the best interests of, Infinity and its public stockholders, determined that the merger and the merger agreement should be approved and declared advisable, and recommended that the board of directors of Infinity approve and declare the advisability of, the merger and the merger agreement. Later in the evening on October 30, 2000, Infinity's board of directors convened a meeting. The Infinity board received the recommendation of the special committee and reviewed the terms of the merger agreement. After the directors were given an opportunity to ask questions regarding the merger agreement and the proposed merger, the board, by a unanimous vote of those directors who were present and did not abstain, determined that the merger was fair to, and in the best interests of Infinity and its public stockholders, approved and declared the advisability of the merger and the merger agreement, and recommended that Infinity's stockholders consent to the approval of the merger and adoption of the merger agreement. Of the ten directors then comprising Infinity's board of directors, one director (Arturo R. Moreno) was absent from the meeting and one director (William S. Levine) abstained from voting on the Viacom merger. On October 30, 2000, Viacom's board of directors by written consent unanimously determined that the merger was fair to, and in the best interests of, Viacom and its stockholders, declared the advisability of the merger agreement and approved the merger agreement. In the evening of October 30, 2000, Viacom and Infinity executed the definitive merger agreement, and on the morning of October 31, 2000 they issued a joint press release announcing the execution of the merger agreement. On December 8, 2000, CBS Broadcasting, Inc., a wholly owned subsidiary of Viacom that holds 100% of the outstanding shares of Infinity Class B common stock representing approximately 90% of the combined voting power of all outstanding Infinity shares, granted its written consent to the adoption of the merger agreement and the approval of the merger. On December 11, 2000, Infinity and Viacom mailed to Infinity's stockholders an information statement/prospectus informing them of the action taken by CBS Broadcasting, Inc. On January 4, 2000, Viacom and Infinity, with the concurrence of the special committee of Infinity's board of directors, decided to seek approval of the merger by Infinity's minority stockholders after a recent Delaware Chancery Court decision involving corporations unrelated to Viacom or Infinity (In re: Digex, Inc. Shareholders Litigation). Although neither Infinity nor Viacom is involved in the Digex litigation, the decision has created uncertainty about whether Section 203 of the Delaware corporation law requires that Infinity's minority stockholders approve the merger. On the same day, Viacom entered into a voting agreement with Messrs. Levine and Moreno pursuant to which each stockholder agreed to vote his shares of Infinity Class A common stock in favor of the merger and the merger agreement. On January 5, 2000, Viacom and Infinity issued a press release announcing that Infinity would call a stockholders' meeting in order to seek approval of the merger by holders of 66 2/3% of its outstanding voting shares, other than those shares owned by Viacom or subject to the voting agreement between Viacom and Messrs. Levine and Moreno. Viacom's Reasons for the Merger are presented in Infinity�s report to the SEC at http://www.sec.gov/Archives/edgar/data/1070518/0000950130-01-000170.txt INMATES LITIGATION: Parole Backlog Cleared; Advocates Point to Loopholes ------------------------------------------------------------------------A backlog of state inmates awaiting parole hearings has been cleared, officials said, but if the state falls behind again it might have to pay for it, with cash. A lawsuit settlement approved in federal court Tuesday requires the state to pay an inmate advocacy organization $ 17.50 a day every time a prisoner doesn't have a timely parole hearing, but some critics of the settlement said it still provides too many loopholes for the state. The settlement, approved in Camden by U.S. District Judge Joel Pisano, ends a class-action lawsuit brought by inmates who complained that they were waiting months, and in some cases up to two years, for overdue parole hearings. The backlog contributed to the forced resignation of state Parole Board Chairman Andrew Consovoy last year. When the suit was filed, Consovoy reportedly told Governor Whitman's top aides only a few hundred cases were backlogged, when in fact the figure was in the thousands. After Whitman administration officials also learned that Consovoy was under investigation by the state police for allegedly helping members of organized crime get out of prison early, he was ordered to resign. At Tuesday's hearing, Parole Board Chairman Mario Paparozzi told Pisano that the last eight overdue parole hearings were held Saturday, clearing a backlog that had totaled 3,400 inmates last spring. Both Paparozzi and Stephen Phillip Fuoco, who represented inmates, called the settlement fair. "Folks were seeking justice," Paparozzi said. He apologized to all the inmates affected by the lawsuit. But Ian Hawker, one of several prisoners who brought the lawsuit, complained about the settlement, saying the $ 17.50 a day should be paid directly to prisoners. Instead, the money would go to a prison rights organization, the Prisoners Resource Center in Newark. Hawker also said inmates had little contact with Fuoco and were not kept up to date with the fine points of the settlement. Elaine Selan, an advocate who runs a prisoner advocacy group called "And Justice For All,"also objected in court, saying the structure of the settlement would make it impossible for the Prisoners Resource Center to collect any money. Under the settlement, the organization would receive money only if the state did not answer a letter from an inmate awaiting an overdue parole hearing within 45 days. Once the state responded, it would then have 120 days to schedule a hearing. Selan said some inmates never received notice of the settlement because it was not posted in the law libraries in two prisons, East Jersey State Prison in Woodbridge and Riverfront State Prison in Camden. Pisano said the settlement was in the"public interest,"and noted that less than 300 of the 5,817 inmates who were subject to overdue parole hearings had objected to the settlement. (The Record (Bergen County, NJ), January 17, 2001) J.C. NICHOLS: Opts To Settle Lawsuit Re 1998 Acquisition By Highwoods --------------------------------------------------------------------- J.C. Nichols has agreed to pay $5.7 million to settle a class-action lawsuit accusing the company of securities fraud in connection with its 1998 acquisition by Highwoods Properties Inc. The settlement agreement was reached before the case was scheduled to go to trial Tuesday in federal court in Kansas City, Kan. The lawsuit stemmed from Nichols' 1998 merger with Highwoods, a Raleigh, N.C.-based real estate investment trust that acquired Nichols for $65 a share. The suit, filed in January 1998 by Nichols shareholder John Flake, alleged that the price was inadequate and that Nichols tried to prevent shareholders from entering into more-favorable deals for their stock. In October 1999, U.S. District Judge Kathryn Vratil certified the case as a class action on behalf of Nichols shareholders and members of Nichols' employee stock ownership plan. The plan's class had as many as 600 members, ranging from Nichols managers to one-time maids and maintenance workers at old Nichols-owned hotels and other properties. The settlement agreement, reached January 12 morning, came after Vratil issued separate rulings on Dec. 15 and Jan. 11 narrowing the scope of the plaintiffs' case. Vratil earlier had dismissed claims that Nichols and Highwoods misled shareholders about the Highwoods deal, but refused to throw out some of the plaintiffs' securities fraud allegations. Both sides said they were satisfied with the settlement, which averted a trial that had been expected to last at least three weeks. The settlement works out to $1.76 a share for members of the plaintiff class over and above the $65 they received from Highwoods. After legal fees and other costs are subtracted, the settlement works out to about $1 a share. That's considerably less than the upper range of damages sought by the plaintiffs, or $10 a share, which was the difference between Highwoods' offer and a $75-a-share offer made by Intell Management Investment Co. of New York. The plaintiffs' damage claim was dealt a blow by Vratil's Jan. 11 ruling, which said no reasonable jury could have inferred from Intell's stated "intent" to acquire Nichols "that Intell likely would have completed the future deal at $75 per share." The settlement must be approved by Vratil, who is expected to schedule a hearing within a few weeks to rule on its fairness. Notice of the settlement agreement will be sent to class members once it is approved. The case was originally filed in state court by Flake, who died last April and was replaced as a plaintiff by his estate. It was moved to federal court in late 1998 after Flake amended the complaint to include federal securities violations and other claims. Besides Nichols and Highwoods, the suit named as defendants Nichols' directors at the time of the Highwoods deal. The suit stemmed from events in 1994 and 1995, when Nichols turned down a takeover bid by Allen & Co., a New York investment banking firm. Allen then sued Nichols, exposing insider transactions that allegedly benefited Nichols chief Lynn McCarthy and other top Nichols executives at the expense of company shareholders. The Allen suit triggered additional litigation by Nichols against McCarthy and by the employee stock ownership plan against Nichols. McCarthy and other top Nichols officials were ousted in mid-1995, and the civil suits were resolved as part of a settlement that called for the unwinding of the insider transactions. McCarthy, former Nichols Chief Financial Officer Walter Janes and former Nichols attorney Charles Schleicher were indicted nearly a year ago on criminal conspiracy charges growing out of the civil lawsuits. The three, who have pleaded not guilty, are scheduled to go on trial April 23. (The Kansas City Star, January 17, 2001) LIFESCAN INC: J&J Subsidiary to Pay $60M Penalties In Blood Meter Case ---------------------------------------------------------------------- A Johnson & Johnson subsidiary last month agreed to plead guilty to criminal charges and to pay criminal and civil penalties of $ 60 million for failing to tell the FDA about problems with its SureStep blood glucose monitor and providing the agency with false or misleading information (United States of America v. LifeScan Inc., No. CR 00-20356-JF, N.D. Calif., San Jose Div.). The plea agreement was the result of a federal criminal investigation and a qui tam lawsuit filed by a former clinical researcher and a chemist of LifeScan Inc., a wholly owned subsidiary of Johnson & Johnson. A plea agreement filed on Dec. 15 indicated that LifeScan knew before receiving 501(k) approval that the device gave inaccurate readings if test strips were not fully inserted and that high blood sugar could display a misleading "Error 1" message instead of a "HI" message. It says the FDA was not told of the problems. No Older Stock Recall In addition, the agreement states that while LifeScan included warnings about strip insertion with new strips, it did not recall older stock without the warnings. When consumers reported Error 1 problems to LifeScan, the agreement says the company failed to file Medical Device Reports with the FDA or to recall the devices, even on advice of a company medical officer. SureStep monitors made before August 1997 were recalled in 1998 (See 6/19/98, Page 23). A few months later, the FDA issued a Class I recall (See 8/17/98, Page 19). According to the plea agreement, the recall occurred after the federal government began its investigation. At the time, two deaths were reported attributed to the SureStep monitor. The plea agreement mentions no deaths, only hospitalizations for hyperglycemia. A RICO class action was certified by the U.S. District Court for the Northern District of California in San Jose. The Ninth Circuit U.S. Court of Appeals recently denied review of the class certification (See 11/16/00, Page 17). On Dec. 14, the United States filed a criminal information charging LifeScan with three misdemeanor violations of federal law for introducing an adulterated or misbranded medical device into interstate commerce, for failing or refusing to furnish appropriate notifications to the FDA and for submitting false and misleading reports to the FDA. Developmental Problems According to the plea agreement filed Dec. 15, LifeScan learned that the SureStep monitor was defective while it was under development in 1993. It said that when blood glucose levels exceeded 500 milligrams per deciliter (mg/dl), the meter sometimes displayed an ER1 or Error 1 message instead of an "HI" message. Error 1, the agreement says, signaled several potential problems, but one was not high blood sugar. In addition, the agreement says LifeScan knew that when a test strip containing some of a patient's blood was not completely inserted into the meter, it sometimes produced low blood sugar readings. The agreement says that despite that knowledge, LifeScan did not tell consumers about the problem with improperly inserted strips. In October 1993, the agreement says LifeScan directed an engineer to fix the Error 1 problem, but he or she did not. LifeScan submitted a 510(k) application in May 1994, the agreement says, but did not tell the FDA about the two problems. The FDA approved the device in March 1995. Defects Not Disclosed The device was marketed in the United States in May 1996, the agreement says, but LifeScan did not disclose either defect until late 1997 or early 1998. While developing a version of the SureStep for health care professionals, the agreement says that a scientist found the prototype had the same Error 1 defect as the approved SureStep in 1996. In February 1997, the agreement says LifeScan's Japanese affiliate notified the company about the Error 1 problem but the meters were not recalled because "it did not consider the ER1 problem to constitute a risk to health." Later that month, the agreement says LifeScan's president, vice president of quality assurance and regulatory affairs, vice president of research, development and engineering, the director of regulatory affairs and others discussed the decision to submit certain data to the FDA about the strip insertion problem. A 510(k) application was submitted for the health care SureStep later that month without disclosing either problem. Services Reps Notified In July 1997, the agreement says LifeScan customer service representatives were given instructions for dealing with consumers who called about the Error 1 problem. The Error 1 problem was corrected in July 1997, the agreement says. In November 1997, it says LifeScan began including inserts about the Error 1 problem in packages of test strips, but did not pull old stock that didn't have that insert. In late 1997, LifeScan redesigned the test strips to address the insertion problem, the agreement says. It reinforced instruction on inserting test strips but did not recall old stock or advise consumer about possible low readings. The agreement says that after the government began investigating problems with LifeScan's products, the company voluntarily recalled SureSteps made before July 1997. Between 1996 and 1998, LifeScan said it received more than 2,000 complaints of inaccurate low reading, some of which were attributable to strip insertion problems. It also said it received more than 700 complaints about Error 1 messages, some of which were attributable to high blood glucose. It told the FDA that it received 61 Error 1 complaints between May 1996 and July 1998 associated with illness, injury and hospitalizations. FDA Reports Withheld, Falsified LifeScan admits in the plea agreement that it failed to file Medical Device Reports with the FDA or filed reports with false, incomplete and/or misleading information about the two problems. In four cases involving unidentified consumers, the agreement says some consumers called LifeScan several times about problems related to the two defects but were not told about the defects. Some were hospitalized when it was found through other means that their blood glucose was as high as 1,000 mg/dl. Most were given new SureStep monitors. In two cases, the agreement says LifeScan's director of clinical evaluations a medical doctor - told management that a Medical Device Report should be filed with the FDA and the meters immediate recalled because they posed an unacceptable risk of harm. Fine, Civil Penalties Under the agreement, LifeScan will pay a criminal fine of $ 29.4 million and civil penalties, damages, attorney fees and restitution to the United States of $ 30.6 million. The United States agreed not to file any other criminal charges against LifeScan, Johnson & Johnson or their officers. LifeScan was also placed on five years' probation, special conditions of which were part of the plea. Qui Tam Action According to a settlement agreement attached as an agreement, a qui tam action was filed in 1997 on behalf of the United States against LifeScan by Robert Konrad, M.D., a board-certified clinical pathologist and former director of clinical research at LifeScan, and John Pumphrey, a chemist previously employed by LifeScan as director of reagent operations and director of advanced reagent development (U.S.A., ex rel. Konrad, et al. v. LifeScan Inc., et al., No. C 00-20478 JF, N.D. Calif., San Jose Div.). The United States agreed to pay Konrad and Pumphrey $ 6,253,790 and their counsel $ 250,000. The government is represented by Acting U.S. Attorney David W. Shapiro and Assistant U.S. Attorneys Jeffrey L. Bornstein and Anne-Christine Massullo. John W. Keker of Keker & Van Nest in San Francisco represents LifeScan and Johnson & Johnson. In the qui tam action, the government is represented by Assistant Attorney General David Ogden, U.S. Attorney Robert S. Mueller, U.S. Senior Trial Counsel Daniel R. Anderson, Assistant Inspector General Lewis Morris and Deputy General Counsel Robert L. Shepherd. Robert L. Vogel in Washington, D.C., and Michael Rubin represent Konrad and Pumphrey. Jan Nielsen Little of Keker & Van Nest represented Johnson & Johnson in the qui tam action. (Mealey's Emerging Drugs & Devices, January 4, 2001) LINCOLN PARK: Students' Action against Searches Granted Class Status -------------------------------------------------------------------- A federal judge on Tuesday granted class-action status to a lawsuit originally filed by three Lincoln Park High School students who claimed they were mistreated during mass searches at the school in 1999. The decision by U.S. District Judge James F. Holderman could add more students to the suit and increase the amount of any damages. The students' lawyer, Gregory Kulis, said that potentially "hundreds of students" were improperly searched at Lincoln Park High School on Nov. 16, 1999. On that date, the lawsuit contends, police and school officials searched them without cause when they entered the school. Kulis said some students complained they were mistreated and fondled. Chicago police and school officials have denied doing anything improperly during the search for weapons and drugs at Lincoln Park. Police said seven students were caught with box cutters and six with marijuana. (Chicago Tribune, January 17, 2001) MAD CRAB: Ohio Court Certifies Class of Food Poisoning Victims -------------------------------------------------------------- The first class action suit claiming food poisoning in state history was affirmed by an appeals court Sept. 28 over objections based in part on the plaintiffs' lawyer's conduct (Sue Farrenholtz, etc. v. Mad Crab Inc., et al., No. 76456, Ohio App., 8th Dist.). Defense counsel asked the appellate panel to review claims that the trial court abused its discretion when it denied a motion to disqualify plaintiffs' counsel for contacting members of the putative class before it was certified. Also challenged was the trial court gag order on defense counsel contacting members of the putative class before it was certified. The majority wrote, "The trial court need only engage in a brief analysis of the claims to be litigated and the proof at trial when resolving the predominance question" if common questions predominate individual questions." (Mealey's Emerging Toxic Torts, January 5, 2001) NEFF CORP.: Announces Shareholder Lawsuits Concerning URI Proposal ------------------------------------------------------------------ Neff Corp. (NYSE:NFF) announced that purported class action lawsuits were filed relating to a merger proposal recently made to the Company by United Rentals, Inc. (NYSE:URI) ("URI"). The actions filed in the Delaware Court of Chancery in January 2001 by purported shareholders of the Company name as defendants, the Company and its directors, URI, General Electric Capital Corporation ("GECC") and Santos Fund I, L.P. The complaints allege that directors Jorge, Juan Carlos and Jose Ramon Mas (the "Mas Family"), GECC and Santos have acted in concert with respect to the URI Merger Proposal to breach fiduciary duties allegedly owed to the remaining stockholders of the Company. The complaints allege that the terms of the URI Merger Proposal are unfair to other Company stockholders. The complaints further allege that URI has aided and abetted the alleged breaches of fiduciary duty by the Company's directors, GECC and Santos. The complaints seek, among other things, to enjoin the consummation of the URI Merger Proposal. The Company believes that the complaints are without merit. In the event a definitive merger agreement is entered into in connection with the URI Merger Proposal, URI expects to file a registration statement on Form S-4, and the Company expects to file a proxy statement with the Securities and Exchange Commission ("SEC"). It is anticipated that the Company and URI would mail a joint proxy statement/prospectus to Company stockholders containing additional information about the proposed transaction. Investors and security holders are urged to read the registration statement and joint proxy statement/prospectus carefully if and when they become available and any other relevant documents filed with the sec because they contain important information. These documents will contain important information about the proposed transaction and the interests of the Company and its directors Jorge Mas, Juan Carlos Mas, Jose Ramon Mas, Paul E. Dean, Arthur B. Laffer, Joel-Tomas Citron and Michael Markbreiter in the proposed transaction. PHILIPS INTERNATIONAL: Amended Complaint Re Liquidation Filed in MD ------------------------------------------------------------------- On January 9, 2001, an amended class action complaint was filed in the United States District Court for the Southern District of New York against Philips International Realty Corp., a Maryland corporation, and its directors. The Amended Complaint alleges a number of improprieties concerning the plan of liquidation of the Company. The Company believes that the asserted claims are without merit, and will defend such action vigorously. The Amended Complaint amends the initial class action complaint (the "Original Complaint") filed in the United States District Court for the Southern District of New York against the Company and its directors on October 2, 2000. The day after the Original Complaint was filed, the plaintiff served the Company with an order to show cause why a preliminary injunction should not be issued enjoining the vote on the Company's then proposed plan of liquidation. At a conference with the Court on October 5, 2000, the parties stipulated that the vote on the Company's proposed charter amendment and the plan of liquidation would proceed as scheduled. On November 9, 2000, the Court, ruling from the bench, denied the plaintiff's motion for a preliminary injunction. On November 30, 2000, the Court issued its written opinion, and the judgment was entered denying the plaintiff's motion for a preliminary injunction on December 1, 2000. A copy of the amended complaint is available in the company�s SEC file at http://www.sec.gov/Archives/edgar/data/1050686/0001125282-01-000110.txt PRI AUTOMATION: Schiffrin & Barroway Files Securities Suit in MA ---------------------------------------------------------------- The following statement was issued on January 16 by the law firm of Schiffrin & Barroway, LLP: Notice is hereby given that a class action lawsuit was filed in the United States District Court for the District of Massachusetts on behalf of all purchasers of the common stock of PRI Automation, Inc. (Nasdaq: PRIA) from January 27, 2000 through September 11, 2000, inclusive (the "Class Period"). Contact: Marc A. Topaz, Esq. or Robert B. Weiser, Esq., both of Schiffrin & Barroway, LLP, 888-299-7706, 610-667-7706, or info@sbclasslaw.com SEMPRA, EL PASO: Documents and Notes Led to Energy Collusion Suits ------------------------------------------------------------------ Documents turned over to an attorney during an earlier lawsuit are what led a team of attorneys to file two class-action suits against San Diego-based Sempra Energy and Houston-based El Paso Energy last month. The handwritten notes and typed meeting agenda allegedly reveal a "conspiracy" to keep energy prices artificially high, according to the attorneys who filed the suit Dec. 19 in Los Angeles County Superior Court. A team of lawyers from Los Angles and elsewhere named Sempra and El Paso Energy, and some of their subsidiaries as defendants in the suit. The action is seeking to recoup billions of dollars the attorneys say has been siphoned out of California due to what they call collusion by the energy companies to divide up the state and keep competition at bay. The suits allege the two energy giants conspired to drive up natural gas costs 1,700 percent this year, in turn helping to push electricity costs to record levels. Most electric generation plants in California are powered by natural gas. All "non-core" users of natural gas from Sempra or El Paso can become parties to the class-action lawsuit, as are all California users of electricity not currently under the rate freeze originally implemented in 1996 -- that is, customers of San Diego Gas & Electric Co. The two class-action lawsuits, filed by eight lawyers from three firms in Los Angeles, one from Hermosa Beach and one from Denver, alleged that El Paso Energy, with the collusion of Sempra officials, conspired to limit natural gas supplies. No Mincing Words The lawsuits do not mince words: In the preliminary statement accompanying the two lawsuits, the words conspire, conspiracy and conspirators appear a total of 14 times in 3 1/2 pages of text. Lance Astrella, attorney from the Denver-based law firm of Astrella & Rice, P.C., alleges that on Sept. 25, 1996, high-ranking officials from El Paso Energy held a secret meeting in Phoenix with high-ranking officials from SDG&E and Southern California Gas Co. At that secret meeting, utility officials allegedly discussed strategies to rig the natural gas market, Astrella said. The meeting was revealed through testimony and documents uncovered during the discovery phase of an earlier case filed in Houston, Astrella said. According to Astrella, the utilities discussed the actions of one of their former competitors, Tenneco Inc. In 1992, Tenneco had completed the Kern River Pipeline, which brings natural gas from Wyoming to Bakersfield. Before the secret meeting in September 1996, Tenneco had been looking to expand that pipeline northward into Canada, and southward to Southern California and Baja California. The company was also looking to build another pipeline to Southern California and Baja from Arizona, Astrella said. Had either of these pipelines been completed, gas customers -- including generators of electricity -- would have seen not only lower gas prices but also a more stable supply, he said. But this never happened. El Paso acquired Tenneco in June 1996, Astrella said. Projects Withdrawn "This placed EPNG in charge of Tenneco's proposed by pass projects, and SoCal Gas and SDG&E saw the opportunity to make a deal with EPNG to eliminate them .... Top officers of EPNG agreed that EPNG would withdraw Tenneco's Southern California and Baja California bypass projects," the complaints state. That helped assure SoCal Gas' continued dominance of the market. At about the same time, the parent companies of SoCal Gas and SDG&E merged, forming Sempra Energy, Astrella said. Officers from the two merging companies knew that El Paso could bring the whole arrangement down by raising objections to the merger, citing potential anti-trust violations. So the companies formed a "gentleman's agreement," under which SoCal Gas would withdraw from competition against El Paso in yet another area, he said. Both SoCal Gas and El Paso were looking to build a lucrative pipeline to Samalayuca, Mexico. Due to an earlier arrangement, these were the only two companies vying for the contract, Astrella said. SoCal had a large cost advantage over El Paso, but withdrew from the project, he said. California Split Into 'Teams' Other deals also came out of the September 1996 meeting. Minutes obtained from the meeting allegedly show that attendees had sought to carve up California, keeping control over Southern California as "Team 1," while ceding control of the northern half of the state to Pacific Gas & Electric and natural gas providers throughout the Northwest as "Team 2," Astrella said. The plan took a few years to implement, but once all the elements were in place, customers got squeezed, Astrella said. El Paso bought up power plants in Southern California, and used those plants to purchase natural gas at artificially high prices. That caused the prices of electricity to jump, which was ultimately passed along to the power customer, he alleged. Also, as El Paso was buying up the capacity on its own pipeline, that led to an artificial shortage in the state. In the past four years, the price of natural gas increased from roughly $ 2 per thousand cubic feet to $ 9 at its source, but jumped from $ 3 to $ 60 once it crossed the border into California, Astrella said. "So they basically pocketed the very high profits on the gas, measured by the difference between the purchase price and the California border price, and then passed along the additional electric generation costs to the consumers," he said. This amounts to a restraint of trade and a monopoly, both violations of the Cartwright Act, and of the unfair competition and unlawful business practices provision of the California Business and Professional Code, said Albro Lundy III, who is joining the lawsuit with Astrella as an attorney representing Hermosa Beach-based Baker, Burton & Lundy. This lawsuit follows on the heels of similar accusations against El Paso from the California Public Utilities Commission. Harvey Morris, public utilities council for the CPUC, filed a complaint with the Federal Energy Regulatory Commission alleging that El Paso gave its affiliates preferential treatment in hoarding the amount of space in its pipeline, artificially driving up the price for other buyers at the Southern California border. The original complaint was filed in April, along with a request that the FERC void the contracts El Paso entered into with its own affiliates. In August, the CPUC applied to the FERC for summary disposition of the complaint, which is still pending, Morris said. What makes the current lawsuits different from the move by the CPUC is that California regulators are looking only to stop El Paso and Sempra from what they're doing right now. The two class-action lawsuits seek to recoup billions of dollars in what they call illegal profits, returning the money to San Diego ratepayers, said Brad Baker, also from the law firm of Baker, Burton & Lundy. The two Dec. 19 lawsuits came on the heels of two earlier class-action lawsuits filed Nov. 28 and 29. Those suits, against Duke Energy, Dynegy, Inc., Enron, PG&E, Sempra and others, alleged collusion and market manipulation among electricity producers and energy marketers trading in California. The earlier lawsuits have no specific examples of market manipulation, however. The new lawsuit makes specific accusations, and has already assembled a paper trail, Lundy said. Doug Kline, spokesman for Sempra, denied the allegations in the two most recent lawsuits. "Any allegations that the company or its subsidiaries violated antitrust or other laws are completely false," he said. "On Dec. 7, SDG&E filed for emergency relief from the Federal Energy Regulatory Commission asking federal regulators to impose a price cap on natural gas transportation prices to the California border that, if approved, would lower costs for California gas customers." (San Diego Business Journal, January 1, 2001) SIMON TRANSPORTATION: Utah District Ct Dismisses Securities Lawsuit ------------------------------------------------------------------- The Company and certain of its officers and directors have been named as defendants in a securities class action filed in the United States District Court for the District of Utah, Caprin v. Simon Transportation Services, Inc., et al., No. 2:98CV 863K (filed December 3, 1998). As previously reported in the CAR, plaintiffs in this action allege that defendants made material misrepresentations and omissions during the period February 13, 1997 through April 2, 1998 in violation of Sections 11, 12(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Update On September 27, 2000, the District Court dismissed the case with prejudice. Plaintiffs have asked the Court for reconsideration and alteration or amendment of the decision. TERAYON COMMUNICATION: Consolidated Securities Complaints Filed in CA --------------------------------------------------------------------- On April 13, 2000, a lawsuit against Terayon Communication Systems and certain of its officers and directors, entitled Birnbaum v. Terayon Comm. Systems, Inc., was filed in the United States District Court for the Central District of California. As previously reported in the CAR, the plaintiff purports to be suing on behalf of a class of stockholders who purchased or committed to purchase our securities during the period from February 2, 2000 to April 11, 2000. The complaint alleges that the defendants violated the federal securities laws by issuing materially false and misleading statements and failing to disclose material information regarding our technology. Several other lawsuits similar to the Birnbaum suit have since been filed. The lawsuits seek an unspecified amount of damages, in addition to other forms of relief. Update On August 24, 2000, the lawsuits against the company and other named individual defendants were consolidated in the U.S. District Court of the Northern District of California and lead plaintiffs and plaintiffs' counsel was appointed pursuant to the private securities litigation Reform Act. On September 21, 2000, plaintiffs filed a Consolidated Class Action Complaint for violation of federal securities laws. The consolidated complaint contains allegations nearly identical to the Birnbaum suit. Defendants filed a motion to dismiss the consolidated complaint on October 30, 2000, and plaintiffs filed an opposition. Defendants filed a reply in support of their motion to dismiss on December 22, 2000. The hearing on this motion was scheduled for January 8, 2001. VERIZON: Cohen Milstein Files Securities Suit in District of Columbia --------------------------------------------------------------------- Cohen Milstein Hausfeld & Toll, P.L.L.C., on January 16 filed a class action lawsuit against Verizon Communications, Inc. and Verizon Internet Services, Inc. in the Superior Court of the District of Columbia on behalf of all purchasers of the Verizon Online and Verizon DSL Access Service. The complaint alleges that Verizon Internet Services, Inc. promised to provide ultra high-speed Internet access through digital subscriber lines ("DSL"). Verizon guaranteed the availability of this service, with the exception of regularly scheduled maintenance. Verizon customers, however, have not had uninterrupted access to the Internet. To the contrary, Verizon customers have experienced significant access disruptions and significant delays in obtaining technical service. The complaint alleges that Verizon and was aware that it would be unable to provide DSL service as promised and knew that its customers would experience significant disruptions and significant delays in obtaining technical support. Verizon aggressively markets its high-speed DSL access service, signing up more than 3,000 new customers per day. However, many of these customers have experienced serious disruptions in their Internet service or significant delays in obtaining technical service. Indeed, Cohen Milstein partner Gary E. Mason stated, "These problems are so severe that entire websites are dedicated to airing grievances about Verizon DSL." Further, Mason noted, "Verizon is acutely aware of these service interruptions and service delays, yet has failed to disclose these problems to current and potential customers." As a result, Mason added, "This class action is aimed at not only compensating Verizon customers for poor service, but also at preventing Verizon from continuing to sell DSL internet access until these problems are resolved." Contact: Cohen Milstein Hausfeld & Toll, PLLC Gary E. Mason, 202/408-4600 Alexander E. Barnett, 202/408-4600uits filed against 14 contractors that operated the government's nuclear weapons and research complex in Oak Ridge since World War II, lawyers said. WEAPONS CONTRACTORS: Lawsuits Claim Radiation Effects, Discrimination --------------------------------------------------------------------- Untold damages, medical monitoring and "a public apology" are being sought in two class-action lawsuits. "One (lawsuit) deals with the health hazards that were created and have never been properly addressed," Nashville lawyer George Barrett said in a telephone interview. "The other deals with the deliberate creation of a racially segregated community which has been preserved up to this time in violation of the Constitution and the laws of Tennessee." The lawsuits were filed Wednesday in U.S. District Court in Knoxville. The lawsuits apparently will rely heavily on the results of an eight-year, $ 14 million health study released last January suggesting that some Oak Ridge residents may have suffered thyroid cancer or brain damage because of toxic releases, particularly from the 1940s to early 1960s. The health study, prepared by the state and underwritten by the Department of Energy, estimated that perhaps less than 100 people developed these diseases. "The ultimate question that we tried to answer can perhaps be summarized by this: Was anybody hurt?" study chairman Paul Voilleque said at the time. "Our answer today is, probably." The eight plaintiffs include former employees, residents and their children. Now Barrett is suing virtually every corporation that managed the DOE-Oak Ridge facilities since their creation in 1944 as part of the top-secret Manhattan Project to build the first atomic bomb. The facilities are: the Y-12 nuclear weapons plant, the Oak Ridge National Laboratory and the former K-25 uranium enrichment plant. Listed as defendants are: Union Carbide Corp., Monsanto Co., Eastman Kodak Co., Eastman Chemical Co., the University of Chicago, Roane-Anderson Co., Turner Construction Co., Martin-Marietta Energy Systems Inc., Lockheed Martin, Lockheed Martin Energy Systems, Babcock & Wilcox Co., McDermott International Inc. and Bechtel Inc. Also named are present ORNL manager Battelle Inc. and Y-12 manager BWX Technologies. Company spokesmen could not be reached for comment Tuesday night.The lawsuits claim hazardous, toxic and radioactive releases from the Oak Ridge plants damaged or threatened the health of residents and their children living in Oak Ridge or downwind or downstream of the plants. The lawsuits seek "a public apology for deliberately irradiating the public and exposing them to deadly radioactive and hazardous materials without their consent," a press release said. In addition, one of the lawsuits claims blacks who relocated to Oak Ridge for work in the 1950s were moved into the Scarboro community, where they were exposed to high levels of pollutants from the Y-12 plant about a mile away. The neighborhood remains predominantly black. In 1999, the U.S. Centers for Disease Control said it could not substantiate claims of a higher incidence of asthma among Scarboro children. The CDC said that 13 percent of 119 Scarboro children had respiratory problems - about double the national average but similar to children living in inner-city Detroit. Last year, Energy Secretary Bill Richardson acknowledged that the government exposed bomb factory workers to health hazards, and Congress approved a compensation program. But DOE is not a defendant in the Barrett lawsuits. In 1998, Barrett won a $10 million settlement against Vanderbilt University in Nashville and others for 1940s experiments in which pregnant women unknowingly ingested radioactive iron. (The Associated Press State & Local Wire, January 17, 2001) ********* 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 * * *