/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010125.MBX C L A S S A C T I O N R E P O R T E R Thursday, January 25, 2001, Vol. 3, No. 18 Headlines AMERITECH: IL Commerce Commission Orders to Stop Discount-Calling Plan AURORA FOODS: SEC and DOJ Investigate on Events Prior to Restatement BONE SCREW: Amicus Briefs Filed; Sp Ct Will Decide in 2001 Re FDA Reg. CANKER PROGRAM: FL Moves to Disqualify Judge Alleging Bias in Remarks CHICAGO: Suit Seeks To Overturn Anti-Mask Law; Move Follows Arrest Of 10 COLUMBIA/HCA: Triad Hospitals Reports on Subpoenas on Business Practices CONNECTICUT: DCF Challenges Ruling for Same Services to Foster Parents CREDITRUST CORP: Consumer Action Filed Before Ch 11 Petition and Stayed CREDITRUST CORP: Debtor Dismisses IL Suit & Files Claim in Bankruptcy Ct CREDITRUST CORP: Officers of Bankrupt Co. Named in MD Securities Suits CREDITRUST CORP: Sued in AL Re Ch 11 Stay Violation; Seeks Relief in MD DELPHI AOTOMOTIVE: Residents Near KS Olathe Battery Plant File Lawsuit FLORIDA: Advocates Expect Guardian Named By Ct to Boost Foster Care Suit HOLOCAUST VICTIMS: Survivors Seek Dismissal for $4.6B Out-of-Court Pact LOUISIANA: Oyster Suit Yields $ 48M for 5 Farmers; Project Can Cost More NATIONWIDE VL: Plans Vigorous Defense of Ohio Suit Re Deferred Annuity OTTAWA: Court Backs $20 Million For Lawyers In Tainted Blood Case PRE-PAID LEGAL: Dreier Baritz Files Securities Suit in Oklahoma PRESIDENTIAL ELECTION: Law Firms Set Sights on Voting Machines TRIAD HOSPITALS: Qruorum Stockholders Seek Injunction on Merger U-M: Harvard Professor Says Affirmative Action Can Mean Re-segregation ********* AMERITECH: IL Commerce Commission Orders to Stop Discount-Calling Plan ----------------------------------------------------------------------The Illinois Commerce Commission on Tuesday ordered Ameritech to stop plying its customers with "misleading" offers of a discount-calling plan that often costs more than regular phone service. Ameritech has endured withering criticism from consumer advocates and others in recent years for alleged excesses in marketing--for example, trying to sell expensive phone packages and second phone lines to nursing-home residents. Tuesday's sternly worded ICC decision, consumer advocates said, is a sign that regulators will not tolerate deceptive marketing practices by phone companies. At issue in the ICC action was Ameritech's SimpliFive calling plan. SimpliFive offers discounts on calls made to places 15 miles or more away. But the plan charges more for calls to locations within 15 miles than Ameritech's basic phone service does. The ICC said Ameritech knew at least since early 1998 that its SimpliFive calling plan--which purported to offer a savings--actually cost many consumers more money than they would have paid under Ameritech's basic phone service. Yet, the commission said, Ameritech continued to tell people they could save by switching to SimpliFive. Ameritech's "SimpliFive marketing practices are misleading, and as such, are unjust, unreasonable," the commission wrote. The order, which levied no financial penalty, was approved unanimously by the ICC's five commissioners. The ICC action is just the latest incidence of regulatory and consumer impatience with Ameritech. The company has come under increasing criticism for its marketing practices, especially since it was taken over by San Antonio-based SBC Communications Inc. in 1999. Ameritech was roasted last year by regulators in five states for poor response to service calls. An Ameritech spokesman played down the significance of the ICC's decision on SimpliFive, saying the company has not marketed the service in two years. SimpliFive, said Ameritech spokesman Dave Pacholczyk, was meant to offer consumers an alternative to the confusing thicket of phone rates and charges offered in Illinois. "It's a plan that customers turn to for simplicity, not necessarily lower costs," Pacholczyk said. The SimpliFive issue surfaced a year ago when the Citizens Utility Board released a study showing that customers who sign up for SimpliFive stood to lose $22 to $150 a year, depending on their calling patterns. Many people rarely call more than 15 miles from their home, the study said, meaning they would see little benefit from SimpliFive. It has never been revealed how many customers have subscribed to SimpliFive. But according to evidence gathered by the ICC, many thousands of consumers bought into the Ameritech plan. CUB filed a complaint with the ICC alleging that Ameritech was violating the Illinois Consumer Fraud and Deceptive Practices Act, and on Tuesday the commission upheld many of the consumer group's allegations and ordered the violations stopped. Ameritech is prohibited "from conveying the net impression to any customer that, by subscribing to SimpliFive, that customer will incur lower total monthly usage charges," the ICC said. The ICC stopped short of saying Ameritech had committed consumer fraud, however. "We use the word misleading," said commission spokesman David Farrell. "We don't use the word fraud." Nevertheless, CUB described the ruling as a victory. "We think it's an important decision by the commission," said Robert Kelter, a CUB attorney. "It sends a signal that they are going to be active in watching marketing." CUB did not win all it wanted. The ICC declined to order Ameritech to refund overcharges to customers victimized by SimpliFive. In its order the commission said that under the state's consumer fraud laws, it does not have the authority to order refunds. Illinois' telecommunications laws are to be rewritten soon and Kelter said CUB will push lawmakers to give the ICC the ability to order refunds to consumers. CUB said that internal Ameritech documents showed that the company had targeted SimpliFive to some customers who the company believed would pay more for the plan than they would by using basic phone service. "Company training manuals instructed service representatives to sell the plan even when they knew it would raise a customer's bills," CUB said. But Pacholczyk, the Ameritech spokesman, said the company is not alone in offering calling packages like SimpliFive. "All competitors sell similar packages," Pacholczyk said. "To hold us to a different standard is absurd." Pacholczyk said the ICC found nothing wrong with CallPack, another calling plan CUB had complained about. CUB, however, says Ameritech's pitches to consumers have grown more intense since the company's merger with SBC. CUB has been critical, for instance, of Ameritech's past attempts to sell its Best Value Pack bundle of services and a second phone line to all customers. The service costs 260 percent more than basic phone service. In newspaper reports last year, Ameritech executives said they had no problem with pitching Best Value Pack--which includes caller ID, voicemail, three-way calling, call back, call forwarding , repeat dialing and wiring insurance--to nursing home residents and people who have trouble paying phone bills. Customer service representatives said at the time they were pressured into heavy-handed sales pitches after SBC took control. Some of Ameritech's marketing woes predate the merger, however. In 1997 Ameritech paid $266 million to settle a class-action lawsuit that alleged the company was charging customers for its "Linebacker" service without their knowledge. That service, which cost $3 to $5 a month, was insurance against the extremely rare occurrence of phone line damage inside a customer's home. (Chicago Tribune, January 24, 2001) AURORA FOODS: SEC and DOJ Investigate on Events Prior to Restatement -------------------------------------------------------------------- The Company has been informed that the staff of the Securities and Exchange Commission and the Department of Justice are conducting investigations relating to the events that resulted in the restatement of the Company's financial statements for prior periods ("Prior Events"). The SEC and DOJ have requested that the Company provide certain documents relating to the Company's historical financial statements. On September 5, 2000, the Company received a subpoena from the SEC to produce documents in connection with the Prior Events. The SEC also requested certain information regarding some of the Company's former officers and employees, correspondence with the Company's auditors and documents related to financial statements, accounting policies and certain transactions and business arrangements. The Company tells says it is cooperating with the SEC and the DOJ in connection with both investigations. The Company cannot predict the outcome of either governmental investigation. An adverse outcome in either proceeding may have a material adverse effect on the Company. As previously reported in the CAR, the company announced that it had reached a preliminary agreement to settle Securities Actions that purport to be brought on behalf of purchasers of the Company's securities during various periods, all of which fall between October 28, 1998 and April 2, 2000. BONE SCREW: Amicus Briefs Filed; Sp Ct Will Decide in 2001 Re FDA Reg. ---------------------------------------------------------------------- The U.S. Supreme Court has received amicus curiae briefs filed on the behalf of the Plaintiffs' Legal Committee in a case regarding the U.S. Food and Drug Administration's regulatory status of pedicle screws used to secure the bones in the lower back. In this case, the Supreme Court said it will decide in 2001 whether federal regulation of medical devices precludes a lawsuit concerning fraudulent federal approval for marketing bone screws for use in spinal surgery. Buckman Co. v. Plaintiffs Legal Committee, No. 98-1768, amicus briefs filed (U.S., Oct. 23, 2000). Background The case arose from ongoing pedicle screw multidistrict litigation. Buckman Co. is a regulatory consultant for medical device manufacturers who help them navigate the FDA's regulatory scheme. In 1984, bone screw manufacturer AcroMed Corp. hired Buckman as its liaison with the FDA in an attempt to obtain marketing clearance for a device called the Variable Screw Placement Spinal Plate Fixation System, or VSP. Buckman, on behalf of AcroMed, applied to the FDA for Section 510(k) clearance for the device. Section 510(k) is a provision of the Medical Device Amendments of 1976. The MDA greatly expanded the FDA's role in regulating medical devices. The MDA state that the manufacturer of a new medical device must present the FDA with evidence that the device is safe and effective. However, if that device can be proven to be "substantially equivalent" to devices that were in use prior to the enactment of the MDA in 1976, that device is exempt from the required FDA approval. This exemption is known as Section 510(k) clearance. Once a device has been approved for marketing under Section 510(k), the manufacturer may not market or promote it for uses other than those specified in the FDA clearance. The FDA rejected Buckman's application for Section 510(k) clearance twice. These applications stated AcroMed intended to market the VSP bone screw for spinal surgery. Then AcroMed and Buckman separated the VSP into its component parts, the screw and plate, and sought Section 510(k) approval for each. This time, the companies said the devices would be marketed for use in the arm and leg bones, and the application was granted. It is legal for surgeons to use medical devices in any way they see fit, no matter how the device is marketed. Many surgeons used the VSP for spinal fixation, instead of in the arms and legs, an activity known as "off-label" usage and one that in no way violates federal law. Subsequently thousands of plaintiffs filed suit against many manufacturers of pedicle screw systems, including AcroMed. The suits were consolidated in a multidistrict litigation based in the U.S. District Court for the Eastern District of Pennsylvania, of which this case is a part. The plaintiffs, represented by the Plaintiffs Legal Committee, contended that Buckman and AcroMed deceived the FDA as to the intended uses of the VSP by stating that they would be marketing the devices for use in the arms and legs, when in fact they intended to market the device for use in the spine. The PLC claimed this amounted to fraud under state law. In 1995 the district court dismissed the "fraud-on-the-FDA claims," as they came to be known, ruling they were preempted by the Medical Device Amendments, which prohibit states from imposing requirements in addition to those imposed by the MDA and the FDA. Following the U.S. Supreme Court decision in Medtronic Inc. v. Lohr, 518 U.S. 470 (1996), which dealt with MDA preemption, the PLC sought to revive its fraud-on-the-FDA claims. In 1997, the court affirmed its previous decision. However, in November 1998, the U.S. Court of Appeals for the Third Circuit reversed, ruling the claims could move forward. Buckman filed its petition for a writ of certiorari on May 4, 1999. AcroMed had previously settled out of the case. Buckman stated in October 1999 that the high court should rule on this matter to settle widespread confusion over the meaning of its ruling in Medtronic and whether, and to what extent, states can allow common- law claims against medical device manufacturers. In addition to the Third Circuit, the 10th Circuit has ruled that Medtronic does not preempt state claims of general applicability. The U.S. Supreme Court said it will decide sometime in 2001 whether the Buckman lawsuit in which more than 5,000 people have filed claims against pedicle bone screw manufacturers should be thrown out. Amicus Filings On Oct. 23, 2000, amicus curiae briefs were filed in support of the Plaintiff's Legal Committee. In an amicus brief filed by Public Citizen, the nationwide nonprofit advocacy group claimed to have a "longstanding interest in the issue presented in this case," because Public Citizen attorneys represented the plaintiffs in Medtronic and plaintiffs in "cases involving the preemptive effect of other federal regulatory statutes on state-law damages actions." Like Public Citizen, the Association of Trial Lawyers of America submitted a brief because "STLS is concerned that the broad scope of implied preemption sought by Petitioner and supporting amici in this case seriously undermines the fundamental right to seek legal redress for wrongful harm." The briefs filed all sought the decision of the court of appeals to be affirmed. (Breast Implant Litigation Reporter, December 27, 2000) CANKER PROGRAM: FL Moves to Disqualify Judge Alleging Bias in Remarks --------------------------------------------------------------------- After becoming a hero to thousands of citrus tree owners, the Broward judge who crippled the state's canker eradication program has come under attack by the Florida Department of Agriculture. The department filed a motion Monday to disqualify Circuit Judge J. Leonard Fleet, asserting that he had made public remarks that showed a bias against the state's case. Fleet is the judge who sharply curtailed the eradication program in November, when he issued an injunction against cutting down all healthy trees within a wide circle of infected ones. The state's attack on the judge stems from a statement he made about Bob Crawford, who as the state's Agriculture Commissioner had presided over the eradication program. "Now that Commissioner Crawford is working for the citrus industry, what are you going to do about changing the defendants named in the complaint, because I believe he has been named as a defendant?" the judge said at a Jan. 11 hearing, according to an affidavit from one of the state's lawyers, The judge was referring to Crawford's pending offer of a $ 200,000-a-year job as executive director of the Florida Department of Citrus, a state agency that answers to the Florida Citrus Commission, which includes industry representatives. On Tuesday, Crawford accepted the job. The department's attorneys said the judge's statement indicated that he had bought the idea -- suggested by a plaintiff quoted in the Sun-Sentinel -- that the job offer was payback for the Agriculture Department's vigorous pursuit of the canker eradication program. Worried that the canker would spread to the vast groves at the center of the state, the citrus industry had strongly supported the state's efforts tree-cutting work in South Florida. "The department fears it will not receive a fair trial or hearing from Judge Fleet," its attorneys wrote, in a motion filed Monday. "The Department is well aware that plaintiffs have asserted the baseless claim that Commissioner Crawford's decisions implementing the (eradication program) were motivated by promises of future remuneration by the citrus industry ...The Department fears and perceives that Judge Fleet, through his comments at the Jan. 11, 2001, hearing, has demonstrated that he also believes without any evidentiary support that Commissioner Crawford is on the payroll of the citrus industry." The judge curtailed the eradication program Nov. 17 when he issued an injunction against the controversial practice of cutting down all healthy trees within 1,900 feet of infected ones. In issuing the injunction, the judge made no secret of his contempt for the program. He said the department had trampled on the rights of homeowners simply to protect one of the state's most powerful industries. He said it was conceived in secrecy, stacked against the public and forged in violation of the state's laws on rule-making. The state appealed to the Fourth District Court of Appeal, which is expected to issue a ruling any day. Even though the case would appear to be in the hands of the appeals court, Fleet remains a factor. He may find himself conducting a retrial, if the appeals court sends parts of the case back to him. And he is scheduled to preside over a separate class-action lawsuit filed by homeowners whose trees have already been cut down. Attorneys for the coalition of local governments that won the initial case said they will fight the state's attempt to disqualify the judge. "In my opinion, they've taken the statement completely out of context," said Jamie Cole, attorney for Dania Beach. "It was a totally innocent comment and didn't indicate bias in any way. Apparently, they're not happy with his decision." (Sun-Sentinel (Fort Lauderdale, FL), January 24, 2001) CHICAGO: Suit Seeks To Overturn Anti-Mask Law; Move Follows Arrest Of 10 ------------------------------------------------------------------------ Anti-corporate protesters joined forces with Palestinian activists and Muslim women in filing a federal lawsuit Tuesday challenging the constitutionality of a nearly 80-year-old Chicago ordinance prohibiting the wearing of masks except during celebrations. The court challenge comes four months after 10 of the plaintiffs were arrested for allegedly violating the little-known ordinance while wearing bandanas over their mouths and noses during a protest along Michigan Avenue. Three Palestinian-Americans and two Muslim women also joined in the proposed class-action lawsuit, alleging that the ordinance is so broad that it prohibits them from wearing traditional head scarves and face veils in public. Edward Voci, the plaintiffs' lawyer, said the ordinance violates 1st Amendment protections for those who conceal their identity in public as an expression of religious or political beliefs or cultural identity. The ordinance makes it unlawful to appear in public "in any mask, cap, cowl, hood or other thing concealing the identity of the wearer" unless attending "carnivals, mask balls, public shows, entertainment or celebrations in the city." The ordinance was unanimously passed by the City Council on June 21, 1922, but written records offered no explanation for the reasons behind its passage, said Jennifer Hoyle, spokeswoman for the city Law Department. A police source said he believed the anti-mask ordinance was a reaction to a resurgence in the 1920s by the Ku Klux Klan and its hooded members. Violators don't face jail time but can receive a fine of up to $200, a sizable amount in 1922, Hoyle said. The maximum fine remains the same today. City lawyers plan to meet with the Chicago Police Department on "how, when and why they use the ordinance," Hoyle said, but she cautioned its longevity doesn't mean the law has necessarily outlived its usefulness. Sgt. Robert Cargie, a spokesman for the Chicago Police Department, said enforcement of the ordinance has been limited in recent years. The lawsuit alleges that 10 plaintiffs were arrested Sept. 26 for wearing bandanas at a peaceful demonstration in front of the Niketown store on North Michigan Avenue protesting alleged exploitative corporate labor practices. Two of those arrested for violating the anti-mask ordinance weren't even wearing bandanas over their faces, Voci said. Charges were dropped against one, he said. The other eight wore bandanas or ski masks over their noses and mouths during the Chicago demonstration to express their solidarity with other protesters around the world and to prevent retaliation for their unpopular political opinions, the suit alleges. The suit names as defendants the city, the Police Department and two of the officers allegedly involved in the arrests. One of the plaintiffs, Hatem Abudayyeh, 29, wearing a red-patterned scarf called a kaffiyah, told reporters he was "horribly offended" by the ordinance and "the arbitrary way" it had been enforced by the city. Another plaintiff, Tracy Robinson, a Muslim, said she wears a veil over her face in public for religious reasons, even during humid summer months. The protest coincided with demonstrations around the country and world over the annual meeting of the International Monetary Fund and the World Bank in Prague. Voci said he also is seeking to have the ordinance violations dismissed in Cook County court. Voci said he wants the ordinance overturned as unconstitutional. The 10 protesters who were arrested are seeking unspecified damages. Voci also said he would soon be seeking a temporary restraining order so that Chicago police wouldn't enforce the ordinance at a rally by Palestinian-Americans. (Chicago Tribune, January 24, 2001) COLUMBIA/HCA: Triad Hospitals Reports on Subpoenas on Business Practices ------------------------------------------------------------------------ Columbia/HCA is currently the subject of several federal investigations into certain of its business practices, as well as governmental investigations by various states. Triad Hospitals says in its report with the SEC that Columbia/HCA is cooperating in these investigations and understands that it is a target in these investigations. Given the breadth of the ongoing investigations, Columbia/HCA expects additional subpoenas and other investigative and prosecutorial activity to occur in these and other jurisdictions in the future. Columbia/HCA is a defendant in a number of suits, which allege, in general, improper and fraudulent billing, overcharging, coding and physician referrals, as well as other violations of law. Certain of the suits have been conditionally certified as class actions. Spin-off into Triad Hospitals On May 11, 1999, Columbia/HCA Healthcare Corporation completed the spin-off of Triad Hospitals, Inc. to its shareholders by a pro rata distribution of 29,898,688 shares of common stock. On the Spin-off date, Triad became an independent, publicly owned company encompassing the operations of what had comprised the Pacific Group of Columbia/HCA. At the Spin-off, the common shares of Triad were distributed to the record date holders of Columbia/HCA at a ratio of one share for every nineteen outstanding Columbia/HCA shares. Following the Spin-off, Columbia/HCA had no ownership in Triad. In connection with the Spin-off, Columbia/HCA has agreed to indemnify Triad in respect of any losses which it may incur as a result of the proceedings. Triad notes that if any of such indemnified matters were successfully asserted against Triad, or any of its facilities, and Columbia/HCA failed to meet its indemnification obligations then such losses could have a material adverse effect on the business, financial position, results of operations or prospects of Triad. Columbia/HCA will not indemnify Triad for losses relating to any acts, practices and omissions engaged in by Triad after the date of the Spin-off, whether or not Triad is indemnified for similar acts, practices and omissions occurring prior to the date of the Spin-off. CONNECTICUT: DCF Challenges Ruling for Same Services to Foster Parents ---------------------------------------------------------------------- A federal appeals court has been asked to overturn a ruling that would require the state Department of Children and Families to provide the same services for all foster parents, regardless of whether they are related to their foster children. Earlier this month, U.S. District Judge Alan H. Nevas ruled that DCF has an obligation under a 1991 consent decree to provide the same level of staffing to relatives who serve as foster parents as it does to non-relative foster parents, which is one social worker for every 40 families. That could cost the state as much as $2 million more a year because the agency would be forced to hire more social workers, DCF said in its appeal. The order followed two years of negotiations between DCF and the plaintiffs in a 1990 class-action lawsuit that was brought on behalf of the state's foster children. As a result of that lawsuit, DCF must abide by the very specific conditions spelled out in the federal consent decree. DCF Commissioner Kristine Ragaglia said her agency doesn't believe "kinship care" is included under the staffing requirement in the consent decree, not because the agency doesn't want to support relatives. "These homes have never been included," Ragaglia said, adding that DCF provides other services to the relatives, such as respite care and parent aides. The agency also will be asking the court to modify the consent decree to reflect its position, Ragaglia said. News of the agency's decision to appeal was not a surprise to the plaintiffs in the case, but it was still unwelcome. "The whole purpose of the judge's order is to ensure stability for children in the foster care system, whether they be in regular foster homes or relative foster homes," said Martha Stone, co-counsel for the plaintiffs and the executive director of the Children's Advocacy Center at the University of Connecticut School of Law. "I'm really disappointed that DCF is planning to appeal this." DCF places more than 5,000 children in roughly 3,000 foster homes each year. Of those, about 1,000 are homes where the foster parents are related to the foster children. (The Associated Press State & Local Wire, January 24, 2001) CREDITRUST CORP: Consumer Action Filed Before Ch 11 Petition and Stayed ----------------------------------------------------------------------- Seven individual complaints, filed in the Circuit Court for Baltimore City by the same attorney seek individual yet identical compensatory and punitive damages and state identical causes of action. Said causes of action include the violation of the Maryland Consumer Protection Act, fraud, constructive fraud, the violation of Federal Consumer Credit Protections Act, negligence, breach of contract, interference with contractual relations, and intentional infliction of emotional distress. Motions to dismiss certain counts and defendants and to remove the remaining matters to the United States District Court for the District of Maryland have been filed. The Company believes these claims are without merit. The Bankruptcy stay has caused the case to be administratively closed. The plaintiffs have filed claims in the Bankruptcy Court. The Company has objected to these claims. The Company intends to contest this litigation vigorously. CREDITRUST CORP: Debtor Dismisses IL Suit & Files Claim in Bankruptcy Ct ------------------------------------------------------------------------ A class action complaint was filed against the Company in the United States District Court for the Northern District of Illinois seeking class damages for all customers of the Company residing in Illinois who received a collection letter alleged to be in violation of the Fair Debt Collection Practices Act. The Company filed an answer and discovery has commenced. Class certification has been challenged and the original plaintiff has withdrawn and a substitute plaintiff has been added. The Company has again challenged certification of the class based upon the lack of sufficient commonality of facts to support liability. The proceeding was dismissed by the plaintiff for no consideration on July 28, 2000, that is, after Creditrust�s petition for chapter 11 relief on June 21, 2000. The plaintiff has filed a claim in the Bankruptcy Court. The Company has objected to this claim. The Company intends to contest this litigation vigorously. CREDITRUST CORP: Officers of Bankrupt Co. Named in MD Securities Suits ---------------------------------------------------------------------- As previously reported, complaints were filed in the United States District Court for the District of Maryland seeking class damages against certain officers of the Company for alleged violation of the Securities and Exchange Act and various rules promulgated thereunder. The company reveals that there are six of these. The Company is not a named defendant because of the Chapter 11 proceeding, but may have indemnification responsibilities to some or all defendants. Motions to dismiss to be filed. The Company's plan of reorganization specifically provides for pre Chapter 11 filing related indemnification claims to be limited to a trust fund and certain insurance policies. The surviving corporation will have no ongoing responsibility for these claims under the plan. Any deductibles the Company may incur have been expensed. CREDITRUST CORP: Sued in AL Re Ch 11 Stay Violation; Seeks Relief in MD ----------------------------------------------------------------------- A complaint was filed against the Company in the United States District Court for the Northern District of Alabama seeking class damages for all customers of the Company who had filed for protection under the U.S. Bankruptcy Code and, in alleged violation of the automatic stay provisions of the Code, continued to receive requests for payment from the Company. Several counts have been dismissed by the court. Class certification is pending. On June 21, 2000, Creditrust Corporation filed a petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland. All proceedings have been stayed as a result of the Chapter 11 proceeding. The plaintiff has filed a claim in the Bankruptcy Court. The Company has objected to this claim. DELPHI AOTOMOTIVE: Residents Near KS Olathe Battery Plant File Lawsuit ---------------------------------------------------------------------- Residents who live near an Olathe battery plant have filed a lawsuit alleging that releases of sulfuric acid damaged their properties. The suit, filed last week in Johnson County District Court, accuses Delphi Automotive Systems of not properly maintaining the plant's venting system and other equipment designed to eliminate sulfuric acid mist. Barry W. McCormick, a lawyer who represents about 40 residents near the plant, said the problems started in summer 1998. That's when employees of the Delphi plant, 400 W. Dennis Ave., first contended that sulfuric acid had damaged vehicles in the company's parking lot. The employees filed a lawsuit in November 1999. It was settled in August. McCormick said residents had periodically noticed damage to their cars, homes and vegetation from oily residue. In April 1999, residents complained of burning skin and eyes and charred foliage. A consulting firm that year said the amount of sulfuric acid released by Delphi did not pose a health risk and did not exceed industry standards. In addition, the consultant said, the plant was operating within its state permit requirements. Last April, the Kansas Department of Health and Environment required Delphi to improve its maintenance procedures, including conducting more frequent inspections, after state and county officials found problems in the emission-control system. McCormick said that wasn't enough. "Although the plant did some work on their systems, they didn't get the problem resolved," he said. "The purpose of the lawsuit is to bring some economic pressure to spend the money necessary to eliminate the sulfuric acid mist." McCormick is seeking to have the lawsuit declared a class action. Damages will be determined later, he said. The lawsuit wasn't filed until recently, he said, because he wanted to get more information on the employees' case. Doug Vickers, one of the residents filing the suit, said he and his neighbors felt they had given Delphi an opportunity to work with them. "They had plenty of time to make all of the wrongs right," Vickers said. "They never seemed to work with us. What happened to us was really, really wrong." (The Kansas City Star, January 24, 2001) FLORIDA: Advocates Expect Guardian Named By Ct to Boost Foster Care Suit ------------------------------------------------------------------------ Activists expect their lawsuit against Florida's foster care officials to get a huge boost Thursday from a court-appointed guardian, who vehemently supports children's claims they've been injured in state care. Douglas Halsey, a Miami-based environmental attorney and longtime child advocate, was appointed by U.S. District Judge Federico Moreno to act as guardian ad litem, or independent court representative, for 22 foster children who are suing the state's Department of Children & Families for failing to protect them. In the suit filed in June, the children declare they are in the same or greater risk in foster care than they were with their allegedly abusive families. They also describe -- in vivid detail -- how they have suffered sexual, physical and emotional abuse, been bounced from foster home to foster home and been left to languish for years in state care with no hope of a permanent home. In a preliminary report to the court, Halsey backs their assertions. "Florida's foster-care system, which is supposed to protect children, harms, often grievously, many of the children the state takes into custody," he wrote after more than four weeks of research, including interviews with foster children and with Children & Families Secretary Kathleen Kearney. Upon reading the report, Ted Babbitt, one of 30 plaintiffs' attorneys, was almost gleeful. "It says many of the things that were a motivating force for me to donate both my time and money toward this lawsuit," he said. "Certainly (Halsey) indicated that my worst suspicions are true." But Paul F. Hancock, deputy attorney general for South Florida, which represents Children & Families, downplayed the impact of Halsey's report. "He's been appointed guardian for these individual kids," Hancock said. "It doesn't go beyond that." On Thursday, the case goes before U.S. Magistrate Robert Dube, who will hear from plaintiffs' attorneys as to why the suit should be granted class-action status. Class-action certification would enhance the scope of the suit from 22 foster children to 18,000, said Babbitt, of West Palm Beach. Also, it has the potential to give the plaintiffs the muscle to overhaul Florida's child-welfare system. Dube also will hear from Hancock, who will argue the case against the state should be dismissed or, at least, be denied the weight of the class-action label. "There are legal standards that have to be met for a lawsuit to continue, and the question before the court is whether those standards have been met," Hancock said. Dube will take into account Halsey's report before passing on his recommendations to Moreno. If Moreno upholds the suit and grants class-action status, attorneys will proceed with discovery. A trial date has been set for July 16. This won't be the first time Moreno will rule on whether to certify a foster-care lawsuit as a class action. The judge oversaw a 1998 Broward County suit that took the state to task for the same thing: placing foster children at risk of abuse and neglect. In that suit, known as "Ward" after the first-named plaintiff, Moreno granted the plaintiffs class-action status. The case was settled last year. But Hancock said one thing has little to do with another. "The Ward case was a case involving children in Broward County. Here, they're asking for much more than he did in Ward." Nevertheless, class-action status is the only way to bring about across-the-board change -- and ultimately protect Florida's foster children, Halsey said. "We're finding things have not improved," he said. "Unfortunately there is a number, and it's not a small number, who come in, having been removed from their homes, only to find what happens in foster care is even worse." (Sun-Sentinel (Fort Lauderdale, FL), January 24, 2001) HOLOCAUST VICTIMS: Survivors Seek Dismissal for $4.6B Out-of-Court Pact ----------------------------------------------------------------------- A federal judge presiding over Holocaust litigation against German banks said she will rule soon on whether to dismiss a class-action suit, a move which would pave the way for over one million former slave laborers to receive payments from a compensation fund already approved by the banks. After hearing from Holocaust survivors, lawyers from both sides, a trustee of the fund, a representative of the U.S. Department of Justice and Charles A. Stillman, a lawyer appointed by the judge as a "special master" in the case, U.S. District Court Judge Shirley Wohl Kram said: "I will reserve my decision. You will be hearing from me shortly." The plaintiffs had asked that their lawsuit be dismissed because of an out-of-court settlement setting up the $4.6 billion fund to compensate people enslaved by the Nazis during World War II. The money is to be funded in equal parts by German industry and the German government. David Buchholz, speaking on behalf of the U.S. Deptartment of Justice, urged Kram to dismiss the case on Wednesday, but lawyers involved in the case said it was more likely her judgment would be issued in the coming days. Stillman, a neutral party charged with making recommendations to the judge on the case, said that "there's no amount of money that is going to right the wrongs of the Holocaust." But he went on to indicate support for her dismissal of the case. While most of those testifying urged the judge to dismiss the case, several Holocaust survivors said that before she did so they wanted to be sure any unclaimed funds would go directly to needy Holocaust survivors and not to organizations that might spend it on other sorts of projects. "Please, judge, this money should go only to Holocaust survivors and not to organizations," said Alice Fischer, who said she was a former slave laborer whose brother and father were worked to death by a German company during the war. Kram said she wanted to be sure there was a mechanism to ensure that the funds would be distributed fairly, and that any victims who are not part of the current lawsuit would still be able to seek legal justice. She also said she wanted to be sure that the money in the fund would not be wrongly diminished by unfairly high lawyers' fees, or by the addition of cases involving Austrian banks with branches in Germany during the war, which would increase the number of plaintiffs the money would have to be allocated to. More than one million former laborers worldwide, most of them central and eastern Europeans, are expected to be eligible for payments. The fund also will compensate people subjected to Nazi medical experiments and some with other Holocaust-related claims. But before the payouts can begin, all court cases in the United States have to be dismissed. (The Associated Press State & Local Wire, January 24, 2001) LOUISIANA: Oyster Suit Yields $ 48M for 5 Farmers; Project Can Cost More ------------------------------------------------------------------------ Case: Avenal v. Louisiana Department of Natural Resources, No. 38-266 (Dist. Ct., Plaquemines Parish, La.) Plaintiffs' Attorneys: Phillip F. Cossich Jr. and Les A. Martin of Belle Chasse, La.'s Cossich, Martin, Samich & Parsiola; Wendell H. Gauthier of Metairie, La.'s Gauthier, Downing, LaBarre, Beiser & Dean; and Michael X. St. Martin of Houma, La.'s St. Martin & Williams Defense Attorney: Andrew C. Wilson of New Orleans' Burke & Mayer Jury Verdict: $ 48 million In the early 1990s, in an attempt to restore marshland and protect New Orleans from flooding, the Louisiana Department of Natural Resources opened a freshwater diversion project at Caernarvon, on the border of Plaquemines and St. Bernard parishes, south of New Orleans, said plaintiffs' attorney Phillip F. Cossich Jr. The Caernarvon project opened the Mississippi River and sent billions of gallons of fresh water into the oyster grounds. The project was necessary for coastal restoration in Louisiana, said Mr. Cossich, but "35,000 acres of oyster farms were destroyed." Oysters need salt water to survive, but the diversion of fresh water denied the oysters enough salt water to live. Since the diversion is continual, he said, the oyster farmers have been unable to revive their businesses. The oyster farmers sued the state, contending that this was a permanent taking. The farmers were certified as a class in 1996; five representative plaintiffs were selected for trial. The state contended that the plaintiffs did not prove causation or damages. "There was no evidence that any of them had ever produced any oysters," said defense counsel Andrew Wilson. In addition, he said, live oysters remained in Breton Sound after the diversion, according to records of seafood dealers. The oyster harvesters, he noted, leased the oyster beds from the state for $ 2 per acre and had been supporters of the freshwater diversion. On Dec. 15, a Pointe a La Hache, La., jury awarded the five representative plaintiffs $ 48 million -- or up to $ 21,345 per acre. Prejudgment interest will bring the award up past $ 70 million, said Mr. Cossich. If the verdict is applied to the remaining class members, he said, the total judgment could be $ 700 million. The defense will contest any such application, said Mr. Wilson: "We expect the judge will determine damages case by case." Post-trial motions to set aside the verdict are pending. (The National Law Journal, January 22, 2001) NATIONWIDE VL: Plans Vigorous Defense of Ohio Suit Re Deferred Annuity ---------------------------------------------------------------------- On October 29, 1998, Nationwide VL Separate Account-D was named in a lawsuit filed in Ohio state court related to the sale of deferred annuity products for use as investments in tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company). On May 3, 1999, the complaint was amended to, among other things, add Marcus Shore as a second plaintiff. The amended complaint is brought as a class action on behalf of all persons who purchased individual deferred annuity contracts or participated in group annuity contracts sold by Nationwide and the other named Nationwide affiliates which were used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. No class has been certified. On June 11, 1999, Nationwide and the other named defendants filed a motion to dismiss the amended complaint. On March 8, 2000, the court denied the motion to dismiss the amended complaint filed by Nationwide and the other named defendants. Nationwide intends to defend this lawsuit vigorously. OTTAWA: Court Backs $20 Million For Lawyers In Tainted Blood Case ----------------------------------------------------------------- Ottawa and the provinces can't appeal a decision that awarded $20 million to lawyers for Canada's victims of tainted blood, Ontario's top court has ruled. Lawyers for the federal and provincial governments went to the Ontario Court of Appeal in a bid to have the lawyers' fees rolled back but were sent packing before making their arguments. A three-judge panel of the court quashed their appeals on Tuesday after hearing submissions on whether the fees were any of the governments' business. The fees were awarded to a team of about 20 lawyers who filed a class action lawsuit in Ontario on behalf of tainted blood victims and went on to negotiate a $1.5 billion settlement package, believed to be the largest in Canadian history. Mr. Justice Warren Winkler of the Ontario Superior Court ruled in June that the fees were fair and reasonable given the risk assumed by the lawyers, the case's vast complexity and the "excellent result." Federal lawyer Michel Lapierre argued that government should have the right to appeal the decision because it's in the public interest to have any contingency fee arrangement in a class action reviewed by a higher court. But lawyer Paul Pape said the governments' appeal was "abusive" and done "on a flyer." "This case is about slagging the lawyers. It's not about protecting the . . interests of the victims," said Pape, who represents lawyer Harvey Strosberg and others who acted for people infected with Hepatitis C through blood transfusions. If the government had succeeded, it would have had "a chilling effect" on class action lawsuits, he added outside court. It would have led to governments popping up in appeal courts to challenge fees in other class actions, such as the impending Walkerton case, Pape said. Not only did the governments lose, the three-judge panel made up of Justices John Morden, Michael Moldaver and James MacPherson ordered them to pay their opponents' costs in an amount to be determined. January 23's decision is in keeping with a November ruling by the British Columbia Court of Appeal denying the federal and provincial governments the right to appeal $15 million in legal fees awarded to lawyers for tainted blood victims in that province. The governments are seeking leave to appeal the B.C. ruling to the Supreme Court of Canada. Justice department officials will be considering whether to do the same with the Ontario appeal court's ruling, Lapierre said. The $20 million awarded to Ontario lawyers works out to less than 2 per cent of the settlement deal. The governments, however, wanted it cut to about $5 million. The fees were calculated by multiplying what the lawyers would normally charge by four, a premium to reflect the risk involved in taking a case with no guarantee of payment. In total, the lawyers say they worked 16,309 hours for the settlement, which amounts to between eight and 10 years if done by a single lawyer. About 10,000 victims are considered to be potential claimants and stand to collect up to $159,000 each from the deal. (The Toronto Star, January 24, 2001) PRE-PAID LEGAL: Dreier Baritz Files Securities Suit in Oklahoma --------------------------------------------------------------- Dreier Baritz & Federman announced on January 23 that it filed a class action in the United States District Court for the Eastern District of Oklahoma on behalf of purchasers of Pre-Paid Legal Services, Inc. (NYSE: PPD) common stock between the period February 7, 2000 and January 16, 2001 (the "Class Period"). The Complaint charges Pre-Paid Legal Services, Inc. and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Contact: William B. Federman of Dreier Baritz & Federman, 405-235-1560, or wfederman@aol.com PRESIDENTIAL ELECTION: Law Firms Set Sights on Voting Machines -------------------------------------------------------------- Two of the country's most feared class action law firms have turned their sights on a machine that launched countless arguments, numerous lawsuits and, possibly, a presidency. On Jan. 9, lawyers from Washington, D.C.'s Cohen, Milstein, Hausfeld & Toll and Cincinnati's Waite, Schneider, Bayless & Chesley announced two suits targeting the Votomatic voting machine, which was blamed for muddying the waters in the 2000 presidential election. The firms are handling the cases pro bono. One suit, filed in Leon County, Fla., claims that the machines are "inherently flawed" and violate Florida law, in addition to the equal protection rights of Florida voters. The defendants are Florida Secretary of State Katherine Harris and other state and county officials. Coyner v. Harris (Fla. Cir. Ct. Leon Co.). The other, filed in Illinois state court, alleges violations of state unfair trade practices law and the due process and equal protection clauses of the U.S. Constitution. The defendants are four companies that manufacture, service or provide components for the Votomatic machines. Wirth v. Election Systems & Software (Ill. Cir. Ct. St. Clair Co.). The plaintiffs, a class of 41 million voters in 28 states that used the Votomatic in November, are seeking court orders banning the further use of the machines. The complaint says that the Votomatic system "contains a host of well-known defects that routinely frustrate the intentions of voters, disenfranchise large numbers of voters, and severely undermine the democratic process." Cohen Milstein partner Matthew Powa said that he expects the Votomatic issue to be settled in the courts rather than in state legislatures. "This is not a matter of what legislatures can do or should do or want to do," said Mr. Powa. "It's a matter of what voters have a right to." The two lawsuits come in addition to cases filed the same week by the American Civil Liberties Union, the National Association for the Advancement of Colored People and other groups, which claim that the allegedly error-prone Votomatic machines disproportionately invalidated the votes of minority voters. (The National Law Journal, January 22, 2001) TRIAD HOSPITALS: Qruorum Stockholders Seek Injunction on Merger --------------------------------------------------------------- On October 19, 2000, Triad announced that it entered into an agreement to acquire Quorum Health Group, Inc. ("Quorum") for approximately $2.4 billion in cash, stock and assumption of debt. Under the terms of the agreement, Quorum shareholders will receive $3.50 in cash and 0.4107 shares of Triad common stock for each outstanding share of Quorum stock. On October 20, 2000, a class action lawsuit was filed against Triad and members of the Board of Directors of Quorum in the Circuit Court of Davidson County, Tennessee, on behalf of all public stockholders of Quorum. The complaint alleges that Quorum's directors breached their fiduciary duties of loyalty and due care by failing to implement reasonable procedures designed to maximize shareholder value and to obtain the highest price reasonably available for Quorum's shareholders. The complaint alleges that Triad aided and abetted Quorum's directors' breach of their fiduciary duties. The complaint seeks an injunction preventing consummation of the merger of Quorum into Triad, or Quorum's acquisition by or business combination with any third party, until Quorum adopts and implements a procedure or process, such as an auction, to obtain the highest possible price for Quorum. Alternatively, the complaint seeks compensatory damages in the event the merger of Quorum into Triad is consummated. The complaint also seeks an award of costs and attorney's fees. Triad believes the claims are without merit and will vigorously defend the actions. The proposed merger is subject to approval of each company's shareholders, antitrust clearance and various other conditions generally customary for transactions of this type. The transaction is also conditioned upon receipt by each of Triad and HCA -- The HealthcareCompany, formerly Columbia/HCA of an acceptable private letter ruling from the Internal Revenue Service that the merger with Quorum and related transactions will not cause the Spin-off of Triad or LifePoint from HCA, on May 11, 1999 or the internal restructuring transactions that preceded the Spin-off to fail to qualify for the tax treatment specified in private letter rulings previously issued to HCA. Triad has received a financing commitment of $1.7 billion from its investment banker to fund the cash purchase price and to refinance certain debt of both companies. U-M: Harvard Professor Says Affirmative Action Can Mean Re-segregation ---------------------------------------------------------------------- A Harvard University professor testified in federal court that a case against the University of Michigan's affirmative action policy, if successful, could result in re-segregated colleges. Gary Orfield, director of Harvard's Civil Rights Project, testified Tuesday during the sixth day of testimony in trial over a class-action lawsuit brought by a Plymouth Township woman in 1997. Barbara Grutter sued Michigan law school, claiming she was denied admission in favor of less-qualified minorities. Orfield testified that in many large cities, black and white students learn in segregated schools with vast differences in the quality of teachers, facilities, and resources. "Race matters deeply in terms of the opportunities students get, and in terms of the preparation they get," he said, noting that during the 1996-97 school year, Detroit's public schools were 90 percent black. "In Detroit, you've still got one of the most segregated metropolitan areas in the country," testified Orfield, reported the Detroit Free Press. "Professional education will be segregated unless there is an explicit commitment to integrating it because of the extraordinary unequal opportunities that exist," Orfield said, reported The Detroit News. What's more, Michigan has the country's most segregated K-12 public schools, he said, with 64 percent of black students attending almost entirely minority schools, Orfield testified. (The Associated Press State & Local Wire, January 24, 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 * * *