/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010130.MBX C L A S S A C T I O N R E P O R T E R Tuesday, January 30, 2001, Vol. 3, No. 21 Headlines ASBESTOS LITIGATION: Widow of Construction Worker Settles Before Trial ASCENDANT SOLUTIONS: Intends to Vigorously Defend Shareholder Suit in TX CANKER PROGRAM: Homeowners Seek Beyond $100 Wal-Mart Vouchers CBOT: IL Suit against Converting Minority Membership into Shares Goes on DEVINK ET AL: Ap Ct Affirms Staying of NJ Action for Principle of Comity DOUBLECLICK: FTC Drops Investigation; Co Seeks to Prtoect User Anonymity FORD MOTOR: Ballachey Orders To Pay Restitution But Not Mark-ups HOLOCAUST VICTIMS: U.S. Judge Refuses To Dismiss 3 Swiss Insurers KANSAS POLICE: Attys. Seek Cert in Suit over Seized Assets in Drug Cases KEEBLER, FLOWERS: Shareholders Sue in DE and IL Seeking to Enjoin Merger MAIL BOXES: IL Ct Certifies Class Challenging Delivery Charges MICROSOFT CORP: Filing Urges Ap. Ct. to Reverse Order to Split Company OKALOOSA, FL: Title IX Suit Filed Alleging Gender-Equity Law Violation ORBITAL SCIENCES: Goodkind Labaton Announces Certification of VA Lawsuit PAINT MANUFACTURERS: Oakland and San Francisco Join Suit over Hazards PINOCHET: Former Chile Dictator Indicted for Political Killings PRE-PAID LEGAL: Kirby McInerney Announces Securities Lawsuit in Oklahoma PRE-PAID LEGAL: Schiffrin & Barroway Announces Securities Suit in OK REZULIN: Judge Sets Conference Jan. 30 to Iron out Plaintiffs' Conccerns TOBACCO LITIGATION: CA Law Firms Cash In on Settlement with Bond Issues VA LINUX: Reuben & Novicoff Announces Securities Suit Filed in N.Y. VA LINUX: Stull, Stull Announces Securities Suit Filed in N.Y. WAR VICTIMS: Fleas Dumped in China, Doctors Testify in Tokyo Court ZIFF DAVIS: Named in Magazine Price Fixing Federal Lawsuits in New York ********* ASBESTOS LITIGATION: Widow of Construction Worker Settles Before Trial ---------------------------------------------------------------------- The widow of a former Bethlehem Steel Corp. worker settled a lawsuit claiming her husband died from a form of lung cancer after working with asbestos-based materials. Bethlehem Steel is not a defendant and is not accused of being at fault in the lawsuits. A Northhampton County Court jury had been chosen and the case was ready to proceed by the end of January when the widow of Richard Zambor reached the agreement with eight manufacturers of such materials, said Edward Rubin, attorney for Joan Zambor. The terms of the settlement reached were not disclosed. Defendants include Combustion Engineering, Harbison-Walker, A.P. Green, Congoleum, H.H. Robertson, Owens Illinois Glass, North American Refractories Co. and Flintkote, which the lawsuits say manufactured asbestos-based materials used at Bethlehem Steel and hid the dangers of the products. Zambor died of mesothelioma, a form of cancer caused by asbestos exposure, shortly after filing the lawsuit in 1998. The lawsuit, which represents one side of a legal argument, said he inhaled asbestos fibers while installing floor and ceiling tiles and repairing furnaces as a carpenter at the steel company from 1953 to 1963. The lawsuit was the first of up to 3,000 being filed on behalf of former Bethlehem Steel workers asserting they were exposed to hazardous levels of asbestos at the plant. (AP, January 25, 2001) ASCENDANT SOLUTIONS: Intends to Vigorously Defend Shareholder Suit in TX ------------------------------------------------------------------------ Ascendant Solutions, Inc. (Nasdaq: ASDS) said that on January 23, 2001, a shareholder of Ascendant Solutions filed a purported class action lawsuit in the United States District Court for the Northern District of Texas against the Company and certain of its directors. The case is styled as: Richard Bell on behalf of himself and all others similarly situated v. Ascendant Solutions, Inc., et al, Civil Action No. 3-01CV0166-P. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder for making untrue statements of material fact and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The plaintiff alleges that purchasers of the Company's common stock during the period between November 11, 1999, and January 24, 2000, were damaged when the market value of the stock dropped on January 24, 2000, subsequent to a Company press release. The plaintiff seeks an unspecified amount of money damages, interest thereon and costs and expenses. At this time, the Company is investigating the allegations, and is unable to predict the outcome of this litigation and its ultimate effect, if any, on the financial condition of the Company. However, Ascendant Solutions intends to defend the suit vigorously in all respects. The Company may have indemnification obligations to certain of the named defendants. CANKER PROGRAM: Homeowners Seek Beyond $100 Wal-Mart Vouchers ------------------------------------------------------------- Another front is about to open in the war over citrus canker, as attorneys begin to press a class-action suit on behalf of thousands of homeowners who lost fruit trees to the state's chainsaws. The lawsuit is to be heard by Broward Circuit Judge J. Leonard Fleet, the same judge who delivered a harsh condemnation of the canker eradication program in November when he ordered the state to stop cutting down healthy trees to contain the disease. The plaintiffs are seeking financial compensation beyond the widely ridiculed $ 100 Wal-Mart vouchers that the state has been handing out. While the state Legislature is considering further compensation of $ 100 per tree, the homeowners' attorneys say that wouldn't be enough. "They went into people's backyards and just took their trees, without notice, without due process," said Jamie Cole, one of the attorneys in the case. "It's an outrageous situation of government just taking people's property without just compensation or due process," Cole said. The suit was filed last year, as part of the case that crippled the eradication program in Broward County. One portion of the lawsuit, the successful attempt to protect the county's remaining trees, is on appeal. The other portion, on behalf of homeowners who lost trees, has just begun to move forward in Fleet's courtroom. This month, the attorneys formally requested that the judge certify the case as a class action. In a class-action lawsuit, a few plaintiffs seek to win something on behalf of a larger group. In this case, if the judge rules in favor of the homeowners and awards damages, a system would be set up to contact the tens of thousands of people who lost trees and to compensate them, Cole said. Named as plaintiffs are several residents of Broward and Miami-Dade counties who lost trees to the eradication program. Beth Garcia, one of the plaintiffs, returned to her house in Hollywood after work and found her lemon tree gone. "We just came home one day and they had chopped it down," she said. "They didn't notify us, they just chopped it down. The next day they came back and took the stump. They didn't even talk to us. I think that's wrong. It's wrong to save a private industry at the expense of homeowners. I didn't feel like getting a voucher to Wal-Mart. You can't replace a tree with that." Before the case can even be heard, the judge must certify it as a class-action, agreeing that the facts and legal issues are the same for the group and that homeowners need not file individual suits. The state plans to oppose class-action certification. A hearing on that issue is scheduled for May 1. "This is a classic case for treatment as a class action," said Robert Gilbert, a class-action specialist in Coral Gables who is working with Cole. "You've got an unfair policy by a department of government, applied across the board to residents of South Florida in an unfair way. No one person has generally suffered large enough damages to go out and hire a lawyer to recover $ 495. You don't find many lawyers willing to take a $ 495 case on a contingency basis." Officials with the Department of Agriculture say they are not worried about the suit. They noted that other class-action lawsuits over the eradication program have failed. While they say they sympathize with homeowners who have lost trees, they said state law considers the trees worthless since they've been exposed to the disease. "We understand their concerns, but state law says that exposed and infected trees are not compensateable," said Liz Compton, spokeswoman for the Department of Agriculture. Since 1995, when the canker appeared near Miami International Airport, the department's work crews have cut down more than 800,000 trees in South Florida to try to contain the disease. Over the furious protests of homeowners, the department argued that the tree-cutting program was essential to preventing the canker from spreading to the vast commercial citrus groves of central Florida. Compton said the department also would oppose the attorneys attempt to win class-action status for the lawsuit. "We don't think they have a cause of action," she said. "You can't have a class if there's no cause of action." While the homeowners' attorneys acknowledge that previous class-action suits have failed, they say this one may be different. It will be heard by Fleet, who has made his contempt for the program abundantly clear. Aware of the judge's views, the state has asked the Fourth District Court of Appeal to disqualify him. Most of the previous suits came before the vast expansion of the eradication program, when work crews began cutting down all trees within 1,900 feet of infected ones. "It's different," Cole said. "What they've done this time is so much beyond anything they've done in the past. It's such a huge, huge expansion of the impact." (Sun-Sentinel (Fort Lauderdale, FL), January 29, 2001) CBOT: IL Suit against Converting Minority Membership into Shares Goes on ------------------------------------------------------------------------ An Illinois judge late last week refused a request to throw out a lawsuit minority members at the Chicago Board of Trade filed contending that an allocation plan to convert memberships into shares in a restructured CBOT is unfair. It is the second judicial blow to full CBOT members in a week. In May, exchange directors approved a plan for the 1,402 full CBOT members to receive 88 percent of the shares of common stock in the planned restructured CBOT. The revamped exchange would become for-profit, with an electronic trading company as a wholly owned subsidiary. As for the different classes of minority members, 774 associate members would get 9.72 percent of the shares; 184 government interest members, 1.16 percent; 643 commodity options members, 0.57 percent; and 641 index, debt and energy members would get 0.57 percent. Minority members at the exchange have said the allocation plan was unfair because it didn't take into account the volume contribution associate members in particular have brought to the exchange. An associate membership allows for the trading of the CBOT's flagship U.S. Treasury complex, which accounts for more than 70 percent of the exchange's total trading volume. The minority members want the allocation changed to receive a larger slice of the exchange pie. On Thursday, Cook County Circuit Court Chancery Division Judge Thomas Durkin said the minority members did indeed have sufficient cause for controversy and the case should be allowed to be heard. However, after his decision, Durkin suggested the minority members and the full members, who are the defendants in the class-action lawsuit, work out an amicable plan outside the courtroom. Durkin said he observed the Chicago futures markets to be "under attack" from alternative trading venues and urged the two sides to work out their differences. "It's in the interest of all sides to address this dispute amicably," he said after his ruling. Last week, in a separate case also before Durkin, he ruled in favor of the Chicago Board Options Exchange, saying the Securities and Exchange Commission, not the Illinois court, had jurisdiction over a disputed right of a full CBOT member to vote and trade at the CBOE. The SEC is the CBOE's regulator. (Chicago Tribune, January 29, 2001) DEVINK ET AL: Ap Ct Affirms Staying of NJ Action for Principle of Comity ------------------------------------------------------------------------ Bass v. DeVink et al, A-2617-99T3, Appellate Division; opinion by Baime, P.J.A.D.; decided and approved for publication January 19, 2001. Before Judges Baime, Wallace Jr. and Lintner. On appeal from the Chancery Division, Morris County. (Sat below: Judge MacKenzie.) DDS No. 07-2-5753 Where 36 separate class-action suits were brought in Delaware, advancing the same claims and causes of action alleged by plaintiff here, and the litigation is national, and even international, in scope, most likely involving Delaware law, and the Delaware Chancery Court is a particularly appropriate forum because of its highly developed body of corporate law, the trial judge properly exercised his discretion in staying the New Jersey action; applying principles of comity, the general rule is that the court first acquiring jurisdiction has precedence absent special equities and there is no reason for a court to evaluate how "meaningful" the earlier filing is. I. -- On November 3, 1999, Warner-Lambert Co. and American Home Products Corp. agreed to merge. Pfizer Inc. then made an unsolicited announcement of its intention to acquire Warner-Lambert. -- On November 4, Pfizer filed suit in the Delaware Chancery Court, seeking to enjoin the proposed merger and to eliminate provisions in the merger plan for termination fees and cross-options. Beginning the same day and continuing for the next two weeks, 39 Warner-Lambert shareholders brought 36 separate class-action suits in Delaware, advancing the same claims and causes of action alleged by Pfizer. -- On November 5, plaintiff filed his complaint in the Chancery Division against Warner-Lambert, its directors and American Home Products. Both seek injunctive relief against the consummation of the merger, a declaration that the directors breached their fiduciary duties, recission of the termination fees provision, damages, costs and attorneys' fees. -- The Delaware Chancery Court immediately consolidated all of the Delaware actions, and instructed the attorneys "to ensure that no duplication of effort or unnecessary expense (occurs)." The Delaware shareholders are represented by 46 separate law firms. It is fair to say that several of the nation's most prominent and highly experienced shareholder litigation firms have been assigned leadership roles in the consolidated actions. The representative plaintiffs include institutional shareholders with substantial holdings. -- On November 19, the Delaware Chancery Court ordered coordinated, expedited discovery. Discovery proceeded rapidly. -- In contrast, plaintiff first moved for expedited discovery on December 2. -- On January 7, 2000, Judge MacKenzie entered a stay pending final judgment in the Delaware litigation. The judge reasoned that the Delaware Chancery Court first acquired jurisdiction and, thus, had precedence absent special equities. The judge stressed that the same factual and legal claims existed in both the instant suit and in the Delaware litigation, and that the parties were the same. The judge also determined that the litigation was national, and even international, in scope and import, with shareholders in all parts of the world. The judge concluded that, although both Warner-Lambert and American Home Products had a strong "presence" in New Jersey, the subject of the litigation had no particular New Jersey nexus. -- On February 7, 2000, it was announced that the merger agreement between Warner-Lambert and American Home Products was terminated, and that Warner- Lambert and Pfizer had entered into a merger agreement. The litigation between Pfizer, Warner-Lambert and American Home Products has been dismissed. The shareholder litigation, nevertheless, remains pending in the Delaware Chancery Court. II. The order staying plaintiff's action was obviously interlocutory. Such interlocutory adjudications are appealable only on leave granted pursuant to R. 2:5-6. Plaintiff sought to bypass these procedures by obtaining a dismissal of his complaint. It is axiomatic, however, that a party cannot appeal from a judgment or order to which he consented. Nevertheless, the court will decide this appeal. III. Held: Judge MacKenzie conscientiously and properly exercised his discretion in staying the New Jersey action. Applying principles of comity, the general rule is that the court first acquiring jurisdiction has precedence absent special equities. This principle has particular efficacy, and takes on added urgency, in light of the nationalization and globalization of our economy. Respect for our sister states and the strong public policy in favor of marshaling judicial resources require abstention in these circumstances. (New Jersey Law Journal, January 29, 2001) DOUBLECLICK: FTC Drops Investigation; Co Seeks to Prtoect User Anonymity ------------------------------------------------------------------------ The Federal Trade Commission last week said that it was dropping its investigation of DoubleClick's online advertising practices, ending a closely watched case against the Internet's biggest and perhaps most-maligned advertising network. Privacy-rights advocates were quick to say that DoubleClick still has fires to put out, in the form of class-action lawsuits and investigations by state attorneys general. Still, to investors and many business leaders, the F.T.C. announcement was a reminder of how far DoubleClick has come since the days when its name was widely synonymous with privacy invasion. Even as some privacy advocates continue to push the company to change its data-collection policies, others formerly critical of DoubleClick acknowledge that the company has made great strides in helping develop industrywide privacy standards. Now, analysts and executives say, the chief issue facing DoubleClick and its competitors is how to regain the revenue momentum that vanished along with so many of their dot-com clients. To help do so, analysts predict, DoubleClick will proceed with plans to use offline data in conjunction with data the company has collected about users' online surfing habits -- albeit with a new privacy religion guiding the way. Of course, the idea of using information about individuals' offline buying behaviors to bolster online surfing data is what detonated the online privacy bomb in the first place. When DoubleClick announced plans in the summer of 1999 to buy Abacus Direct, which tracks the catalog buying behavior of millions of consumers, privacy advocates began scrutinizing the company. Among other things, the privacy people feared that DoubleClick would know too much about too many consumers who had not received enough notice about DoubleClick's tracking or adequate opportunities to block the surveillance. The defense DoubleClick offered was that it had given consumers adequate notice about how to reject its "cookies" -- small files containing identification numbers, which DoubleClick places on users' hard drives when they visit one of DoubleClick's 1,500 affiliates. Unless the user disables it, a cookie tracks the user's online movements. In January 2000, privacy rights groups, including the Electronic Privacy Information Center and the Center for Democracy and Technology, noted that DoubleClick had changed its privacy policy to state that it could merge its offline and online databases, even though the company had not yet actually combined the data. That sparked the lawsuits and government investigations, including the F.T.C. inquiry. Last week's F.T.C. announcement acknowledged that DoubleClick had not begun to merge the online and offline data last January, or at any time since. That made the issue of whether the company had violated its stated privacy policy moot. But the announcement raised again the question of whether the advertising companies that had made large investments in systems to merge offline and online data had wasted their money. At least one other advertising company, 24/7 Media, was attempting to do the same thing. The answer, analysts said, is not necessarily. "DoubleClick is developing a way to leverage the Abacus database so they can target banner ads," said David Doft, an analyst with ING Barings. Although DoubleClick has disclosed few details, Mr. Doft and other analysts said the plan called for DoubleClick and Abacus to gather data about online and offline behavior separately. Then, rather than merging the data directly, so that DoubleClick could use a cookie number to identify a user, Abacus would instead send the data to another company to make the match. That company would "cleanse" the data of personal identifiers before returning it to DoubleClick. That way, for instance, DoubleClick could deliver banner ads for computer peripherals to people who had recently bought computer monitors offline. DoubleClick, however, would not know who those people were by name or mailing address. Meanwhile, the company hired by DoubleClick to match the cookie number with the person's offline information would not have the data associated with that person's online activities. DoubleClick said it hoped to begin testing the system this spring, Mr. Doft said. "But they already delayed it once or twice," he said, "so who knows if they'll hit that." Jules Polonetsky, DoubleClick's chief privacy officer, declined to confirm whether the company was developing such an ad-delivery method. "We do have folks looking at additional ways to use information to provide relevant ads and maintain user anonymity," he said. "We could use third parties or other technological tools like encryption, which, as a cardinal rule, would not allow DoubleClick to have personally identifiable information." But, he said, the company had set no timetables for adopting such methods. "We're gauging reactions to the best and most privacy-sensitive ways to explore these ideas," Mr. Polonetsky said. Mr. Doft, of ING Barings, said it was not yet clear that such a method, even if one emerged, would help DoubleClick or competitors using a similar approach attract substantially more advertising revenue. "Everyone looks at click-through rates for banners getting down to one-quarter percent," he said, referring to the rate at which users click on banner ads. "And no one has been able to come up with a more effective way to target those ads. But it's tough to say how effective it will be to target ads, using that offline transactional data." Direct marketers use past buying behavior to predict future purchases, sending catalogs and promotional mail based on that data. "That's been very powerful in the past," Mr. Doft said. And such information could help give DoubleClick a competitive edge, he said, particularly "if banner ads become more of a commodity than they are now." Of course, DoubleClick is not alone in its ambition to use offline data to make its online ads more effective. One of its chief competitors, 24/7 Media, actually began gathering offline data on consumers before DoubleClick's acquisition of Abacus. But 24/7 halted its efforts to merge the data when the F.T.C. investigation of DoubleClick began. David J. Moore, chief executive of 24/7, said it was looking at ways to use the offline consumer information it had gathered, using methods to ensure the anonymity of users. "Given that there's still a lot of talk in Congress about legislation," he said, "we'd like to have a clearer direction from this new Republican regime as to where this will go, before we make any decisions." Other analysts, meanwhile, said that even if DoubleClick and 24/7 ended up scuttling plans to use their offline data, it would not be a great loss. Dana Serman, an analyst with Lazard Freres & Company, said of DoubleClick: "They poured $1.7 billion into Abacus. But that was in the form of stock, so it's fair to say they got a significantly profitable company and they didn't spend much money at all." Mr. Serman acknowledged that DoubleClick's original intention had been to leverage the Abacus offline model for Web purposes. "But they got a lot of assets out of Abacus," he said, "like data-modeling techniques, Ph.D. statisticians and mathematicians who think about how to target campaigns based on purchase transaction history. So a lot of that carries over from the offline to the online world." (The New York Times, January 29, 2001) FORD MOTOR: Ballachey Orders To Pay Restitution But Not Mark-ups ---------------------------------------------------------------- Ford should pay restitution to consumers who replaced faulty ignition switches, but it doesn't have to compensate them for mark-ups dealerships tacked onto the repair cost, retired Alameda County Judge Michael Ballachey ruled on January 25 - a decision that could lead to restitution of about $150 per person, plaintiffs' attorneys said. The ruling clears the way for a court-appointed referee, Jerome Falk Jr., to hear evidence on the size of the restitution fund. Last year Ballachey ordered a historic bench recall of 1.7 million Ford vehicles with the faulty switches. Meanwhile, a jury hung on a verdict in the damages phase of the trial. A retrial of that phase could start sometime in late summer. Ford's attorneys -- who still maintain the part is not defective -- argued that parties to the class action should get a much smaller fraction. Consumers should only get what they paid indirectly to Ford Motor Co. for the part, minus fees all intermediaries may have passed on to the consumers, attorneys say. "With respect to the replacement parts, part of that money goes to labor and dealer mark up," Ford attorney Richard Warmer argued in court. "The restitution should only be amounts received by Ford directly ," said Warmer, a partner in the S.F. office of Los Angeles' O'Melveny & Myers. The plaintiffs' attorneys, who represent 3 million people who owned the affected Ford models between 1983 and 1995, were pleased with Ballachey's ruling. "What we are dealing with is a traditional concept of restitution and we agree with it," said Jeffrey Fazio of Hancock Rothert & Bunshoft. Records of the number of cars with replacement ignition modules are incomplete, said Fazio. However, the eventual restitution order could cover roughly 750,000 TFI repairs that were made in California from 1998 to present, he said. The ruling clears the way for a court-appointed referee, Jerome Falk Jr., to hear evidence on the size of the restitution fund. HOLOCAUST VICTIMS: U.S. Judge Refuses To Dismiss 3 Swiss Insurers ----------------------------------------------------------------- Three insurers incorporated in Switzerland do not qualify as German insurers under the Berlin Agreements, a federal judge ruled Dec. 19 (Walter Winters, et al. v. Assicurazioni Generali, et al., No. 98-Civ-9186, 97-Civ-2262, S.D. N.Y.). Walter Winters filed a proposed class action against a number of insurers, seeking to represent those who lost their assets in insurance and contractual rights as either victims or heirs of the Holocaust. The complaint alleged the policies were sold, confiscated or converted during and after the war. Claims The complaint alleged violations of international law, plundering of private property, crimes against humanity, breach of contract, unjust enrichment, conversion, breach of fiduciary duty, bad faith and conspiracy. In October 2000, plaintiffs voluntarily dismissed most of the defendants in order to participate in the settlement reached between the German and U.S. governments, known as the Berlin Agreements. The plaintiffs had to dismiss claims against German companies as defined in the Berlin Agreements to participate in the settlement. The plaintiffs did not dismiss claims against three defendants they contend are not German companies under the Berlin Agreements: Winterthur Leben, "Zurich" Versicherungs-Gesellschaft and Basler, Versicherungs-Gesellschaft. All three defendants were incorporated in Switzerland. The insurers have moved to dismiss the claims against them, arguing they are German companies under the Berlin Agreements. Fair Reading U.S. Judge Michael B. Mukasey of the Southern District of New York ruled a fair reading of the Berlin Agreements and relevant documents does not support the insurers' argument that they are German companies and should be dismissed. "The Swiss defendants argue that 'it is a matter of common sense that at least some of [their] wrongdoing' must be connected with the activities of their German branch offices. They contend for that reason that they qualify as German companies and 'should be included in plaintiffs' voluntary dismissal' of their suit. The Swiss defendants might be correct that 'at least some of [their] wrongdoing' is connected to the activities of their German branch offices. However, that would qualify them as German companies only with respect to that wrongdoing. It would not, as Swiss defendants appear to suggest, qualify them as German companies with respect to all of the plaintiffs' claims against them in this case," the judge held. The complaint states sufficient facts to warrant claims against the Swiss insurers, the judge held. Additionally, the judge said plaintiffs state they intend to file an amended complaint to allege more explicitly conduct engaged in by defendants that is independent of their German branches. "If there is discovery, and plaintiffs cannot produce evidence substantiating their claims that Swiss defendants committed unlawful acts independent of their German branch offices, then Swiss defendants can move for summary judgment with respect to those claims," the judge held. Counsel Plaintiffs are represented by Melvyn I. Weiss and Deborah M. Sturman of Milberg, Weiss, Bershad, Hynes & Lerach in New York; Michael D. Hausfeld and Paul T. Gallagher of Cohen, Milstein, Hausfeld & Toll in Washington, D.C.; Martin Mendelsohn and Verner Lipfert in Washington, D.C.; Irwin Levin and Richard Shevits of Cohen & Malad in Indianapolis; Burt Neuborne of New York; Morris A. Ratner, Robert L. Leiff, Elizabeth J. Cabraser and Caryn Becker of Lieff, Cabraser, Heimann & Bernstein in New York; Joseph D. Ament and Michael B. Hyman of Much, Shelist, Freed, Deneberg, Ament & Rubenstein in Chicago; Barry A. Fisher of Fleishman, Fisher & Moest in Los Angeles; and Arnold Levin, Craig D. Ginsburg and Daniel Levin of Levin, Fishbein, Sedran & Berman in Philadelphia. William M. Brodsky and Susan R. Kaplan of Baden, Kramer, Huffman & Brodsky in New York represent Winterthur Leben. Robert M. Raive and David D. Howe of Gilbert, Segall & Young in New York represent Zurich Versicherungs-Gesellschaft. James M. Davis and Anita Tucker Smith of New York represent Basler, Versicherungs-Gesellschaft. (Mealey's Litigation Report: Emerging Insurance Disputes, January 9, 2001) KANSAS POLICE: Attys. Seek Cert in Suit over Seized Assets in Drug Cases ------------------------------------------------------------------------ A Clay County judge's ruling has led to a class action lawsuit filed on behalf of hundreds of people whose property may have been seized illegally in drug cases. If a Jackson County judge certifies the lawsuit as a class action, the attorney who filed it said he will file similar actions in other counties. The Jackson County lawsuit names the Kansas City Police Department and the Missouri State Highway Patrol as defendants. It cites one case involving a $ 38,000 seizure. In the Clay County ruling earlier this month, a judge ordered the Kansas City police to return more than $34,000 plus interest to an imprisoned drug felon, Vincent Karpierz. Kansas City police violated the law when they seized Karpierz's money and gave it to the federal Drug Enforcement Administration instead of going through state court, an appellate court has ruled. The DEA returned $21,000 to the police department. Kansas City police officials said a few days ago that they planned to appeal the Karpierz decision. For years police in Missouri have worked with the federal government to keep forfeited funds. If the money were forfeited under state law, it would usually go to fund public education instead of back to police departments. If approved by a judge, the Jackson County lawsuit will cover similar cases that occurred in the last five years, said James McMullin, the attorney in the Karpierz lawsuit and one of the two lawyers who filed the prospective class action. U.S. Department of Justice statistics show that over five years, it has returned more than $31 million to law enforcement in Missouri. (The Associated Press State & Local Wire, January 29, 2001) KEEBLER, FLOWERS: Shareholders Sue in DE and IL Seeking to Enjoin Merger ------------------------------------------------------------------------ On July 19, 2000 and July 25, 2000, substantially identical purported class action lawsuits (C.A. Nos. 18159NC (Behrens) and 18175NC (Lewis)) challenging the proposed sale of Keebler by Flowers were filed in the Delaware Court of Chancery by purported shareholders of Keebler against Flowers, Keebler and the directors of Keebler. On January 10, 2001, the plaintiffs in both of these actions filed a notice and order of dismissal to dismiss the cases without prejudice. On January 5, 2001, a purported class action lawsuit (No. 01CH0273 (Behrens and Lewis)) challenging the proposed sale of Keebler was filed in the Circuit Court of Cook County, Illinois by purported stockholders of Keebler against Keebler, Flowers, Kellogg and the following directors of Keebler: Robert P. Crozer, Sam K. Reed, Amos R. McMullian, Jimmy M. Woodward, G. Anthony Campbell, C. Martin Wood III, Franklin L. Burke, Melvin T. Stith, Johnston C. Adams, Jr. and Wayne H. Pace. The complaint alleges, among other things, that Keebler and its directors breached their fiduciary duties to the Keebler public stockholders by failing to act in an informed manner in approving the sale of Keebler, and that Kellogg and Flowers aided and abetted these breaches by working together to exclude rival bidders and by excluding any meaningful participation by the Keebler special committee. The complaint seeks, among other things, that the merger be enjoined, or, if consummated, rescinded and that the defendants pay unspecified monetary damages as well as unspecified costs and attorneys� fees. Both Keebler and Flowers believe that the lawsuit is without merit and intend to defend this matter vigorously. MAIL BOXES: IL Ct Certifies Class Challenging Delivery Charges -------------------------------------------------------------- The Illinois Circuit Court certified a class of customers who alleged that a mailbox store violated the state Consumer Fraud Act by not disclosing hidden delivery charges. (Ho, et al. v. Mail Boxes, Etc., USA Inc., No. 99CH03657 (Ill. Cir. Ct. 10/23/00).) Allan Ho filed a class action against Mail Boxes, Etc., USA Inc. alleging violations of the state Consumer Fraud Act, breach of contract and unjust enrichment. Ho claimed the defendants "engaged in unfair and/or deceptive acts and practices by hiding additional charges under the category 'stamp sales.'" Ho claimed he paid 71.25 in postage under the "stamp sales," but the actual postage affixed to his package was 38.60. Ho claimed class members overpaid for delivery of packages. Ho alleged that "[h]ad they known of the hidden charges, they would have made an informed decision whether to pay them, and had an option of taking their packages to the Post Office themselves, thus avoiding the hidden 'stamp sales' charges." The Circuit Court for Cook County certified two classes and appointed Ho as class representative. Judge Bernetta D. Bush ordered that the class shall initially include only Illinois residents but stated she may later expand the class. Dmitry N. Feofanov of Brooks, Adams and Tarulis in Napeville, Ill., represent the class. Samuel Issacson of Katten, Muchin & Zavis in Chicago represent Mail Boxes, Etc. (Consumer Financial Services Law Report, January 22, 2001) MICROSOFT CORP: Filing Urges Ap. Ct. to Reverse Order to Split Company ---------------------------------------------------------------------- Microsoft, in its last major filing before oral arguments next month, again urged a federal appeals court Monday to reverse a lower court's order to split the software giant into two companies to remedy antitrust violations. In a 75-page filing, Microsoft MSFT said the government's appeal brief, which was filed on Jan. 12, admitted that Microsoft's decision to include Internet technologies, such as the Internet Explorer browser, benefited consumers and was pro-competitive. Read Microsoft brief. The company also reasserted that it didn't stop rival Netscape, now a part of AOL Time Warner AOL, from distributing its browser to consumers. "We believe our appeal presents a strong case for reversal of the district court judgment," said Microsoft spokesman Jim Cullinan. Bundled up Microsoft's decision to bundle its Internet Explorer browser with Windows is at the heart of the government case against the company. The federal government and 19 states successfully argued in a 78-day trial that Microsoft used the monopoly power of its Windows operating system to sideline a rival browser made by Netscape. U.S. District Court Judge Thomas Penfield Jackson found that Microsoft illegally bullied and cajoled its business partners and others to not distribute the Netscape browser. Last June, Jackson ordered Microsoft split into a software company and an operating systems company and set significant restrictions on the firm's business conduct. Jackson, however, stayed the remedy pending the outcome of Microsoft's appeal. Microsoft also reasserted its claims that Jackson's contact with reporters during and after the trial brought his impartiality into question. In Monday's brief, the company cited remarks by Jackson quoted in a new book by author Ken Auletta. Microsoft Alleges bias Microsoft noted that in one passage of the book, "World War 3.0: Microsoft and its Enemies," Jackson compared the "obstinacy" of Microsoft executives to the attitudes of four members of a street gang convicted in a racketeering, drug dealing and murder trial that the judge had presided over five years earlier. The gang members "had maintained that they had done nothing wrong, that the whole case was a conspiracy by the white power structure to destroy them. I am now under no illusions that miscreants will realize that other parts of society will view them that way," Jackson is quoted as saying. Microsoft also argued that Auletta's book and other articles indicated that Jackson received information from reporters during the course of the trial that may have contributed towards bias. "The district judge's extrajudicial comments here created a(n) ... appearance of partiality, if not demonstrating actual prejudice or bias," Microsoft's lawyers wrote. The company contends that a new judge should preside if any part of the case is remanded back to the district court level. The government, in its Jan. 12 reply to Microsoft's initial appellate brief, argued that Jackson's findings of fact were supported by the trial record and that the breakup was an appropriate remedy based on the court's "factual findings and the circumstances before it." Read the government brief. The government argued that Microsoft's initial brief merely offered a "sanitized" description of its conduct and that the company isn't entitled to re-argue the facts of the case. Appeals courts traditionally give great deference to lower courts' findings of fact, focusing their inquiries on the legal conclusions. Jackson took the rare step of bifurcating his judgment, issuing findings of fact in November 2000 followed by his legal conclusions more than six months later after settlement talks between the government and the company broke down. Oral arguments before the appeals court are set for Feb. 26 and 27. (CBS.MarketWatch.com) OKALOOSA, FL: Title IX Suit Filed Alleging Gender-Equity Law Violation ---------------------------------------------------------------------- A class-action lawsuit was filed against the Okaloosa County (Fla.) School District for violating Title IX gender-equity laws. The suit, filed in U.S. District Court in Pensacola, claims the district failed to provide its female athletes equal opportunities in equipment and supplies, schedules and practice times, travel, coaching, locker rooms, facilities and publicity. Superintendent Don Gaetz said he was attempting to correct any Title IX violations before the lawsuit was filed and pledged to remedy them as soon as possible. Attorney Sam Schiller, who has filed nearly 20 Title IX lawsuits throughout the country and is representing three north Florida parents, said most cases are settled before they reach the litigation stage. Schiller, an Oklahoma lawyer, said he hopes an agreement can be reached in this case. "All we're asking is for it to be fixed," Schiller said. "We're living in the 21st century now. It's not a particularly radical idea that we would treat our girls like our boys." (Your School and the Law, January 25, 2001) ORBITAL SCIENCES: Goodkind Labaton Announces Certification of VA Lawsuit ------------------------------------------------------------------------ The following was released January 26 by Goodkind Labaton Rudoff & Sucharow LLP: IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION SUMMARY NOTICE OF PENDENCY AND SETTLEMENT OF CLASS ACTION To: ALL PERSONS WHO PURCHASED THE COMMON STOCK OR CALL OPTIONS OF ORBITAL SCIENCES CORPORATION ("ORBITAL") DURING THE PERIOD JULY 22, 1997 THROUGH OCTOBER 29, 1999 INCLUSIVE. PLEASE READ THIS NOTICE CAREFULLY. YOUR RIGHTS MAY BE AFFECTED BY A CLASS ACTION LAWSUIT PENDING IN THIS COURT. This Summary Notice of Pendency and Settlement of Class Action is given pursuant to Rule 23 of the Federal Rules of Civil Procedure and an Order of the United States District Court for the Eastern District of Virginia (the "Court"), dated December 22, 2000. The purpose of this Notice is to inform you (a) that this Action has been certified as a class action on behalf of purchasers of Orbital Securities described above (the "Class") and (b) of the proposed settlement that has been reached in this Action on behalf of the Class against KPMG LLP ("KPMG"). The proposed settlement (the "KPMG Settlement") resolves all claims which were asserted or could have been asserted against KPMG and related entities (collectively the "KPMG Released Parties") in this Action. The settlement consideration consists of $1,000,000 in cash which is to be distributed as described more fully in the detailed KPMG Notice of Pendency and Settlement of Class Action previously mailed to Class members. A separate settlement was previously entered into in the related action brought on behalf of the Class, In re Orbital Sciences Corporation Securities Litigation (the "Orbital Settlement") against Orbital and certain of its officers. A hearing on the Orbital Settlement is scheduled for December 13, 2000. The hearing on the KPMG Settlement will be held by the Court on March 30, 2001 at 10:00 a.m., in the United States District Court for the Eastern District of Virginia, 401 Courthouse Square, Alexandria, Virginia 22314. The purpose of the hearing will be, among other things: (1) to determine whether the proposed KPMG settlement is fair, reasonable and adequate and should be approved and, whether this Class Action therefore should be dismissed on the merits and with prejudice and without costs; and (2) to consider the reasonableness of an application by Plaintiffs' Counsel for the payment of attorneys' fees and reimbursement of expenses incurred in prosecuting the Action. If you bought Orbital common stock or call options between July 22, 1997 and October 29, 1999, inclusive, you are a Class member. Your rights against the KPMG Released Parties will be affected by the KPMG Settlement. As a Class Member, you may file a Proof of Claim to share in the KPMG Settlement, request exclusion from the Class, or object to the KPMG Settlement, all as described in the Notice of KPMG Settlement of Class Action. If you have not already received a copy of the KPMG Notice of Pendency and Settlement of Class Action, or a copy of the Proof of Claim, you may obtain such information by contacting: In re Orbital Sciences Corporation Securities Litigation c/o Complete Claim Solutions, Inc. P.O. Box 24608 West Palm Beach, Florida 33416 PLEASE DO NOT CONTACT THE COURT OR THE CLERK'S OFFICE FOR INFORMATION. DATED: December 22, 2000 BY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA SOURCE Goodkind Labaton Rudoff & Sucharow LLP CONTACT: Ginny Ponzini, Complete Claim Solutions, 561-651-7777, for Goodkind Labaton Rudoff & Sucharow LLP PAINT MANUFACTURERS: Oakland and San Francisco Join Suit over Hazards --------------------------------------------------------------------- Partially emboldened by a favorable December court ruling, the two cities run by the Mayors Brown -- Oakland and San Francisco -- announced that they have joined Santa Clara County's fraud suit against paint manufacturers. The suit, which was filed in March 2000, alleges that the lead paint industry has known about the hazards of some of its paint products for nearly a century. The paint companies say the statute of limitations has run out for such suits and that the litigation is a way for government agencies to shake down paint manufactures -- which voluntarily discontinued lead paint in 1955 - - for cash. On Dec. 8, Santa Clara County Superior Court Judge Gregory Ward ruled that the complaint should not be dismissed on the statute of limitations basis. Ward also overruled arguments that the government services doctrine required local agencies to pick up the tab for the effects of lead paint use, such as abatement and public notification. "Basically we were allowed to go forward," said Santa Clara County counsel Ann Ravel. That court victory helped convince city attorney John Russo to get involved. "It's my impression that that was an important hurdle," said Russo. "Now that they have survived the initial motions, we can get into discovery. There is little doubt about what has been revealed -- that the companies were not up-front." Joining the fray earlier this month were the city and county of San Francisco, San Francisco Housing Authority the San Francisco Unified School District, Oakland, the Oakland redevelopment agency, the Oakland Housing Authority, and the Oakland Unified School District. The suit falls in line with Russo's effort to boost the city's legal profile on groundbreaking litigation. "Oakland is and remains on the cutting edge legally," said the city attorney, referring to the city's involvement with anti-tobacco company litigation. "I want us to be more assertive with things where the public was bearing the burden of environmental issues." According to figures provided by Oakland, there are an estimated 7,900 children in the city who suffer from lead poisoning and 84,000 Oakland homes built before 1950 may have been painted with lead-based paint. As a co-plaintiff in what Santa Clara County hopes will become a class action, Oakland will also shoulder any court-imposed fees if it loses the suit, said Karen Boyd, spokeswoman for the city attorney's office. Burlingame's Cotchett, Pitre & Simon has helped Santa Clara County litigate the suit and has agreed to take 17 percent of any settlement or judgment. An attorney with a South Bay firm who represents NL Industries, one of the defendants, downplayed the December ruling and the growing lists of plaintiffs. "There are many weaknesses in the case," said James McManis, managing partner of San Jose's McManis, Faulkner & Morgan. The government agencies still must overcome weaknesses in the suit related to the statute of limitations, the allegation of fraud and causation, he said. "The demurrer, which was the subject of the (December) procedure ... doesn't look at evidence," McManis said. "Any clever lawyer -- especially ones as wily as Cotchett lawyers -- can write a complaint." (The Recorder, January 23, 2001) PINOCHET: Former Chile Dictator Indicted for Political Killings --------------------------------------------------------------- A federal judge reinstated homicide and kidnapping charges against Gen. Augusto Pinochet on Monday, ordering the former dictator held under house arrest for a series of political killings under his 17-year military rule, a lawyer said. Judge Juan Guzman, whose earlier indictment of Pinochet was struck down on appeal last month, reinstated charges involving dozens of deaths at the outset of military rule, according to Hugo Gutierrez, a lawyer close to the case. For months, the judge has been investigating the ailing Pinochet in connection with the so-called Caravan of Death, a military squadron that hopscotched Chile by helicopter, executing 75 political prisoners in the early weeks of Pinochet's 1973-90 dictatorship. ''We are very pleased to know Pinochet has been ordered to face the courts for these homicides,'' said Gutierrez, adding that the judge's decision included a house arrest order. Gutierrez is one of the main lawyers representing families of victims from the Caravan of Death, who along with other plaintiffs have filed dozens of criminal suits against Pinochet. Guzman had no immediate comment on the decision. Under Chilean law, indictments can be appealed to higher courts. Pinochet, 85, was resting at his summer home in Los Boldos outside the capital. Neither he nor his family had any comment. He was released Saturday from a military hospital where he had been treated for what doctors described as a brief interruption of the blood flow to his brain. The symptoms that forced Pinochet's aides to rush him to the hospital a strong headache, a brief loss of consciousness and a moderate loss of strength in the left side of his body later disappeared, according to a hospital statement. Pinochet has been hospitalized repeatedly in recent months for a variety of ailments, and four days of medical tests ordered by Guzman this month showed he suffers from ''moderate dementia.'' Guzman's previous indictment against Pinochet was shot down on appeal because he had not conducted a required interrogation of the defendant. The new indictment came after Guzman formally questioned the right-wing general earlier this week. In that interrogation, Pinochet said regional military commanders were responsible for the killings of the ''Caravan of Death,'' not him. The families of the victims have filed dozens of criminal complaints against Pinochet arising from that case, in which prisoners were taken from jails and shot, stabbed and tortured to death. ''I am not responsible. I am not a criminal,'' Pinochet told Guzman, according to the published text of the legal interrogation. Last week, retired Gen. Joaquin Lagos told state television that Pinochet was indeed responsible because the chief of the caravan, Gen. Sergio Arellano, was acting as a direct representative of Pinochet at the time of the deaths. Lagos, who was commander of the northern military garrison where most of the executions occurred, said that when he confronted Arellano, he produced a document ''showing that Pinochet had appointed him as his personal delegate.'' (AP Worldstream, January 29, 2001) PRE-PAID LEGAL: Kirby McInerney Announces Securities Lawsuit in Oklahoma ------------------------------------------------------------------------ Kirby McInerney & Squire, LLP announces that the firm has been retained to commence a class action lawsuit in the United States District Court for the Eastern District of Oklahoma on behalf of all purchasers of Pre-Paid Legal Services (NYSE: PPD) securities between February 7, 2000 and January 16, 2001 (the "Class Period"). The complaint will charge Pre-Paid Legal Services and certain of its officers and directors with violations of sections 10(b) and 20(a) of the Securities Act of 1934. The complaint will allege that defendants, throughout the Class Period, issued materially false and misleading information concerning Pre-Paid Legal Services' financial condition and results (as described below). Due to the accounting methods used by defendants during the Class Period, defendants reported results that inflated Pre-Paid Legal Services' assets, earnings, and growth, and consequently its stock price. When, on January 16, 2001, critiques of defendants' accounting emerged in the press, Pre-Paid Legal's stock - which during the Class Period had traded above $48 per share - fell to close below $21 per share. Specifically, the complaint alleges that, throughout the Class Period, defendants caused Pre-Paid Legal Services to record -- as assets -- the lump-sum, up-front commission payments it made to its sales force. The payment of such commissions allowed the defendants to recruit a fast-growing, multilevel marketing force and consequently to accelerate the company's revenue growth. Defendants' accounting for such commissions allowed defendants to report large increases in the company's salesforce and assets. However, defendants' accounting for this practice, the complaint will allege, presented the public with a materially false and misleading view of the company's financial condition. By recording certain expenses as assets, Pre-Paid Legal's reported earnings were artificially inflated. By failing to capitalize these commission expenses in a timely and accurate fashion, and by failing to set aside sufficient allowances for unrecoverable commission advances (so as to properly account for customer cancellations and salesforce withdrawals), Pre-Paid 's financial condition and growth were misleadingly inflated. The complaint will allege that, as a result of the foregoing, the price of Pre-Paid Legal Services' stock was artificially inflated during the Class Period, and that investors who purchased Pre-Paid Legal Services shares were damaged thereby. The action will seek to compensate investors for their losses. Contact: Kirby McInerney & Squire, LLP Ira Press, Esq. / Orie Braun, 212/317-2300 Tollfree: 888/529-4787 obraun@kmslaw.com PRE-PAID LEGAL: Schiffrin & Barroway Announces Securities Suit in OK -------------------------------------------------------------------- The law firm of Schiffrin & Barroway, LLP announced on January 26, 2001 that a class action lawsuit was filed in the United States District Court for the Western District of Oklahoma on behalf of all purchasers of the common stock of Pre-Paid Legal Services, Inc. (NYSE: PPD) from April 19, 1999 through January 16, 2001, inclusive (the "Class Period"). The complaint charges Pre-Paid Legal Services and certain of its officers and directors with violations of Sections 10 and 20(a) of the Securities Exchange Act of 1934 for improper accounting practices and materially false and misleading statements in its public statements and filings with the SEC. Pre-Paid underwrites and markets legal service plans which provide for or reimburse a portion of legal fees incurred by members in connection with specified matters. The Company's legal expense plans provide for or reimburse a portion of the legal fees associated with a variety of legal services in a manner similar to medical reimbursement plans. Pre-Paid utilized a multi- level marketing system to sell its policies. The complaint alleges that during the Class Period, Pre-Paid continually announced favorable earnings and growth in the number of "associates" who sold its policies, when, in fact, many of its associates were no longer generating new business and were not repaying advances from the Company and the Company's earnings were manipulated and overstated by improperly capitalizing commission expenses and failing to write off uncollectible advances. As a result, Pre-Paid's stock traded at inflated levels during the Class Period, increasing to as high as $48.75 per share. On 1/17/01, The Wall Street Journal published a story on Pre-Paid's accounting which began to expose the scheme. Upon these disclosures, Pre-Paid stock dropped to $20 per share. Contact: Marc A. Topaz, Esq. or Robert B. Weiser, Esq. of Schiffrin & Barroway, LLP, 888-299-7706 or 610-667-7706, or info@sbclasslaw.com REZULIN: Judge Sets Conference Jan. 30 to Iron out Plaintiffs' Conccerns ------------------------------------------------------------------------ The Rezulin MDL judge has ordered a conference for Jan. 30 to iron out the plaintiffs' executive committee's concerns that the judge's handling of class action proceedings in the MDL would create factual and jurisdictional problems (In Re: Rezulin Product Liability Litigation, MDL No. 1348, S.D. N.Y.). The committee raised several possible problems with the order of U.S. Judge Lewis A. Kaplan of the Southern District of New York for a consolidated amended complaint, including the Second Circuit's "disapproving the imposition of a consolidated amended complaint to join disparate and distinct substantive claims or parties." Master Class Action The committee on Dec. 15 filed what it styled a master class action complaint. Regina LaPolla of Milberg Weiss Bershad Hynes & Lerach explained in an accompanying letter to Judge Kaplan that the committee had done so "to clarify that this complaint is not extinguishing the claims and allegations of the previously filed class action complaints." The judge responded in an order handwritten on LaPolla's letter that, "The Court directed the filing of a single consolidated class complaint. This necessarily requires extinguishment of the previous complaints. Plaintiffs shall comply forthwith." The committee filed the amended complaint late last month, but filed a motion to coordinate class action proceedings at the same time. The committee's motion proposes that Judge Kaplan, as did U.S. Senior Judge Louis C. Bechtle in the diet drug litigation, allow plaintiffs' counsel who believed that a claim or plaintiff should have been considered in the class motion the opportunity to concurrently file a motion for class certification "because some counsel or their clients may believe that they or their claims would be disenfranchised by our consolidated amended complaint." History Of Rezulin The complaint reviews the history of Rezulin, including the allegation that both Warner-Lambert and executives from the FDA had withheld from the agency's Endocrinologic and Metabolic Drugs Advisory Committee important information about the drug. The complaint also asserts the relatively untested issue of heart toxicity. It cites a rat study in which "every rat receiving Rezulin showed adverse, detrimental changes in heart tissue," and 56 FDA-listed cases of heart failure among people taking Rezulin. According to the complaint, questions of law and fact common to the class include: * Whether the drug was dangerously defective. * Whether its use causes injury and whether class members are at increased risk of developing liver illness. * Whether Warner-Lambert continued to manufacture and market Rezulin after learning of its allegedly dangerous properties. * Whether the company "falsely and fraudulently" misrepresented in its marketing and promotional materials Rezulin's safety and efficacy. Causes Of Action The complaint asserts negligence, fraud, fraud on the FDA, violation of the New Jersey Products Liability Act (failure to warn, defective design), strict product liability, breach of express and implied warranty, violation of the New Jersey Consumer Fraud Act (knowing concealment, suppression or omission of material facts) and violation of statutory consumer protection acts. It seeks medical monitoring and injunctive and equitable relief, disgorgement of unjust enrichment, creation of a court-supervised trust fund to finance medical monitoring and compensatory, statutory and punitive damages. The plaintiffs' executive committee consists of Charles A. Mathis Jr. of Middleton, Mathis, Adams & Tate in Atlanta, Arnold Levin of Levin, Fishbein, Sedran & Berman in Philadelphia, Ramon Rossi Lopez of Lopez, Hodes, Restaino, Milman, Skikos & Polos in Newport Beach, Calif., and Melvyn I. Weiss of Milberg, Weiss, Bershad, Hynes & Lerach in New York. Warner-Lambert's national defense is handled by David Klingsberg, Alan F. Goot, Jay Mayesh, Glenn Pogust and Liza I. Karsai of Kaye, Scholer, Fierman, Hayes & Handler in New York. (Mealey's Litigation Report: Diabetes Drugs, January, 2001) TOBACCO LITIGATION: CA Law Firms Cash In on Settlement with Bond Issues ----------------------------------------------------------------------- In May 1999, representatives from some of the nation's best-known anti-tobacco law firms, including Robert Lieff from San Francisco, spent an entire day in a conference room in Rockefeller Center's Rainbow Room, watching a dog-and-pony show put on by investment bankers from half a dozen firms. The lawyers were looking for a banking firm to help them create an unusual bond from some of the $ 11 billion in legal fees that the law firms are receiving over the next two decades or so as part of the landmark 1998 settlement with the large tobacco companies over health issues. The lawyers would get a lump sum from investors up front in exchange for giving up the long-term stream of income. "Somebody said, 'This is the deal of the decade,'" Lieff remembered. Now, nearly two years later, the first of these tobacco-fee bond deals appears ready to be marketed to investors, albeit on a smaller scale than envisioned that day. The behind-the-scenes lobbying that led to the deal, which will be marketed within a couple of weeks, gives a glimpse into how the Wall Street players instantly move in to get a piece of the action when there's big money being doled out. Most people outside the modern world of high finance might think that an investment involves owning a piece of a real company through a stock, or loaning money to real companies through a bond. But over the past 30 years, Wall Street has found a way to create an entirely new line of "asset-backed" securities that are bought and sold among the wealthiest investors just like stocks and bonds. Now almost anything can be turned into an investment: credit card debt, mortgages, state highway funds, even the royalties paid to singers like David Bowie or James Brown. From Wall Street's point of view, it's a way to make extra money. "These oddball securitizations are easily absorbed by the investor community and are an attractive fee engine for investment bankers," said John Macauley, vice president with consultants A.T. Kearney. The tobacco-fee bond is the first time that legal fees have been turned into a bond and is being closely watched by other lawyers. Over the next few weeks, investment bankers at Deutsche Bank plan to invite some of the largest institutions in the country to invest in a $ 300 million bond issue backed up by fees owed to about 11 of the law firms. This idea of packaging up future income and selling it off as a bond started in the 1970s. At that time, banks, which were still the main lenders in the country, were stuck with bad agricultural loans and tightening Federal Reserve loan requirements. To generate money to lend, the banks bundled up home loans they'd already made and sold them as bonds to investors, who basically bought the right to get the loan payments paid by a group of home borrowers. These mortgage-backed securities expanded the amount of money available for mortgages and proved to be "a much cheaper way of lending," said Macauley. Today, most kinds of loans, including car loans and credit card debt, are packaged and sold to investors -- part of what keeps the wheels of the country's debt-happy society turning. "Anybody who is paying a credit card payment, a portion of their interest payment is being paid to investors in a credit-card-backed security," Macauley said. The tobacco-fee bond issue is simply what one investor calls "another animal out of the ark" for Wall Street, but it makes some wonder whether these deals have any real purpose beyond making money for the investment bankers and the lawyers. "When we securitize auto loans, it helps lenders make more loans" and car dealers can sell more cars, noted one bond expert familiar with but not involved in this bond deal. "What's this doing? Making more lawyers? This is not something we need." Whatever the social value, rarely has such a vast sum of money been at stake. Under the 1998 settlement, four tobacco companies agreed to pay state and local governments nationwide an estimated $ 246 billion, over an estimated 25 years or so, to settle claims related to states' expenditures on smokers' health problems. The tobacco companies also agreed, in separate deals with the law firms, to pay more than $ 11 billion, mostly in long-term payouts, to more than 100 firms including several leading plaintiffs' firms: Scruggs, Millette, Bozeman & Dent, the firm of Mississippi's famed asbestos and tobacco foe Richard "Dickie" Scruggs; South Carolina-based Ness, Motley, Loadholt, Richardson & Poole; Milberg Weiss Bershad Hynes & Lerach of New York, and San Francisco's Lieff, Cabraser, Heimann & Bernstein. The lawyers, accustomed to getting their giant class-action fees fairly soon after the decision, were going to have to wait two decades or more to get the money. They also faced the risk that the tobacco payments could stop in the event of a tobacco company bankruptcy or a future court order or government decision nullifying the big tobacco settlement. By turning their fees into a bond, the law firms would get only a fraction of the eventual total now -- generally about 30 percent to 40 percent -- but could put it in the bank immediately. Basically, investors would make the payment to the law firms up front and then, over the next five to 12 years, the investors would collect the stream of tobacco fees instead of the law firms. These investors, mostly insurance companies or pension funds, will buy the bonds in a private placement not available to the average public investor. They will get a yield a tad more than they could get with plain-vanilla corporate bonds with similar ratings, perhaps in the range of 8 percent a year, some say. The bankers stand to make around half a percent of the bond deal's value, or perhaps $ 1.5 million, in fees, according to people familiar with these types of deals. Deutsche Banc AG's Deutsche Banc Alex. Brown unit declined to comment on the deal or confirm its details. Preliminarily, Moody's has given the bond a favorable double-A3 rating, and Fitch Inc. has given it an A rating, because they deem the risk of the tobacco companies going bankrupt slim. The bond deal has not appealed to the biggest law firms involved in the tobacco litigation. They complain that the proposed payout is insufficient, that the deal doesn't shift enough risk to the investors and that the tax implications are overly complex. "It just didn't seem worth it," said Pat Coughlin, a lawyer with Milberg Weiss. But some smaller firms have gone for it, partly to free their fortunes from being linked long-term to the tobacco companies. "It's like all of a sudden someone has put an asset in your portfolio, all invested in tobacco," said Ronald Borod, an investment attorney whose law firm, Brown, Rudnick, Freed & Gesmer, was a minor player in the litigation but came up with the bond idea in the first place. "Anyone who is sane is going to want to diversify his portfolio." This kind of arrangement closely mimics what some state and local governments are doing with their portion of the $ 246 billion settlement. Since late 1999, about a dozen public entities, including parts of Alabama, New York, Alaska and Puerto Rico have turned about $ 2.3 billion that they expect to get from the tobacco firms into bonds, according to Bernard Fischer, an analyst at the rating service Standard & Poor's. The state of California has decided against turning its roughly $ 250 million in annual payments into a bond. Large California counties like Los Angeles, Orange, Santa Clara, and San Francisco have also rejected bond deals for their share of the windfall, citing an ability to borrow more cheaply on their own or worries about investors. "It starts to shift the burden to our investors" in case the tobacco payments don't last, said Susan Leal, treasurer of San Francisco. However, a group of 20 smaller California counties is considering a tobacco-related bond deal. For many of the small local law firms participating in the current bond deal, it's a chance to take the money and run. "I'm from Collinsville, Alabama -- one stop light," said Jim Nance, an attorney in Melbourne, Fla., whose firm was scheduled to receive $ 200 million in tobacco fees. "I've never seen money like that." Even if he and his firm get only 30 to 40 percent now, he's happy. "That's pretty big income to me." (San Jose Mercury News, January 29, 2001) VA LINUX: Reuben & Novicoff Announces Securities Suit Filed in N.Y. ------------------------------------------------------------------- The law firm of Reuben & Novicoff announces that a class action lawsuit was filed on January 24, 2001, on behalf of purchasers of the securities of VA Linux Systems, Inc. (NASDAQ: LNUX - news) between December 9, 1999 and December 6, 2000, inclusive. A copy of the complaint filed in this action is available from the Court, or can be viewed on Reuben & Novicoff's website at : http://www.rnlaw.com The action, numbered O1 CIV. 0611, is pending in the United States District Court for the Southern District of New York, located at 500 Pearl Street, New York, NY 10007, against defendants Linux, Credit Suisse First Boston Corporation ("Credit Suisse"), Larry M. Augustin and Todd B. Schull. The Complaint alleges violations of the federal securities laws. On December 9, 1999, Linux completed the initial public offering ("IPO") of its common stock. In connection with the Linux IPO, the Company filed a registration statement and prospectus (the "Offering Documents"). The complaint alleges that the Offering Documents were materially false and misleading because, among other reasons, they failed to disclose that Credit Suisse received excessive and undisclosed commissions from certain investors with the understanding that those investors would receive large blocks of shares in Linux's IPO. Contact: Reuben & Novicoff Timothy D. Reuben, Esq., 310/777-1990 tdr@rnlaw.com or Berbay Corp. Kemi Chavez, 818/342-0088 chavez@berbay.com VA LINUX: Stull, Stull Announces Securities Suit Filed in N.Y. -------------------------------------------------------------- The law firm Stull, Stull & Brody gives notice that a class action lawsuit was filed on January 19, 2001, in the United States District Court for the Southern District of New York on behalf all persons who purchased the securities of VA Linux Systems, Inc. (NASDAQ: LNUX) between December 9, 1999 and December 6, 2000, inclusive (the "Class Period"). The complaint alleges violations of Sections 11, 12(a) (2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On December 9, 1999, the Company completed an initial public offering of 4.4 million of its shares of common stock at an offering price of $30 per share (the "Linux IPO"). In connection therewith, Linux filed a registration statement, which incorporated a prospectus (the "Prospectus"), with the SEC. The complaint further alleges that the Prospectus was materially false and misleading because it failed to disclose, among other things, that: (i) Credit Suisse had solicited and received excessive and undisclosed commissions from certain investors in exchange for which Credit Suisse allocated to those investors material portions of the restricted number of Linux shares issued in connection with the Linux IPO; and (ii) Credit Suisse had entered into agreements with customers whereby Credit Suisse agreed to allocate Linux shares to those customers in the Linux IPO in exchange for which the customers agreed to purchase additional Linux shares in the aftermarket at pre-determined prices. As alleged in the complaint, the SEC is investigating underwriting practices in connection with several other initial public offerings, including the Linux offering and the offerings of Ariba Inc. and United Parcel Service, Inc. Contact: Stull, Stull & Brody Tzivia Brody, Esq. 1-800-337-4983, or by e-mail at SSBNY@aol.com, or by fax at 212/490-2022 WAR VICTIMS: Fleas Dumped in China, Doctors Testify in Tokyo Court ------------------------------------------------------------------ Japan's military dumped swarms of infected fleas on China that triggered outbreaks of bubonic plague in the 1940s, two Chinese doctors said Wednesday in the first such testimony. Retreating Japanese forces unleashed fleas tainted with cholera, typhoid, anthrax and bubonic plague in one attack in the eastern Chinese province of Zhejiang, said Qiu Mingxuan, a 70-year-old physician. He said the attacks had killed 50,000 people in six years. ``Japan's germ warfare has left behind problems that still threaten our lives,'' Qiu said at a trial in which about 180 Chinese plaintiffs are demanding compensation and an apology from the Japanese government for the deaths of their relatives. The plaintiffs believe they were killed in biological experiments, vivisections and other acts of brutality carried out by Japan's notorious Unit 731. Qiu said another outbreak could occur any time. In earlier testimony on January 24, Huang Ketai, a 68-year-old bacteriologist, said at least 109 people died of bubonic plague in the last two months of 1940 after Japanese war planes dumped fleas over the city of Ningbo, south of Shanghai. The problem hasn't ended there. A single outbreak requires 50 years of follow-up, a big burden on the city budget, he said. Infected houses, hospitals and other buildings were burned and had to be left untouched for decades. Fears of another outbreak still haunt the city, he said. The dropping of the fleas mixed with wheat by air has been confirmed by the Chinese government and was witnessed by many locals. ``Obviously, the outbreak was deliberately created,'' Huang said. ``It perfectly matches the area and the timing of the Japanese military's wheat dumping.'' Unlike usual outbreaks of bubonic plague, the Ningbo instance occurred in a small area, lasting just 34 days and with only one dead rat found, he said. He said the fleas, a kind not native to the region, were infected with ``plague with artificially intensified toxicity,'' which he added only Unit 731 could do. The lawsuit, filed in 1997, claimed at least 2,100 people were killed in germ-bombings and other biological experiments by the unit and its affiliates. After decades of denial, Japan several years ago acknowledged that Unit 731 existed but has refused to confirm its activity. Huang has led a municipal investigation of the impact of the flea bombings in Ningbo, among several targets of Japan's germ warfare. The trial at the Tokyo District Court was expected to continue for months. Although some Japanese veterans have come forward in recent years and confessed to war crimes, the Japanese government has shied away from making apologies. Japanese textbooks still often present only brief, perfunctory accounts of Japan's aggression in East Asia from the mid-1930s to the war's end in 1945. Chinese victims of Japanese aggression are unable to forget the spread of death. Qiu, the physician, said he still remembers the way his uncle died of bubonic plague and his grandmother of typhoid. ``The incidents affected me tremendously, and that's why I chose the medical profession,'' he said. (AP, January 25, 2001) ZIFF DAVIS: Named in Magazine Price Fixing Federal Lawsuits in New York ----------------------------------------------------------------------- Ziff Davis Media Inc. reveals in its report to the SEC that the company has been named along with 11 other magazine publishing companies in several federal class action price fixing lawsuits brought in late summer and early fall of 2000 in Federal District Court for the Southern District of New York. All of these complaints have since been consolidated. They allege that the magazine publishing companies unlawfully conspired to limit the discounting of magazine subscriptions in violation of the Sherman Act. ********* 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. 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