/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010201.MBX C L A S S A C T I O N R E P O R T E R Thursday, February 1, 2001, Vol. 3, No. 23 Headlines ANDRE AND NICOLE: Judge Dismisses Mobile Home Antitrust Suit ASBESTOS LITIGATION: WR Grace Considers Filing for Chapter 11 Protection BASF CORP: Supreme Court Upholds Class-Action Status of Farmers' Suit CENDANT CORP: 3rd Cir Affirms Extension of Claim Deadline in Prides Suit CINAR CORP: Announces Proceedings in Quebec against Executives COCA-COLA: Black workers would get $1,000 to $150,000 Each in Bias Case GEORGIA DEPT: Illegal Immigrant Files Suit for Driver's License GOODYEAR TIRE: Auto Safety Group Responds to Sealed Brief GUESS? INC: Cauley Geller Announces Securities Lawsuit Filed in CA GUESS?, INC: Charles J. Piven Announces Securities Lawsuit in CA GUESS? INC: Milberg Weiss Files Securities Suit in California GUESS? INC: Schiffrin & Barroway Files Securities Suit in California HEWLETT-PACKARD: Reneges on Pledge for Lifetime Rebates, Retiree Says HMOs: Aetna Posts 65% Drop in Profits, Tries to Settle Patients' Suits INDIANA: Attorney Sues to Ban Punch-Card Ballots in Hoosier State INMATES LITIGATION: Activists Seek Expanded Services for Mentally Ill LESLIE, SPENCE: 3rd Party Defendants in Maritime Asbestos Cases in Ohio LOCKFORMER CO: Judge Refuses to Gag Residents' Lawyers in Spill Case MORGAN STANLEY: Appeals to Sp Ct Application of Unfair Competition Laws QUAKER OATS: N.D. Ill. Denies Summary Judgment in Shareholder Suit REGENTS: Female Employees of Lawrence Livermore Lab Win Class Status SOTHEBY'S, CHRISTIE'S: Federal Judge Dismisses Three Suits on Auctions TAINTED WATER: $50M E Coli Deal Not Inked for Possible Long-Term Effects VANTIVE CORP: Investors Appeal to 9th Cir against Dismissal By CA Ct ********* ANDRE AND NICOLE: Judge Dismisses Mobile Home Antitrust Suit ------------------------------------------------------------ A federal judge dismissed an anti-trust lawsuit against the owners of a St. Albans mobile home park. The suit, brought by Vermont Legal Aid on behalf of 34 plaintiffs, accused Andre and Nicole Lapierre of using their ownership of some of the few vacant lots at the Town & Country Mobile Home Park to charge inflated prices for mobile homes. The class action suit was 3 years in the making was scheduled to last three weeks. But U.S. District Judge William Sessions dismissed the case against the Lapierres and their bank, the Peoples Trust Co. of St. Albans, after a week of testimony. Lawyer Steve Norman had argued that the Lapierres violated Vermont law and the federal anti-trust laws, accusing the couple of an "unlawful tying arrangement." He argued that the Lapierres allowed prospective tenants into the mobile home park only if they bought a mobile home from them, or from an approved dealer. In either case, the price was marked up $12,000 to $15,000. Lawyers from the Lapierres countered that although the couple had marked up the mobile homes, the practice was neither unusual nor illegal. Sessions dismissed the case, saying the plaintiffs failed to show they were overcharged for the mobile homes the Lapierres sold them, and they didn't prepare a credible argument regarding the extent of the Lapierres' "market power." Based on the scarcity of mobile home lots in the area, the plaintiffs argued this "market power" gave the couple the leverage to overcharge their prospective tenants. Although the plaintiffs said they had looked to settle in Franklin and Chittenden counties, their economic expert spoke only to the Lapierres' market power in Franklin County. Norman said he and his clients were disappointed by the dismissal. "We feel we did the best job we could with the evidence we had," he said. "We hope that prospective mobile home park tenants will be educated to be very careful when shopping for homes and to ask a lot of questions." Ted Hobson, lawyer for the mobile home park owners, said, "the Lapierres were the victims of a concerted effort to take over their mobile home park, based on claims and legal theories that never had a factual or legal basis. To the extent the state-funded agencies were part of this, public officials should review the decision that led the state to support this effort." Larry Osgood, a self-described "highly unpaid advocate for mobile home owner rights," attended parts of the trial and regarded its dismissal with sadness. "Mobile home ownership is the last form of private home ownership for the low-income person," he said. "Mobile home owners are treated like third-class citizens." (The Associated Press State & Local Wire, January 31, 2001) ASBESTOS LITIGATION: WR Grace Considers Filing for Chapter 11 Protection ------------------------------------------------------------------------ In a statement, WR Grace, a US chemical and building products group, said it was considering filing for Chapter 11 bankruptcy protection. The company said asbestos litigation had become more complex and more uncertain after lawsuits against it jumped 81 per cent last year. Its problems included potential barriers to crucial credit, spiralling litigation costs and reserves - which precipitated charges and a loss last quarter, according to the Financial Times (London). The report says some experts estimate 171,500 people died between 1967 and 1997 from asbestos-related cancer in the US. Even so, it seemed the problem had slipped from the spotlight - until recently. A wave of bankruptcies and the seemingly endless stream of new claims has revived the issue and intensified the battle over the limits of this litigation. Almost 30 years after litigation first hit asbestos makers and users, many are again sweating over their liability reserves for the mineral that causes lung disease and cancer. Some members of Congress tried to address the asbestos liability problem with two ill-fated bills introduced last year. One proposed a federal claims process with medical criteria limiting claims to those actually sick and a system for quick settlements. Another bill proposed a cap on personal injury lawyers' contingency fees. The second bill planned 2 billion dollars in current and retroactive tax breaks to help companies. According to the Financial Times, the industry hopes President George W. Bush may be more sympathetic than Bill Clinton because of his general belief in tort reform. Mr Bush has suggested one way to keep plaintiffs' attorneys in check would be to require the loser in a lawsuit to pay the winner's legal expenses. However, none of the Washington remedies are likely to succeed in the near term. Mr Bush has pushed tort reform way down his list of proposed solutions, while any sort of asbestos bill would be too politically charged in a tight Congress, the report says. "I don't think Congress will ever touch it," said Barbara Allen, of Arnhold & S. Bleichroeder, a broker. Hundreds of thousands of people each year file asbestos-related lawsuits against companies not yet bankrupt. A recent series of bankruptcies - G-1, Owens-Corning, Armstrong World Industries, Babcock & Wilcox and Pittsburgh Corning - put financial pressure on others still afloat. WR Grace, USG Corp and Federal-Mogul have shored up reserves. Others, such as Owens-Illinois and Georgia-Pacific, are watching warily. All have seen their share prices plummet, the Financial Times (London) reports. So why now the renewed activity? First, asbestosis, a lung disease, and potential cancers have a long latency period. People often do not become sick until decades after working around the material. In addition, recent verdicts have sent settlement amounts skyward, while claims continue to pour in, helped by the internet. Payouts have grown since the Supreme Court struck down class actions for asbestos in 1997. Some add that the recent landmark 240 billion dollars tobacco settlement with a group of states reignited the asbestos issue, the report says. Asbestos is the name for a group of minerals formed in deposits of long silky fibres that shed into microscopic shards. The minerals have been mined and used in North America since 1880, but more extensively from 1940. So widely has asbestos been used in the US that experts say everyone has been exposed to some degree. Litigation volume and dollar claims have surpassed the wildest corporate estimates. Experts still cannot predict fresh claims, the Financial Times says. A Merrill Lynch report estimated recently that companies still have up to Dollars 30bn in liabilities, far more than what they have on hand to pay. Some see claims continuing at least another 50 years. G-1 says it adds 50,000 claims per year and Johns Manville's settlement trust expects 500,000 new claims by mid-century. According to the Financial Times, the litigation is not likely to stop even if companies currently facing the wave lose their struggle. Bankrupt asbestos-related companies typically restructure by setting up a trust, with majority equity in the company, to fund and settle claims. Meanwhile, asbestos continues to be used as an inexpensive building material in much of the developing world. Some forecast at least 1m global deaths from asbestos in the next 30 years. (Financial Times (London), January 31, 2001) BASF CORP: Supreme Court Upholds Class-Action Status of Farmers' Suit --------------------------------------------------------------------- The Minnesota Supreme Court is upholding the class-action status of a federal lawsuit by farmers against BASF Corporation. Minneapolis lawyer Douglas Nill, who filed the lawsuit in December 1997 on behalf of farmers around the country, said the ruling reinstates the case and remands it back to Norman County. Farmers from around the country contend Mount Olive, N.J.-based BASF used bogus marketing practices for its Poast and Poast Plus products, which kill weed grasses. BASF labeled the more expensive Poast for only minor crops in the national agriculture market such as sugarbeets, sunflowers, potatoes, field beans, vegetables and fruits. At the same time, BASF container labeled cheaper Poast Plus for only a few major crops such as soybeans and cotton. The suit accuses BASF of deceiving farmers by selling one herbicide as two separate products, charging a premium for Poast, the one marketed as stronger. Norman County District Court Judge Michael Crocker dismissed the class-action lawsuit in March, ruling that the company had complied with state and federal rules. The three-judge appeals court panel unanimously concluded in November that "the issues of whether BASF's actions rise to the level of fraud or an unconscionable commercial practice ... are issues for a jury to decide." The case was then appealed to the Supreme Court. (The Associated Press State & Local Wire, January 31, 2001) CENDANT CORP: 3rd Cir Affirms Extension of Claim Deadline in Prides Suit ------------------------------------------------------------------------ The District of New Jersey did not err in extending the deadline for filing claims in the $340 million settlement of the Cendant PRIDES securities litigation, ruled the Third Circuit. Circuit Judge Carol Los Mansmann, writing for the panel, concluded that the date change did not impose on the company a settlement other than the one to which it agreed. In re Cendant Corp. PRIDES Litigation, No. 00-5199 (3d Cir., Nov. 22, 2000). The U.S. Court of Appeals for the Third Circuit also affirmed U.S. District Judge William Walls' use of the "excusable neglect" standard in permitting the late claims. In March 1999, the parties presented a proposed settlement agreement between Cendant and those persons who purchased Income or Growth Prides (PRIDES) between Feb. 24, 1998, and April 15, 1998. The settlement resulted from a securities fraud class action alleging that the investment was overvalued. The proposed settlement did not contain any specific dates regarding the deadline for submitting proofs of claim. At the hearing, Judge Walls selected the date of June 18, 1999, and wrote it in by hand. When the settlement administrator permitted late claims, or corrective measures that cured defective claims, Cendant objected to them. The company argued that, under contract law, these deadlines were part of the bargain and the court abused its discretion in changing them. On Oct. 21, 1999, the district court denied Cendant's motion to disallow approximately 200 claims. It also extended the deadline for the submission of proofs of claim from June 18, 1999, to Sept. 7, 1999, and changed the date for the submission of papers to cure certain claims from Aug. 17, 1999, to Sept. 7, Relying on Fed. R. Civ. P. 6(b)(2), the court also incorporated the "excusable neglect" standard. On appeal, the company argued that the rights of late-filing and late-curing class members were extinguished after June 18, 1999, and 20 days following the any notices to cure. Judge Mansmann addressed whether the district court had the power to extend the deadlines, and if the court applied the appropriate standard for accepting the late claims. She found that the dates had not been negotiated by the parties, but rather, had been supplied by the district court in the order approving the settlement. "Though Cendant argues ... the Stipulation document ascribed to the District Court only the ministerial responsibilities of interpreting and enforcing the terms of an ordinary contract, the Stipulation actually places into the District Court's jurisdiction ongoing authority over the Settlement, and with that comes the discretion necessary to exercise jurisdiction," wrote the court. The court concluded that the district court had the authority to change the deadlines, and noted that, in a class action settlement, a court retains special responsibility to see to the administration of justice. Moreover, the court held that under Fed. R. Civ. P. 6(b)(2), the court did not err in modifying the terms of the stipulations using the "excusable neglect" standard. The court interpreted the category broadly to include: the failure of claimants to receive notice, illness, intervening company name changes, other system delays, and circumstances beyond the control of a claimant. The Cendant appellants were represented by Michael Rosenbaum and Carl Greenberg of Budd, Larner, Gross, Rosenbaum, Greenberg & Sade in Short Hills, N.J., and Samuel Kadet of Skadden, Arps, Slate, Meagher & Flom in New York. The PRIDES class members were represented by Roger W. Kirby of Kirby, McInerney & Squire in New York. (Securities Litigation & Regulation Reporter, December 20, 2000) CINAR CORP: Announces Proceedings in Quebec against Executives -------------------------------------------------------------- Troubled film producer Cinar Corp. has sued its former top three executives, including co-founders Ron Weinberg and Micheline Charest, for $ 28.6 million. Cinar announced on January 30 it has begun legal proceedings in Quebec Superior Court against Weinberg and Charest, the husband-and-wife team that started the company but were fired as co-chief executives nearly a year ago. The company is also suing Hasanain Panju, former chief financial officer who was fired in 1999 after auditors discovered millions of dollars in company funds had been invested in offshore accounts without the knowledge of the board of directors. Cinar said it is claiming "the net balance owing by the defendants to Cinar or its subsidiaries in relation to various related-party transactions. Cinar is also claiming an accounting of certain profits and other relief." The value of the suit is roughly equal to money Cinar owes federal and provincial film-funding agencies. The company reached settlements last month with the agencies, agreeing to repay ill-gotten tax credits, fines and interest for a total of $ 27.5 million. The Montreal company had been under investigation by the RCMP for more than a year since it was revealed Cinar fraudulently obtained tax credits for Canadian productions using scripts written by Americans. Last Friday, auditors Ernst and Young quit in a dispute with Cinar management. Managers wanted to issue financial statements to pave the way for interested buyers, but a source told the Montreal Gazette the managers could not guarantee the restated results were free of fraud, illegal activities or related-party transactions. Lawyer Paul Unterberg, representing minority shareholders in a class-action suit against Cinar and its executives, said the fact Weinberg and Charest are still major shareholders "may be a stumbling block for future buyers. Maybe by suing they would help get them out." Charest and Weinberg control 62 per cent of Cinar. Cinar produces a number of animated children's shows including Arthur, Caillou, Wimzie's House and The Busy World of Richard Scarry. (The London Free Press, January 31, 2001) COCA-COLA: Black workers would get $1,000 to $150,000 Each in Bias Case ----------------------------------------------------------------------- Coca-Cola Co. will pay black employees from $ 1,000 to about $ 150,000 as part of its settlement of a race discrimination suit. The figures are in a class notice on settlement terms that Coke mailed to employees. The notice provides eight examples of payments from $ 82.8 million in cash and stock options set aside for compensatory damages and a back-pay fund. The allotments will be based on length of employment, pay, education and any wage disparities that exist between them and their white counterparts. U.S. District Judge Richard W. Story approved the notice on Jan. 16 and told the company to mail it immediately to all African-Americans employed by Coke from April 22, 1995, to June 14, 2000. Class members may elect to take some or all of it in 10-year restricted shares of Coca-Cola stock. The settlement totals $ 192.5 million. It also includes more than $ 20 million in legal fees; an estimated $ 43.5 million to make pay equity adjustments for African-Americans during the next decade; $ 36 million for a "diversity task force"; and $ 10 million to be distributed during the next decade to African-American executives who are promoted and succeed, comparable to an existing bonus plan. No one will receive less than $ 1,000, but there is a cap on damages. The cash award from both funds cannot exceed the lower of two amounts -- either $ 150,000 or three times the class member's annual base salary. Stock options The notice examples do not indicate how much of each back-pay award will be issued as 10-year stock options. But attorneys have agreed on a graduated schedule where employees at grades 10 through 18 must accept from 18% to 48% of their award in options. Employees at high pay grades must accept 53% of the back-pay award in stock options. Options may be exercised at prices ranging from $ 48.87 to $ 65.87, according to the individual's settlement status. Coke's share price on Jan. 18 was $ 57.12. The notice also does not tell each eligible employee and former employee how much he or she individually will receive. That information will come "in due course," the notice said. Meanwhile, those eligible to participate in the settlement have until March 19 to let Coke know whether they intend to accept or opt out of the settlement class and pursue legal action independently. The number of people who opt out is of particular interest to attorneys who negotiated the settlement on behalf of four former Coke employees and who now represent the class. Florida attorney Willie Gary has made it clear he is waiting in the wings to represent Coke employees unhappy with the settlement offer. (The National Law Journal, January 29, 2001) GEORGIA DEPT: Illegal Immigrant Files Suit for Driver's License --------------------------------------------------------------- The debate over whether illegal immigrants should get a driver's license is moving to a Fulton County courtroom. A lawsuit filed by an illegal immigrant against the Georgia Department of Public Safety challenges a state law that says only U.S. citizens and legal residents can get a driver's license. Fifty-four illegal immigrants plan to join the suit, said Christopher Adams, an Athens lawyer who represents them. Advocates say thousands of illegal immigrants a day drive in Georgia and that it makes sense to license them so they can get auto insurance and learn the rules of the road. They say a change would reduce wrecks with uninsured motorists and lower the cost of auto insurance. Opponents say it makes no sense for the state to recognize someone whose presence violates federal law. They say illegal immigrants could use a license to access other government services. Adams sued in Fulton County Superior Court last week on behalf of a 21-year- old woman whose parents brought her here illegally when she was 8. He said she drives occasionally but worries a routine traffic stop could get her deported. The suit says the law keeping illegal immigrants from a license is unconstitutional because it deprives people of a "fundamental right to travel. " Adams wants a judge to let the suit proceed as a class-action suit, which would entitle illegal immigrants across Georgia to a share of any damages that result. Adams is asking for $ 5,000 per plaintiff. Gordy Wright, spokesman for the Department of Public Safety, declined to comment because department lawyers had not yet seen a copy of the suit. Georgia residents must get a license within 30 days of moving here, but illegal immigrants do not meet the legal definition of "resident." Wright said they can drive indefinitely on a valid license from their native country. Donna Locke, coordinator of the Georgia Coalition for Immigration Reform, said her group "will do whatever we can to fight it. It just contributes to the climate of lawlessness. You're giving legitimacy to people who are here illegally." Officials in North Carolina have licensed illegal immigrants for years. Last year, after meetings with Latino leaders, South Carolina changed its policy to license illegal immigrants who have a letter saying they can't get the Social Security number that otherwise would be required. Alabama and Tennessee passed laws in 1996 and 1998, respectively, requiring applicants to have a Social Security number, which most illegal immigrants lack. In Georgia, a four-member panel appointed by Gov. Roy Barnes, known as the Latino Forum, recommended last year that the state license illegal immigrants. Teodoro Maus, Mexican consul general for Georgia and three other states, said he has pressed the issue in private meetings with legislators. (The Atlanta Journal and Constitution, January 31, 2001) (The Calgary Sun, January 31, 2001) GOODYEAR TIRE: Auto Safety Group Responds to Sealed Brief --------------------------------------------------------- The public interest group CARS -- Consumers for Auto Reliability and Safety -- has filed a response in New Jersey state court to a sealed brief submitted by Goodyear Tire & Rubber Co. in a tire defect case. Goodyear wants a protective order on internal documents to remain in force, while CARS contends that the company is merely seeking to "hide evidence." Frankl v. Goodyear Tire & Rubber Co. (Andrews Publications, Inc., December 19, 2000) GUESS? INC: Cauley Geller Announces Securities Lawsuit Filed in CA ------------------------------------------------------------------ The Law Firm of Cauley Geller Bowman & Coates, LLP announced on January 30 that it has filed a class action in the United States District Court for the Central District of California, on behalf of all individuals and institutional investors who purchased the common stock of Guess? Inc. (NYSE:GES) between February 14, 2000 and January 26, 2001, inclusive (the "Class Period"). The Complaint alleges that defendants violated the federal securities laws by making false and misleading statements during the Class Period. Specifically, the complaint charges Guess and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that as Guess' inventory increased during the Class Period, the price of Guess shares fell from the$28-$33 range to the $18-$20 range, and it became obvious to defendants that they could not successfully complete the sale of 4.5 million shares in their planned secondary offering for expected returns of approximately $120 million (or approximately $27 per share). Therefore, according to the complaint, defendants embarked on a campaign to conceal the adverse financial condition of the Company and thereby avoid a complete collapse in the price of Guess shares. On Nov. 9, 2000, after defendants had sold over $2.2 million of their own Guess shares, they revealed that in the 3rdQ fiscal 2000 ("F00") Guess would earn only $0.13 per share compared to analysts' revised estimates of $0.33 per share ($0.45 unrevised), that in the 4thQ F00 the Company would earn only $0.08 per share compared to an estimated of $0.44 per share (unrevised), and for F01 $ 0.95 per share compared to $1.85 per share (unrevised). In addition, and for the first time, defendants also revealed that Guess would record a loss of over $4.7 million related to below cost sales of inventory, and an additional charge of $ 5.4 million to increase reserves for impaired or worthless inventory. As further alleged in the complaint, the Nov. 9, 2000 press release was defendants' attempt to effectuate a "soft landing" (i.e., avoid a complete collapse in Guess stock) and was a precursor of things to come. On Jan. 26, 2001, the Company issued a press release in which it admitted that, throughout the Class Period, it had artificially and improperly inflated its earnings by failing to expense costs or record accruals relating to the value of its substantially impaired inventory. As a result of the Company's accounting improprieties, Guess was forced to restate its financial results for the 1stQ, 2ndQ and 3rdQ of fiscal 2000. Contact: Cauley Geller Bowman & Coates, LLP, Boca Raton Media: Sue Null or Charlie Gastineau 888/551-9944 (Toll Free) or Jackie Addison, 888/551-9944 (Toll Free) E-mail: info@classlawyer.com GUESS?, INC: Charles J. Piven Announces Securities Lawsuit in CA ---------------------------------------------------------------- Law Offices Of Charles J. Piven, P.A. announced on January 31 that a private securities action requesting class action status has been initiated on behalf of purchasers of Guess ?, Inc. common stock during the period between February 14, 2000 through and including November 9, 2000. No class has yet been certified in the above action. Until a class is certified, you are not represented by counsel unless you retain one. If you purchased the stock listed above during the class period, you have certain rights. Contact: Law Offices Of Charles J. Piven, P.A., Baltimore Charles J. Piven, 410/332-0030 pivenlaw1@erols.com GUESS? INC: Milberg Weiss Files Securities Suit in California ------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/guess/)announced on January 30 that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of Guess? Inc. (NYSE:GES) common stock during the period between Feb. 14, 2000 and Jan. 26, 2001 (the "Class Period"). The complaint charges Guess and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that as Guess' inventory increased during the Class Period, the price of Guess shares fell from the $28-$33 range to the$18-$20 range, and it became obvious to defendants that they could not successfully complete the sale of 4.5 million shares in their planned secondary offering for expected returns of approximately $120 million (or approximately $27 per share). Therefore, defendants embarked on a campaign to conceal the adverse financial condition of the Company and thereby avoid a complete collapse in the price of Guess shares. On Nov. 9, 2000, after defendants had sold over $2.2 million of their own Guess shares, they revealed that in the 3rdQ fiscal 2000 ("F00") Guess would earn only $0.13 per share compared to analysts' revised estimates of $0.33 per share ($0.45 unrevised), that in the 4thQ F00 the Company would earn only $0.08 per share compared to an estimated of $0.44 per share (unrevised), and for F01 $ 0.95 per share compared to $1.85 per share (unrevised). In addition, and for the first time, defendants also revealed that Guess would record a loss of over $4.7 million related to below cost sales of inventory, and an additional charge of $ 5.4 million to increase reserves for impaired or worthless inventory. The Nov. 9, 2000 press release was defendants' attempt to effectuate a "soft landing" (i.e., avoid a complete collapse in Guess stock) and was a precursor of things to come. On Jan. 26, 2001, the Company issued a press release in which it admitted that, throughout the Class Period, it had artificially and improperly inflated its earnings by failing to expense costs or record accruals relating to the value of its substantially impaired inventory. As a result of the Company's accounting improprieties, Guess was forced to restate its financial results for the 1stQ, 2ndQ and 3rdQ of fiscal 2000. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach, 800/449-4900 wsl@mwbhl.com GUESS? INC: Schiffrin & Barroway Files Securities Suit in California -------------------------------------------------------------------- The law firm of Schiffrin & Barroway, LLP announced on January 31 that a class action lawsuit was filed in the United States District Court for the Central District of California on behalf of all purchasers of the common stock of Guess?, Inc. (NYSE: GES) from February 14, through January 26, 2001, inclusive (the "Class Period"). The complaint charges Guess? and certain of its officers and directors with issuing false and misleading statements concerning the Company's business and financial condition. Specifically, the complaint alleges that as Guess' inventory increased during the Class Period, the price of Guess shares fell from $28-$33 per share to $18-$20 per share. As a result, defendants realized that they could not successfully complete the sale of 4.5 million shares in their planned secondary offering for expected returns of approximately $120 million (or approximately $27 per share). The complaint further alleges that defendants attempted to conceal the adverse financial condition of the Company and thereby avoid a complete collapse in the price of its shares. On November 9, 2000, after defendants had sold over $2.2 million of their own Guess shares, they revealed that Guess would earn only $0.13 per share in the 3rd Quarter fiscal 2000, compared to analysts' revised estimates of $0.33 per share ($0.45 unrevised). Furthermore, the Company would early only $0.08 per share in the 4th Quarter Fiscal 2000 compared to an estimated $0.44 per share (unrevised), and for Fiscal 2001, $0.95 per share compared to $1.85 per share (unrevised). Defendants also revealed that Guess would record a loss of over $4.7 million related to below cost sales of inventory, and an additional charge of $5.4 million to increase reserves for impaired or worthless inventory. On January 26, 2001, defendants issued a press release which admitted that throughout the Class Period, it had artificially and improperly inflated its earnings by failing to expense costs or record accruals relating to the value of its substantially impaired inventory. As a result of the Company's accounting improprieties, Guess was forced to restate its financial results for the 1stQ, 2ndQ and 3rdQ of Fiscal 2000. 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 HEWLETT-PACKARD: Reneges on Pledge for Lifetime Rebates, Retiree Says --------------------------------------------------------------------- According to a class action suit filed January 31 against Hewlett-Packard Company (NYSE: HWP) by one of its Gold Badge retirees, the company has reneged on a pledge to provide retirees with lifetime rebates on purchases of HP products. The class-action suit was filed by Mark G. Leonard, an HP employee of 23 years who is the sole inventor of four patents assigned to HP. Mr. Leonard is one of more than 3,800 HP retirees who have been informed by the company that they are no longer eligible for the Employee Purchase Rebate Program, despite the fact that the company continues to provide this benefit to other HP retirees. Mr. Leonard retired from HP in 1998 after accepting the company's voluntary retirement program. According to Mr. Leonard's complaint, HP in 1999 re-classified him and others as a retiree of HP's newly spun-off company Agilent, even though he had always worked for HP. Upon his retirement from HP, Mr. Leonard became a Gold Badge Retiree (age 55 or older with 15 years of service). Agilent did not exist at the time of Mr. Leonard's retirement. "I retired from Hewlett Packard with the agreement that I would enjoy lifetime use of the product discount program," said Mr. Leonard. "The voluntary severance package offered included a product discount program, which was to me an important element of the overall package. The company has informed me that HP has the right to change the design of its benefits programs but I do not believe they have the right to unilaterally change the terms of our contract without my consent or to say that I retired from Agilent, which did not exist and which I had never heard of at the time I retired." Mr. Leonard has corresponded with Carly Fiorina, HP's Chief Executive Officer as well as other executives of the company and has not received a response satisfactorily addressing the issue. Ronald Katz, Mr. Leonard's attorney at the law firm Coudert Brothers in Palo Alto and San Francisco, stated that HP breached the contract by failing to fulfill its obligation to allow Mr. Leonard and other retirees to participate in the Employee Purchase Rebate Program. He said, "Based upon arbitrary reclassifications of Mr. Leonard and thousands of other HP retirees, Hewlett Packard believes it can deny the promises it made in connection with these product related rebates. Saying that someone retired from a company that did not exist when he retired and that he'd never heard of is outrageous. We believe that this class action will require HP to reinstate this policy for all the members of the class." HP's response to the complaint is due in thirty days. Contact: Chris Tofalli of Broadgate Consultants, Inc., 212-232-2226, for Coudert Brothers HMOs: Aetna Posts 65% Drop in Profits, Tries to Settle Patients' Suits ---------------------------------------------------------------------- Aetna Inc., the parent of Aetna U.S. Healthcare in Blue Bell, reported a 65 percent drop in fourth-quarter profits and confirmed it has had preliminary settlement talks with class-action lawyers who allege the company's business policies harmed patients. Reporting its first earnings as a pure health-care company since selling its financial services and international businesses last month, Aetna said it is raising prices, slashing costs and retreating from unprofitable markets to improve results in 2001. "We are making progress, but we have a long way to go," said chief executive John W. Rowe, in a conference call with analysts. "It will take time for our final performance to reach the level of other industry leaders." Rowe said that will take two years but would result in a doubling of earnings per share. Meanwhile, Aetna's chairman, William H. Donaldson, confirmed that it had held "preliminary" talks regarding the settlement of class-action suits against the company. In more than 50 separate suits, patients allege that Aetna put its bottom line ahead of their care, such as by unfairly restricting medical care. Donaldson said the company is continuing a thorough review of operations to find ways to be more responsive to patients, doctors and employers. If this review indicates a policy change that would resolve allegations in a suit, the company may consider settling, Donaldson said. The company exited Medicare and other markets in 2000, bringing its enrollment down 6 percent to 19.3 million members. It expects another 10 percent decline in 2001, including the loss of 1.5 million members acquired from Prudential Health Care in 1999. Aetna said it is negotiating price increases of 11 percent to 12 percent this year in commercial policies, and 4 percent in its Medicare business. Rowe told analysts the company is working to appoint some key executives. He said Aetna may announce a new chief medical officer next week, and is close to selecting a chief information officer and an executive to run healthcare operations. He said the company continues to work on finding ways to make it more "member-centric," including disease management programs, and less emphasis on certification and referrals that lead to a consumer distaste for managed care. He pointed to the company's announcement last month that it would change a policy despised by doctors that required them to contract for all of Aetna's products -- such as HMOs as well as other plans -- or none at all. As a recent example, he said that of 16,000 physicians in Texas, only about two dozen opted to change their contracts under the new policy. "The physicians wanted the opportunity to choose," he said. But the policy change turned to be "much ado about little." Profit from continuing operations fell from $ 81 million, or 55 cents a share, in 1999 to 28.7 million, or 20 cents a share last year. The company also took charges of $ 382 million against continuing operations and $ 174 million against discontinued operations. The charges were to cover the exit from markets and the reduction of 5,000 jobs announced last month. The company has not said where it will make the cuts, but a spokeswoman said Aetna, which is headquartered in Hartford, plans to maintain a strong presence in Blue Bell where is healthcare operations are based. (The Philadelphia Inquirer, January 31, 2001) INDIANA: Attorney Sues to Ban Punch-Card Ballots in Hoosier State ----------------------------------------------------------------- An attorney filed a class-action lawsuit Tuesday seeking to ban Indiana from using punch-card voting systems - the problematic voting method that led to Florida's presidential recount. The lawsuit filed by Indianapolis attorney Bill Groth makes Indiana the fourth state facing a challenge to the constitutionality of voting systems in the wake of last year's presidential election. The other states are in Florida, Georgia and Illinois. Groth's lawsuit was filed on behalf of two voters and seeks to force Indiana to ban and replace all punch-card systems, which are currently used in 35 Indiana counties, in time for the May 2002 primary elections. While the Indiana Constitution requires "fair and equal" elections, Groth said there is nothing "equal" about a voting system proven to have a higher error rate in recording votes than other types of voting equipment. Critics say uncounted votes may have changed the results in the presidential race that was decided in George W. Bush's favor by 537 votes in Florida. Groth's lawsuit was filed in Marion County Superior Court against Secretary of State Sue Anne Gilroy, the state's chief elections officer; the co-directors of the state's elections division; and the Indiana Election Commission. Groth said he hopes Gilroy, already an advocate for modernizing Indiana's voting equipment, will simply agree with the lawsuit, putting the state on line to replace the outdated punch-card systems. Gilroy said Tuesday she hasn't seen the lawsuit, but agrees with its goal. In fact, she said bulky lever machines used in some counties can also be inaccurate and they also need to be replaced. The cost of replacing both types of voting systems has been estimated at $30 million. Gilroy and Gov. Frank O'Bannon are forming a task force to recommend changes to Indiana's voting system. And Gilroy is the impetus behind an Indiana Senate bill sponsored by state Sen. Becky Skillman, R-Bedford, that seeks to create a fund to help counties purchase modern equipment. On Wednesday, Gilroy was expected to appear before the Indiana House Elections Committee to endorse a similar bill sponsored by Rep. Jonathan Weinzapfel, D-Evansville. Groth said the plaintiffs in his lawsuit - each a voter in a county that uses punch-card ballots - endorse both Skillman's and Weinzapfel's bills. But he said they worry state lawmakers won't include money for voting system reforms in the next biennial budget. Charles Toth of Terre Haute, one of the plaintiffs, said it would be an investment not just in new equipment but in voter confidence. Toth, a former Terre Haute city council member, said he was involved in a recount of a 1996 state legislative race and was shocked at problems with holes incompletely punched, leading to votes being discarded. But he said it was his sons' reactions to the Florida recount that prompted him to try to get rid of the punch-card ballots. He said his sons, ages 20 and 21, were so disillusioned by Florida's recount they say they won't vote next time. "We try to convince people their vote counts. This election shows your vote doesn't count. Not always. It just depends," Toth said. (The Associated Press State & Local Wire, January 31, 2001) INMATES LITIGATION: Activists Seek Expanded Services for Mentally Ill --------------------------------------------------------------------- Mentally ill prison and jail inmates fare poorly in a correctional system that offers limited mental health services while focusing on security and punishment, say advocates for the mentally ill. In a recent report, the National Alliance for the Mentally Ill of Maine said expensive new treatment services are needed to help the thousands of inmates in the state with mental health problems. In many other states, the report noted, lack of treatment has placed prisons under class-action lawsuits for violations of federal law. Two recent incidents in Maine point up the need for changes, said Carol Carothers, executive director of the National Alliance for the Mentally Ill of Maine. In one, a 19-year-old man was transferred from the Lincoln County jail and committed suicide after being segregated at the state's Supermax prison because he showed signs of depression and possible suicide. Another incident involved a 22-year-old man housed at the Supermax, who bit off pieces of his fingers. Mentally ill people often arrive at the state's jails and prisons after running into problems with law enforcement officials because of their illnesses, Carothers said, and the treatment they receive in jails often makes their illnesses worse. She cited national statistics which suggest that 15 percent of jail admissions require specialized placements because of serious mental illnesses. Carothers said her group's proposals will be large, complex and expensive. "This will have a huge bill and it will be very controversial," she said. Rep. Edward J. Povich, D-Ellsworth, House chairman of the Legislature's Criminal Justice Committee, said he will sponsor legislation derived from Carothers' study. But he made it plain he will alter her group's proposals after consulting with county and state corrections officials. "I said if you want me to hang onto all of them, then I'm the wrong sponsor. But if you want me to lead a discussion, that's what I'll do," Povich said. Povich and Department of Corrections spokeswoman Denise Lord criticized Carothers' report for superimposing national percentages on Maine statistics. "I think the Maine situation is different," Lord said. "A lot of this criticism, I haven't seen the documentation for. I suspect it is anecdotal." While acknowledging that any system can be improved, Lord defended the state's actions. "For prisoners with mental-health issues, I think we provide comprehensive treatment. I think we can do better, you always can. But we're not a hospital and we're not set up to be a hospital," she said. (The Associated Press State & Local Wire, January 31, 2001) LESLIE, SPENCE: 3rd Party Defendants in Maritime Asbestos Cases in Ohio ----------------------------------------------------------------------- Circor International Inc. reports to the SEC that two of the company�s subsidiaries, Leslie Controls and Spence, are third-party defendants in over 300 civil product liability actions filed against ship owner defendants in the U.S. District Court, Northern District of Ohio (Cleveland) between the 1980s and 1996. These cases are part of tens of thousands of maritime asbestos cases filed in this court against multiple defendants. The ship owner defendants' third-party claims in the Leslie Controls and Spence cases typically involve 20-30 third-party defendants. The claims against Leslie Controls and Spence assert that the packing in metal pumps and the gaskets in metal valves supplied by Leslie Controls and Spence contained asbestos which contributed to the asbestos exposure of plaintiffs who worked on the defendants' ships. Only two cases involving Leslie Controls have settled in a way that required a payment from Leslie Controls. One case settled in 1995 with a $2,000 payment from Leslie Controls; another settled in 1989 with a $500 payment from Leslie Controls. These thousands of cases are subject to court ordered moratoriums on answers and motion practice, and the very small percentage of these cases that have come to trial since 1996 have not involved Leslie Controls or Spence. LOCKFORMER CO: Judge Refuses to Gag Residents' Lawyers in Spill Case -------------------------------------------------------------------- A federal judge Tuesday refused to gag lawyers in the ongoing legal dispute between residents of a Lisle neighborhood and Lockformer Co. The company this month asked U.S. district Judge Harry D. Lienenweber to muzzle attorney Shawn Collins, claiming the lawyer for area residents who are suing the company had "crossed the line" in comments to the media and was "tarnishing the integrity" of the judicial process, Collins responded he was following the metal fabricating company's lead in dealing with the spills of a chemical solvent on its site. Lockformer had "sought a public, media-concentrated forum," when it appeared before the Lisle Village Board last summer, he claimed. During that meeting, where the company asked the village to create an ordinance to prohibit drilling any wells near its site, Lockformer offered its "own views on the dimensions of the contamination," Collins asserts, and made a commitment to "assume full responsibility" for chemical spills on its Ogden Avenue site. In denying Lockformer's motion, Collins said, the judge basically told all the attorneys that they should be prepared to prove in court whatever they say to the press. "That's what I believe the standard was and I'm perfectly comfortable with that," Collins said after the judge's decision. Collins' firm represents a group of Lisle homeowners living south of the company's plant, who filed a seven-count lawsuit in November claiming the manmade solvent used for nearly 30 years by Lockformer contaminated their private wells, damaged their property and permanently diminished their property values. The degreaser, containing the possible carcinogen tricholorethene, or TCE, spilled onto the ground near the plant. The firm also is seeking class-action status for its lawsuit. A study done for the homeowners found traces of TCE in 21 of 33 homes, including six above the federal guidelines. This month, Illinois Atty. Gen. Jim Ryan and the DuPage County state's attorney's office filed a four-count lawsuit against Lockformer, its parent, Met-Coil Systems Corp. and Delaware-based Honeywell International, which now owns the company that delivered the chemical to Lockformer's plant. The suit alleges the companies created a substantial danger by allowing hazardous chemicals to spill and contaminate soil and groundwater. Without admitting any responsibility, Lockformer agreed last week to pay for an alternate water supply for residents in the affected area and to define the extent of contamination resulting from the chemical spills. As part of that agreement, on Monday it provided a list of 17 other businesses in the area that could be sources of the contamination found in the wells, including one it alleges commonly dumped drums of TCE into a storm drain from 1978 to 1981. In testing conducted last month of 48 other homes on private wells in an area south of the plant, the Illinois Environmental Protection Agency south of Lockformer's plant, TCE was found in 34 private wells and in amounts that exceeded federal standards for TCE at nine homes. This week, the IEPA has begun testing additional wells within the affected area in Lisle, which the state has defined to be from Front Street south to Gamble Drive and from Kingston Avenue east to Westview Lane. (Chicago Tribune, January 31, 2001) MORGAN STANLEY: Appeals to Sp Ct Application of Unfair Competition Laws ------------------------------------------------------------------------ Morgan Stanley Dean Witter & Co. has asked the U. S. Supreme Court to hear its challenge to the application of California state unfair competition laws to investment brokers. The California Supreme Court recently denied review of a similar petition and, according to Morgan Stanley, potentially subjected the industry to a torrent of new litigation. Roskind v. Morgan Stanley Dean Witter & Co. (Securities Litigation & Regulation Reporter, December 20, 2000) QUAKER OATS: N.D. Ill. Denies Summary Judgment in Shareholder Suit ------------------------------------------------------------------ The Northern District of Illinois has refused to dismiss the shareholder class action against the Quaker Oats Co. for its alleged failure to update forward-looking statements regarding its acquisition of Snapple Beverage Co. in The shareholders claim that the company violated the antifraud provisions of federal securities law by not revising statements made regarding its debt-to-capitalization ratio prior to the merger. Weiner et al. v. Quaker Oats Co. et al., No. 98-3123 (N.D. Ill., Nov. 13, 2000). The court concluded that reasonable investors could have considered the debt-to-capitalization ratio (or leverage ratio) important enough to be material to their overall perception of the company. The plaintiffs contend that, when negotiations between Quaker (NYSE: OAT) and Snapple escalated around August 1994, Quaker must have known that its previously stated leverage ratio in the upper-60-percent range was no longer a realistic possibility. A corporation's leverage ratio is a calculation equal to the amount of a corporation's total debt (short-term and long-term) as a percentage of its total debt plus preferred and common shareholders' equity. In 1994, Quaker decided Snapple was the type of high-growth, high-profit-margin product that would compliment Quaker's Gatorade line; and, in early August, Quaker's management formally announced its desire to acquire Snapple. About the same time, the company issued an analyst's report that did not alter its previously announced leverage ratio guideline. On Oct. 31, 1994, Quaker announced an agreement to acquire Snapple in an all-cash transaction at $14 per share for a total of $1.7 billion. To do so, Quaker borrowed about $1.5 billion, which increased its leverage ratio to 86 percent. That same day, the price of Quaker stock fell by more than $7 per share, and plaintiffs attribute this drop to the increase in Quaker's debt. Initially, the U.S. District Court for the District of New Jersey granted the defendants' motion to dismiss. However, the U.S. Court of Appeals for the Third Circuit reversed, and the case was subsequently transferred to the Illinois district court. In part, Quaker Oats asserted that the omitted information regarding the company's intention to exceed the 60 percent leverage ratio guideline was immaterial, because no reasonable investor would have assumed that the guideline was a ceiling that the company could never exceed. Moreover, the defendants said the shareholders had not met the pleading standards regarding the level of intent, or scienter, of the company or its CEO, William D. Smithburg. U.S. District Judge Rebecca R. Pallmeyer found the defen dants' arguments "unconvincing." Quaker's public filings discuss the "prudent" use of leverage, said the court, and do not support its position that the upper- 60-percent range was a temporary ceiling. In refusing to grant summary judgment for the defendants, the court also said there is sufficient evidence to raise a genuine issue of fact regarding the defendants' intent. The court noted that the evidence suggests "a gradual but constant progression toward a plan for a highly-leveraged acquisition." However, the court also recognized that "the Snapple acquisition may have disappointed Quaker shareholders for reasons unrelated to the company's debt-to-capitalization ratio, and that a federal securities action may not be an appropriate avenue for challenging defendant's business judgment." Two years after the acquisition, Quaker sold Snapple for less than its acquisition price. The plaintiffs are represented by Marvin Alan Miller and Jennifer Winter Sprengel of Miller Faucher and Cafferty in Chicago; David J. Bershad and Robert Wallner of Milberg Weiss Bershad Hynes & Lerach in New York; Lawrence G. Soicher of New York; and M. Richard Komins, Leonard Barrack, Samuel Robbins Simon and Daniel E. Bacine of Barrack, Rodos & Bacine in Philadelphia. The defendants are represented by Jerold Sherwin Solovy and Avidan Joel Stern of Jenner & Block in Chicago; Dennis J. Block and Jason M. Halper of Cadwalader, Wickersham and Taft in New York; and Frederic K. Becker of Wilentz, Goodman & Spitzer in Woodbridge, N.J. (Securities Litigation & Regulation Reporter, December 20, 2000) REGENTS: Female Employees of Lawrence Livermore Lab Win Class Status -------------------------------------------------------------------- The Sturdevant Law Firm, and the law firm of Gwilliam, Ivary, Chiosso, Cavalli & Brewer, attorneys for a group of female scientists, professional and technical women employees of the Lawrence Livermore National Laboratory, (Singleton v. Regents, Alameda Superior Court No. 807233-1), announce a major victory in their two-year old lawsuit against the Regents of the University of California for employment discrimination against women. Several women who will be plaintiffs and class members will attend a press conference on February 1, 2001 to comment on their reactions to this key ruling. Their attorneys will discuss the future implications of Judge Ronald Sabraw's ruling. The ruling granted the plaintiffs' motion to certify the case as a class action, giving them the right to represent all current, past and future women employees at the Lab who have been subject to discrimination in pay or promotions from October 1, 1998 onward. It is estimated that the number of women in the class may well exceed 10,000, all of whom will now be able to seek money damages and injunctive relief for the discrimination they suffered at the Lab without having to file separate lawsuits. The Livermore Lab is a national research facility within the purview of the U.S. Department of Energy. The Regents manage the Laboratory pursuant to a contract with the federal government, currently employing in excess of 6,000 scientists and other employees, approximately one third of whom are women. The lawsuit was originally filed in December of 1998 by six current and former women employees of the Lab. It alleges that the Regents and the directors of the Lab have engaged in a long-standing pattern and practice of paying women employees less than the salaries paid to their male counterparts and of discriminating against women in promotions. The lawsuit also alleges that the Regents and Lab management refused to eliminate the discriminatory practices despite strong evidence of their existence and the sustained efforts of women employees to get them to do so for more than a decade. Commenting on the recent ruling, attorney James Sturdevant stated that "(t)here are two critical events in the life of a class action lawsuit: the certification of the class and the trial. Our clients have successfully crossed the first of these thresholds". Contact: James C. Sturdevant, Esq., of The Sturdevant Law Firm, 415-477-2410, or Gary Gwilliam, Esq., of Gwilliam, Ivary, Chiosso, Cavalli & Brewer, 510-832-5411 SOTHEBY'S, CHRISTIE'S: Federal Judge Dismisses Three Suits on Auctions ---------------------------------------------------------------------- A federal judge has dismissed three lawsuits against Sotheby's and Christie's by buyers at foreign auctions who said they had been cheated in a price-fixing scheme dating back to 1992. Judge Lewis A. Kaplan of Federal District Court in Manhattan ruled that because the auctions took place abroad without any direct or substantial impact in the United States they could not be tried under domestic antitrust laws. "Unless the court is to impute to Congress an intention to establish an antitrust regime to cover the world, the answer must be no," he wrote. The lawsuits were filed on the heels of a $512 million settlement last fall of a class-action lawsuit brought by more than 100,000 customers who say they were defrauded in a price-fixing scheme involving commissions between Sotheby's and Christie's. Judge Kaplan is considering a request for final approval of the settlement and has set a hearing for Friday to consider objections. The J. Paul Getty Trust, which runs the J. Paul Getty Museum in Los Angeles, will be among those objecting. Officials said the trust opposed the settlement because it offers no compensation for the oversees transactions. (Over the years, the Getty has bought millions of dollars of fine art at Sotheby's and Christie's in London.) "It also discriminates against purchases in excess of $50,000," said Deborah Gribbon, vice president of the trust and director of the museum. The settlement stipulates that auction buyers will receive 5 percent of the sales price on each purchase of $50,000 or less and a flat $2,500 for each purchase above $50,000. Judge Kaplan's decision follows a pattern of courts dismissing similar claims involving foreign transactions, including a case on behalf of foreign customers trying to sue Microsoft under United States antitrust laws. Sotheby's and Christie's applauded the judge's decision. "We have said all along that it was inappropriate for this lawsuit to be filed in the U.S. courts and we are very pleased that this case has been dismissed," said Sotheby's in a written statement. Christie's issued a statement that said in part, "The court's decision brings us closer to the day when we can put this matter behind us." But Paul T. Gallagher, a partner at Cohen Milstein Hausfeld & Toll, one of the law firms representing the foreign buyers and sellers disagreed. "It's the old adage the defendants may have gotten what they wish, and it may be to their detriment," he said. "This decision only increases the likelihood that both Christie's and Sotheby's will have to address legal claims outside the United States, most particularly the U.K." He added that he was preparing lawsuits that would be filed in the British courts. Had the lawsuit by foreign buyers been allowed to proceed it could have cost Sotheby's and Christie's millions of dollars more. As it is, both auction houses have agreed to pay $256 million to settle the claim. A. Alfred Taubman, Sotheby's former chairman, has agreed to pay $156 million of Sotheby's portion. As part of the settlement, agreed to in October, the two auction houses have the option of paying $100 million of the settlement in the form of coupons to future sellers that can be put toward commission fees. But Judge Kaplan, skeptical that the coupons were worth the same as cash, hired economists to evaluate them. Under pressure from the plaintiffs' lawyers, Sotheby's and Christie's sweetened the deal earlier this month, agreeing to pay cash for unredeemed certificates at face value five years after their issuance. Now they have gone one step further, according to people familiar with the negotiations. Amid concerns that the coupons would not be worth as much as cash, the houses have agreed to issue $125 million in coupons rather than $100 million, without reducing their cash payments. The result, they said, would be to increase the value of the coupons to sellers by 25 percent. This implies that the coupons are expected to trade at 80 cents on the dollar. Also, the houses would allow customers to redeem the coupons after four years at face value, even though they would still be accepted for five years. A spokesman for Sotheby's confirmed these details. (The New York Times, January 31, 2001) TAINTED WATER: $50M E Coli Deal Not Inked for Possible Long-Term Effects ------------------------------------------------------------------------ Too many unanswered questions stand in the way of Walkerton residents signing off on a proposed settlement and accepting $ 2,000 cheques, critics say. Ron Leavoy, of Concerned Walkerton Citizens, said the reported $ 50-million deal in a giant, class-action suit falls short because the long-term effects of the tainted-water scandal on the town's health and economy remain unknown. "There's still a lot of health issues that are outstanding. There's still a lot of children sick," said Leavoy, whose graphics company saw a 40% drop in business in the E.coli outbreak. "I lost a lot more money than that. I'm afraid of what's going to happen in the future. " While the "artificial economy" created by the continuing inquiry has boosted his business, Leavoy said he fears little will be left in Walkerton when the lawyers and investigators leave. Need Investment Leavoy said he'd like to see a financial investment in the community to reinvigorate the economy. "We have an awfully tainted image. We were struggling before," Leavoy said. Lawyers for the plaintiffs would not comment on reports of the tentative deal, and local residents learned of the details only through the media. According to reports, the cost of the proposed deal is split -- $ 33 million from the province, without admitting liabililty, and $ 17 million from the municipality's insurers. Any settlement would need approval by a Superior Court judge, who would also supervise larger claims involving deaths or serious illness. Last May's tragedy killed seven people and sickened 2,300. "The psychological trauma -- it's extremely real in this community," said Bruce Davidson, who is with the 500-member citizens' group. "There are people who can't bring themselves to drink from the tap." (The Toronto Sun, January 31, 2001) VANTIVE CORP: Investors Appeal to 9th Cir against Dismissal By CA Ct -------------------------------------------------------------------- Investors in Vantive Corporation are appealing dismissal of their securities class action against the company, asserting that the Northern District of California erred when it held the timing of the insider trading rebutted any inference of scienter. According to the investors, top executives sold more than $36 million of their personal holdings after making false earnings announcements in a "pump and dump" scheme. In re Vantive Corporation Securities Litigation, No. 00-16136, appellants' opening brief filed (9th Cir., Nov. 6, 2000). In their opening brief to the U.S. Court of Appeals for the Ninth Circuit, the appellants contend the officers' misleading statements concealed that Vantive's flagship product suffered from serious flaws, its sales force was in disarray and a contract with an important reseller was incomplete. During the class period, Vantive also used the artificially inflated stock to acquire two companies, Innovative Computer Concepts and Wayfarer Communications, and issued convertible debentures for $60 million, the shareholders say. Moreover, seven top officials allegedly sold 46 percent of their stock before it fell by more than a third. In response to U.S. District Judge William H. Orrick Jr.'s dismissal of the complaint in May, the investors argue that the court overlooked many crucial facts, and they should have been permitted to amend their complaint. From the mid-1990s, Vantive produced "front-office" software that helped businesses respond to customer complaints and inquiries. The company went public in 1995, and its stock price rose to $35 per share by late 1996. Due to growing competition from software giants such as Oracle and PeopleSoft, Vantive was forced to combine its call-center/help desk software with sales-force automation software, typically in an integrated package. According to the appellants, Vantive's attempt to use its own sales-force automation software was known inside the company as a disaster, and the product was pulled in the fall of 1997. The technical problems with the program also meant trouble for resellers trying to relicense it to end users, they add. Nevertheless, the company prematurely recognized millions in license revenue that really amounted to nothing more than contingent sales, the investors argue. They also charge the company with recognizing $19 million in revenue from a contract that contained undefined performance requirements. Vantive exceeded analysts' expectations through these accounting manipulations, the investors say, throughout the class period of April 23, 1997, to July 6, 1998. The stock eventually fell to just $5 per share, and PeopleSoft acquired the company. Although the district court acknowledged that the individual defendants' insider trading was "undoubtedly substantial," it said that the allegations failed to raise a strong inference of conscious recklessness -- the required state of mind. Citing Howard v. Everex Systems, No. 98-17324 (9th Cir., Sept. 29, 2000), the appellants argue that "knowledge or recklessness is required for a finding of scienter" under the antifraud provisions of federal securities laws. In Howard , the circuit court concluded a desire to raise corporate financing is circumstantial evidence of the required state of mind, the investors say. Judge Orrick's dismissal cannot be reconciled with Howard, the shareholders argue, and Vantive's use of stock to fund its acquisitions along with its sale of the debentures raise an even more compelling inference of scienter than the facts in that case. Relying on Provenz v. Miller, 102 F.3d 1478 (9th Cir., 1996), the appellants also argue that insider sales of 20 percent of stock holdings are sufficient to infer motive and that Judge Orrick showed little regard for Ninth Circuit precedent on this point. The plaintiff-appellants are represented by Leonard B. Simon, Eric A. Isaacson, Edward P. Dietrich and Kevin K. Green of Milberg Weiss Bershad Hynes & Lerach in San Diego; Sanford Svetcov of its San Francisco office; and Paul J. Geller of Cauley & Geller in Baca Raton, Fla. (Corporate Officers and Directors Liability Litigation Reporter, December 18, 2000) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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