/raid1/www/Hosts/bankrupt/CAR_Public/010227.MBX
C L A S S A C T I O N R E P O R T E R
Tuesday, February 27, 2001, Vol. 3, No. 40
Headlines
ALLIANCE PHARMACEUTICAL: Wechsler Harwood Files Securities Suit in N.Y.
AUTO FINANCE: 7th Cir OKs Toyota's Gobbledygook Explanation under TILA
COMMTOUCH SOFTWARE: Brodsky & Smith Announces Securities Suits in Fd Cts
CONNECTICUT: Agrees To Pay 100,000 To Settle Case Re Parking Placards
CREDIT CARDS: NC Business Ct Dismisses Charges of Interest Rate Increase
EQUICREDIT CORP: Lawsuit Says PA Borrowers Tricked into High Cost Loans
E.SPIRE COMMUNICATIONS: Utilities Destruction Spawns Bid for Lawsuit
HIALEAH: Police Chief's Favor of Hispanics Could Cost City 1.4 Mil
HOLOCAUST VICTIMS: Nazi Labor Fund Asks Member Companies To Up Payments
INMATES LITIGATION: Activists Seek New Services For Mentally Ill
LOEWS, AMC: Fed Judge Clears Way for Trial for Lawsuit By 3 Deaf Men
MICROSOFT CORP: Antitrust Case Goes to Appeals Court
N.Y. FUTURES: 3 Nybot Locals Su over Erroneous Stock Settlement Prices
NASCAR MERCHANDISE: Fed Ct OKs Settlements of Antitrust Suit
NORTEL NETWORKS: Admirers Say Roth Is Visionary, The Ottawa Sun Reports
NORTEL NETWORKS: Berger & Montague Files Securities Suit in New Jersey
NORTEL NETWORKS: Cuts 4,000 Jobs; C.F.O. Lowers Earnings Projections
NORTEL NETWORKS: Keller Rohrback Files Securities Suit
NORTEL NETWORKS: Retired Widow from Ontario Launches National Action
NORTH CAROLINA: Supreme Ct Sidesteps Parking Fees By The Disabled
SOUTH DAKOTA: Parents Survey on Season Switch for Girls and Plan Lawsuit
TIME, TICKETMASTER: Threat to Continuous Service Seen in Lawsuit
* Clash over Measures to Restrict Class Actions Heats up
* Webb Proposes Creation of Group for Minority Investors’ Suits in H.K.
*********
ALLIANCE PHARMACEUTICAL: Wechsler Harwood Files Securities Suit in N.Y.
-----------------------------------------------------------------------
A class action lawsuit was filed in the United States District Court for
the Southern District of New York on behalf of all persons who acquired the
common stock of Alliance Pharmaceutical Corp. (NASDAQ: ALLP) pursuant to
the merger between Molecular Biosystems, Inc. ("MBI") and Alliance (the
"Merger") completed on December 29, 2000 (the "Class"). The complaint
charges Alliance and certain of its officers and directors with violations
of Sections 11 and 15 of the Securities Act of 1933.
The complaint alleges that defendants violated the Federal securities laws
by issuing a Registration Statement pursuant to the Merger which failed to
disclose that enrollment for a critical Phase 3 trial of Alliance's
synthetic blood substitute, OXYGENT, would be "suspended indefinitely" and
that the Company would have insufficient capital for the current fiscal
year.
On January 8, 2001, only five days after Alliance announced the
consummation of the Merger, defendants announced that the Phase 3 trial of
OXYGENT would be "suspended indefinitely."
On January 9, 2001, at least one analyst downgraded the Company's stock
and, in contrast to the Registration Statement's representations, reported
that the Company had insufficient working capital for the forthcoming
fiscal year.
Plaintiffs, former MBI shareholders, seek to rescind the Merger or,
alternatively, seek rescission damages on behalf of Class members.
Plaintiffs are represented by the New York law firm of Wechsler Harwood
Halebian & Feffer LLP, which has extensive experience representing
shareholders in class actions and has been recognized as able practitioners
by the courts. www.whhf.com
Contact: Wechsler Harwood Halebian & Feffer LLP Patricia Guiteau,
877/935-7400 pguiteau@whhf.com
AUTO FINANCE: 7th Cir OKs Toyota's Gobbledygook Explanation under TILA
----------------------------------------------------------------------
So long as an automobile lease discloses the name of the method used to
calculate an early termination charge in a clear and conspicuous manner,
adding a "gobbledygook" explanation of the method does not violate the
Truth in Lending Act. (Jordan, et al. v. Toyota Motor Credit Corp., No.
00-2327 (7th Cir. 1/9/01).)
Claudine W. Jordan leased an automobile through Toyota Motor Credit Corp.
The lease referred to the "constant-yield method" of calculating an early
termination charge. Jordan filed a class action against Toyota Credit,
alleging the lease violated the TILA because its reference to the
constant-yield method was too abstruse to be clear. Although the lessees
agreed that the language was conspicuous, they maintained it was not clear
unless the average consumer understood how the method worked.
Clear and Conspicuous Disclosure
Based on the 7th U.S. Circuit Court of Appeal's decision in Channell v.
Citicorp National Services Inc., 89 F.3d 379 (1996), which held the
method's name for computing an early termination charge must be disclosed
in a clear and conspicuous manner but does not have to be explained, the
U.S. District Court, Northern District of Illinois dismissed the case.
Regulation
On appeal, the lessees urged the 7th Circuit to overrule Channell. The
court, however, refused. It noted the Federal Reserve Board adopted a
regulation permitting lessors to disclose a method by giving its name
instead of the details of its calculation. As the court observed, "The Fed
has so far blessed disclosure by name, because it believes that nothing
better is achievable at acceptable cost."
Despite Channell, the lessees argued the lease "flunk[ed] the TILA" because
it did more than give the methods' name - it included two incomplete
paragraphs attempting to explain how Toyota Credit calculated the early
termination charge. The lessees insisted "a goggledygook explanation of
that method entitles them to damages."
Recognizing the lack of a better explanation, Judge Frank Hoover
Easterbrook concluded, "Because the written paragraphs are no worse than
the unelaborated name (they do not throw readers off the scent), and
because both the name and the exposition will prove equally indigestible to
most lessees, adding the explanation did not produce a violation of the
TILA."
The 7th Circuit affirmed the District Court's decision to dismiss the
complaint. The plaintiffs will be seeking certiorari in the case.
Christopher V. Langone of the Christopher V. Langone Law Firm in Chicago
represented Jordan. Thomas Crisham of Quinlan & Crisham in Chicago
represented Toyota. (Consumer Financial Services Law Report, February 20,
2001)
COMMTOUCH SOFTWARE: Brodsky & Smith Announces Securities Suits in Fd Cts
------------------------------------------------------------------------
Brodsky & Smith, L.L.C., of Bala Cynwyd, PA, on February 23 announced that
class action lawsuits involving the purchase of the below mentioned stock
have been initiated in federal courts across the country alleging
violations of the federal and/or state securities laws for the following
proposed time period:
Corporation Class Period CommTouch Software, Ltd.
(NASDAQ:CTCH) 04-18-00 to 02-13-01
The class has not been certified by the court for this stock, and until
certified, an investor is not represented. You have the right to be
represented and participate as a plaintiff in this lawsuit if you purchased
the above-named stock during the identified proposed class period.
Contact: Brodsky & Smith, L.L.C. Jason L. Brodsky, Esquire Evan J. Smith,
Esquire 877-LEGAL90 smith@brodsky-smith.com
CONNECTICUT: Agrees To Pay 100,000 To Settle Case Re Parking Placards
---------------------------------------------------------------------
Resolving a federal lawsuit that was filed to stop the state of Connecticut
from charging a fee for parking placards for people with disabilities, the
state agreed earlier this month to pay 100,000 and supply permanent
placards to eligible individuals at no cost.
Duprey v. State of Connecticut was a class action alleging that
Connecticut's practice of charging the 5 fee violated Title II of the ADA.
The assessment of the fee, claimed lead plaintiff Michelle Duprey,
constituted an impermissible surcharge. Surcharges are specifically barred
by Title II regulations.
In November 1998 - before the class had been certified - a federal District
Court in Connecticut granted Duprey's motion for summary judgment, clearing
the way for this month's final settlement. In that ruling, the court
determined that three elements must be established in order to show that
the fee for the placards violated ADA requirements. First, it said, the fee
must in fact constitute a surcharge; second, the fee must be imposed only
on people with disabilities; and third, the fee must be used to cover the
costs of accessibility-related measures that are required by the ADA.
Rejecting several defense arguments, the court determined that all three
elements were met. In a decision reported at 14 NDLR 27, it held that the
fee was a discriminatory surcharge, and it granted summary judgment in the
plaintiff's favor.
The arguments raised by the state demonstrate the issues that arise when a
claim is made that a fee for parking placards violates the ADA. For
example, the state argued that the 5 fee was not a surcharge because it was
not an "unusual, excessive, or discriminatory charge." The court rejected
that argument, saying that to define a surcharge as an extra or additional
cost would be underinclusive.
The defendant also argued that the fee for placards was not a surcharge
because card holders could not be charged for overtime parking, when parked
in a legal area. But the state was not required to allow overtime parking
at no charge, the court said, and its decision to do so did not remove the
5 fee from the surcharge definition.
Nor did the imposition of the fee on individuals who might not qualify for
ADA protection save the fee, the court said. Although the state could
impose the fee on people who did not qualify under the ADA, it could not
impose a surcharge on individuals who did, the court explained.
In a subsequent decision issued in March 2000, the court granted the
plaintiff's motion for class certification, defining the plaintiff class as
all people who paid for the placards since August 1993 as well as any
future purchasers. That set the stage for the final settlement. (Disability
Compliance Bulletin, February 23, 2001)
CREDIT CARDS: NC Business Ct Dismisses Charges of Interest Rate Increase
------------------------------------------------------------------------Where
a credit application expressly permits a bank to amend, modify or terminate
the credit terms, a lender can increase the interest rate charged to credit
card customers during the year in which an annual fee was paid, if the
notice complies with the Truth in Lending Act, the North Carolina Business
Court held. (Gaynoe, et al. v. First Union Direct Bank N.A., No. 97 CVS
16536 (N.C. Bus. Ct. 1/19/01).)
In 1993, John Gaynoe applied for a First Union Direct Bank credit card. He
agreed to pay an annual fee of 39 with an annual percentage rate of prime,
plus 6.9 percent. Beginning in 1994, the bank offered applicants six credit
card options, mixing different interest rates with different annual fees,
as part of its Valuable Choice Program. The agreements applicable to
Gaynoe's account were virtually identical to the agreements applicable to
the Valuable Choice applicants.
Amendment
In February 1997, the bank sent Gaynoe notice that his APR would increase
to prime, plus 11.9 percent. The notice stated: "As with any change of
terms, if you do not wish to continue your account under the above new
terms, we will close your account and permit you to pay the outstanding
balance under the terms in effect before the change in terms." Gaynoe
claimed he called the bank and was advised the new rate would not apply to
him. Nonetheless, his monthly statements reflected the new interest rate.
Gaynoe filed a class action against the bank, alleging it breached the
contract by changing the interest rate during the year in which an annual
fee was already paid. Gaynoe sought certification of the following class:
"[A]ll persons who opened credit card accounts with [the bank] under the
Valuable Choice Program, whose annual percentage rates were, during a
period beginning four years prior to the date of the complaint and running
to the present ... increased by [the bank] to a value above that chosen by
the customer." Both parties moved for summary judgment.
'Unambiguous Contract'
Gaynoe argued the credit application created a binding contract between the
bank and applicant for the extension of credit at a fixed APR for one year
that could not be modified during the year. Gaynoe asserted the original
annual fee was paid in consideration for the lower interest rate.
Conversely, the bank argued both Georgia law and the credit card agreement
permitted it to change the credit terms at any time so long as it provided
notice as required by the TILA.
State Law
The court noted the Georgia Credit Card Act provides: "A domestic lender or
credit card bank may, as specified in the written agreement governing a
credit card account, modify in any respect any terms or conditions of such
credit card account, upon such prior written notice of such modification as
specified by the terms of the written agreement governing the credit card
account or by the Truth in Lending Act ... ." Applying Georgia law, the
court concluded the issuance of a credit card to Gaynoe constituted an
offer by the bank to extend him an open line of credit.
"The acceptance of that offer by Mr. Gaynoe subjected him to the agreement
that expressly permitted [the bank] to amend, modify or terminate the
credit terms subject to the restrictions of the Georgia Credit Card Act."
Consideration
The court stated, "as a general rule, and in this case, an annual fee is
imposed as a charge for the issuance or availability of credit that is
charged to the customer on an annual basis. The imposition of an annual fee
is not 'consideration' for favorable [annual percentage rate] terms."
Concluding the contract was unambiguous and provided for the amendment of
its terms subject to state and federal law, the court dismissed the
complaint and granted the bank summary judgment.
Gary W. Jackson, counsel for Gaynoe, told Consumer Financial Services Law
Report Gaynoe intends to appeal the court's decision. He may be reached at
(919) 582-2100.
Opinion by: Special Superior Court Judge Ben F. Tennille.
Gary W. Jackson and Paul R. Dickinson Jr. of Michaels, Jackson & Oettinger
PA, in Raleigh, N.C., and Gordon M. Fauth Jr. and Robert S. Green of Girard
& Green LLP in San Francisco, represented the plaintiff. Edward T. Hinson
Jr. of James, McElroy & Diehl PA, in Charlotte, N.C., and J. Preston Turner
of Pope & Hughes PA represented First Union. (Consumer Financial Services
Law Report, February 20, 2001)
EQUICREDIT CORP: Lawsuit Says PA Borrowers Tricked into High Cost Loans
-----------------------------------------------------------------------
A Pittsburgh law firm is claiming Pennsylvania consumers were tricked into
taking high-cost loans due to improper fee arrangements between a local
loan broker and a lender in suburban Philadelphia.
The complaint, filed in U.S. District Court in Pittsburgh this month,
alleges EquiCredit Corp. of Pennsylvania in Trevose, Bucks County, paid
loan broker Atlantis II Mortgage Corp. of Verona referral fees to steer
customers its way at the same time Atlantis was charging consumers a fee to
shop for the best loans.
"We've alleged the referral fee agreement undermined Atlantis' ability to
do its job, which is finding loans with favorable terms for its clients,"
said Erin Brady, of Malakoff Doyle & Finberg in Pittsburgh, which filed the
suit.
The complaint asserts that EquiCredit, a unit of Bank of America,
"manipulated the loan broker-client relationship" by agreeing to pay
referral fees to loan brokers such as Atlantis.
The suit was filed on behalf of West Homestead resident Bette Ross and
Malakoff Doyle is seeking to turn it into a class action that would
represent Pennsylvania consumers who received mortgage-secured loans from
EquiCredit and who paid loan broker fees for their loans.
EquiCredit denied the allegations.
"We basically disagree with the premise of the suit," said Jerri Franz, a
spokeswoman at EquiCredit headquarters in Jacksonville, Fla. "Mortgage
brokers are not agents of EquiCredit; they are selected by the borrower,"
she said, adding that EquiCredit complies with all federal and state
regulations.
Atlantis owner Norman Verzinskie also denied the charges. "I can
categorically tell you we did nothing wrong," he said.
The suit seeks damages in an unspecified amount, including punitive damages
and attorneys fees. It also asks for an injunction allowing customers to
cancel their loans. (Pittsburgh Post-Gazette, February 26, 2001)
E.SPIRE COMMUNICATIONS: Utilities Destruction Spawns Bid for Lawsuit
--------------------------------------------------------------------When
shoddy utility work knocks out phone service and turns a major road into a
canal for a week, lawyer Clifford J. Steele says someone should have to pay
for area business' aggravation and lost revenue.
Two cases pending in Fulton County Superior Court stem from last summer,
when utility installation crews repeatedly severed phone, gas, sewer and
water lines while installing fiber optic cable. On June 8, according to
Steele, a crew working for e.spire Communications Inc. knocked out phone
lines to businesses at Piedmont Road near Miami Circle. A month later on
July 10, another crew hired by e.spire to lay cable severed sewer, water
and gas lines, washing out the same intersection for a week.
In response, Steele filed two suits against e.spire and the companies it
retained to do the utilities work: B&O Boring of Texas, Morris Plumbing and
Electric of Atlanta, and Utiliquest and Utility Marking Co. The latter
company marks the location of utility lines on a road before crews start
digging. Newton-Dixon v. E.Spire Communications, No.00CV25673 (Fult. Super.
July 19, 2000), and Goldman v. E.Spire Communications, No. 00CV24579 (Fult.
Super. July 10, 2000).
"The basic rule is that for every wrong there is a remedy," Steele says.
"They've been telling us there's no remedy."
He is asking for class action certification, compensatory damages and
punitive damages. However, the suits must first survive a motion to
dismiss. The case, defense lawyers say, would set a dangerous precedent if
the court allows it to proceed.
Utiliquest lawyer T. Ryan Mock, a partner with Hawkins & Parnell, likens
Steele's complaint to a hypothetical situation in which a careless
kite-flier gets a kite tangled in power lines and knocks out power for a
half day to much of Buckhead. Should Buckhead residents and businesses be
able to sue the offender for lost revenue? he asks.
"We just can't have that in our society," he says.
In their motion to dismiss, defendants are relying on a 98-year-old case:
Byrd v. English, (91 Ga. 117, 43 S.E. 19 (1903)). In that case, the court
held that the owner of a printing company had no right to re cover damages
from an excavation company that severed power lines, causing him to lose
business.
The court ruled that if the printer were allowed to collect on his
complaint, "then a customer of his, who was injured by the delay could also
recover from them; and one who had been damaged through his delay could in
turn hold them liable; and so on without limit. To state such a proposition
is to demonstrate its absurdity."
Steele says the suits are a question of basic fairness. Someone should be
held responsible for the damage caused the plaintiffs, he says. He suspects
the case may spend some time in the higher courts before coming to trial.
"Basically we're probably going to be making new law, because the old one
is over 97 years old," he says. (Fulton County Daily Report, February 26,
2001)
HIALEAH: Police Chief's Favor of Hispanics Could Cost City 1.4 Mil
------------------------------------------------------------------
A Hispanic police chief violated the civil rights of seven white
non-Hispanic police sergeants when he favored Hispanics in giving out
assignments, a jury decided.
It awarded the plaintiffs 1.4 million.
The plaintiffs said that the Hispanic police chief repeatedly passed them
over for specialty assignments in favor of Hispanic employees.
The chief denied the allegations and said the sergeants were opposed to his
policies and that he made his assignment selections based on
nondiscriminatory reasons.
The jury found for the plaintiffs, but the city is filing post-trial
motions to reduce the award or overturn the verdict. Shaw, et al. v. City
of Hialeah, No. 97-CV-2130 (S.D. Fla. 8/700). (HR Reporter, February 23,
2001)
HOLOCAUST VICTIMS: Nazi Labor Fund Asks Member Companies To Up Payments
-----------------------------------------------------------------------
The German industry compensation fund for Nazi-era forced laborers is
asking member companies to increase their donations to help it collect its
promised 5 billion marks (dlrs 2.3 billion), the fund's spokesman said.
A letter sent to the more than 5,900 companies in the fund asks them to
increase their contribution by 50 percent from the required one-thousandth
of their annual sales, Wolfgang Gibowski said.
That amount was determined because the fund's 17 founding members including
leading firms such as DaimlerChrysler, Volkswagen and Deutsche Bank are on
average giving that much, Gibowski said. ''We thought that it was
absolutely correct to tell this to all other members and to ask them to
supplement their payments,'' he said.
German industry has been criticized for failing to come up with its half of
the 10 billion mark (dlrs 4.7 billion) government-industry fund, so far
raising only 3.6 billion marks (dlrs 1.7 billion).
Gibowski said the failure to collect the money was due to the lack of
mid-sized companies joining the fund.
''If there would be enough time, then it would be no problem to collect the
money from all mid-sized companies,'' he said. ''As those mid-sized
companies are really reluctant and we definitely hope we can distribute the
money very soon to those who are entitled to receive the money we think
that we should look for another way.''
However, Gibowski declined to name a deadline by when the fund would
collect the total amount.
About 1 million victims of the Nazis' forced labor policies _ mostly
non-Jews from eastern Europe could receive payments under the fund. The
fund also would compensate concentration camp detainees who survived
dangerous work conditions as slave laborers that were intended literally to
work them to death.
Payments have been delayed by a continuing dispute over the legal security
German firms will get in exchange for the fund, which they founded under
pressure of class-action lawsuits in the United States. The companies have
insisted they will not make payments until every single U.S. lawsuit is
dismissed, while other negotiators say the agreement was only for the major
class-action lawsuits to be set aside before victims receive compensation.
(AP Worldstream, February 26, 2001)
INMATES LITIGATION: Activists Seek New 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, a lack of treatment has placed
prisons under class-action lawsuits for violations of federal law.
Two recent incidents in Maine point to the need for change, the report
says. 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. 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 prisons after running into
problems with law enforcement because of their illnesses, and the treatment
they receive in jails often exacerbates their illnesses.
Source: The Associated Press. (Published in Corrections Professional,
February 23, 2001)
LOEWS, AMC: Fed Judge Clears Way for Trial for Lawsuit By 3 Deaf Men
--------------------------------------------------------------------
A federal judge has cleared the way for a trial in a lawsuit filed by three
deaf area men who want to force the Loews Cineplex and AMC movie theater
chains to make captioned first-run movies available to patrons who are deaf
and hard of hearing.
The suit, filed in April, is aimed at compelling the theater chains to use
technology that would allow deaf and hard-of-hearing patrons to enjoy
just-released films with the rest of the public. It maintains that the 1990
Americans With Disabilities Act requires theaters, as public places, to
make reasonable accommodations.
U.S. District Judge Gladys Kessler recently turned down a defense request
to dismiss the lawsuit and has set a hearing for April 11 to consider
pretrial issues. The plaintiffs' attorneys want the case to move forward as
a class-action matter, covering thousands of deaf moviegoers in the
Washington area, as well as hard-of-hearing patrons who aren't helped by
the more readily available listening aids offered in theaters.
"We're excited about the class-action certification because it will cover a
larger group of people," said Wayne Cohen, a lawyer representing Kevin
Ball, John F. Stanton and Aaron J. Fudenske, the original plaintiffs in the
lawsuit.
Cohen contended that captioning can be provided at minimal cost. For
example, some theaters now provide rear-window captioning, a system that
uses special equipment to display subtitles on individual plastic panels
attached to cup holders or seats. Deaf and hard-of-hearing viewers watch
movies through these panels, seeing the big-screen image along with the
subtitles.
The General Cinema Theatres chain provides rear-window captioning at some
theaters, including one in Springfield and another in Owings Mills, near
Baltimore.
Loews Cineplex and AMC provide listening devices to hearing-impaired
customers and take part in a nationwide effort to occasionally screen
open-captioned movies, which provide subtitles for all to see. In court
papers, the chains' attorneys maintained that they have "spent much time
and effort in making their theaters accessible to patrons with special
needs," but they argued that federal law does not require captioning. (The
Washington Post, February 26, 2001)
MICROSOFT CORP: Antitrust Case Goes to Appeals Court
----------------------------------------------------
Microsoft told a U.S. appeals court Monday that it did not illegally stifle
competitors but some judges peppered the software giant's lawyer with
questions suggesting the company faces difficult odds in reversing its
ordered breakup.
``I don't see how you can get a reversal,'' Judge David Tatel said at one
point in early arguments that focused on Microsoft's battles with Netscape,
its chief rival in the Internet browser market.
At another point, Judge Douglas Ginsburg accused the company of using
``saturation bombing'' tactics against Netscape.
The company's lead lawyer, Richard Urowsky, fielded questions from all
seven judges of the U.S. Court of Appeals for the District of Columbia as
he sought to reverse a historic antitrust ruling that is the most important
since the breakup of AT&T in 1984.
Microsoft, known for its Windows operating system, its Internet Explorer
browser and Word processing program, is appealing a judge's order that the
company be split in two.
Urowsky attacked the government's chief argument, saying that Microsoft's
bundling of its Explorer browser with Windows did not hurt Netscape.
The lawyer got some support from Judge A. Raymond Randolph, who asked,
``What if Microsoft thought that Navigator could threaten Windows? Why
isn't that enough'' to compete aggressively?
Urowsky agreed. ``I think it is enough, if Navigator is perceived as a
potentially strong competitor'' to ``take competitive steps to compete'' he
said.
Jeffrey Minear, assistant to the U.S. solicitor general, argued for the
government that Microsoft spent huge amounts of money to promote its
browser, overwhelming competitors. ``The company used its monopoly power to
stifle the competitive process,'' Minear asserted.
Urowsky provided the court with evidence he said showed Netscape was not
hurt by Microsoft.
Between 1996 and 1998, ``Netscape's users increased 15 million to 33
million,'' Urowsky argued. ``Millions of people chose to use Navigator
despite'' the fact rival Explorer was included with Windows, he said.
``Netscape had unfettered access to consumers,'' Urowsky added.
On Wall Street, Microsoft's stock gained $2.13 to $58.56 per share in early
trading.
The Justice Department, 18 states and the District of Columbia sued
Microsoft, contending that the company violated federal antitrust law by
using illegal methods to protect its monopoly.
Last June, U.S. District Judge Thomas Penfield Jackson ordered the breakup
of Microsoft. ``Microsoft, as it is presently organized and led, is
unwilling to accept the notion that it broke the law,'' Jackson said.
He ruled two months after concluding that Microsoft violated antitrust laws
by using illegal methods to protect its monopoly in computer operating
systems, stifling competition. He also said the company tried illegally to
expand its dominance into the market for Internet browsers.
Urowsky argued Monday that the lower court was wrong to consider
Microsoft's licenses with manufacturers as illegal.
The licenses require that there be no alteration of Microsoft software when
computers are first booted up and that the company's icons be displayed on
the desktop.
Contending the licenses are legal, Urowsky said, ``What is at issue in this
dispute is only the very first time the computer is booted up.''
He also said Microsoft was ``exercising its rights under federal copyright
laws'' to protect its operating systems.
One topic set for argument is Microsoft's contention that Jackson showed
his bias in remarks to reporters and book authors. He made scathing
personal attacks on Microsoft Chairman Bill Gates, the company's legal team
and the appeals court.
Jackson accused appellate judges of ``making up 90 percent of the facts on
their own'' in an earlier Microsoft ruling, and said they lacked practical
trial experience.
``In conscious or unconscious ways, the court of appeals will feel fewer
inhibitions to second-guess Jackson's findings concerning crucial pieces of
evidence,'' said William E. Kovacic, a specialist in antitrust law at
George Washington University. ``Nothing good will come to the government
plaintiffs from all of this.''
Since President Bush took office, legal experts have wondered whether the
Republicans would try to settle the case brought by the Clinton
administration - and do so under far more favorable terms to Microsoft than
the Democrats would have allowed.
Andrew Gavil, a law professor at Howard University, said it was unlikely
that new Justice Department antitrust chief Charles A. James would seek to
modify the government's position until after the appeals court ruled. James
``has a very conservative approach to antitrust,'' he said.
James has not provided any clues to his views on the case since his
appointment.
While Bush was president-elect, spokesman Ari Fleischer said the new
administration would review all government litigation. Without referring
specifically to Microsoft, he said: ``As a rule, the president-elect is not
going to rush to litigation the way some people in Washington do. He does
not think that serves the country well.'' (The Associated Press, Feb 26
2001)
N.Y. FUTURES: 3 Nybot Locals Su over Erroneous Stock Settlement Prices
----------------------------------------------------------------------
Three New York Board of Trade (Nybot) locals are suing the exchange and
Norman Eisler, former chairman of the New York Futures Exchange, for $60
million. The locals claim the defendants permitted erroneous settlement
prices in the Pacific Stock Exchange Technology index options contracts.
Three New York Board of Trade (Nybot) locals are suing the exchange and
Norman Eisler, former chairman of the New York Futures Exchange (Nyfe), a
division of Nybot, for $60 million. The locals claim the defendants
permitted erroneous settlement prices in the Pacific Stock Exchange
Technology index options contracts.
The plaintiffs claim that the settlement committee did not follow normal
procedures in setting settlement prices at the end of the day, the result
of which had a profound impact on margin requirements. The plaintiffs say
the miscalculation in PTech options settlement prices began prior to Jan.
1, 2000, and continued until approximately May 15, 2000.
Eisler was not only chairman of the exchange but also chairman of the
settlement committee for the PTech Index futures and options contracts. One
plaintiff, Mike Vitanza, claims Eisler manipulated settlement prices to
favor his own positions over a period of two years by as much as. 80%
before being discovered.
The suit claims that the miscalculation of the settlement prices led to the
collapse of the P-Tech contract and once those settlements prices were
corrected led to the collapse of futures commission merchant (FCM) Klein &
Co. due to losses sustained by Eisler. (See Trendlines, Futures, August
2000)
According to the suit, in May 2000 Eisler's account faced a margin call
that he could not meet. As a result, Eisler was suspended from Nyfe. After
Eisler's suspension, settlement prices in the P-Tech options were
calculated correctly and were in large contrast to previous settlements.
Eisler's account went from a positive balance of approximately $4 million
to a deficit of about $4.5 million.
The plaintiffs in the suit contend that Nybot officials knew or should have
known that P-Tech options settlement prices were being distorted.
"I complained for two years to my FCM and through the settlement committee
about the settlement prices," Vitanza says.
He claims that on April 6, 2000 he paid an average of $31 on the close for
puts and calls, respectively, of strikes equidistant from where the futures
were trading and each were settled below $7. In a letter Vitanza sent to
the CFTC, he states, "When the settlement price manipulation grew to
ridiculous levels and when the gap between reasonable and actual settlement
prices became obscene, it seems inconceivable how anything so blatant could
have gone so long threatening the financial position and reputation of the
exchange and its members as well as the clearinghouse and FCM's."
Christine Jackson of Cadwalader, Wickersham and Taft, which is representing
Nybot, says: "The complaint fails to state a claim under the Commodities
Exchange Act and Nybot is presently preparing a motion to dismiss their
action."
The suit, filed in U.S. District Court in the Southern District of New
York, lists Nybot CEO Mark D. Fichtel, Nybot Chairman Albert Weiss as well
as 10 board members and officers of Nybot and the New York Clearing Corp.
in addition to Nybot itself and Eisler. (Futures, February, 2001)
NASCAR MERCHANDISE: Fed Ct OKs Settlements of Antitrust Suit
------------------------------------------------------------
Federal District Judge Thomas Thrash has approved a settlement of a class
action lawsuit filed against numerous defendants who allegedly fixed the
prices of merchandise they sold at professional stock car races sanctioned
by the National Association for Stock Car Auto Racing, Inc. ("NASCAR").
The suit alleged that the sellers had conspired to fix prices in violation
of the Sherman and Clayton Acts by: (1) entering into oral and written
agreements to fix minimum prices for souvenir merchandise sold at the
events; (2) distributing price lists fixing the minimum prices; (3) having
secret meetings before NASCAR events for the purpose of setting minimum
prices; (4) monitoring the prices charged by the vendors at the events; and
(5) punishing vendors who violated the price-fixing agreements.
The parties reached four separate settlement agreements. Although the
settlement agreements differ in the amounts agreed to be paid by the
defendants, each agreement provides for the payment of substantial cash and
the issuance of coupons redeemable for merchandise at NASCAR events. The
defendants' settlement obligations do not end with the mere issuance of
coupons. Instead, the defendants' obligations terminate when 93.7% of the
coupons are redeemed.
While noting that Rule 23(e) of the Federal Rules of Civil Procedure
requires judicial approval of class action settlements, Judge Thrash also
noted that Rule 23(e) provides no standards. Judge Thrash therefore used a
well-established six-part test to determine whether the settlement
agreements were "fair, adequate, reasonable and free of fraud or
collusion."
First, Judge Thrash looked at the likelihood of success at trial and
recognized the problems the class plaintiff may face if the action were to
proceed. The main difficulty facing the plaintiffs, according to Judge
Thrash, was whether a class could be certified. With respect to Rule
23(b)(3), Judge Thrash had his doubts as to whether the "predominance"
requirement would be met, finding that plaintiffs would likely have
difficulty in establishing antitrust impact as to each member of the class
without having to resort to lengthy individual examinations of each
plaintiff. The fact that most plaintiffs had no record of purchases and the
change of vendors and merchandise sold over time would require that each
plaintiff's situation be viewed separately, making class certification, in
Judge's Thrash's opinion, very difficult. This, coupled with the general
complexity of the case even if a class was to be certified, added to Judge
Thrash's feeling that the settlements should be approved.
Judge Thrash next analyzed the range of possible recoveries for the
plaintiffs should the case be tried. Noting again the difficulties in class
certification as well as the difficulty in proving damages, Judge Thrash
found that the settlement proposed was certainly within the range of what
plaintiffs could expect to receive.
The third factor, the point on or below the range of possible recovery at
which a settlement is fair, adequate, and reasonable, also weighed in favor
of Judge Thrash approving the settlements. Although settlements of class
actions involving coupons had been severely criticized, Judge Thrash found
that the coupon aspect of the settlements in this case did not suffer from
the same maladies as had been found in other circumstances. Some of the
facts which led Judge Thrash to this conclusion included the facts that the
coupons were fully transferable, the defendants would continue to issue
coupons until the face value had been fully redeemed, the defendants would
make charitable donations after a certain time period if the coupons were
not fully redeemed, and the coupons were combinable. Also important to
Judge Thrash was that the face value of the coupons in relation to the
items to be purchased was reasonable.
Fourth, Judge Thrash recognized the complexity, expense and duration of the
litigation in relation to the settlement agreements. He noted that over 70
depositions had been taken, and the parties had engaged in extensive
discovery. When viewed in light of the complex litigation and the time and
costs involved, Judge Thrash found the settlements to be reasonable.
The fifth factor - the substance and degree of opposition to the
settlements was easily disposed of. While there had been only two
objections filed, both objections had been withdrawn.
Finally, Judge Thrash found that the parties were fully aware of the merits
and problems of each of their respective positions, having taken expert and
other depositions and reviewed numerous volumes of documents. Thus, Judge
Thrash found that the settlement was reached after an arms-length
negotiation where each party was apprised of the "facts, risks and
obstacles involved with the possibility of continued litigation."
The parties moving to confirm the settlements were represented by Mark E.
Kraynak, Atlanta. The plaintiffs were represented by Martin D. Chitwood,
Chitwood & Harley, Atlanta. The defendants were represented by Emmet J.
Bondurant, II, Bondurant Mixon & Elmore, Atlanta.
In re Motorsports Merchandise Antitrust Litigation, 112 F.Supp.2d 1329
(N.D.Ga. 2000) (Entertainment Law Reporter, February, 2001)
NORTEL NETWORKS: Admirers Say Roth Is Visionary, The Ottawa Sun Reports
-----------------------------------------------------------------------
Although John Roth has class-action lawyers smelling blood, the CEO of
Nortel Networks still has admirers in the telecom industry who see him as a
visionary leader.
"Many companies express delight in the fact that they are there to do their
customers' bidding," says Iain Grant of the Yankee Group in Canada.
"What Roth has managed to do is understand what the customers are going to
want three years hence -- before they even know it themselves. That's a
visionary leader."
But after more than a week of intense scrutiny since Nortel shares lost
one-third of their value in one day, it's still not clear why Roth didn't
see he would have to lower Nortel's targets dramatically because of the
U.S. downturn that's battering the world's leading hi-tech companies.
Profit Warning
"I'm not sure why he didn't take advantage of some of the pessimism that
was abundant in December and January" and take a more cautious approach for
2001, Grant says.
A lot of investors are asking the same question.
From Jan. 19 to Feb. 16, the period between Nortel's prediction that it
expected 30% revenue growth in 2001 and the day after Roth revised that
forecast to 15%, the company's shares fell from $ 60.85 to $ 31.
At least five class-action suits, three in the U.S. and two in Canada, have
been provoked by Nortel's about-face.
Targets Revised
Paul Lussier, president of the Quebec Association for the Protection of
Shareholders, said his group's suit claims Nortel knew its growth targets
would have to be revised prior to its Feb. 15 profit warning.
But Roth, speaking to the Canadian Club in Toronto, said the company now
fills orders just four to eight weeks after receiving them.
"This abrupt downturn has hit us as abruptly as it has the U.S. economy,"
he said.
Roth, who offered no apologies, also boasted that Nortel remained Canada's
most valuable company even though its share price was about one-quarter its
52-week high of $ 124, achieved last summer.
As of last Friday, Nortel's total stock-market value was still more than $
94 billion -- 2.5 times the $ 38 billion it was worth when Roth took over
as CEO in October 1997. (The Ottawa Sun, February 26, 2001)
NORTEL NETWORKS: Berger & Montague Files Securities Suit in New Jersey
----------------------------------------------------------------------
The law firm of Berger & Montague, P.C. (http://www.investorprotect.com),
filed a class action on February 23 in the United States District Court for
the District of New Jersey on behalf of all persons or entities who
purchased Nortel Networks Corporation (NYSE: NT) securities during the
period from November 1, 2000 through February 15, 2001 inclusive (the
"Class Period").
The complaint charges defendants with violations of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges
that the defendants issued materially false and misleading information that
misrepresented the Company's financial condition and prospects.
On January 18, 2001, Nortel issued a press release announcing outstanding
fourth quarter and fiscal year 2000 results. The press release projected
strong market demand in Nortel's target industry segments and stated that
Nortel would achieve 30% growth in revenues and EPS in 2001, despite
economic uncertainty.
The complaint alleges that defendants' guidance as to revenues and earnings
for the first quarter of 2001 and full year 2001 as set forth in the
Company's January 18, 2001 press release was materially false and
misleading because at the time they made these statements, defendants were
aware that the economy in the United States had slowed down dramatically.
Moreover, Nortel's customers, who are largely Internet-related companies
and telecommunications companies, were suffering from severe deterioration
of their businesses, so that they had and would have to drastically reduce
their purchases from Nortel in the first quarter of 2001, leading to
weakness in revenue and earnings growth for the remainder of 2001.
Defendants' misrepresentations caused the price of Nortel securities to be
artificially inflated throughout the Class Period. Additionally, certain
Company insiders took advantage of the artificially inflated prices to dump
thousands of their own shares on unsuspecting investors, reaping proceeds
of over $7 million.
On February 15, 2001, after the close of trading, the Company stunned
investors when it issued new earnings and revenue guidance to investors.
Nortel slashed its projected growth rate for 2001 revenues and EPS to 15%
and 10%, respectively, from the previously announced growth rate of 30%.
These disclosures caused Nortel's stock price to plummet from its February
15, 2001 closing price of $29.75 to as low as $19.50 on February 16, 2001,
wiping out more than $33 billion in market capitalization.
The lawsuit seeks to recover losses suffered by individual and
institutional investors who purchased the Company's securities during the
Class Period at artificially inflated prices.
Contact: Todd S. Collins, Esquire, Douglas M. Risen, Esquire or Kimberly A.
Walker, Investor Relations Manager, all of Berger & Montague, P.C.,
888-891-2289, or 215-875-3000, or fax, 215-875-5715 or
InvestorProtect@bm.net
NORTEL NETWORKS: Cuts 4,000 Jobs; C.F.O. Lowers Earnings Projections
--------------------------------------------------------------------
On Jan. 18, Nortel chief financial officer Frank Dunn lowered Nortel's 2001
revenue and earnings projections from 35 per cent to 30 per cent and
announced the elimination of 4,000 jobs.
Despite the negative news, Nortel's stock price gained nine per cent.
On Feb. 15, less than a month later, Nortel again revised its earnings and
revenue growth for 2001, this time to 15 per cent and 10 per cent and
increased the job cuts from 4,000 to 10,000. Needless to say, the market
retaliated in usual fashion, sending shares of Nortel 40 per cent lower by
the close of that week.
Within 24 hours of the surprise announcement, two class-action lawsuits in
the United States were filed against Nortel chief executive John Roth and
other key executives, accusing them of providing false and misleading
information in their Jan. 18 financial commentary.
Whoever or whatever is to blame for the sudden change in Nortel's 2001
projections, the news has damaged the company's credibility. This is
unfortunate for the company's stock price.
Notwithstanding an abrupt slowdown in U.S. economic growth, the failure of
Cisco (Nortel's closest competitor) to meet its January numbers or the
remarks of Cisco chief executive John Chamberlin his company's revenue and
earnings would suffer under a slower growth scenario, Bloomberg Financial
shows 40 out of 45 analysts had Nortel rated a buy or strong buy when the
recent news hit the street.
Only 10 per cent, including BMO Nesbitt Burns' technology analyst Brian
Piccioni, had Nortel rated a sell or market perform.
Up until Nortel's surprise announcement, the average earnings per share
estimate among analysts matched the company's projections.
The previous 96 cents a share estimate for 2001 was exactly 30 per cent
higher than 2000 and directly in line with Nortel's Jan. 18 revised
earnings guidance.
The lack of skepticism among analysts demonstrates a level of complacency
with Nortel's projections that could be construed as naive.
It is unsettling to think 90 per cent of analysts believed Nortel's
30-per-cent growth projection in light of a decelerating economy with
companies cutting back on capital expenditures.
Capital expenditures are one of the first things to be reduced in leaner
times. Nortel's business is based on capital investment and is not immune
to gyrations in the business cycle.
The Nortel story offers many life-long investment lessons -- one of which
is the importance of proper diversification.
A good rule is never invest more than you can afford to lose in any one
company.
No matter how compelling the story or how much research you have done, if
it can happen to a company as revered and as public as Nortel, it can
happen to any company, anywhere, any time.
There's a second lesson with respect to timing the purchase of a stock.
Investors who would buy a stock for no other reason than it is down 50 per
cent will sooner or later go broke or grow tired of losing money.
When a stock sells off on its fundamentals, something other than time or a
price decline is needed to reverse sentiment and shift the balance back in
favour of the buyers. Until this occurs, it's like catching a falling
knife.
Until the dust settles, however, tread cautiously and pay attention to the
economic story unfolding in the U.S. (The London Free Press, February 26,
2001)
NORTEL NETWORKS: Keller Rohrback Files Securities Suit
------------------------------------------------------
The law firm of Keller Rohrback L.L.P. announces that a class action
lawsuit was filed on February 23, 2001, on behalf of purchasers of the
securities of Nortel Networks Corp. (NYSE:NT)(TSE:NT) between November 1,
2000 and February 15, 2001, inclusive (the "Class Period").
The complaint alleges that Nortel and certain of its officers and directors
violated federal securities laws by making a series of materially false and
misleading statements, by issuing a series of material misrepresentations
to the market between November 1, 2000 and February 15, 2001. Specifically,
the complaint alleges that defendants misrepresented the level of demand
for its products from its customers. Defendants knew at the time they made
these statements that, in fact, Nortel was experiencing a substantial
shortfall in first quarter sales and earnings due to decreased orders from
its customers. As a result of these false and misleading statements, the
complaint charges, Nortel's stock price was artificially inflated
throughout the Class Period, causing plaintiffs and the other members of
the Class to suffer damages.
Contact: Keller Rohrback L.L.P. Jennifer Tuato'o, 800/776-6044
investor@kellerrohrback.com www.SeattleClassAction.com
NORTEL NETWORKS: Retired Widow from Ontario Launches National Action
--------------------------------------------------------------------
A national class action lawsuit was launched on February 23 on behalf of
all Canadians who lost money when Nortel's stock price collapsed on
February 16, 2001.
The Statement of Claim was issued in Toronto, Ontario. The lawsuit alleges
that insiders at Nortel profited from knowledge which was not publicly
disclosed to ordinary investors. The class action was started by Carol
Fraser, a 74 year old retired widow from St. Catharines, Ontario who lost
savings when the stock collapsed. Mrs. Fraser's lawyer, Vincent Genova,
explains, "Corporations have a duty to their shareholders - all of their
shareholders, whether rich or poor, to alert people right away when there
are problems with the company. It is unfair that some insiders appear to
have known about material changes at Nortel, but the ordinary investor was
shut out in the cold."
Joel Rochon, also a lawyer working for Mrs. Fraser states, "We need to get
to the bottom of this situation. And we need to make sure that Canada's
security laws are enforced. We can't leave this problem to be resolved by
U.S. Courts."
Mrs. Fraser's law firm, Rochon Genova, is an established class action law
firm based in Toronto. It is associated with the pre-eminent American class
action law firm, Lieff, Cabraser, Heimann & Bernstein LLP ("LCHB"). LCHB
represents American shareholders who lost money on Nortel. Also acting for
Mrs. Fraser is the Toronto class action law firm McGowan & Associates.
Mr. Rochon explains, "It is important for Canadians and Americans to work
together to resolve this problem. People have to be able to trust the
capital markets by knowing that security laws will be enforced. Otherwise
there is no protection for the average investor."
Mrs. Fraser's lawsuit is the first action commenced in Ontario (an action
was commenced in Quebec on February 22, 2001), and it is the first action
to include all of Canada (actions were started in New York on February 19,
2001).
Contact: contact Joel Rochon or Vincent Genova at Rochon Genova, (416)
363-1867, www.rochongenova.com. Or call Vincent Genova at (416) 876-7054
(cellular)
* Clash over Measures to Restrict Class Actions Heats up
--------------------------------------------------------
The fight over tort reform is taking shape, and the clash over the
granddaddy of them all -- measures to restrict class actions -- is already
heating up.
Business advocates at the American Tort Reform Association (ATRA) and the
U.S. Chamber of Commerce are handicapping their chances at advancing the
half-dozen tort reform bills that died with the end of the last Congress,
while their entrenched opponents -- trial lawyers -- are meeting with
allies on the Hill to plot a defense.
Neither side has much time to contemplate strategy: Tort reform is already
a major component of the new Patients' Bill of Rights Act introduced two
weeks ago by Sens. John McCain, R-Ariz., and Edward Kennedy, D-Mass. And
other measures, targeted at limiting liability in fields as far-flung as
education and high-tech, are just around the corner.
It won't be an easy fight for either side.
Although the tort reformers have gained a Republican president, they lost a
number of their staunchest supporters in the Congress in the last election
cycle, including Sens. John Ashcroft, R-Mo., Spencer Abraham, R-Mich., and
Slade Gorton, R-Wash. With a closely divided house and evenly split Senate,
not to mention a slate of higher priorities, President George W. Bush
doesn't seem willing to risk his political capital on the issue anytime
soon.
But that has not deterred tort reform supporters, who have already begun to
take incremental steps toward their goal of systemwide reform.
Nothing 'meaningful'
Mark Gitenstein, a partner at Mayer Brown & Platt in Washington, D.C., who
advises the Chamber of Commerce and companies like the Hewlett-Packard Co.
on tort reform, says the close margins in the 107th Congress may have kept
the political climate from improving significantly. "Despite Republican
control of the White House and Congress, I think it will be difficult to
pass meaningful legislation," he says.
James Wootton, president of the U.S. Chamber of Commerce's Institute for
Legal Reform, says, "The real action won't start until some consensus
emerges in the business community." Wootton is forming a business coalition
to push tort reform.
To get a bill passed in the current political environment, "it would have
to be focused, bipartisan, and perceived to be fixing a specific problem
that hurts consumers," says Gitenstein.
During the Clinton years, Congress approved a slew of tort reform bills --
among them, the Y2K Information and Readiness Act.
The buzz on Capitol Hill is that the high-tech industry, partly because of
its bipartisan appeal, could be the next benefactor of liability-reducing
legislation. Joseph Rubin, director of congressional and public affairs at
the Chamber of Commerce, says high-tech executives are increasingly
concerned about being sued by consumers over privacy concerns or junk mail.
"A lot of trial lawyers target deep-pocketed industries," says Rubin.
A Classy Act
But a bill limiting the liability of software-makers and other high-tech
companies would be small potatoes compared to what business advocates
really hope to achieve: class-action overhaul.
The most dramatic change proposed last year, class action legislation is
expected to be introduced again this session by Sen. Orrin Hatch, R-Utah,
and Rep. R. James Sensenbrenner Jr., R-Wis. "We are pretty optimistic,"
says the chamber's Rubin. "We are working with a number of senators on both
sides of the aisle."
The legislation would stop class-action plaintiffs in multiple
jurisdictions from bringing suit in state courts, referring those cases to
the federal judiciary, where the proponents of the bill say the cases can
be handled better.
Plaintiffs lawyers who poured millions of dollars into former Vice
President Al Gore's presidential campaign aren't about to let their guard
down. They speculate that Bush, to whom they gave much less money during
the election cycle, may be saving tort reform for later in his term.
ATRA president Sherman "Tiger" Joyce points to a class action brought in an
Illinois court against the State Farm Insurance Co., which charged the
company with replacing crash parts with lower-valued auto parts. The
plaintiffs, who came from all over the United States, won a $ 1.6 billion
verdict, which is now on appeal.
"The case was too big and outsized for that judge," says Joyce, adding that
the judge didn't seem to take into account that rules governing auto part
replacement differ from state to state.
But the trial attorneys say the drive to move class actions into federal
court is not aimed at finding a more fair or better equipped venue. Rather,
they believe, the proposal would make class actions more costly and
difficult, since the federal courts are already clogged and understaffed.
"It's vitriolic, mean- spirited, and disingenuous," says Fred Baron,
president of the Association of Trial Lawyers of America (ATLA).
Of course, trial lawyers have traditionally also achieved better results in
state courts, where juries tend to be more sympathetic and where lawyers
are able to donate money to the campaigns of elected judges.
The trial attorneys have been calling on the recipients of their campaign
largess to discuss defensive measures. A spokesman for ATLA says the group
is meeting with lawmakers on both sides of the aisle and conferring with
environmental, women's and seniors groups about what they can expect from
this session of Congress.
A Democratic staffer on the Senate Judiciary Committee says the Senate will
act as a "fire wall" to any of the major tort reform efforts, even if
Republican backers of bills are able to get the votes of Sen. Joseph
Lieberman, D-Conn., and Sen. John Rockefeller, D-W.Va., two senior
lawmakers with histories of breaking with the party on tort reform.
"There are a number of things that the Democrats would be anxious to talk
about if [the Republicans] should open the issue," says the staffer,
hinting at a filibuster -- the likely recourse for Democrats should one of
the tort reform bills make it to the Senate floor.
A filibuster is not the likely scenario for Kennedy and McCain's new
version of the Patients' Bill of Rights, which aims to satisfy both trial
lawyers and health care companies.
The new bill sets up a bifurcated system that would let patients who are
denied medical service bring malpractice suits in state courts. Patients
who want to sue their health maintenance organizations over coverage issues
will be able to take their cases to federal courts. The coverage disputes
will be capped at $ 5 million and governed by contract law -- not tort law
-- so that the cap does not set a precedent for awards made for denial of
services.
Teacher Protection
There may be a bigger fight over the Teachers Protection Act, which would
limit the liability of teachers and principals who undertake "reasonable
actions" to maintain order in the classroom. The legislation would also
force plaintiffs who lose suits against schools to pick up their opponents'
legal bills.
During his bid for the White House, Bush ran ads calling for a so-called
Teachers Protection Act, which would aim to protect teachers from spurious
suits. This provision, although mentioned in his report to Congress last
month outlining his education agenda, will not be proposed as part of the
legislation that the administration plans to send to the Hill.
"I must say that I was surprised to see that it was not part of the
package," says Bush ally Sen. Judd Gregg, R-N.H., who is planning to
introduce a slightly tweaked version of the teachers protection bill that
the late Sen. Paul Coverdell, R-Ga., sponsored last year in hopes of
amending it to Bush's education package.
What worries ATLA's Baron about the Teachers Protection Act is that the
legislation isn't intended so much to correct a problem as to advance the
federalization of tort laws. He says there is no evidence of the education
system being overwhelmed by lawsuits.
"Tort law should be dealt with by the states," says Baron, adding that tort
reform proponents "are creating a record of federal tort protection so
that, next time when they want federal legislation, they'll be able to say,
'Well, look what we did for the teachers.' "
But Victor Schwartz, a lobbyist with Crowell & Moring and general counsel
of ATRA, says the problem of teachers being dogged by lawsuits is a real
one. Many of the cases, says Schwartz, are settled out of court because
schools figure they aren't worth the risk or time to fight. "It's a
nickel-and-dime operation that really adds up," he says.
According to a survey of secondary and elementary school principals
conducted by ATRA, the percentage of respondents who claimed to have been
involved in a lawsuit or settlement in the past two years jumped from 9
percent in 1989 to 25 percent in 1999.
"In my discussions with teachers in New Hampshire," says Sen. Gregg, "they
have told me that the only reason they become members of a union is because
they want liability coverage."
Diane Shust, chief lobbyist for the National Education Association -- the
largest education organization in the country -- says her group isn't
taking a position on the issue. The NEA doesn't believe suits against
teachers and school officials are a widespread problem requiring a federal
law and does not feel threatened by a possible membership drop should the
federal bill become law. Besides, adds Shust, "this issue is already
covered by state law."
Some states, however, are debating whether current laws provide enough
protection for teachers. Versions of the legislation have been introduced
in Arizona and New Hampshire and are being considered in Oklahoma and North
Carolina.
Karen Miller of the American Legislative Exchange Council, a bipartisan
association of 2,400 state legislators, says that she has sent out the
Teachers Protection model legislation to lawmakers all over the country.
"In the couple years that I've been doing this," she says, "this bill is
moving faster and more furiously than any of the other bills that we've
been working on." (Broward Daily Business Review, February 23, 2001)
SOUTHLAND CORP: 7-Eleven Franchise Owners Petition in Suit over Share
---------------------------------------------------------------------
Supreme Court Case No. S095104
Case Below: A083037; Cal.Ct.App., 1st Dist., Div. 4; 85 Cal.App.4th 1135,
01 C.D.O.S. 52
Petition filed: February 8, 2001
Procedure: Petition for review after affirmance of judgment.
Question presented: Did record evidence support a trial court's finding
that the settlement of a class action lawsuit filed by a number of 7-Eleven
franchise holders was fair, adequate and reasonable?
Facts: A group of 7-Eleven store franchise holders, calling themselves the
7-Eleven Owners for Fair Franchising, brought a class action lawsuit
against Southland Corporation. The franchise holders alleged that Southland
had breached its franchise agreements with them by failing to share ratably
in certain "returns, discounts and allowances" (RDAs) over a period of
several years.
After four and a half years of litigation, and voluminous discovery, the
parties settled. Out of a class totaling some 5,500 franchisees, all but 80
joined in the proposed settlement. Of those 80 which opted out of the
settlement, nine filed objections, alleging collusion.
After lengthy review of the fairness, adequacy, and reasonableness of the
proposed settlement, the trial court approved it.
Ginger Watson and the other objectors appealed.
The court of appeal affirmed, holding that the trial court did not abuse
its discretion in approving the settlement.
Looking to the factors outlined in Dunk v. Ford Motor Co. (1996) 48
Cal.App.4th 1794, the court found that they weighed in favor of a finding
that the settlement was fair. The settlement was reached through
arm's-length bargaining, and the extensive investigation and discovery
undertaken in the case were sufficient to allow both counsel and the court
to act intelligently. Further, the franchise holders' counsel was
experienced in litigation of this type.
Finally, the court noted, the percentage of objectors, out of a total class
of more than 5000, was small. Given the threat that divisive litigation
posed to the parties' ongoing business relationships, the court found also
that the $37 million settlement fund was not unattractive.
The court rejected the objectors' allegations of collusion and other claims
of error as without merit.
Counsel for petitioner Ginger Watson: J. David Franklin, Franklin &
Franklin, 550 W. C St., Ste. 950, San Diego, CA 92101, 619-239-6300
Counsel for respondent The Southland Corporation: Mark Spooner, Arnold &
Porter, 777 Figueroa St., 44th Fl., Los Angeles, CA 90017, 213-243-4000
Counsel for respondent 7-Eleven Owners for Fair Franchising: John Wells,
Stark, Wells, Rahl, Schwartz & Schieffer, 1999 Harrison St., Suite 1300,
Oakland, CA 94612-3508 (California Supreme Court Service, February 16,
2001)
NORTH CAROLINA: Supreme Ct Sidesteps Parking Fees By The Disabled
-----------------------------------------------------------------
The Supreme Court will not get involved for now in the question of whether
the disabled may be made to pay some of the government's cost to
accommodate them, such as a fee for special ''handicapped'' parking tags.
The court, without comment, turned aside three cases involving fees under
the 1990 Americans with Disabilities Act.
The justices looked at appeals arising from fees charged in North Carolina,
California and Texas, but chose not to consider any of them.
At issue was the government's ban on any state surcharges to the disabled
for the cost of providing special services, and a larger constitutional and
ideological question about whether Congress had the authority to force
states to do certain things under the ADA.
Opponents of the fees claim they discriminate against the disabled and thus
violate the ADA, the very law that gave rise to them.
Federal appeals courts have reached different conclusions about fees for
services under the ADA.
The high court declined to decide if the 4th U.S. Circuit Court of Appeals
was right to approve North Carolina's fees for handicapped license plates
or parking placards in 1999.
Five disabled people had sued North Carolina, saying the state broke the
law by charging $5 for placards. The state argued that Congress did not
have the power to forbid such fees.
The 9th U.S. Circuit Court of Appeals overturned California's $6
application fee for handicapped placards. The appellate court ruled in 1999
that the fee is discriminatory and violates the ADA.
Lawyers for California appealed, claiming the fee is justifiable because it
helps police enforce handicapped parking rules and that the placard program
actually affords the disabled more access than the ADA requires.
The appeals court decision ''creates a serious disincentive to states that
seek to implement progressive programs that exceed the ADA's
requirements,'' California lawyers wrote.
The 5th U.S. Circuit Court of Appeals threw out a challenge to Texas'
planned $5 fee for handicapped parking placards. It ruled last year that
the ban on such surcharges is unconstitutional, and dismissed a
class-action lawsuit.
The court also added a twist by ruling that the fee ban is ''a highly
intrusive limit on the core state power to choose revenue sources.''
The main plaintiff in that suit, Nell Neinast, appealed to the Supreme
Court. Neinast argued that the ADA prohibits discrimination of any sort,
and that a fee is discriminatory, ''whether it be a $5 charge for equality
such as equal access to buildings or a $50 charge.''
She also argued that a state's power to raise revenue is irrelevant to
enforcement of the ADA.
The cases are Brown v. North Carolina, 99-424; California v. Dare, 99-1417;
and Neinast v. Texas, 00-263. (AP Online, February 26, 2001)
SOUTH DAKOTA: Parents Survey on Season Switch for Girls and Plan Lawsuit
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Surveys are being mailed to South Dakota schools by a group that wants to
put a switch of the girls' volleyball and basketball seasons back on the
bargaining table.
"This is something we're doing for our daughters across South Dakota," said
Rod Goeman of Madison, whose group, People Against Switching Seasons,
distributed the survey. "It's in the best interest of these girls."
The parents in the group said their daughters will have to choose between
basketball and gymnastics or other activities if basketball is moved to the
winter. The switch is scheduled to occur next year. "They're entitled to do
a survey if that is what they wish," said John Brown of Pierre, lawyer for
the SDHSAA.
The group also plans to file a federal class-action lawsuit against the
South Dakota High School Activities Association and a complaint with the
U.S. Justice Department.
Activities association officials question some of the information in the
group's survey. And Brown said it's not likely the seasons will be switched
back since a federal court already has ordered the change.
The SDHSAA's board of directors voted on Dec. 4 to switch the volleyball
and basketball seasons, effective in the fall of 2002. That means
volleyball will be played in the fall and girls' basketball in the winter.
It was part of a settlement in a lawsuit filed by two Sioux Falls families
that had charged the SDHSAA with discrimination. The suit said girls forced
to play volleyball in the winter would lose out on college scholarship
opportunities when competing against girls of other states who play the
sport in the fall.
Gymnastics parents protested the switch. The female athletes will be forced
out of activities they traditionally participated in during the opposite
seasons, Goeman said. "We're hoping the survey will show that the districts
were not well-informed," Goeman said.
Marlyn Goldhammer, SDHSAA executive director, said his group has not yet
spoken with Goeman about the survey. Goldhammer said he would not comment
until after the SDHSAA's March 9 meeting.
Rick Entwistle, a lawyer who represented the families that brought the
original season-switch suit, said the activities association is not likely
to reverse itself. "If the gymnastics parents wanted to stop this, the case
was no secret," said Entwistle. "They had a chance to protest this in court
back then." (The Associated Press State & Local Wire, February 26, 2001)
TIME, TICKETMASTER: Threat to Continuous Service Seen in Lawsuit
----------------------------------------------------------------
The class-action suit brought against Time Inc. and Ticketmaster means more
negative publicity for the magazine subscription business.
Less than half a year after a series of lawsuits alleging price-fixing were
filed against a number of large publishers, a class-action suit has been
filed against Time Inc. and Ticket-master, raising concern among consumer
marketing executives about the suit's impact on continuous service. The
suit claims that a marketing partnership between the companies resulted in
unlawful credit-card and confidential information disclosure.
The complaint, filed by attorney Christopher Casper in Hillsborough County,
Florida, alleges that Victoria McLean received a trial subscription to
Entertainment Weekly after purchasing tickets to a Who concert. Although
the suit says McLean declined a trial subscription offer during the ticket
transaction, McLean received a letter a short time later saying that she
had been signed up for a trial subscription, and that her credit card would
be charged if she didn't cancel.
According to the suit, "Mrs. McLean has not knowingly ever provided her
credit card information to Time."
In response to the suit, Time Inc. spokesman Peter Costiglio says, "The
actual offer itself complies with all the relevant laws and regulations,
and we will be addressing the specifics that are mentioned in the suit in
the appropriate forum."
Costiglio adds that Time Inc. isn't concerned about the issues the suit
raises with regard to partnership marketing and continuous service: "We've
had this relationship with Ticketmaster for two years, and we've been able
to introduce a lot of people to our magazines," he says. "We believe that
the offer that's being made to customers is very clear and quite
straightforward."
Other industry executives, however, are concerned about what the suit might
mean for the future of partnerships and continuous service.
"Who knows what the outcome will be?" says one consumer marketing director
who spoke on the condition of anonymity. "We might have to send
announcement letters before we charge the credit card, or we might have to
send permission to charge the credit card, which is essentially getting
back to renewal notices. Before long, we've missed our chance to become
like the cable industry, the newspaper industry and the Internet ISP
industry."
The lawsuit hits the industry at a time when publishers are trying to move
more subscriptions to continuous service and are exploring strategic
marketing partnerships. Last October, AOL president Robert Pittman
announced that an online trial between Time Inc. and AOL had resulted in
500,000 new subscriptions. Of those, 95 percent of the new subscribers had
used credit cards and 50 percent were continuous-service subscriptions.
Problems Persist
While continuous service is touted as an exciting opportunity in
circulation circles, issues remain. "The continuous service issue is
fraught with problems that we haven't worked through--and fraught with
consumer problems," says a circulation director at a large consumer
publisher. "Whether we are in compliance with the law, the presumption of
fraud is what's going to hurt us."
A major roadblock is the disclosure of credit-card data. "Anytime you're
talking about a marketing proposition that involves getting credit-card
numbers, you've got something that's sensitive," says David Lee, corporate
marketing director, F+W Publications. "A credit-card number on the loose
conjures up all kinds of frightening images for the consumer, and you have
to reassure them that nothing will ever be done with their card."
Although the suit brings more negative publicity to the magazine industry,
Lee doesn't believe it will end partnership marketing and continuous
service. "This can be dealt with," Lee says. "But it does underscore why
the need for customer service and quality control has to be stronger than
for general magazine selling." (Folio: the Magazine for Magazine
Management, February 1, 2001)
* Webb Proposes Creation of Group for Minority Investors’ Suits in H.K.
-----------------------------------------------------------------------
Independent financial commentator David Webb has proposed the creation of a
Hong Kong shareholder activist group with a US$ 30 million annual budget to
be funded by a new stock exchange transaction levy.
The group would sue companies which abuse minority investors, lobby on
their behalf, and establish a corporate governance ratings system in an
attempt to raise the standards of listed companies.
Mr Webb called on the Government to back up its stated commitment to
improved corporate governance by supporting the proposal.
"If the Government really feels (corporate governance is an important issue
here), then they are going to have to get behind it and endorse the
proposal," he told a conference.
Mr Webb, a trenchant critic of Hong Kong's regulatory system, spelled out
his vision for the Hongkong Association of Minority Shareholders (HAMS).
The association could be a catalyst for shareholder activism in the SAR,
helping to raise corporate governance standards, lowering the cost of
capital for companies and thereby improving Hong Kong's economic
competitiveness, he said.
"Investors will pay a premium for good governance, but they discount prices
in emerging markets for the risk of bad governance. This lowers the market
ratings of Asian issuers and increases the cost of equity and debt capital,
making them less competitive globally," he said.
Improved governance would create a "virtuous circle" by raising the quality
of the market, stimulating growth and attracting issuers and investors.
"Increasing globalisation forces our issuers to compete with Western
companies at home and overseas, and if our funding costs are lower through
good corporate governance, then we will be more competitive."
Mr Webb said the creation of HAMS would set a "shining example" to the rest
of Asia.
"Nothing on this scale has been attempted so far and it would go a long way
to achieving Hong Kong's aspirations to be a world financial market, which
is something that the Chief Executive has repeatedly stated (he desires)."
He proposed HAMS be funded by a 0.01 per cent transaction levy, which would
raise more than HK$ 300 million based on last year's stock exchange
turnover. That should support running costs of up to US$ 30 million a year.
The levy represented a minimal increase in transaction costs and could be
absorbed if the Government cut stamp duty by the same amount or more, Mr
Webb said. Investors pay stamp duty of 0.1125 per cent, a levy of 0.01 per
cent and brokerage commission of at least 0.25 per cent.
He said the levy could more than pay for itself by preventing investment
losses from corporate governance abuses.
HAMS would run a team of lawyers to select and pursue targets for
litigation, creating a deterrent to bad governance.
With a large membership, the association could create "pseudo-class
actions" by finding multiple plaintiffs among its membership. He expected
the association could achieve at least 50,000 members.
During the past two years, Mr Webb has become one of Hong Kong's most
outspoken commentators on investment and regulatory affairs through his
Webb -site.com Internet commentary service.
He was speaking at the Symposium on Corporate Governance and Disclosure
organised by the Master of Accountancy Programme of Chinese University of
Hong Kong.
Initial reaction to the HAMS proposal had been positive, he said. He now
intended to put the plan to the Financial Services Bureau (FSB) and seek
support from the Securities and Futures Commission and professional bodies
such as the Hong Kong Society of Accountants and the Law Society.
An FSB spokesman said last night: "The (Standing Commission on Company Law
Reform) and its sub-committees are looking into the issue of shareholders,
including the protection of minority shareholders. We would welcome Mr
Webb's as well as others' proposals which would be considered by the
sub-committees." (South China Morning Post, February 24, 2001)
*********
S U B S C R I P T I O N I N F O R M A T I O N
Class Action Reporter is a daily newsletter, co-published by Bankruptcy
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Washington, DC. Theresa Cheuk, Managing Editor.
Copyright 1999. All rights reserved. ISSN 1525-2272.
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