/raid1/www/Hosts/bankrupt/CAR_Public/010301.MBX
C L A S S A C T I O N R E P O R T E R
Thursday, March 1, 2001, Vol. 3, No. 42
Headlines
AUTO INSURANCE: Policy Owners Sue Farmers Group over Replacement Parts
GLOBALSTAR: Hit With Securities Suit in New York Filed By Shalov Stone
H&R BLOCK: Fed Judge Orders to Stop Advertising 'Rapid Refund' of Taxes
HMOs: Judge to Rule on Dismissal of Lawsuit By Health Care Providers
HOLOCAUST VICTIMS: Author Says Documents Back His Case against IBM
HOLOCAUST VICTIMS: Corporate PR Mentality Seen in IBM Press Release
HOLOCAUST VICTIMS: German Firms May Make up Shortfall In Fund
HOLOCAUST VICTIMS: German Industrial Fund Presses Companies for Money
HOLOCAUST VICTIMS: Lambsdorff Sees Lack of Guarantee for Legal Closure
HOLOCAUST VICTIMS: Polish Victims Donate Money To Shame German Industry
MICHIGAN SCHOOLS: Anti-Gay Group Wages Lawsuit Against Harassment Rules
MICROSOFT CORP: Ap. Ct. Questions Govt Plan to Split & Trial Ct. Ruling
MISSISSIPPI: Jackson State U Denied Law School in Desegregation Suit
NORTEL NETWORKS: Articles Show Different Views on RBC Dominion Role
NORTEL NETWORKS: Spector, Roseman Files Securities Suit in New Jersey
NORTHWEST PORTLAND: Pearl Lofts Owners Cite Shoddy Work, Press Suit
PRIORITY FINANCIAL: Alleged Mental Illness Not Sufficient to Defeat Cert
TRW: 3 Men Injured in Explosion in Airbag Bldg; Suit Re 1991-99 Pending
VITAMIN PRICE-FIXING: 3 Companies to Pay $26 Mil in Australian Suit
WAR VICTIMS: California Lawsuits Claim Japanese Firms Enslaved Koreans
* Law Journal Publishes Strategies For Mass Tort Defense Counsel
* Who Should Be on the Hook for Unsuitable Insurance Sales
*********
AUTO INSURANCE: Policy Owners Sue Farmers Group over Replacement Parts
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Farmers Group Inc. faces a lawsuit from policy owners who say the
fourth-largest U.S. home and car insurer uses auto repair shops that
install inferior replacement parts on damaged vehicles. The suit, filed
in Los Angeles County Superior Court, says Farmers broke a contractual
duty to provide replacement parts of "like kind and quality" by referring
policyholders to shops that use substandard parts.
In a similar suit, an Illinois state jury in 1999 ordered State Farm
Mutual Automobile Insurance Co. to pay policy owners $ 1.2 billion for
allegedly using inferior replacement parts. State Farm is appealing. The
California plaintiffs, who want to change Farmers' alleged "undisclosed
internal policies and procedures," claim the repairs did not return their
vehicles to pre-collision condition.
The suit seeks class-action status and disgorgement of Farmers' profit
from the practice and unspecified damages. Los Angeles-based Farmers, a
unit of Zurich Financial Services, could not be reached immediately for
comment. (Los Angeles Times, February 28, 2001)
GLOBALSTAR: Hit With Securities Suit in New York Filed By Shalov Stone
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Shalov Stone & Bonner issued the following announcement on February 28: A
class action was commenced on behalf of all persons who purchased the
common stock of Globalstar Telecommunications Ltd. (Nasdaq: GSTRF) in the
period from December 6, 1999 to October 27, 2000. The complaint names
Globalstar, Bernard Schwartz and Loral Space & Communications Ltd. as
defendants. The lawsuit was filed on February 28 in the United States
District Court for the Southern District of New York (Case No. 01 Civ.
1748).
The complaint alleges that the defendants made material
misrepresentations and omissions of material facts concerning the
company's business performance during the relevant time. According to the
complaint, throughout the relevant time period, defendants repeatedly
assured investors that the company's operations were performing well,
that the company was enjoying strong growth and that the company's shares
were undervalued, among other things. At the same time, however, the
complaint alleges that the defendants knew or recklessly disregarded that
Globalstar was falling dramatically below the company's publicly stated
business plan and that severe shortfalls in the sales of phones
necessarily imperiled the company's business plan at all relevant times.
Plaintiffs are represented by the law firm of Shalov Stone & Bonner,
which has extensive experience in the prosecution of class actions on
behalf of investors. For more information about Shalov Stone & Bonner,
please visit the firm's website at: http://www.lawssb.com
Contact: Kenneth A. Ricken, Esq.; or Mark J. Nemetz, Legal Assistant,
both of Shalov Stone & Bonner, 212-686-8004
H&R BLOCK: Fed Judge Orders to Stop Advertising 'Rapid Refund' of Taxes
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A federal judge has ordered H&R Block, the nation's largest income-tax
preparation company, to stop using the phrase "rapid refund" and other
terms that he said were deliberately intended to disguise expensive loans
that Block arranges for people anticipating refunds on their income
taxes.
Judge Raymond A. Jackson of United States District Court in Norfolk, Va.,
found that Block had engaged in false advertising and went to great
lengths to conceal the reality that rather than receiving refunds,
clients were taking out high-interest loans to obtain their money a few
days sooner than the Treasury would have sent it to them at no charge. On
some loans, the annual percentage rate charged was more than 500 percent.
Block acted "maliciously, willfully and in bad faith," Judge Jackson
found in a 45-page ruling, which he signed on Friday but did not issue
until Monday.
Block, based in Kansas City, Mo., "strongly disagrees with the judge's
finding of maliciousness" and will appeal, its spokeswoman, Linda
McDougall, said. When the lawsuit was filed 13 months ago, a Block
spokesman called it ridiculous.
This case is unrelated to separate class-action litigation brought
against Block over its high-interest loans. In that case, Block arranged
to have lawyers that it and a partner selected sue it on terms the
partners proposed, and then persuaded a federal judge in Chicago to
approve their prearranged settlement. Other lawyers who had been suing
Block say they will appeal once the judge's decision is final.
In the advertising case, Judge Jackson criticized Block at length for
signing consent decrees promising not to engage in false advertising, and
then after "they consented to one state's order they have simply taken
their advertisements to a new jurisdiction and continued to run similarly
offensive advertisements."
He also held that Block was in violation of Internal Revenue Service
rules that prohibit tax preparers who are allowed to file returns
electronically from marketing loans in deceptive ways.
The I.R.S. said it was aware of Judge Jackson's ruling, but declined
comment on what disciplinary action, if any, it would take against Block.
The lawsuit was brought by John Hewitt, a former Block executive, who
founded the nation's second-largest tax preparer, the Jackson Hewitt Tax
Service, and later sold it. In 1996, Mr. Hewitt opened Liberty Tax
Service, which now has franchises in 37 states.
Mr. Hewitt said the I.R.S. relies on Block for half its electronically
filed returns, and he maintained that because of a Congressional mandate
to have 80 percent of all returns filed electronically by 2008, "the
I.R.S. has turned a blind eye to Block's continued misconduct."
Ms. McDougall, in a statement, said Block believed that the advertising
case affected only free loans it made in Virginia and that free loans
were not covered by the I.R.S. rules.
Judge Jackson held that Block gave away free loans to "target the
newcomer" company, Liberty Tax Services. He awarded $506,000 plus legal
fees to Liberty Tax.
The judge said that despite Block's agreement in his court a year ago to
stop running "rapid refund" and similar advertising, it had "continued to
run both false and misleading advertisements" and had issued a statement
suggesting that it would continue to do so if such ads drew customers.
Judge Jackson also criticized Block's lawyers, led by N. Louise
Ellingsworth of the Bryan Cave law firm in St. Louis, for making an
argument in court based on law that the judge found did not accurately
represent the law. In a footnote, he spelled out the ethical duties of
lawyers under Virginia Bar rules to disclose when they have made
arguments unsupported by law.
On Monday, Block filed a motion for an immediate hearing, saying it did
not understand the court's order and had not expected the judge to issue
a ruling applying nationwide, and it asked that it continue to be allowed
to use the term "rapid refund."
Judge Jackson denied the request for a hearing but said Block could use
the term "rapid refund" in areas other than advertising, like reports to
the Securities and Exchange Commission.
He gave the company until March 9 to remove a list of what he called
offending terms from its advertising. (The New York Times, February 28,
2001)
HMOs: Judge to Rule on Dismissal of Lawsuit By Health Care Providers
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A federal judge in Miami is expected to rule this week on motions to
dismiss lawsuits brought by health care providers against several
publicly traded managed care companies.
During a status meeting Monday, U.S. District Judge Federico Moreno
indicated that a ruling would be issued in the next few days, according
to lawyers and industry analysts familiar with the case.
Last year, the managed-care industry became the target of a deluge of
lawsuits filed by health care providers and patients in federal courts
around the county. The lawsuits named most of the nations health
insurers, including Aetna Inc., Cigna Corp., Health Bet Inc., Humana
Inc., PacifiCare Health Systems Inc., UnitedHealth Group Inc. and
Wellpoint Health Networks Inc.
In October, a six-judge federal panel held that pretrial motions for more
than 50 suits against the HMOs would be consolidated under one judge in
Florida . At the time, Moreno was already handling a case against Humana.
A hearing regarding motions to dismiss the lawsuits took place late last
year.
The plaintiffs contend that managed-care companies have violated
racketeering laws by misleading consumers about the quality of health
care. Plaintiffs also claim the companies have violated their fiduciary
responsibilities under the Employee Retirement Income Security Act, or
ERISA.
Managed-care companies have denied the allegation, insisting they are the
target of political attacks by the plaintiffs lawyers.
In December, Moreno ruled that doctors accusing HMOs of arbitrarily
reducing fees and stalling payments must settle their financial disputes
through arbitration. But Moreno also decided that allegations of
conspiracy and racketeering lodged against six managed care companies by
three doctors must remain in federal court.
Moreno is slated to rule next month on class certification for the
provider lawsuits, which would consolidate the litigation. (Palm Beach
Daily Business Review, February 28, 2001)
HOLOCAUST VICTIMS: Author Says Documents Back His Case against IBM
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Edwin Black marshals page after page of photocopies to rebut charges from
Holocaust historians that he has failed to document his allegations that
IBM knowingly sold technology to Nazi Germany that helped identify and
exterminate Jews and other minorities.
"There is no smoking gun (indisputable evidence)," Black acknowledged in
an interview toward the end of a four-nation book tour. But the punch
card machines that IBM sold the Nazis made the Holocaust easier and more
efficient, he said.
"There always would have been a Holocaust with or without IBM," Black
said. "If it is easier, if it is more efficient, it led to the deaths of
more."
He lays out his case in his book, "IBM and the Holocaust: The Strategic
Alliance between Nazi Germany and America's Most Powerful Corporation."
IBM acknowledges that the Nazis used its Hollerith punch card machines,
but said it did not know whether they contributed to the Holocaust and
that the New York headquarters had lost control of its German subsidiary
after World War II began in September 1939.
Other critics say that many of Black's findings already are in the public
domain, and that the book is linked to a class-action law suit brought by
Holocaust survivors against IBM.
"My prediction is that the suit will go nowhere," said Raul Hilberg, a
University of Vermont professor and historian who has written several
respected books on the Holocaust. "There is no substantive case in the
suit. Just as there is no substantive proof in the book."
"I personally feel that he did not prove anything that we did not already
know," said Hilberg, interviewed from his home in Burlington, Vt. "I
certainly would not review the book. It's much too slippery for that."
The suit, filed Feb. 10 in New York, seeks to force IBM to open its
archives and pay "any ill-gotten gains ... from its conduct during World
War II," roughly estimated at dlrs 10 million in 1940s money, said
Michael Hausfeld, lead lawyer in the case.
IBM spokeswoman Carol Makovich said that the company had not yet been
served notice of the suit.
The company has issued a statement denying complicity in the Holocaust.
"IBM and its employees around the world find the atrocities committed by
the Nazi regime abhorrent and categorically condemn any actions which
aided their unspeakable acts," said the statement, posted on the IBM Web
site.
"It has been known for decades that the Nazis used Hollerith equipment
and that IBM's German subsidiary during the 1930s - Deutsche Hollerith
Maschinen GmbH (Dehomag) - supplied Hollerith equipment," IBM said. "As
with hundreds of foreign-owned companies that did business in Germany at
that time, Dehomag came under the control of Nazi authorities prior to
and during World War II."
Black shows a reporter letters that he says prove that even after Nazi
Germany and the Soviet Union invaded Poland on Sept. 1, 1939, IBM
chairman Thomas Watson and other company officials kept close tabs on the
operation of their German subsidiary before and during the war, and
should have known from contemporary Western newspaper accounts that the
Nazis were persecuting Jews.
And Black says that Watson visited Berlin as late as the fall of 1941,
just before the United States entered the war, and discussed the movement
of Hollerith machines in and out of Nazi occupied Poland and Romania.
The Nazis used the IBM machines in the 1930's and early 1940's to
tabulate census data on Jews and other minorities in Germany, the
Netherlands and Romania, Black said. They used them again to force them
into ghettos, and then to send them to concentration camps, he said.
IBM officials, said Black, gave Germany "the Promethean gift of data
automation on which they had a monopoly ... and they bestowed on Nazi
Germany the magic of information technology that even Germany did not
understand. It was the hallmark of IBM to anticipate the solutions their
clients would need."
"We proved that in France where there was a paper and pencil persecution,
and some 24 percent of the Jewish population was exterminated," he said.
In Holland, where the machines were used and "which had a very willing
bureaucracy, the death rate was 73 percent."
Bob Moore, a historian who specializes in the Holocaust in the
Netherlands, said the book did not appear to be entirely accurate.
"My recollection is that nowhere in the text does he prove that the punch
cards were used in the Netherlands," Moore said in an interview from
Sheffield, England.
Black acknowledges in the book and interview that other historians have
touched on some aspects of IBM involvement in the Holocaust.
"There have been a handful of beginnings," Black said. "But no one has
written about the Hollerith departments in the camps."
Black claims to be the first to show that the machines were used
extensively in the camps. During an interview, he showed photocopies of
lists from which cards were compiled; cards themselves; documents
summarizing the cards, and smaller bits of cards on which he says that
the Nazis wrote the names of exterminated victims.
"Millions and millions of people went in and out of the camps in the
12-year Reich, whether they were Russian prisoners, U.S. fliers or Jews.
The total capacity of all concentration camps was 300,000 to 500,000,"
Black said. "So we are talking about traffic management in the most
oversimplified way."
Moore, although wary of some of Black's claims, praises the book as "a
very clear exposition of the way that a multinational company could and
indeed did maintain trading relations with an enemy throughout the war."
Defending his work, Blacks says that "if there is a message, it is that
this concept of 'Never Again' is not just a catch phrase for the
Holocaust, but a mantra for businessmen everywhere, that their that
technology, their corporate muscle, their assets should not be used to
afflict innocent civilians." (The Associated Press State & Local Wire,
February 28, 2001)
HOLOCAUST VICTIMS: Corporate PR Mentality Seen in IBM Press Release
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"IBM and its employees around the world find the atrocities committed by
the Nazi regime abhorrent and categorically condemn any actions which
aided their unspeakable acts."
According to the Pittsburgh Post-Gazette, this sentence in the recent IBM
press release deserves close study as a hilarious example of the
corporate public relations mentality in action. By denying -- in stilted,
phony language an accusation no one has made, it rises above
meaninglessness only to raise the very doubt it was meant to suppress.
The press release was issued in response to a book and (naturally) a
lawsuit raising questions about IBM's dealings with Nazi Germany 60 years
ago. The book doesn't allege that IBM actually favored Nazi atrocities
even at the time.
But IBM's earnest revelation that it has gone to the trouble of "finding"
the Nazis objectionable suggests the company had to stop and think before
reaching this conclusion. Perhaps it did a few computer runs to determine
that, yes, the Nazis were bad, bad, bad.
Furthermore, the company is obviously lying when it asserts that its vast
army of "employees around the world" all share this corporate finding.
How does it know? Did it interview each of them? Not one closet Naziphile
in the bunch? None even who find Nazis "disgusting" but not quite
"abhorrent"?
In short, IBM sounds like it has its fingers crossed. This is the way it
would talk if it were rebutting an actual and valid accusation. In the
political world, this mode of discourse is known as "spin" and has been
recognized long since as a language operating far above petty concepts of
truth and falsehood. But, as with so many other great American
achievements, the private-sector contribution to the creation of spin is
underappreciated. Companies like IBM do it darned well.
Unfortunately, a morally universal language that makes truth and
falsehood sound the same isn't so wonderful on occasions when you're
actually telling the truth. This still doesn't give us cause to worry
that IBM harbors any sympathy now for Nazis long ago. But the reflexive
recourse to spin, among politicians and corporations alike, does give us
cause to wonder if they'll get it right the next time a moral dilemma
comes along.
In a way, moral neutrality is built into the corporate form. Although
corporations like to exploit the pathetic fallacy -- the tendency to
attribute human emotions to inanimate objects -- by portraying themselves
as devoted primarily to curing homeless orphans of cancer, they are
almost required to avoid extravagant moral sensitivity and do whatever
they can, within the law, to maximize value for their shareholders. Even
corporate good works must be justified as good for business.
There's a certain circularity here: It's good for business for the
company to look as if it cares about more than just what's good for
business. The puzzle is that if people came to believe this, it would no
longer be true. The business justification for corporate high-mindedness
depends on the perception that there is no business justification.
The conceit that corporations are human beings is why today's IBM is
being held morally and legally responsible for what the company may have
done two-thirds of a century ago. A class-action lawsuit demands that IBM
"disgorge" lovely word -- its wrongful profits from that time. Plus
interest. IBM, famous for stockholder loyalty, probably has more
continuous owners since the 1930s than any large company other than AT&T.
But this group surely represents a small fraction of IBM's current
ownership. Why should the rest bear responsibility for the company's
ancient wrongs?
The answer is: That's the deal when you buy a share. In exchange for
limited liability -- the most you can lose is the value of your share --
you assume your fraction of responsibility for anything the company has
done or will do in its perpetual life.
Still, it's odd. Even if the company's current value reflects whatever
profits it made from its dealings with the Nazis, those profits
presumably were reflected in the price you had to pay for your shares, so
any payout now means you're disgorging twice for sins not your own.
Punishing shareholders for past corporate wrongs is even odder when you
reflect on who gets punished. It's not the shareholder when the sin was
committed or even the shareholder when the punishment is inflicted; it's
the shareholder when the suit is announced. At that point, the stock
price presumably adjusts itself to reflect the likelihood and likely cost
of any punishment. After that, buying or selling the stock is merely a
gamble on changing expectations about how the process will turn out.
But share price aside, it's good to know that IBM abhors the Holocaust.
(Pittsburgh Post-Gazette, February 28, 2001)
HOLOCAUST VICTIMS: German Firms May Make up Shortfall In Fund
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Some leading German companies are ready to help make up a shortfall in
their compensation fund for Nazi-era forced laborers, a move that could
help convince U.S. judges to dismiss class-action suits against the
country's banks.
A hearing in a class-action case against banks and insurers is scheduled
Wednesday in New York. The lead German envoy on the slave labor issue
said that case along with another in New Jersey _ would be a critical
test for companies seeking legal security in exchange for establishing
the fund.
Otto Lambsdorff said he hoped both lawsuits would be dismissed shortly.
But Lambsdorff said he had failed to persuade companies to begin handing
over as a goodwill gesture some of the money they have pledged so far to
the 10 billion mark (dlrs 4.7 billion) government-industry fund. New
lawsuits, including a complaint against IBM in the United States, have
made the companies even more cautious, he told German radio.
Still, electronics giant Siemens and insurer Allianz said they are
prepared to increase their contributions to the fund. Industry has so far
donated 3.6 billion marks (dlrs 1.7 billion), well short of the 5 billion
marks (dlrs 2.4 billion) promised. The government has pledged the other
half.
Embarrassed by the failure to make good on a pledge intended to help
elderly survivors before they die, the industry foundation drumming up
donations said it has written to all 5,900 companies who have so far
contributed and asked them to give more.
With thousands of smaller companies still refusing to come forward,
pressure is growing in particular on the 17 founding members of the fund
large companies including DaimlerChrysler, Volkswagen and Deutsche Bank
to make up the difference and show U.S. judges that Germany was sincere
in its efforts to atone for its past.
''The founding members are ready to close the gap'' together with the
other companies who have already given, said Joerg Allgauer, a spokesman
for Allianz.
Among other companies, tiremaker Continental, cosmetics makers Beiersdorf
and cookie company Bahlsen said they had yet to make a decision on
whether to increase their contribution.
About 1 million victims of the Nazis' forced labor policies mostly
non-Jews from eastern Europe could receive payments under the fund. (AP
Worldstream, February 28, 2001)
HOLOCAUST VICTIMS: German Industrial Fund Presses Companies for Money
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The German industrial fund for compensating former Holocaust-era slave
labourers has stepped up its attempts to raise money from companies, in
an attempt to ensure dismissal of US lawsuits against German businesses.
Last year, German industry and government pledged to pay DM10bn (Pounds
3.2bn) to Holocaust survivors, but industry has so far raised only about
DM3.6bn of its DM5bn share, from 5,489 companies. The New York judge
overseeing a lawsuit against the biggest German banks said she was
troubled that not all the money had been raised.
Wolfgang Gibowski, spokesman for the fund, said that all contributing
companies had been asked to increase their payments by 50 per cent, from
the current required level of one thousandth of their annual sales. If
many companies respond by increasing their contribution, Mr Gibowski said
that the 17 founding members of the foundation - which include some of
the largest German companies such as Siemens, DaimlerChrysler, Allianz
and Deutsche Bank - were prepared to improve their contribution further.
Pressure is also growing for wealthy individuals who profited from slave
labour to contribute. Munich's Suddeutsche Zeitung newspaper ran an
opinion piece under the headline "The time is ripe" calling on the
descendants of arms manufacturer Friedrich Flick to pay money to slave
labourers.
Flick's company had 120,000 employees during the war, 40 per cent of whom
were slave labourers. The article claimed that Friedrich-Karl Flick, who
now lives in Austria, had a fortune of around DM10bn, while his sons
Gert-Rudolf and Friedrich-Christian each have personal fortunes of about
DM1bn.
Gert-Rudolf Flick said in 1996 that it was "absolutely possible" that his
family would make donations to Holocaust survivors.
Mr Gibowski stressed that the full DM5bn would be paid. "It was promised
and we keep our word," he said.
The money is due to be paid once German companies have achieved "legal
peace" in the US. Lawyers for Holocaust survivors hope that this can be
achieved with the dismissal of the class action case against German banks
in New York. However, Mr Gibowski said that this would not be enough to
guarantee legal peace, because a few other lawsuits are outstanding.
Separately, the Austrian government said a new lawsuit filed against it
in California had little chance of success. Last month Austria signed a
deal with the US government, modeled closely on the German agreement. The
new lawsuit has been brought by lawyers objecting to that settlement.
(Financial Times (London), February 28, 2001)
HOLOCAUST VICTIMS: Lambsdorff Sees Lack of Guarantee for Legal Closure
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Germany's top negotiator over compensation to Nazi-era forced laborers
warned Wednesday that even if a New York judge dismisses a key lawsuit
against German firms involved in the program, this would not be enough to
give German industry the legal closure it demands before beginning
payments to the victims.
Otto Lambsdorff told Deustchlandradio Berlin that the New York
class-action suit currently underway against German banks was only one of
a number of cases pending in the United States against German firms over
the slave labor issue.
German government and industry has promised almost five billion dollars
in compensation to former Nazi slave and forced laborers.
Time is of the essence however in beginning the payments as the Nazi
victims have an average age of over 80 and are dying off.
A second suit filed against German firms in New Jersey must also be
dismissed if German industry is to be free of any more legal action,
Lambsdorff said.
Michael Jansen, the head of the foundation handling the
five-billion-dollar fund, said Saturday that a law suit over US computer
giant IBM's alleged links to the Nazi regime was also delaying the
compensation payments.
"It is really annoying that a climate of uncertainty can grow out of new
complaints that come precisely from where you don't expect it, namely
those who signed the compensation agreement," he told DeutschlandRadio.
He added: "The problem is in the United States, and not the fact that we
don't have enough money to pay up."
Earlier this month, former forced labourers filed a suit in New York
against IBM for supplying punch-card machines to Adolf Hitler's Germany.
Compensation payments by German firms to former Nazi slaves and forced
laborers were postponed in January after New York judge Shirley Kram put
off a ruling on suits against German firms until the end of February.
Kram requested a detailed schedule of funding, "including a specific
cut-off date by which all funding must be accomplished," and asked German
industry to verify it will supply the full five billion marks (2.5
billion euros, 2.3 billion dollars) it has pledged for compensating the
Nazi victims.
German industry has so far raised only 3.6 billion marks. The German
government is also to pay five billion marks.
Kram further requested a list of the standards that the German
"Remembrance, Responsibility and Future" foundation will use to evaluate
property claims and "the form and mechanics of the appeal process for
property claims rejected by the commission."
Lambsdorff has said that plans to begin payments in March will now
"definitely not be met."
German industry wants legal closure, which must come from US courts, to
clear the way for the German parliament to declare German firms immune
from further prosecution, and then for the payments to start.
The US government agreed last July to oppose the then 55 remaining class
action suits in the United States as well as other possible future claims
against German companies and their subsidiaries filed in the United
States by Holocaust-era victims.
The forced laborers, mainly from five East European countries -- Belarus,
then-Czechoslovakia, Poland, Russia and Ukraine -- number from 750,000 to
one million, depending on whether agricultural workers are counted. They
will get an average of 5,000 marks (2,600 euros, 2,400 dollars) each.
Aside from the forced laborers, there are also former slave laborers --
almost all Jewish -- who were treated more harshly. They number up to
about 200,000 and should get about 15,000 marks each. (Agence France
Presse, February 28, 2001)
HOLOCAUST VICTIMS: Polish Victims Donate Money To Shame German Industry
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Aging Polish survivors of Nazi-era slave labor, irked by delays in
promised compensation from Germany, tried to shame German industry by
making their own symbolic contributions to a compensation fund.
Several dozen elderly Poles, some of whom worry they might die before
seeing any payments, dropped coins into a collection box at Warsaw's
Jewish Theater in hopes of shaming German companies into faster action.
''We, survivors of ghettos, death and labor camps and factory barracks
have met to support the poor German industry with contributions from Nazi
victims,'' said Ludwik Krasucki, 75, secretary of the Association of
Jews, Veterans and World War II Victims.
''German industry is clearly playing for time, and it is a matter of
decency to raise the money. We are doing this to shame them,'' added
Krasucki, a survivor of the Stuthoff death camp.
The German government and industry agreed to set up the 10 billion mark
(dlrs 4.8 billion) fund last year to compensate survivors of Nazi-era
slave- and forced-labor regimes and end U.S. class action lawsuits.
Payments have been delayed, however, by problems collecting German
companies' half of the fund and by a New York court's refusal to dismiss
a Holocaust suit against German banks. The next hearing is Wednesday.
Many Polish survivors say Germany is hiding behind legal arguments.
''We want to alert public opinion in Poland, Germany and in other
countries to such treatment of Nazi victims, empty declarations and
neglected promises,'' Krasucki said.
The group collected about 400 zlotys (dlrs 100), which it plans to turn
over to an industry representative at the German Embassy.
So far, German companies who used forced or slave labor during World War
II have collected dlrs 1.7 billion of their dlrs 2.3 billion in pledges
to the fund.
Various estimates put the number of eligible survivors at 1 million to 2
million, mostly non-Jewish citizens of Eastern Europe and the former
Soviet Union.
Warsaw estimates that 500,000 Poles are eligible, and has expressed
concern that many might die before receiving any compensation.
''We have everything except time. It's ticking away on us and it's
nearing the end,'' said Andrzej Grabowski, in his late 70s, another
survivor of the Stuthoff camp. (AP Worldstream, February 27, 2001)
MICHIGAN SCHOOLS: Anti-Gay Group Wages Lawsuit Against Harassment Rules
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An anti-gay organization says it may sue Michigan schools whose
harassment policies could be used to stop students from speaking against
homosexuality. Gary Glenn, the group's president, said its legal
affiliate was willing to represent any student or parent in a lawsuit
contending the policy curbs free-speech rights. The school district has
received no such complaints, Assistant Superintendent Jayne Mohr said.
The American Family Association of Michigan sent a letter Tuesday to the
Traverse City Area Public Schools, saying their policy was ``strikingly
similar'' to a ``speech code'' struck down this month by a federal court
in Pennsylvania.
Glenn said AFA-Michigan also would scrutinize other schools' harassment
guidelines. ``Traverse City is the only district we've yet discovered
that has an unconstitutional speech code in place,'' he said. ``But I'd
be very surprised if there were not many such speech codes around the
state.''
On Feb. 14, a panel of the 3rd U.S. Circuit Court of Appeals overturned
anti-harassment rules in the State College, Pa., school system. The court
said the policy went too far by prohibiting harassment based on
everything from race and sexual orientation to ``other personal
characteristics'' including clothing, appearance and social skills. The
ruling is binding only within the 3rd Circuit, which doesn't include
Michigan. But the AFA says it sets a precedent that would strengthen
lawsuits against similar policies elsewhere.
The Traverse City policy says harassment could include ``written or oral
innuendoes, comments, jokes, insults, threats or disparaging remarks
concerning a person's gender, national origin, religious beliefs, etc.''
It does not mention sexual orientation. But the ``etc.'' and the
provision about religious beliefs could be construed as forbidding
written or spoken comments about homosexuality, Glenn said.
The definition also includes placing offensive ``objects, pictures or
graphic commentaries in the school environment.'' That could mean
bringing a Bible to school or handing out religious tracts, said Bryan J.
Brown, a lawyer with the AFA Center for Law & Policy in Tupelo, Miss.
Mohr said the Traverse City policy was intended to cover only forms of
harassment already prohibited by anti-discrimination law. ``Sexual
orientation is not meant to be a part of that,'' she said.
She said school attorneys regularly review policies to make sure they
comply with pertinent court rulings. ``At this point we don't see
anything illegal within the policy,'' Mohr said.
Kary Moss, executive director of the American Civil Liberties Union of
Michigan, said schools should guarantee a free exchange of ideas but also
protect students from harassment that impedes learning. ``The AFA doesn't
seem to be concerned about the First Amendment or the right to free
speech,'' Moss said. ``It seems they are concerned about their own
ability to harass children because of their sexual orientation.''
Will Poland, spokesman for a group called the Traverse City Campaign
Against Discrimination, said even well-intended comments could incite
physical attacks against minorities.
But Glenn said barring students from ``compassionately warning fellow
students about the severe medical consequences of homosexual behavior not
only violates the Constitution, but arguably (puts) young lives at
greater risk.'' (The Associated Press, March 1, 2001)
MICROSOFT CORP: Ap. Ct. Questions Govt Plan to Split & Trial Ct. Ruling
-----------------------------------------------------------------------
An appeals court questioned on Tuesday a government plan to split
Microsoft Corp. in two and raised doubts about the credibility of the
trial judge who ruled that the company violated antitrust laws. For the
second consecutive day, the appeals judges bombarded government attorneys
with questions about whether the violations warranted breakup, whether
dividing Microsoft would truly promote competition, and why there had
been no full hearing on the split.
Several judges on the seven-member panel raised the possibility of
throwing out one or two of the three major findings against Microsoft and
upholding only the charge that the company illegally maintained its
monopoly in personal computer operating systems.
That could mean sending the case back to the district court level to
reevaluate the remedy part of the trial, said judge David Sentelle.
``Don't we have to re-litigate remedy if we strike down any of your
case?'' Sentelle asked Justice Department counsel David Frederick.
Chief Judge Faults Jackson
Edwards and other judges lashed out at trial judge Thomas Penfield
Jackson for making out-of-court statements about the case in speeches and
comments to journalists. ``It violates the whole code of office,'' said
Edwards, chief judge for the U.S. Court of Appeals for the District of
Columbia. ``The system would be a sham if all judges went around doing
this.''
In a book published after the trial ended, a journalist says he
interviewed Jackson twice during the trial. In those interviews, the
judge compared Microsoft executives' to a street gang and criticized the
appeals judges for overturning one of his earlier rulings.
Microsoft argued that the out-of-court comments show Jackson was biased
and asked the appeals court to void all of his rulings. The U.S.
Department of Justice and 19 states contend the statements shouldn't
affect the trial because they were published after Jackson ruled on the
case.
Judges Sentelle and Stephen Williams wondered whether they should show
deference to Jackson's findings of fact, given his remarks.
Chance Of Breakup Seen Diminished
On June 7, Jackson ordered that the company be broken up to prevent
future antitrust violations, and set other remedies, all of which he
suspended pending appeal.
Jackson had found Microsoft holds monopoly power in the market for
personal computer operating systems with its Windows product and
illegally used that power, including integrating its Web browser into
Windows and refusing to offer it separately.
Legal analysts say the appeals judges are unlikely to void all Jackson's
rulings and start the trial over again. But Jackson's remarks could make
it easier for them to strike down the break-up remedy and many of
Jackson's other rulings.
``He doesn't get the benefit of the doubt, and Microsoft's arguments are
elevated in importance,'' said William Kovacic, a George Washington
University law professor attending the hearings.
Edwards raised other problems with Jackson's ruling during Tuesday's
arguments. He said the trial court was ``absolutely unclear'' in reaching
findings that Microsoft had acted illegally in trying to monopolize the
market for Web browsers.
``(T)here are these sleights of hand about whether we're talking about a
browser market or whether we're talking about what we were talking about
yesterday, which is the platform market,'' said Edwards. ``You can't have
it both ways.''
The government charges that Microsoft offered Netscape a deal in 1995 to
divide the browser market. But the idea that Microsoft would be able to
gain a monopoly over the browser market, Judge Tatel said, was ``awfully
speculative.''
Microsoft has denied proposing to divide the browser market in a June
1995 meeting with Netscape Communications Corp., now owned by AOL Time
Warner .
Richard Urowsky, arguing for Microsoft, said any attempt to manipulate
the browser market would have failed as there were so many other browsers
available to consumers at the time.
There had also been signals Monday that the appeals court was skeptical
of Jackson's ruling. The appeals judges had reserved the toughest
questions for the government's lawyers, quizzing them on whether
destroying Microsoft's monopoly might simply result in another firm's
dominating the market.
``I don't think we're going to see a breakup,'' Kovacic said Tuesday. ``I
sense a consensus among them that perhaps parts of the government's case
are going to fall by the wayside.''
There has been speculation that weakening of the case by the appeals
court could lead to settlement talks between Microsoft and the new
administration of President George W. Bush.
It is not clear how soon the appeals court will produce its opinion, with
estimates ranging from a few weeks to several months. (Washington
(Reuters), Thursday, March 1, 2001)
MISSISSIPPI: Jackson State U Denied Law School in Desegregation Suit
--------------------------------------------------------------------
A federal judge overseeing Mississippi's long-running college
desegregation suit says historically Black Jackson State University
cannot justify the need for a new law school.
The ruling, by U.S. District Judge Neal Biggers Jr., comes as parties
continue settlement talks in the case.
The law school, which would be the third in the state, had been a
bargaining point in the plaintiffs' $ 800 million settlement proposal.
"The feeling is that (Black) people are under-served by the two law
schools," says State Sen. Hillman Frazier, D-Jackson.
The University of Mississippi operates the state's only public law school
in Oxford. Mississippi College, a Clinton-based private institution,
maintains a law school in downtown Jackson.
The Mississippi College law school enrollment trends "indicate that the
demand for legal education in the Jackson area is satisfied and that a
stable and continuing demand for a public law school at JSU does not
exist," Biggers wrote in a five-page ruling.
Biggers also said enrollment data did not warrant expansion of the Ole
Miss law school to Jackson to increase White enrollment at Jackson State
University. He says that the Ole Miss law school has promoted diversity,
and that minority enrollment and applications has increased in recent
years.
Black enrollment at the Ole Miss law school and at Mississippi College is
about 10 percent, reports show.
Jackson lawyer Reuben Anderson, who is part of a team of lawyers for the
state, would not comment on specifics in the judge's new order.
Officials have projected $ 54 million in cuts for the state's eight
public universities next fiscal year and more cuts coming this year.
College Board members have said they weighed the state's financial crunch
in producing a settlement plan of $ 400 million, which includes the $ 83
million already spent on Ayers remedies.
Mississippi was accused in a 1975 lawsuit, known as the Ayers case for
plaintiff Jake Ayers Sr., of running a segregated college system and
neglecting Black universities.
The U.S. Supreme Court ordered Mississippi in 1992 to abolish segregation
at its eight universities. The state has spent $ 83 million since 1995
for improvements at its three historically Black schools -- Jackson
State, Alcorn State and Mississippi Valley State universities.
College Board members have argued there's no need for a JSU law school
after accepting recommendations from consultants in 1998. Officials say a
new law school could cost at least $ 25 million.
Supporters of a Jackson State law school point out that only 5 percent of
Mississippi's lawyers are Black in a state with a 37 percent Black
population. They say a JSU law school would help Mississippi boost its
number of African American lawyers. (Black Issues in Higher Education,
February 1, 2001)
NORTEL NETWORKS: Articles Show Different Views on RBC Dominion Role
-------------------------------------------------------------------
National Post (formerly The Financial Post) cites The Globe and Mail
columnist claiming RBC Dominion Securities 'aided and abetted' the Nortel
Networks Corp.
RBC Dominion held a Webcast with John Roth on Feb. 12 during which the
Nortel chief executive said telecommunications customers were cutting
their capital spending 'like we've never witnessed before.' Three days
later, Mr. Roth warned the world that Nortel's growth rate would slow to
10% from 30%, and lawyers have been working overtime since, it is pointed
out in the National Post article.
Not one of the 10 class-action lawsuits pending against the company in
the United States and Canada mentions RBC Dominion as a defendant, the
National Post notes.
According to the article, if Mr. Roth is guilty of selective disclosure
during the RBC Dominion Webcast, only one person is responsible: John
Roth; RBC Dominion deserves none of the blame. All the brokerage firm did
was try to give its clients useful information about Nortel. That is no
different from what newspapers try to do for their readers, the report
adds.
Unlike the Globe, the National Post report says that John Wilson, RBC's
telecommunications equipment analyst, deserves credit for unearthing a
valuable piece of information, a feat all too rare in equity research.
The Globe complains RBC Dominion made no effort to broadcast the Roth
interview 'to anyone but its own clients.'
Nortel Networks, on the other hand, did, which is why Canadian securities
regulators will surely be paying a visit to Mr. Roth's office for a chat,
if they haven't done so already, says the National Post report.
According to the National Post, this case is already making chief
executives more worried about violating the fair disclosure rules of
provincial securities commissions and the U.S. Securities and Exchange
Commission.
The Post points out that the risk is executives will become so paranoid
that they will refuse to say anything -- to analysts, the media, or even
their own shareholders. If that happens, how are people supposed to make
a reasoned decision about investing in a company when management won't
discuss its strategy?
The regulator is drafting guidelines on how companies can stay on the
right side of the disclosure law, the National Post reports.
It is also suggested that if companies that do chats with analysts --
like the one Mr. Roth had with Mr. Wilson -- they should allow anyone to
listen to it 'live'; posting it on the company Web site hours later
simply is not good enough.
For small-cap companies that lack the money or technological ability to
broadcast every twitch and grunt by a chief executive, perhaps they
should only talk to analysts after the market closes, giving them time to
disseminate a transcript of the conversation before trading begins the
next day. Or perhaps they should make a point of saving their important
news for the media -- instead of reserving it for a select few. (National
Post (formerly The Financial Post), February 28, 2001)
NORTEL NETWORKS: Spector, Roseman Files Securities Suit in New Jersey
---------------------------------------------------------------------
The law firm of Spector, Roseman & Kodroff, P.C. announces that a class
action lawsuit has been commenced in the United States District Court for
the District of New Jersey against defendant Nortel Networks Corporation
on behalf of purchasers of the stock who purchased Nortel Networks
Corporation (NYSE:NT - news) securities during the period from November
1, 2000 through February 15, 2001 (the "Class Period").
The Complaint alleges that the defendants, who issued materially false
and misleading information that misrepresented the Company's financial
condition and prospects, violated the Securities Exchange Act of 1934 and
Rule 10b-5 promulgated thereunder.
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 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. As a result of the foregoing, misrepresentations, 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 a press release detailing new earnings and
revenue guidance. 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, 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: Spector Roseman & Kodroff Robert M. Roseman, 888/844-5862
E-mail: classaction@spectorandroseman.com
NORTHWEST PORTLAND: Pearl Lofts Owners Cite Shoddy Work, Press Suit
-------------------------------------------------------------------
Summary: The plaintiffs say their expensive 6-year-old condos have leaky
windows, mildew and other faults
When William Weinstein moved into the Pearl Lofts about half a dozen
years ago, he thought of himself as a pioneer.
The lofts, a set of condominiums at 1009 N.W. Hoyt St. in the Pearl
District, were one of the first large housing developments to rise out of
the new neighborhood, which was just starting to evolve from a collection
of warehouses and rail sidings into an upscale residential area.
"There was a lot of love, pride and ownership that went into being one of
the first to move in here," said Weinstein, who runs his own
environmental technology company. "We felt proud that we were the first
people to make a statement about living in a revitalized area. We were
true pioneers."
Since then, the Pearl has become home to high-priced condos, night clubs,
trendy apartments and restaurants.
But the residents of the Pearl Lofts haven't been able to completely
enjoy the experience. Instead, Weinstein and 24 other homeowners see
themselves as the victims of shoddy workmanship, leaky windows and other
problems that have reduced the value of their condos.
"You have a symphony of defects at the Pearl Lofts," said Dean Aldrich, a
Portland lawyer who represents the homeowners. "The window company has
the most extensive solo. [It's] trying to give some solo time to the
developer and the builder.
"It's a shame from the homeowners' perspective because they all have to
wait on a building that's a complete mess. This isn't something any
reasonable person should be expected to deal with in a building that's
just six years old."
The Pearl Lofts homeowners association and its residents filed a lawsuit
two years ago, but the case has moved too slowly for their liking. A May
7 trial date has been set to resolve the matter in Multnomah County
Circuit Court.
Three Companies Named
The suit names three companies operated by developer Patrick Prendergast,
Walsh Construction and Weather Shield Windows as defendants. Several
other defendants have been attached to the suit by the original
defendants, according to court records.
The plaintiffs say moisture leaked through the windows and other parts of
the building shortly after it was completed in 1994. When the matter was
brought to the attention of the defendants, they made some repairs in
1996.
But the problems continued, the plaintiffs say, resulting in bulging
walls and cracks in the building's facade. They say many of the condos
have dry rot, mold and mildew from wood inside the walls that continues
to get water damage.
Mark Gorman, who lives in one of the condos with his wife, Leta, said he
first noticed the problem when he looked at the French doors that lead
out to a deck.
"I just thought we had bad door frames," he recalled. "You could see the
damage around the edges, and I was just thinking we needed to get new
framing done."
Massive Mold And Mildew
But when the couple decided to do some remodeling, he said they found
massive amounts of mold and mildew coating the wood behind the drywall.
The wood was so damaged that it was completely discolored.
For his part, Prendergast admitted that the condos have problems. But he
placed the blame on the windows, not on his role in the project.
"The culprit in the whole thing is Weather Shield Windows," Prendergast
said. "The homeowners do have a problem, and I understand that they're
anxious to have it resolved.
"But you can't just say to the developer: 'The windows are faulty, so
write me a check.' There's a process you have to go through that doesn't
allow that kind of latitude. I want to help these people as bad as the
next person, but it will get fixed. It just takes time to sort out the
legal stuff."
Weather Shield officials, based in Wisconsin, did not return repeated
phone message requests for interviews. But Elizabeth Schleuning, a
Portland attorney who represents the window company, said in an e-mail
that her client isn't to blame.
"Weather Shield has sold hundreds of thousands of these windows, and when
they have been installed properly and flashed properly, these windows
experience no water intrusion problems," Schleuning wrote. "We are aware
of a number of construction errors and defects, as well as building
design defects at Pearl Lofts, which have caused the water intrusion
issues the homeowners have experienced."
Bob Walsh, who runs Walsh Construction, also admitted that there are
problems. But he placed the blame on the windows as well. He added that
once the plaintiffs filed a lawsuit, the matter was out of his hands.
The reason is that most developers and builders carry liability insurance
to cover problems that might arise during a project. In the Pearl Lofts
case, Walsh said, attorneys for his insurance carrier are handling the
suit. "It's out of everybody's hands now," he said.
Repairs Set At $1.5 Million
The plaintiffs say it will take $1.5 million to repair the damage to the
condos and possibly an additional $200,000 in legal fees. As it stands
now, both sides are supposed to meet next month with a mediator to see
whether an agreement can be reached.
Weinstein has his doubts, pointing out that an attempt at mediation last
year "failed miserably."
"There is no way words can point out how much time and effort we've put
into rectifying this situation," Weinstein said. "We're hard-working
people, and we're committed to helping improve this area. All we want is
to be made whole again. "
Walsh and Prendergast said they tried to work with the homeowners to take
care of the problem, but now it's up to the courts to decide the
solution. (The Oregonian, February 27, 2001)
PRIORITY FINANCIAL: Alleged Mental Illness Not Sufficient to Defeat Cert
------------------------------------------------------------------------Allegations
a class representative could not meet his obligations because he suffered
from mental illness and had been incarcerated were insufficient to defeat
a motion for certification. The U.S. District Court, Southern District of
Indiana held a debt collector contesting class certification must prove
the named plaintiff would be irresponsible with facts or supporting case
law. (Hill v. Priority Financial Services Inc., No. IP 98-1319-C-B/S
(S.D. Ind. 12/22/00).)
Priority Financial Services Inc. mailed Yvonne Clark and Johnathan Hill a
collect notice. The debtors filed a class action against Priority under
the Fair Debt Collection Practices Act and moved for class certification.
The class proposed Clark as class representative but subsequently moved
to substitute Hill.
Priority contested the motion on grounds Hill could not adequately
fulfill his obligations. Priority argued Hill was a "mental patient" and
referred to Hill's statement Clark was abducted by aliens. It also
alleged Hill was irresponsible because he "once failed to appear at a
small claims hearing because he was in jail."
Judge Baker found Priority failed to support its claims with facts or
relevant case law. The court stated Priority took Hill's "alien"
statement out of context because. After reading Hill's deposition, it
found Hill was using sarcasm "to convey to defense counsel that he (Hill)
had no idea what happened to Clark." Even if Priority showed Hill
suffered from depression or another disorder it must also prove the
disorder affected his understanding of the case and his ability to serve
as class representative, the court explained.
Regarding Hill's small claims court hearing, Judge Baker opined that
nothing in Hill's deposition indicated Hill would be unavailable for
future proceedings in the FDCPA action. (Consumer Financial Services Law
Report, February 5, 2001)
TRW: 3 Men Injured in Explosion in Airbag Bldg; Suit Re 1991-99 Pending
-----------------------------------------------------------------------
An explosion in an automotive airbag building being prepared for demotion
injured three men critically, fire officials said.
Fire officials said sodium azide, a powdery, volatile chemical used to
deploy airbags, ignited and exploded Tuesday night at one of TRW Inc.'s
Vehicle Safety Systems Inc. factories.
At the time, the three TRW workers were using a blowtorch to cut pipes in
a room in which sodium azide once had been stored, authorities said.
The blast blew walls outward and hurled bits of debris at the men but
didn't produce a continuing fire, firefighters said.
"Sodium azide is very, very explosive," Deputy Mesa Fire Chief Mary
Cammelli said, "and (it can be set off) if it's handled in any way that
is different than how it's supposed to be handled or if there's too much
in the mix or anything.
"Maybe there was some residual sodium azide that no one saw," Cammelli
added. "It just doesn't take much of sodium azide to get an explosion."
The workers' names and towns of residence weren't released, but
authorities said their ages ranged from 24 to 41. A 35-year-old was
reported in extremely critical condition.
Officials say sodium azide is known to break down quickly into nontoxic
substances when exposed to air, and they did not order evacuation of
surrounding homes.
TRW's two Mesa plants have been plagued with problems repeatedly over the
last decade. Firefighters were called to the operations numerous times
for fires and explosions mainly related to sodium azide.
Neighbors filed a class-action lawsuit in April against TRW, the world's
second-largest airbag maker. The suit claims that from 1991 to 1999,
fires and explosions at the plants exposed residents to sodium azide,
hydrazoic acid, ammonia, chromium and nickel, harming their health and
killing their pets.
Overall, 16 workers were injured in 32 fires from 1993 to 1995, prompting
the Mesa Fire Department to shut down one plant for a day in September
1995 to secure improved safety regulations.
In April 1998, fire officials said, 1,400 pounds of sodium azide exploded
in a smoke plume, but no one was hurt.
In September 1994, a construction worker was killed and six employees
were injured at one of the Mesa plants when ignited airbag propellant
residue exploded.
Cleveland, Ohio-based TRW later paid a $1.75 million fine in a plea
bargain with the Arizona Attorney General's Office to avoid a
manslaughter charge.
The company also agreed in January to pay nearly $25 million to settle
criminal allegations that it illegally stored and dumped the toxic
chemical. Investigators said TRW was shipping tons of wastewater
containing sodium azide to landfills in Arizona, Utah and California.
The settlement included $12 million in state and federal fines.
To settle civil complaints, TRW agreed to pay a $5.67 million fine, to
perform more than $5.7 million worth of projects to enhance the
environment and to pay $1.5 million for cleanup of a contaminated
landfill southwest of Phoenix. (The Associated Press State & Local Wire,
February 28, 2001)
VITAMIN PRICE-FIXING: 3 Companies to Pay $26 Mil in Australian Suit
-------------------------------------------------------------------
Three multinational vitamin companies must pay a record $26 million in
fines in a landmark Australian trade practices case, after admitting to a
world-wide price-fixing conspiracy relating to animal vitamins.
The Federal Court ruling signals success for an unrelated class action -
Australia's biggest - in which businesses want millions in compensation
for being overcharged for vitamins for animal and human consumption
during the 1990s.
The Australian Competition and Consumer Commission (ACCC) had taken the
Federal Court proceedings after court rulings overseas in which the
companies admitted to a global conspiracy to inflate the price of animal
and human vitamins.
In the Australian proceedings last December, Roche Vitamins Australia Pty
Ltd, BASF Australia Limited (BAL) and Aventis Animal Nutrition Pty Ltd
pleaded guilty to colluding to artificially inflate the price of bulk
vitamins.
In Perth, Federal Court justice Kevin Lindgren ordered that Roche pay $15
million for its part in the conspiracy, BAL $7.5 million and Aventis
Animal Nutrition Pty Ltd $3.5 million.
The amounts must be paid to the commonwealth government within 30 days.
Describing the penalties as "the heaviest yet imposed in Australia for
anti-competitive conduct", Justice Lindgren also ordered the
multinationals be restrained for four years from meeting to discuss any
matters to do with price fixing.
All were ordered to pay $65,000 costs.
Outside the court, ACCC Western Australian regional director Stuart Smith
said the watchdog body was very pleased with the judgment.
"A penalty of $26 million for the three companies - and one company in
particular at $15 million - is the biggest penalty ever awarded against a
company for a breach of the Trade Practices Act", Mr Smith said.
"It's the first time that over $10 million has been awarded against a
company and it sends a very clear message that breaches of the Trade
Practices Act are expensive."
Mr Smith said the order that the companies not meet for four years was
"an important safeguard" because it meant if they were found engaging in
the same conduct in the future, they would be in contempt of court.
"That is a criminal offence and can carry prison terms," he said. (AAP
Newsfeed, February 28, 2001)
WAR VICTIMS: California Lawsuits Claim Japanese Firms Enslaved Koreans
----------------------------------------------------------------------
Two lawsuits filed Tuesday demand compensation from Japanese
conglomerates that allegedly used thousands of Koreans as slave laborers
before and during World War II.
The suits, which seek class-action status, assert that Mitsubishi and
Mitsui subsidiaries used forced labor from unpaid Koreans in coal mines,
factories and shipbuilding operations from 1931 to 1945.
Workers were subject to "inhumane conditions, beatings, torture and
starvation," according to one suit.
"They profited from (slave labor) ... they should pay," said Barry
Fisher, one of the lawyers who filed the suits. "It's long after the war,
and it's time."
Company spokespersons couldn't comment on the suits.
"We haven't been served with the suit and can't comment" until the
company has seen it, Jessica Barist, a Mitsui and Co. USA spokeswoman,
said from New York.
Mitsubishi Heavy Industries America in New York also said it could not
comment because the company had not seen the suits.
The suits are the latest in a series that seek reparations for those who
were forced to labor for companies that fueled the German and Japanese
war efforts. Some researchers have identified 135 Japanese companies
which used slave labor.
California became a magnet for such cases two years ago when the
Legislature enacted a law allowing victims of slave labor until 2010 to
sue multinational corporations operating in the state.
The suits, filed in Los Angeles County Superior Court, seek unspecified
reparations, although Fisher said he hoped the companies would agree to
settle.
The exact number of victims will be determined later as the case
proceeds, lawyers said, but one suit says there were at least 4,000
forced laborers at one Mitsui shipbuilding operation alone.
Syeong Kyoon Ahn, 78, of Los Angeles is a plaintiff. Through an
interpreter, Ahn said that he was forcibly taken to Japan in 1944 and put
to work creating bolts, chisels and other tools for shipbuilding for
Mitsui. (The Associated Press State & Local Wire, February 28, 2001)
* Law Journal Publishes Strategies For Mass Tort Defense Counsel
----------------------------------------------------------------
Unless corrective steps are taken, American business and civil justice
systems may not be able to withstand the onslaught of class actions
RESOLVING mass tort litigation is complex because of a variety of forces.
While the task of doing so falls to courts, administrative agencies and
lawyers, the lay public and the media often drive a frenzy that creates
insatiable demands on the system and impedes the fair and expeditious
resolution of the claims. Responding to media sensationalism, the lay
public overestimates the nature and extent of the problem and the
solutions the civil justice system has to offer for the alleged tortious
activity of corporate America. Liability issues are oversimplified,
leading to far too many claims without merit. The large number of
questionable claims hinders the resolution of genuine claims.
The proliferation of Internet users and websites has created an
additional dimension of distortion. Disgruntled and Internet savvy
consumers need only know how to access various sites on the Internet
before they are parties to a massive class action lawsuit. Type in
"asbestos litigation" or "breast implant litigation," and almost any
search engine will take the user to a number of plaintiffs' attorneys'
websites.(1) But the Internet has a positive aspect as well. It may be a
tool to reduce litigation costs by offering a variety of workable
solutions to the growing problems of inefficiency and redundancy in mass
tort litigation.
The breast implant litigation illustrates how mass tort litigation in the
United States has gone terribly wrong. But there are strategies and
viewpoints that have emerged from both the trenches and the civil justice
system experts for battling the mass tort litigation problem.
BREAST IMPLANT CASES AND JUNK SCIENCE
The Cases
For more than a decade, thousands of women have claimed that their
silicone breast implants have caused them to suffer a wide variety of
often non-specific ailments. Their claims have been widely and vigorously
reported by the media, including coverage of consumer-led protest marches
on the offices of manufacturers. Given that virtually all well-controlled
scientific studies following accepted scientific methodology have
concluded that there is no causal link, it is puzzling how the breast
implant saga was "created." Anecdotally, however, it provides insight
into the future of mass tort litigation and plaintiffs' strategies.
Plaintiffs in the breast implant cases have asserted strict liability,
negligence and breach of warranty claims against various breast implant
manufacturers. The battlegrounds have been both state and federal courts,
and the stakes for both the larger and smaller manufacturers are
exceedingly high.
Over time, the plaintiffs' theories have varied because the scientific
evidence linking silicone breast implants with the alleged injuries was
very weak from the outset. This shifting-sands approach to liability,
designed to deflect legal and scientific challenges to the viability of
claims, has become increasingly popular. The singular truth is that once
there are enough claims, the focus necessarily shifts from defending the
product to saving the company. It is often argued that the only rational
approach is settlement. Leverage based on numbers of claims, as opposed
to the strength of liability, is the key focus of plaintiffs' counsel. It
becomes readily apparent then that the scope of potential mass tort
litigation is boundless.
A single theory of liability or claim of injury will limit the number of
potential plaintiffs. Therefore, plaintiffs' counsel identify many
potential claims of injury. This increases the defendant's potential
exposure by increasing the number of plaintiffs and spreads the cost of
plaintiffs' counsel over many more claims. In the breast implant cases,
for example, most plaintiffs initially focused on the alleged risk of
breast cancer from silicone implants. Later, the theory evolved to one
alleging that the implants caused autoimmune diseases. Finally, other
plaintiffs claimed that the implants gave them "atypical connective
disease."
Faced with a proliferation of claims and theories, most judges and
juries, untrained as chemists, biologists, toxicologists or
epidemiologists (only four among many scientific fields necessary to
understand the validity of the plaintiffs' claims) were uncertain as to
how to resolve the cases properly. Initially, the manufacturers,
believing the claims unfounded, seemed not to take them seriously. The
result of such forces at the beginning of the litigation was huge jury
awards to plaintiffs who could not even offer valid scientific proof that
their alleged ailments were caused by the defendants' products.
A crucial turning point came in late 1996 when Judge Robert E. Jones in
the U.S. District Court for the District of Oregon barred plaintiffs'
expert witnesses. Relying on his own court-appointed scientific experts,
Judge Jones held that the plaintiffs' experts' evidence supporting the
linkage between silicone breast implants and systemic diseases did not
meet the threshold of scientific proof necessary under Daubert to merit
being presented to the jury.(2)
Most of the breast implant cases now have been consolidated by the
Multidistrict Litigation Panel in the U.S. District Court for the
Northern District of Alabama. There, Judge Sam C. Pointer Jr. has taken
innovative and efficient approaches to seeing the cases disposed of in a
timely manner.(3) He appointed neutral scientific experts, called the
National Science Panel, to weigh the scientific evidence. He also
appointed Professor Francis McGovern of Duke University School of Law to
assist in facilitating cooperation between state and federal courts with
respect to discovery and other pretrial matters.
The battle is nearing its end, but the costs have been extremely high for
the defendants. For example, Dow Coming, the nation's leading producer of
the breast implants, went into bankruptcy in 1995 to shield itself from
the thousands of lawsuits being filed. Last December, a federal
bankruptcy judge approved Dow Corning's $ 4.5 billion plan to settle the
claims against it. Three other defendants--Baxter, Bristol Myers Squibb,
and Minnesota Mining-agreed to a $ 3 billion combined settlement in an
effort to remove their potential exposure, however minimal that might be.
The total agreed to be paid to settle these "junk science" claims is
currently more than $ 7 billion. Of course, these amounts do not reflect
the total cost of the litigation--other settlements; verdicts; the cost
of defense, expert and consultant fees; the loss of productivity of
employees; and the loss of good will.
The Lessons
The breast implant cases offer a number of valuable lessons to mass tort
defendants and their counsel.
Be wary of mass tort litigation potentially involving a large number of
consumers
No matter how unsupportable a claim may seem to be, defendants and their
counsel must recognize the potential for mass tort litigation driven by
large numbers of potential plaintiffs. Defendants in cases involving
widely used products need to recognize that every case involving the
products is the potential launching pad for mass tort litigation.
Defendants must have the best counsel available, vigorously defend the
case and refuse to settle, unless there is an economic disincentive that
is inherently part of the settlement. Otherwise, the payment of money is
simply addictive to plaintiffs' lawyers. If defendants make it too easy
and pay premiums because of the desire to avoid litigation costs,
plaintiffs and their lawyers will make each settlement the ground floor
for the next. Companies that develop a reputation for avoiding trial will
become targets.
Be wary of mass tort litigation driven by "junk science": Two plans of
attack.
One of the often-cited problems with mass tort litigation involving
exposure to, or ingestion of, chemicals, implants or drugs is that the
science has not caught up with the litigator. If no scientific and
medical support exists for their claims, plaintiffs ought not be in
court. This is precisely what happened in the breast-implant litigation.
However, "junk science" claims continue to make it through the courthouse
doors, and defendants and their counsel need to be ready. There are two
approaches that offer a strong defense.
a. Impeach "junk science" with real science
Defense counsel and their clients must explore the utilization of
impeachment scientific evidence, or, as may be the case, a total lack of
scientific evidence. For example, Daubert is becoming an ever-more viable
tool for limiting the use of "junk science." In Kumho Tire Co. v.
Carmichael,(4) the U.S. Supreme Court ruled that a trial judge's
gate-keeping function, as announced in Daubert, applied not only to
"scientific" testimony, but also to the testimony of engineers and other
experts who are not scientists. In short, trial judges have wide latitude
in determining the reliability of an expert's testimony and in excluding
such testimony when warranted. Absent expert support on the critical
element of causation, plaintiffs' claims must fail.
b. Use Rule 706 early
Second, defense counsel should consider moving under Rule 706 of the
Federal Rules of Evidence to have the court appoint a panel of neutral
experts. To avoid the pitfalls experienced in the breast implant
litigation, where the use of the National Science Panel has been
criticized as being "very expensive and slow",(5) defense counsel, after
carefully considering the appropriate literature and scientific or other
critical liability issues, should consider requesting the appointment of
a panel at an early stage in the litigation. This approach may provide
defendants and their counsel with a good brake on the plaintiff's case
early enough to derail the mass tort litigation train before it picks up
speed.
SUGGESTED STRATEGIES
Suggestions and strategies for stemming the onslaught of mass tort claims
have come from a variety of sources. The most important ones fall into
four broad categories:
* Stop the lawsuits before they start.
* Derail the mass tort litigation train before it picks up speed.
* Keep costs down by making mass tort litigation more efficient.
* Find a way to make settlement of mass tort litigation both global and
fair.
* Stop the Lawsuits
Stopping potential mass tort litigation in its nascent stage is the best
strategy to address the problem. The acceptance of this statement is not
the problem; rather, the problem is its implementation. It is not that
manufacturers do not want to head off litigation before it starts, and it
is not that they do not know (at least to some extent) how to do so. It
is that they generally adopt a bunker mentality when faced with potential
or multiple claims. If they can settle claims inexpensively after
obtaining appropriate information, they often try to do so. These
settlements are justified because they generally are much less than the
cost of defense. However, the company has to ensure that its settlement
policy doesn't encourage more claims or generate additional lawsuits.
Although manufacturers request information to evaluate claims, how often
do they provide meaningful information to claimants? Small claims
generally are easy to resolve, but that is not true of more significant
claims or claims involving unsupportable liability. If the manufacturer
merely sends a letter denying liability, claimants feel angry and believe
their claims have not been given fair consideration. Corporate counsel
cannot be blamed, and the reasons are simple. As lawyers, they are
careful and do not want to convey too much information. Nor do they want
to be accused of misleading or taking advantage of unrepresented persons.
Public Relations Tools
There should more effective ways to provide meaningful information to
consumers who are potential plaintiffs. Consumer-oriented materials could
be prepared to deal with most common concerns and complaints. Rather than
using lawyers, companies should consider training nonlawyers as consumer
ambassadors to handle inquiries and provide meaningful responses. The
consumer ambassador also should be trained in claims resolution
techniques, many of which do not necessarily involve payment of money.
Listening carefully and then responding with appropriate information
directed to the consumer, with emphasis on the appropriate level of lay
knowledge, may save the manufacturer millions of dollars down the road.
On some occasions, the company's first contact with the consumer comes
indirectly through the media. Both consumers and potential jurors are
likely to assess a company's potential fault through their perception of
how it responds to news stories. Public relations techniques can be used
to reassure worried consumers frightened by media accounts--"bad
press"--concerning a manufacturer's product. It is critical that the
responses to the media's reports of potential liability from a product's
use be well conceived and carefully implemented.(6)
Public relations also can be used to handle crisis situations. As a
public relations lecturer and training consultant puts it: "Being able to
manage a crisis effectively is vital. A badly handled crisis can actually
threaten a company."(7) Public relations departments need to be prepared
for crises and to be aware of the important role their responses at times
of crises can play in avoiding litigation.
Crisis Management Teams
Manufacturers should look beyond public relations and have existing and
prepared crisis task force, which is another effective tool for avoiding
massive litigation. The team should track developments that might lead to
negative publicity and be prepared to act quickly with a definitive
position. A response of "no comment" or "the company is looking into the
claims" will be viewed by the public as an invocation of the corporate
privilege against self-incrimination.
Effectively dealing with a potential crisis is essential. The task force
ideally would be multidisciplinary: doctors, lawyers, engineers,
regulatory affairs, public relations and marketing professionals. It is
important that manufacturers also involve outside counsel, who are or
will be involved in the litigation, in the crisis team. This involvement
is critical because positions taken must be accurate and considered from
all potential approaches.(8)
Tort Trend Analysis Teams
A corporate tort trend analysis team would be similar to the crisis
management team, and it too would be multidisciplinary. The goal of this
team would be to identify and evaluate nascent mass tort areas before
they have an impact on the manufacturer. The team should work to develop
effective defenses in the event claims are presented under developing
theories of liability. Are there lessons to be learned from the tobacco
litigation? The answer is clearly yes, regardless of how different the
tobacco context might be from other potential mass tort litigation.
For example, the current attacks on the gun industry are illustrative of
how a crisis situation could have been identified and potentially avoided
had the manufacturers utilized the services of tort trend analysis teams.
A study of the current state of mass tort litigation in the United States
shows a dangerous trend, which one commentator sums up as "a struggle
against products that kill, and against industries that have dodged or
defeated change in Congress."(9)
Derail the Litigation Train
This strategy focuses on the power of effective planning and creative
problem solving. It can be developed internally or with the assistance of
government agencies like the U.S. Consumer Product Safety Commission.
This strategy offers a possible brake on litigation that has just
commenced.
Early Intervention
Toro, a large manufacturer of lawnmowers and garden equipment,
successfully implemented an early intervention program at its own
initiative.)by Phil Philcox.(10) Toro's program addresses both
pre-litigation claims and claims that have been filed. Its legal
department opens an average of 127 files each year, and about 70 of those
are dealt with in-house by an early intervention/ hazard prevention team
composed of an attorney, two paralegals and engineers with a working
knowledge of the product involved in the accident at issue. Toro's
approach is to address the claim immediately instead of ignoring it or
denying liability, both of which are common corporate responses. As soon
as Toro receives a consumer complaint, it sends company representatives
to meet with the consumer or the consumer' s attorney.(11)
Toro reports a 95 percent settlement rate, a decrease of an average
file's life span from two years to three months, a $ 9 million savings
from reduced claim costs and insurance, and a savings of at least $ 50
million in litigation costs. The indirect effect of killing "bad press"
may be invaluable. Some members of the legal community have recognized
Toro's effort. In 1995, it won the Significant Practical Achievement
Award from the CPR Institute for Dispute Resolution.(12)
Role of Government
Manufacturers should consider the role the government may be able to play
in preventing or lessening the number of lawsuits. In February 1998, the
Consumer Product Safety Commission convinced almost an entire industry
that it needed to mediate thousands of claims before they resulted in
mass tort litigation.(13) After receiving a large volume of consumer
complaints about heating systems, the commission investigated the venting
systems used in certain home furnaces and boilers and found that the
units had faulty pipe systems that could leak carbon monoxide.
The commission acted immediately and convinced 27 furnace makers, sellers
and parts manufacturers to engage in preventive mediation. It took a
hands-off approach and let the parties choose mediators and establish the
mediation and settlement process. The result was that the faulty systems,
which were found in about 250,000 homes, would be replaced without charge
to the consumer and at a cost of about $ 400 each for the manufacturers.
When compared with the cost of protracted litigation, this was surely a
significant savings for the corporations involved.
Evidence Rule 706
Another potential tool available to defense counsel is Rule 706 of the
Federal Rules of Evidence, which provides that either a court or a party
may move to have a panel of experts appointed. Asking for a Rule 706
appointment offers many advantages to defense counsel, yet it has been
used rarely. In the breast implant litigation, a Rule 706 panel was used
by Judge Pointer for the express purpose of addressing a Daubert
challenge. However, this occurred after the litigation had progressed for
years. In appropriate circumstances, defense counsel should consider
making a motion for the appointment of a Rule 706 panel at the very
outset of the litigation.
In order to do this effectively, defense counsel will first need to
decide "whether the disputed scientific issue is legitimately one that
falls within Daubert, or whether the evidence is such that experts can
legitimately offer opposing conclusions on disputed issues." An
experienced mass tort defense litigator, with the assistance of a
scientific consultant in the appropriate discipline, should be able to
make this threshold inquiry without much difficulty. More importantly,
"[t]here is nothing in Rule 706 that prevents a party from seeking to
have the court retain experts to assist in ... deciding the ultimate
causation issue."(14) Where a plaintiff's claim is so obviously without
merit, this may be a useful weapon for getting a case dismissed
summarily.
Defendants and their counsel also should consider phased discovery, with
the focus on the critical liability issues and the ultimate goal of
having a Daubert hearing as soon as practicable. If the court appoints
its own panel, the finding of no causal connection to establish liability
is the first and perhaps most important step in derailing the mass tort
litigation train. It also should be remembered that Daubert is a valuable
weapon even without the use of a Rule 706 expert or panel of experts.
Having the availability of a device to establish that the methodology
employed by the plaintiffs' experts to establish causation cannot
withstand a Daubert challenge has a profound and beneficial impact on the
course of potential mass tort litigation.(15)
Keep Litigation Costs Down
This strategy offers varying approaches with significant potential, and
the approaches come from a variety of expert sources.
The Internet: A Potential Ally?
Dot.com mania just keeps spreading. These days, even lawsuits get their
own web sites.(16)
While potential plaintiffs may learn about and join mass tort litigation
via the Internet, it also offers litigators a way to work more
efficiently. Creative use of the Internet to reduce the cost of
litigation is just beginning. For example, Judge Robert J. O'Neill of the
San Diego Superior Court has a website that parties can use to access
materials in the breast implant litigation he oversees.(17) His
colleague, Judge Ronald S. Prager, maintains a website for the parties to
tobacco litigation.(18) To the north, Judge Daniel Solis Pratt of the Los
Angeles Superior Court has a website for the parties to the diet drug
litigation.(19) PACER (Public Access to Court Electronic Records) is
available on the Internet with electronic access to a wealth of court
documents.(20)
Other Viewpoints and Approaches
It is helpful to know where various national legal organizations--the
American Law Institute, the Defense Research Institute, the Institute for
Civil Justice, the Association of Trial Lawyers of America, and the Mass
Torts Working Group--stand on mass tort litigation problems.
a. American Law Institute
In response to the proliferation in recent years of complex litigation
cases and the myriad of issues they raise, the American Law Institute
drafted the Complex Litigation Project and proposed it to Congress in May
of 1993. The proposal would establish "new mechanisms and standards for
the intra-federal, state-to-federal, federal-to-state, and state-to-state
transfer and consolidation of related, yet geographically dispersed,
actions and provide a set of choice-of-law rules for actions transferred
to a federal court." The ALI "subscribes to the premise that, although
commendable and perhaps heroic, judicial efforts to tackle the
increasingly nightmarish problems of multistate complex litigation are in
urgent need of legislative assistance or other guidance in the form of
pre-formulated rules."(21)
The CLP addresses only judicial dispute resolution and matters of
procedure; it does not extend to substantive law, case management,
jurisdiction or the right to trial by jury. One of the proposed actions
was to replace the existing Multidistrict Litigation Panel with a Complex
Litigation Panel of federal judges to be guided by the CLP. The operation
of this panel would be limited to mass tort litigation.
Defense counsel concerned with the issue of mass tort litigation should
familiarize themselves with the CLP, as, even if it does not become
legislation, its ideas will influence judicial opinion.
b. Defense Research Institute
DRI created a task force to consider the issues and formulate
recommendations for change. It "intends to pursue a more global approach
to mass torts issues. An important part of that approach is to coordinate
and work with many existing organizations that have led the charge in
this arena for over the past decade." With this goal in mind, DRI is
seeking comments, suggestions and experiences from the "experts."(22)
c. Institute for Civil Justice
ICJ is an independent research program within the RAND Corp., a
broad-based policy research group. Its stated mission is to help make the
civil justice system more efficient and equitable. It works toward that
goal by supplying the government, private decision makers and the public
with the results of its research, while also analyzing trends and
outcomes in the civil justice system.
ICJ recognizes that class actions are "the most controversial feature of
the contemporary legal landscape" and the subject of debate on the bench
and in the bar.(23) In the early 1990s, ICJ initiated a study of class
action litigation specifically aimed at assessing its economic and social
effects. Some of its preliminary findings were published in 1997.(24) The
study found that litigation, especially in the state courts, is
increasing rapidly, with most of the growth taking place in the consumer
area. More important to mass tort defense counsel is the report's caution
against proposals to alter the Federal Rules of Civil Procedure relating
to certification of class actions based on the dollar value of individual
claims or on specific types of cases.
In October 1999, ICJ released a draft of its executive summary of a more
recent three-year study, entitled Class Action Dilemmas: Pursuing Public
Goals for Private Gain. This is a summary of the findings and
recommendations in its forthcoming report.
d. Association of Trial Lawyers of America
ATLA is an association of 60,000 plaintiffs' attorneys. It contends that
the "marketplace continues to yield situations posing physical and
financial harm to the public which can best be addressed through class
action legal procedures."(25) ATLA's policy is that mass torts should be
prosecuted as class actions if society's interest in deterring wrongful
conduct can be advanced, if individual litigation to redress wrongful
conduct would be impractical and if the rights of victims to fair and
timely compensation can be protected.
ATLA opposes the Class Action Fairness Act, H.R. 1875 in the current
Congress. Although not directly dealt with in ATLA's position statement,
the proposed act is a controversial subject for that organization for a
simple reason. Most of its members focus on representation of individual
claimants, even when there is mass tort litigation. Much of the mass tort
class action and multidistrict litigation is controlled by a small group
of plaintiffs' lawyers. Thus, the economic interests and the positions of
these two groups do not coincide on the issue of the best way to handle
such claims.
e. Mass Torts Working Group
The Judicial Conference Civil Rules Advisory Committee has been studying
class actions and mass torts for several years. In 1998, the Chief
Justice Rehnquist authorized an informal one-year review under the
leadership of Judge Paul V. Niemeyer of the U.S. Court of Appeals for the
Fourth Circuit. The group became known as the Mass Torts Working Group.
It received and evaluated input from persons who were considered experts
in the field of mass torts, and a draft report was submitted to the chief
justice in February 1999.(26) It suggested the creation of a "follow up"
group to make specific recommendations, but the chief justice has not yet
acted on the report.
List of Problems
The working group's draft report identified the basic problems inherent
in most mass tort litigation. The problems are:
* sheer number of claims;
* inherent subject matter difficulties, which are usually science
related;
* staggeringly high transaction costs;
* delay, especially regarding meaningful access to courts for plaintiffs;
* unwillingness of courts to coordinate with each other;
* forum shopping by plaintiffs;
* fraudulent joinder of marginal defendants in order to defeat federal
diversity jurisdiction and keep cases in state court;
* problems identifying future claimants whose injuries may not become
apparent until many years later;
* inefficient discovery due to complexity of cases and inconsistent
rulings on questions of privilege and admissibility;
* uncertain evidence regarding liability and causation which hampers
aggregation of claims;
* uncertainty of science issues in the legal context, where certainty is
sometimes demanded by legal rules;
* problems in adapting Rule 23 to unforeseen uses, like single-event
mass accidents;
* premature or delayed aggregation of cases;
* limited funds to compensate all claimants or for defense of claims;
* closure of cases in light of the Amchem decision;
* choice of law problems wherever a common course of activity affects
persons in multiple jurisdictions;
* rivalry problems related to attorney appointment and attorney conduct;
* attorney compensation issues, particularly concern over huge
plaintiffs' attorneys' fees;
* plaintiff "scorched earth" and defense "pile it on" strategies;
* disputes among defendants and their insurers over who must pay;
* varying statutes of limitations in different jurisdictions;
* varying damages statutes in different jurisdictions; and
* problems of punitive damages awards depleting the funds available for
compensatory damages for other victims.
Suggested Solutions
The Mass Torts Working Group was not charged with offering specific
solutions to mass tort litigation problems it identified, so its list of
possible solutions reads, as does the list of problems, like a laundry
list. Two of the more interesting proposals are federal court deference
to state courts and the Multiparty-Multiform Jurisdiction Act.
As to federal court deference, the proposal envisions a state transfer
statute that would authorize federal district courts to stay or dismiss
proceedings in deference to a present or future action in a state court.
This proposal recognizes "that state courts might be superior to federal
courts as for a for some mass tort actions."(27)
This proposal is worthy of note by corporations and their counsel because
it is potentially very dangerous. Generally, mass tort defendants want to
be in federal court for good reason. Plaintiffs, on the other hand, want
to be in state court, particularly plaintiff-friendly state courts.
Plaintiffs' attorneys have long recognized the state court forum
advantage. Under this proposal, plaintiffs would likely file more
speculative mass tort claims in pro-plaintiff state courts because they
would realize their claims, although speculative, would stand a better
chance of surviving in the state court. This procedure is neither
efficient nor fair to defendants, who will be forced to defend in various
state courts instead of potentially in one federal court under the
multidistrict transfer procedure. It results in an inefficient use of
judicial resources.
The Multiparty-Multiforum Jurisdiction Act, on the other hand, is a
proposed statute that would facilitate consolidation in federal court of
all actions arising from a "single event" mass tort" and requires only
minimal diversity. In September 1999, the House of Representatives passed
H.R. 2112, the Multidistrict, Multiparty, Multiforum Trial Jurisdiction
Act, which contains such a provision, but the Senate has not yet taken
action.
This proposal is more attractive for defendants. It expands federal
diversity jurisdiction beyond that allowed under the present diversity
statute, 28 U.S.C. [sections] 1332. The amount in controversy requirement
under this proposal is damages of at least $ 50,000 per person, with at
least 25 natural persons being injured in the "single event." A federal
court could hear all claims arising from a single catastrophic event.
Litigation would be more efficient because there would be coordination
and uniformity--all in one federal courthouse. The act applies only to a
specified "single event," however, so its usefulness is limited.
f. Two Alternate Approaches
Other alternate approaches to address the cost and inefficiency problems
inherent in mass tort litigation should be considered. Two merit
consideration.
State-federal Coordination
Legislative in nature, this approach envisions a statute that would
provide a basis to seek and obtain cooperation between state and federal
courts in mass tort litigation. It is uncertain how specific this could
or would need to be, but the statute would be more attractive if it were
very specific in terms of the expected methods of coordination, and it
also should contain a strongly worded policy that cooperation and
coordination are expected. Implementation and use of the statute would
depend, in large part, on the specific type of litigation, on the
complexity of the factual or legal issues, and on the concentration of
claims in state or federal court. Cooperation would be implemented by
coordinated pretrial management orders.
The major advantages of a "cooperation statute" are that it is simple,
relatively noncontroversial, and subject to less political maneuvering
and pressure. The major disadvantage is that the statute would not be
mandatory as to the state courts and judges, leaving historically
plaintiff-oriented jurisdictions free to ignore the need for or mandate
of a policy of cooperation and coordination. The statute would have to be
very specific as to what exact type of cooperation is expected.
Minimum Diversity
Another legislative proposal worthy of consideration is a statute to
create the right of cooperation among the federal and state courts by
"permitted" (or "required") removal to federal court once the mass tort
litigation has reached a certain point--for example, the filing of a set
number of cases. This statute would include a provision allowing or
requiring a defendant to remove all litigation pending against it to
federal court under a minimum diversity jurisdictional basis. The minimum
diversity requirement is simple; defendant and at least one plaintiff
would be required to be citizens or residents of different states. The
extent to which there are other non-diverse defendants or plaintiffs
would be ignored for removal purposes. Once removed, the cases would
continue to be subject to the provisions of the multidistrict litigation
statute, 28 U.S.C. [sections] 1407.
This proposal raises a number of issues, however, that must be carefully
considered. For example, the number of cases necessary to "trigger" the
right must be chosen wisely. The ideal number would probably range from
15 to 20 state court cases. The number of pending federal cases would not
be considered, because presumably they could be handled under existing
multidistrict procedures. There also must be a non-arbitrary mechanism
for determining the cutoff date for removal. From a fairness standpoint
and otherwise, it would be important that cases that are "mature"--that
is, in which discovery is or almost complete--not be subject to removal.
It would make no sense to remove state court cases that are ready for
trial, or substantially so, to federal court. In order to achieve the
economies and efficiencies that the proposal intends, however, the
removal provisions should encompass most of the state cases. To be
specific, each state case at issue for six months or less, based on the
date of defendant's response or answer to the plaintiff's initial
pleading, would be automatically removable. There would be a rebuttable
presumption that cases at issue longer than six months would not
ordinarily be removable. However, the case could be removed if all
parties agreed, or in the alternative, if one or more of the parties
filed a motion to have a particular matter removed and the court granted
the motion.
The federal district court, or in the alternative, the multidistrict
litigation court to which the case was transferred, would then determine
whether, under all the circumstances, the interest of justice would be
served by having the case removed from state court.
This proposal is more attractive to defendants and their counsel because
it would result in significantly more federal control over mass tort
litigation. The main advantage is that defendants would have a right to
remove cases to federal courts to obtain coordinated pretrial procedures.
The litigation is in federal court, with effective methods of
coordination, judges less disposed to the influence of the plaintiffs'
bar, and subject to stringent application of Daubert.
Global and Fair Settlements
Potential defendants are realizing more and more that they have a special
obligation--and will save money in the long run--if they settle these
cases relatively quickly and provide for the people who are hurt, or
think they are hurt, when compensation is most needed.... But such
settlements themselves present unique legal, economic and ethical
problems.(28)
Three recent cases--Amchem,(29) Ortiz(30) and Wish(31)--address the issue
of class action settlement in mass tort litigation. It can be argued that
these cases stand for the general proposition that courts are "not overly
interested in civil tort cases but under extreme pressure to answer the
growing question of how trial judges can deal with cases involving
hundreds of thousands of claims arising from a single event or line of
products."(32) (Emphasis added.) These cases also illustrate the "unique
legal, economic and ethical problems" that make it difficult for
litigators to find a way to reach settlements in mass tort litigation
that are both global and fair.(33)
Amchem and Ortiz
Both Amchem and Ortiz were decided by the U.S. Supreme Court, were
asbestos cases, and were settlement-only class actions. According to one
commentator, settlement class actions are not ordinary class action
settlements because counsel for the plaintiffs negotiates a settlement
with the defendants before a complaint has been filed, and then the
parties move together for class certification and settlement
approval.(34) This form of settlement would have become increasingly more
common had not Amchem and Ortiz gone the way they did.
In Amchem, the Court rejected a $ 1.3 billion class settlement with a
consortium of defendants because it was concerned that the class
representatives did not adequately protect the interests of the class.
Although the Court "did not close the door on mass tort settlement
actions, it made them more difficult by insisting on judicial scrutiny to
ensure fairness and compliance with Rule 23."(35)
In Ortiz, the Court rejected a $ 1.5 billion class settlement of claims
against one defendant. A critical evaluation of the decision is useful
because it is significantly different from Amchem in that the settlement
involved what is called a limited fund class. Justice Souter's opinion
for the Court carefully defined the "limited fund class," which is
essentially a sub-type of class action settlement.(36)
According to the Court, the first characteristic of a limited fund class
is that "the totals of the aggregated liquidated claims and the fund
available for satisfying them, set definitely at their maximums,
demonstrate the inadequacy of the fund to pay all the claims." The second
is that "the whole of the inadequate fund [is] to be devoted to the
overwhelming claims." The third is that the "claimants identified by a
common theory of recovery [are] treated equitably among themselves." The
Court then cautioned that "the greater the leniency in departing from the
historical limited fund model, the greater the likelihood of abuse."(37)
It is important for defense counsel to note this judicial concern for
potential abuse when shaping global limited fund class settlements. Due
process considerations must guide that effort.
Wish
Wish is a fen-phen case, of which thousands have been filed in federal
and state courts by plaintiffs alleging that their ingestion of the diet
drugs caused various illnesses. Plaintiffs without existing injuries have
brought actions asking for legal or equitable relief in the form of
medical monitoring or refunds of purchase prices.
Like the Supreme Court in Ortiz, the U.S. District Court for the Eastern
District of Pennsylvania in Wish was asked to rule on the issue of
whether the parties' joint motion for a limited fund class certification
should be approved. Judge Louis C. Bechtle ultimately denied the motion
in September 1999, noting that, as did the Supreme Court in Ortiz, he had
concerns over the "fairness" of the proposed settlement. The court
stated, "While this court does not read Ortiz as a bar to limited fund
class certification in all mass tort cases, Ortiz does counsel against
those class certifications which would deprive the class of the
protections available under the traditional [limited fund] model."(38)
Do Wish and Ortiz indicate that there is no room for settlements in a
limited fund class situation? Probably not. Judge Bechtle in the diet
drugs MDL case has stated he has found no cause to rescind preliminary
approval of the American Home Products Corp. settlement agreement.(39)
Citing the settlement agreement, he stopped a diet drug trial that was to
have commenced in West Virginia.(40)
Perhaps these types of settlements, even where sought by defendants for
purely business reasons, are simply adding more fuel to the fire.
Unfortunately, because there are many plaintiffs' counsel who stand ready
to pursue even the most unsupportable claims, mass tort litigation
probably will grow at an exponential rate absent some meaningful effort
at reform.
Class Action Settlement Act
Worthy of consideration is Judge Niemeyer's proposed approach to
settlement of mass tort cases. His view is that the best approach to the
problem would be one in which the judiciary takes the lead "with a
sensitive interaction with Congress."(41) With this in mind, he has
outlined a proposal for new legislation, the Class Action Settlement Act,
which would authorize a new form of action to obtain approval of class
settlements. To take advantage of the proposed statute, a defendant would
have to demonstrate that in absence of settlement, the defendant would
not be able to pay all claims in full, if presented, or would suffer a
substantial injury to its credit. Unlike the current practice, the
actions would lie in federal district courts rather than the bankruptcy
courts. This is a novel approach intended to make its way through the
concerns raised by the Supreme Court in Amchem and Ortiz.
To experienced defense counsel, the obvious advantage to Judge Niemeyer's
proposal is that it permits settlement of class actions when the stated
requirements can be met. Given the need to settle cases quickly because
pending litigation is a threat to the continued viability of a defendant
company, this proposal presents a potentially workable option. The
disadvantages are, first, it may be available only in a limited context,
and, second, it raises significant due process concerns. Both Amchem and
Ortiz emphasized the protection of the rights of members of the class.
There is an additional practical concern--whether publicly traded
companies would be willing to take advantage of the provision, except in
the most exigent circumstances. Those companies would have to consider
the practical impact on their stock prices, both short and long-term. And
this concern would be particularly acute if there were a chance that the
settlement might not be approved.
Another Working Group Suggestion
The Mass Torts Working Group also suggested a prohibition on multiple
court consideration of class settlements. This proposal also envisions
legislation, which would be intended to reduce competition among class
action courts--in short, to reduce forum shopping. It would "address the
'reverse-auction' problem by prohibiting parties from asking a second
court to approve a settlement substantially similar to a settlement
rejected by a first court."(42)
Like the federal court deference to state courts approach discussed
above, this approach is potentially dangerous for defendants because it
focuses only on settlements and does not address the real issue: why are
multiple courts allowed simultaneously to litigate similar class actions
asserted on behalf of the same people? In essence, the problem lies with
the initial misuse of the class action vehicle, not just with the
defendants who seek settlements.
"Fairness"
A final issue related to the settlement of mass torts has been framed as
follows: "If defendants become willing to settle questionable claims in
order to reduce their litigation costs, they may motivate plaintiffs'
attorneys to dip even deeper into the potential claimant pool and take on
more questionable litigation."(43) In attempting to determine whether
there is a way to make these settlements both global and fair, it is
important for courts, defendants and defense counsel to keep in mind that
settlement may not be fair to the already overburdened civil system as a
whole because it may encourage further spurious litigation.
Conclusion
In mass tort litigation, there are a variety of strategies available to
defendants and their counsel.
Three are preventative and require forethought: (1) the use public
relations tools to get more information to the consumer; (2) the creation
of a crisis management team prepared and ready to act; and (3) the
establishment of a tort trend analysis team to study developing areas of
litigation. Defense counsel should inquire whether their corporate
clients have these strategies or personnel, or both, in place. If not,
these measures should be instituted, because in the long run they will
save companies money in reduced litigation costs and retained good will.
Three of the strategies are designed to intervene in the litigation
before it reaches crisis proportions: (1) design and implement an early
intervention program; (2) consider the role the government may play in
preventing or slowing down lawsuits; and (3) consider Daubert challenges
and the use of Evidence Rule 706 early in the litigation. The first two
strategies in this category again require some forethought on the part of
companies. The third, however, is a purely procedural tool and can be
developed by defense counsel in conjunction with the defendant and their
consultants or experts.
Corporate clients and their counsel must be aware of the various
philosophical viewpoints that are shaping the debate over mass tort
litigation efficiency, particularly the suggestions of the Mass Torts
Working Group. Many of the legislative solutions would alter the form of
mass tort litigation, some for the good, some for the bad.
Three recent cases have altered the landscape of mass tort settlements.
Settlement, when identified as the desired conclusion to mass tort
litigation, is not necessarily an achievable result, at least when the
desired result is a full and final resolution of all claims. How then
does a corporate defendant fully and finally put the litigation behind
it? There is no answer to that question now. However, if an answer is not
"found" creatively, the burden on corporations, business, commerce and
the judicial system will become even greater. (Defense Counsel Journal,
April 1, 2000)
* Who Should Be on the Hook for Unsuitable Insurance Sales
----------------------------------------------------------
An effort to advance a regulation on the suit ability of insurance
products has insurers and producer groups at odds over where consumers
should point the finger of blame if there is an unsuitable sale.
Producers are arguing that insurers should not be "off the hook" at the
expense of producers.
The issue was just one of a number of points raised during a meeting last
week of the National Association of Insurance Commissioners' suitability
working group in Kansas City, Mo. The meeting drew regulators from seven
states and representatives from about 25 companies and trade groups.
The goal of regulators is to adopt a model regulation by the end of the
year.
"NAIFA communicated again to the working group our desire to bring back
responsibility to the insurer to make sure that sales are suitable," says
Ron Panneton, associate general counsel with the National Association of
Independent Financial Advisors in Falls Church, Va.
Panneton says it is still an open issue. "I think it will be a challenge,
at least for NAIFA and some consumer representatives that want an insurer
hack on the hook for unsuitable sales, to communicate to the working
group why it is appropriate to not only have producers responsible for
suitable recommendations, but to also have insurers responsible for
suitable sales."
In a letter submitted by NAIFA, more general concern was expressed over
developing a separate model regulation establishing suitability standards
and requirements for sale of non-registered life insurance products.
Michael Lovendusky, senior counsel-state relations with the American
Council of Life Insurers in Washington, says the issue of who is
responsible for a suitable sale is a "contentious" one that centers on
the specific language to be used and is yet to be resolved.
The model is "such a radical departure from traditional notions of
regulation," Lovendusky continues. "There is a lot of room for reasonable
people to agree and disagree on suitability.
"It is not a black and white," he says, adding there is not a specific
criminal activity that can be pointed to. A replacement model regulation
addresses this issue.
This is one reason that the use of the Unfair Trade Practices Act to
create authority for the proposed regulation is raising concern,
Lovendusky says. There is also concern over how it might involve states'
private cause of action rules, he adds.
Lovendusky says, however, that if done correctly, the proposed model
should not open the industry up to class action lawsuits.
Additionally, he says that at the meeting regulators seemed to be
inclined to remove provisions that would put insurers in compliance with
the regulation if they had membership in the Insurance Marketplace
Standards Association or followed suitability standards of the National
Association of Securities Dealers.
The sense regulators gave was that it would make it too easy for insurers
to escape their responsibilities, he says.
In the past, regulators such as working group chair Roseanne Mead have
said the responsibility lies with both producers and insurers (see NU,
Jan. 22, 2001).
Other groups also weighed in on the suitability issue.
The National Alliance of Life Companies in Rosemont, Ill., submitted
written comments in which it outlined concerns it has with the concept as
well as the draft model.
NALC opposes the "creation of yet another model regulation to regulate
the behavior of the insurance industry." The letter states that the
necessary tools are available to address unfair trade practices and the
issue is really one of enforcement.
NALC also opposes using the Unfair Trade Practices Act to create the
authority for the new regulation because it would "allow a person,
standing outside of the contractual relationship between two parties to
void the transaction." A regulator could do this even if both buyer and
seller agreed the transaction should go forward, NALC says.
Since it is a public policy issue, NALC says that a separate law or act
needs to he drafted.
The NALC letter also says the term "suitable" is not definable. "It is,
by definition, subjective and interposes the opinion of one party over
another,"
The National Association for Variable Annuities also submitted comments
in which it suggests that rather than requiring a broker-dealer and its
producers to study, implement, and adhere to multiple suitability
guidelines, the model would be "much more effective and better achieve
its regulatory goals if it permitted the producer to adhere to one set of
consistent guidelines, that is, the guidelines established by his or her
employer."
NAVA continues: "If, for example, an insurer entered into an arrangement
with a brokerdealer under which the brokerdealer's registered
representatives followed the brokerdealer's established suitability
procedures or guidelines, the insurer would, of course, monitor
compliance with the guidelines as otherwise required under the Model
Suitability Regulation." (National Underwriter Life & Health-Financial
Services Edition, February 19, 2001)
*********
S U B S C R I P T I O N I N F O R M A T I O N
Class Action Reporter is a daily newsletter, co-published by Bankruptcy
Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc.,
Washington, DC. Theresa Cheuk, Managing Editor.
Copyright 1999. All rights reserved. ISSN 1525-2272.
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