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/raid1/www/Hosts/bankrupt/CAR_Public/010313.MBX C L A S S A C T I O N R E P O R T E R Tuesday, March 13, 2001, Vol. 3, No. 50 Headlines CREDIT CARD: Wins Dismissal Web Gambling Suits over Racketeering CREDIT CARDS: FleetBoston Wins Round 1; Case Hinges What "May" May Mean DAIMLER CHRYSLER: Judge's Opinion Defends Action for Airbag Claims DELOITTE & TOUCHE: Creditors and Shareholders of Defunct United Cos. Sue DIGEX, INCORPORATED: Announces Settlement Hearing for DE Securities Suit HOLOCAUST VICTIMS: Schroeder to meet German industry leaders Wednesday INVESTMENT BANKS: 7 Wall St. Banks Sued Over Initial Offerings KEY BANK: Judge Allows Investors' Suit That Alleges Bank Aided Criminal LAYOFFS: Workers Fight Back Taking Former Employers to Court MITSUBISHI CORP: Shareholder Accuses of Cover-up of Driver Complaints NIKE INC: Bernard M. Gross Announces Securities Lawsuit Filed in Oregon NIKE, INC: Savett Frutkin to File Securities Lawsuit in Oregon OAKLAND POLICE: Jerry Brown Under Fire As City Copes With Scandal ORACLE CORP: Milberg Weiss Files Securities Suit in California ORACLE CORP: Pittsburgh Law Firm Announces Class Action Suit Filed in CA RENT-A-CENTER: EEOC Joins Nationwide Sex Discrimination Suit STEWART ENTERPRISES: Announces Securities Lawsuits Withdrawn SULLIVAN: AL High Ct Reverses Verdict for Property Contamination Damage TACO BELL: Workers in Oregon Win Back Pay Lawsuit TEAM COMMUNICATIONS: Cauley Geller Files Securities Lawsuit in CA TEAM COMMUNICATIONS: Charles J. Piven Announces Securities Lawsuit Filed TEAM COMMUNICATIONS: Milberg Weiss Files Securities Suit in California TWINLAB CORPORATION: Announces Settlement of Securities Lawsuit in NY U OF TORONTO: Retired Professors Sue for Back Pay and Fair Pensions UNISYS CORP: Pa. Ap. Ct. Reinstates Claims of 20,000 Retirees ********* CREDIT CARD: Wins Dismissal Web Gambling Suits over Racketeering ---------------------------------------------------------------- In a significant victory for Visa, MasterCard, and several card-issuing banks, a federal judge in New Orleans has dismissed two class actions filed by people who lost money through Internet gambling and argued that they did not have to pay their card debts because the card companies were engaging in racketeering. Dozens of lawsuits like this have been filed in state courts around the country, and at least one plaintiff has won debt forgiveness. But in the only federal cases so far, Judge Stanwood R. Duval Jr. of U.S. District Court in New Orleans ruled Feb. 26 that the plaintiffs did not show that the card companies were engaging in a "criminal enterprise," merely that their line of business had inadvertently aided online casinos that would be illegal in the United States but were legal in their host countries. The judge wrote in his decision that providing "important services to a racketeering enterprise is not the same as directing the affairs of the enterprise," and that the use of particular payment cards at online casinos constitutes "a random intersection, not an ongoing organization." Last June the House Banking Committee approved legislation that would have made it illegal to use checks, credit cards, or other bank-issued instruments to gamble on the Internet. But the legislation died in the House. In what is perhaps considered the seminal case in this area -- and may well have encouraged copycat cases -- a California woman sued MasterCard, Visa, and Providian Financial Corp. in 1998 after racking up $70,000 in card debt at various offshore casino Web sites. The woman, Cynthia J. Haines, argued that Internet gambling is illegal in California, so the companies acted wrongly in letting her use her credit cards, and that this relieved her of the obligation to pay. Ms. Haines prevailed, with the court absolving her of the debts. The case led MasterCard in 1999 to publish payment guidelines for Internet casinos, which Visa had done already. The rules require casino operators to post notices that online gaming is illegal in some jurisdictions and that customers can be held liable for any bets they place. In the federal cases, Judge Duval showed little sympathy for the gambling debtors. "Plaintiffs in these cases are not victims, they are independent actors who made a knowing and voluntary choice to engage in a course of conduct," the judge wrote. "Litigation over their own actions arose only when the result of those actions became a debt that they did not wish to pay." The card companies were cheered by the ruling but said it might not close the door on the matter. "We're obviously very pleased on the decision," said Eileen Simon, vice president and counsel to MasterCard International. But it is not the "death knell for other decisions. We are hopeful that this signals some skepticism as to the validity of these types of claims." At most Internet casinos, people buy virtual "chips" with credit cards and use them to play standard gambling games, such as roulette and blackjack. Steve Zelinger, director of litigation for Visa International, said Judge Duval's decision made clear that the purchase of those chips does not constitute a gambling transaction. The person could decide not to gamble and could cash in all the chips. "It's not our role to legislate people's lives," he said. "We're not a police organization, we're a payment mechanism." (The American Banker, March 12, 2001) CREDIT CARDS: FleetBoston Wins Round 1; Case Hinges What "May" May Mean ----------------------------------------------------------------------- Fleetboston Financial Corp. has won round one in what promises to be a protracted set of related litigations. The issue is the alleged bait-and-switch tactics it employed to attract credit card customers. Boston-based FleetBoston Financial was created when Fleet Bank acquired BankBoston in 1999. The corporation and its credit card arms, Fleet Credit Card Services L.P. and Fleet Credit Card Holdings Inc., are the targets of a suit in Rhode Island state court and two U.S. District Court suits in Philadelphia. The defendants are referred to collectively as Fleet in court documents. On Dec. 29, 2000, Fleet got a belated Christmas gift. U.S. District Judge Bruce W. Kauffman dismissed a lawsuit in which plaintiff Paula E. Rossman was assessed an annual fee after signing up for a Fleet credit card on the basis of what she claims was a promise that no fee would be imposed. That, she alleges, was contrary to the federal Truth in Lending Act (TILA). According to the judge, Fleet ''unquestionably engaged in wrongdoing'' if it lured customers with favorable terms that it intended to change but wrongdoing alone does not automatically trigger application of TILA. "I've filed a notice of appeal," says plaintiffs' attorney Michael D. Donovan, a partner at Donovan Miller, Philadelphia. "The decision ignores congressional amendments to TILA that specifically prohibit what Fleet did." The case will also be refiled in both Pennsylvania and Rhode Island state courts. Rossman is already plaintiff in a state claim under Rhode Island's Unfair and Deceptive Trade Practices Act, making the same bait-and-switch allegations in regards to Fleet's interest rates. Other suits making similar charges have been filed as well. Fed Raised Its Rate, So Did Fleet In 1999, the plaintiff received a solicitation letter over the signature of Fleet's executive vice president along with documents titled "Consumer Information" and "Terms of Pre-Qualification." The letter offered a credit card with no annual fee. The consumer information document repeated the statement that Fleet would not impose an annual fee. The terms of pre-qualification document advised that upon receipt of a credit card, the plaintiff would receive a cardholder agreement, the terms of which would be "subject to change." That agreement contained a paragraph that stated: "We have the right to change any of the terms of this agreement at any time. You will be given notice of a change as required by law. Any change in terms governs your account as of the effective date, and will, as permitted by law and at our option, apply both to transactions made on or after such date and to any outstanding transactions." About seven months later, in May 2000, the plaintiff received another letter in which an annual fee of $ 35 was assessed. It attributed the change to the Federal Reserve's decision to raise interest rates. The letter said the fee would be charged to plaintiff's account on the anniversary of the date the account was opened. A month later another letter modified the terms further, stating that continued rate increases made it necessary to charge the fee as of July 2000, several months before the one-year anniversary. Rossman's suit was filed on July 31, 2000. "If you offer a no-annual-fee credit card, you can't charge an annual fee within the first year," says Donovan. "It's untruthful to say it has no annual fee when the intention is to adopt one." Intention is the key word, and Donovan has a simple method for discerning Fleet's intentions. "Interest rates went up and they adopted the fee. That was their business plan. I don't think they'll deny that." Yes they will, according to Fleet's attorney, Burt M. Rublin, a partner at Ballard Spahr Andrews & Ingersoll, Philadelphia. "My client doesn't want me to speak for the record," he says, but he points out public documents that answer questions about the federal case and also indicate the broad outlines of Fleet's position in state courts. Fleet accepted the premise of the plaintiff's federal case for purposes of argument and maintained that, even if it did intend to raise rates, it hadn't violated federal law. No one in the Fleet legal department would comment. I Wish I May, I Wish I Might Fleet argued that it had done nothing contrary to TILA. In a memorandum in support of its motion to dismiss the case, it quoted Judge Richard A. Posner, chief judge of the 7th Circuit, in a recent decision: "The Act is not a general prohibition of fraud in consumer transactions or even in consumer credit transactions." Fleet said TILA simply requires a creditor to make disclosures that reflect the terms of the legal obligation between the parties, and that disclosures in direct-mail applications and solicitations must be accurate as of the time of mailing. Fleet claimed that documents given to the plaintiff as part of the solicitation and when the card was issued (the cardholder agreement) both provided that, subject to the agreement's change-in-terms provision, there was no annual fee on the account. Thus, the solicitation's representation that there was no annual fee accurately reflected the terms to which the parties were legally bound at the time of the disclosures. The case ultimately hinged on interpretation of Regulation Z, promulgated by the Federal Reserve Board to guide enforcement of TILA. The argument came down to the interpretation of one word in that regulation-"may." The regulation requires credit card issuers to "disclose any annual or other periodic fee, expressed as annualized amount, or any other fee that may be imposed. The plaintiff interpreted that to mean "might" be imposed in the future. The judge disagreed, and chose an alternative meaning. "Although the term 'may' can be used to connote possibility," he wrote, "it can also be used to connote permission." He buttressed his position with a reference to the Federal Reserve's official staff interpretations of Regulation Z, which say the disclosures should reflect credit terms to which the parties are legally bound at the time the disclosures are given. He stated that if Fleet did what the plaintiff alleges, it had engaged in wrongdoing, but it hadn't violated TILA. The decision was wrong on several counts, according to Donovan. "In 1988 Congress passed the Fair Credit and Charge Card Disclosure Act, and in 1989 the Federal Reserve published final amendments to Regulation Z to implement that Act," he says. According to Donovan, Congress acted in order to make a distinction between closed-end loans and open-ended credit programs. Prior to 1988 TILA required both kinds of creditors to simply disclose the terms and conditions when the loan closed. He claims the Court relied on cases dealing with closed-end loans for its analysis. "The 1988 Act requires disclosure of all terms and conditions applicable to an ongoing plan, including those that 'may' be charged," he says. "The Court construed the word 'may' as if it were a closed-end loan case," he says. "Congress's intention was that you had to disclose the entire plan. If you had a plan to impose an annual fee, you had to say so." Fleet disagrees. In its memorandum it states: "There is nothing in TILA that compels disclosure by a creditor of an intention to modify the parties' legal obligations in the future. In fact, Regulation Z specifically contemplates and permits a creditor to make a change in terms in open-end credit transactions, such as revolving credit card accounts." Donovan also claims that the ruling is in conflict with a 9th Circuit decision issued in 2000, Demando v. Capital One. That decision allowed the plaintiff to proceed against a credit card company on the basis of an attempted rate increase that was never imposed. According to the 9th Circuit's decision: "Notice that credit card issuer sent to card holder, purporting to increase holder's fixed interest rate, violated regulation mandating, pursuant to Truth in Lending Act (TILA), that all disclosures issued in conjunction with open-ended credit arrangements reflect terms of legal obligation of the parties, in that notice contained terms which were in violation of credit agreement." Fleet will argue that its agreement contemplated changes in terms. Class-Action Status Sought Fleet's state court position appears to be much tougher. The fraud and deceptive-trade practices laws the plaintiffs filed under allow for a closer examination of Fleet's intentions at the time it solicited customers. Fleet has cited the Fed's interest rate increases as justification for all subsequent changes in its credit card terms. Queried whether state courts are likely to assume that the financial analysts who design Fleet's credit card programs were blindsided by those increases, Rublin stuck with his "no comment" comment. A suit pending in Rhode Island is typical. "We're concentrating on an analysis of whether Fleet's solicitation was likely to deceive," says Kelly M. Dermody, a partner with Lieff, Cabraser, Heimann & Bernstein, San Francisco. Her firm represents plaintiff Tyler Chavers, who transferred the balance of his three credit cards to obtain the 7.99 percent annual interest rate Fleet was advertising. One month later, he received a letter from Fleet saying that because the Federal Reserve had raised interest rates, the bank was increasing its rates to 9.5 or 10.5 percent, depending on when cardholders opened their accounts. "We'll be asking for class-action certification," says Dermody. (Corporate Legal Times, March, 2001) DAIMLER CHRYSLER: Judge's Opinion Defends Action for Airbag Claims ------------------------------------------------------------------ In a harshly worded opinion, Philadelphia Common Pleas Judge Mark I. Bernstein has set forth a thorough account of why the Superior Court should affirm judgments he made in a case that resulted in a multi-million dollar verdict against Daimler Chrysler in a class-action airbag case. "Defendant has repeatedly, cumulatively and repetitiously raised the same claims in numberless form throughout the trial," Bernstein wrote in Crawley v. Daimler Chrysler Corp. "Their claim that no class action can possibly be properly certified has been restated hundreds of times under every imaginable guise." "The fact that defendant voluminously claim, in repetitive protean guises, that a class action could not proceed and this court disagrees, and the fact that court conducted a jury trial in this class action lawsuit does not demonstrate bias." The quote comes near the very end of the 64-page opinion, rebutting Daimler's contention that it was denied a fair trial. The class action had alleged that Daimler, between 1988 and 1990, knowingly sold cars with airbags that could severely burn the hands and wrists of drivers even though equally effective, safer airbags were available. Bernstein said that even today, "whenever an original airbag deploys, an equally defective system is reinstalled and the vehicle returned to the owner without warning or explanation." The plaintiffs pressed three claims: one for common-law fraud, one for breach of warranty and one under Pennsylvania's Unfair Trade Practices and Consumer Protection Act. A jury returned a verdict in favor of the class on March 11, 1999, for $ 730 per class member in compensatory damages and $ 3.5 million in punitive damages. The class could be as many as 80,000. Bernstein denied post-trial motions on Jan. 7, 2000. The current opinion hashes out a number of issues, but two of the most prevalent throughout include issues of class certification and reliance, including an apparent issue of first impression on the issue of reliance. Other issues Bernstein addresses include expert testimony and a cross-appeal filed by the class. When the case was filed, it was originally assigned to Judge Bernard J. Avellino. The case was later reassigned to Judge Stephen E. Levin to handle all pretrial activity. Levin handles all pretrial activity for all of the class actions in the First Judicial District. Daimler challenges the court's procedure, claiming it violates state rule. Bernstein said to have the judge assigned to pretrial work and handle trials as well would result in an "impenetrable and intolerable delay." Class Certification Bernstein said Daimler has raised countless objections to the class certification in the case, claiming that no class can exist. Bernstein disagreed repeatedly throughout the opinion."There can be no other fair method of adjudicating these common issues because, in this world, there is no other possible method of adjudicating these claims," Bernstein wrote. "Precluding redress of injury is the antithesis of fair. The conduct of this action as a class action was proper." Reliance Daimler argued on appeal that the class failed to make a case for common law fraud and therefore the court was wrong to charge the jury with the claim. Bernstein said on the contrary, that the class presented sufficient evidence to establish the element of scienter required for a charge on common law fraud.Bernstein said the case presented a classic example of a duty to disclose."The 1988 field investigations revealed an unacceptable burn rate," Bernstein wrote. "Defendant decided to redesign the airbags and issue an Owner's Manual Supplement. Under these circumstances, defendant had a duty to know of the unacceptable risk of burns, knew of the unacceptable risk and had a duty to disclose that risk." Bernstein said the evidence showed, however, that Daimler made a "conscious decision to conceal." In cases where alleged misrepresentation is nondisclosure or concealment, Bernstein said, plaintiffs must prove reliance, which is closely related to the element of materiality in this case. To show reliance on material fact, the class had to show that if the misrepresentation was never made, that they would not have purchased the vehicle."In certain cases, however, reliance on material misrepresentation may be presumed," Bernstein said. "Although there are no Pennsylvania cases directly on point with this case, a presumption of reliance has been applied in consumer protection cases, products liability cases and federal securities fraud cases." Bernstein discussed several pertinent cases, ultimately asserting that the jury charge telling members that they may, but are not required to, presume class reliance, was not in error. "Defendant in this case had superior access to information regarding the safety of its airbags," Bernstein wrote. "No public policy is furthered by permitting defendant to avoid liability merely because the intentional misrepresentations are nondisclosures." "It logically follows from the cases discussed that where the defendant fraudulently engages in a uniform omission of a material fact, as in this case, reliance may be presumed." Bernstein said Daimler Chrysler argued that each one of the class members should testify to prove reliance, while at the same time arguing the court erred by allowing individual class members to testify because such testimony is "irrelevant and cumulative." The court then set forth witness testimony and explained why it was relevant and validly permitted to show reliance. Bernstein called Daimler's argument of class reliance "another veiled variation" of the argument that class certification was not proper. The court also said it was proper to submit to the jury the plaintiffs' fraud claim under the Consumer Protection Law and that reliance may be presumed under the CPL. Other Issues After disposing of what seemed to be the major issues of the case, Bernstein turned to addressing a number of issues reviewed prior to his ruling on post-trial motions. He said none of the "repetitive and overlapping grounds" presented reversible error. Bernstein said Daimler raises "voluminous" issues regarding the expert witnesses presented by the class. The court said the witnesses were "well qualified," and he discussed several in length. Daimler also argued that the allowance of evidence as to a design change made to the airbags constituted reversible error, but Bernstein said the design change was applicable to show Daimler's intentions throughout the time up to the trial. Bernstein said Daimler knowingly surprised the class with a late expert report. Daimler said the report was late because it was unsure of whether reliance could be presumed. Again Bernstein said that Daimler's position that each class member needs to testify as to reliance is another attempt to attack the validity of the class certification. "Certification of this class is possible only if a jury could presume class reliance upon adequate individual proof," Bernstein said. "The contention that defendant Chrysler was somehow cast adrift by ... their lack of clarity on this issue is belied both by their motions in limine on this very issue and their desultory decision to submit the report prior to any ruling." Bernstein said some of Daimler's trial techniques consisted of a "blatant and transparent attempt to conduct trial by ambush." The court said the issue of reliance was raised before the class was certified. Cross-Appeal The class filed a cross-appeal asking the court to issue an order with specific identification of those class members who are entitled to relief. The court said any specific designation would be premature before a proper claims procedure is completed, and that procedure should not be completed while appeals are still pending. "The potential costs of litigating individual claims under an antagonistic and contentious model do not justify forcing any resolution before appellate review is completed," Bernstein said. The court, therefore, denied plaintiffs' request.Bernstein also denied plaintiffs' request that the damages awarded under the CPL should be trebled, asserting he would not replace the jury's verdict with a judicial evaluation.In addition to other issues, Bernstein also said the court made the proper decision in limiting the class action to Pennsylvania, rather than expanding the class to a multi-state action .Attorneys representing the class include Martin J. D'Urso and Joseph C. Kohn of Kohn Swift & Graf. Pennsylvania attorneys for Daimler Chrysler include: William H. Lamb of Lamb Windle & McErlane; Richard A. Sprague of Sprague & Sprague; and Keith D. Heinhold of Marshall Dennehey Warner Coleman & Goggin.Claudia Ginanni contributed to this report. (The Legal Intelligencer, March 9, 2001) DELOITTE & TOUCHE: Creditors and Shareholders of Defunct United Cos. Sue ------------------------------------------------------------------------ A group of United Companies Financial Corp. creditors and shareholders have filed suit against the defunct company's outside accounting firm for allegedly issuing "grossly inaccurate financial statements" and concealing crucial accounting mistakes. In the lawsuit filed in state civil district court in New Orleans on Feb. 28, the plaintiffs claim Deloitte & Touche defrauded them because it knew United Companies was losing money and helped distort United's books. "Deloitte breached its duties of care and loyalty by, among other things, providing the company with unsound and negligent professional advice," the plaintiffs claim in the suit. "Deloitte thereby created and maintained a facade of corporate solvency, allowing the company to become increasingly insolvent and the value of the company to decrease dramatically." In a one-paragraph statement, Deloitte said it planned to vigorously fight the allegations. The suit does not specify damages being sought. The suit stems from United's descent into bankruptcy and subsequent collapse in 1999. Some shareholders saw fortunes in company stock vaporized in the process. When United issued its final financial statement in late 1999, the company revealed it had lost more than $584 million in 1998. Deloitte & Touche is based in New York City. Its New Orleans branch acted as United Companies' outside auditor, meaning it verified United's internal accounting records and issued an opinion as to their accuracy and consistency. Since United's collapse, many shareholders have claimed that United's management was misled by Deloitte's advice. Leo Buese, a Phoenix attorney representing the plaintiffs, declined to comment on the lawsuit. Buese said only that the suit spoke for itself and that he would discuss it at the "appropriate time." In its statement, Deloitte & Touche called the lawsuit an "attempt to shift responsibility for adverse business developments to (United's) outside auditors." United suffered setbacks during a time of financial upheaval, Deloitte said. Blaming the company two years after United's demise was "wholly without merit," the company said. The suit was filed by William Hays Jr. of Atlanta. Hays serves as trustee of a litigation fund that was established in United's bankruptcy plan. Hays is an accounting fraud investigator who has worked in Louisiana previously. In the early 1990s, a judge placed him in charge of collecting debts and returning money to people who were defrauded in the failed Place Vendome mall project in Baton Rouge. Hays, along with other members of the litigation trust fund, also declined to comment on the suit. United's bankruptcy plan, which was completed late last year, calls for various United creditors to receive 70 percent of any proceeds from a lawsuit, while shareholders would get the remaining 30 percent. United specialized in high-risk mortgages. The company raised additional money by using the loans to securitize bonds that were sold to Wall Street investors. During the 1990s, United sold more than $11 billion worth of the bonds. At its peak, United had been the fancy of Wall Street until questions were raised over its accounting practices in 1997. The company suffered another setback in August 1998 when a global financial crisis caused investors to shy away from high-risk lending companies. In its final financial statement, United slashed $605.6 million off the bonds' value, driving United deeply into the red. The 52-page suit outlines in complex detail the plaintiffs' claims of how Deloitte allegedly misled company officers about United's financial condition. Among their numerous accusations, the plaintiffs claim that Deloitte allowed United to overstate its "interest spread" - the difference between the interest United received from borrowers and the interest it had to pay bond holders. "Deloitte's failure to report the gross overvaluation of this asset account caused United's financial statements to be false and misleading, and led the board of directors and audit committee to believe that United was profitable when, in fact, it was losing money on each securitization transaction," the plaintiffs said. Another claim delves into the way United treated income from its loan service fees. The plaintiffs said that in 1996, United began reporting servicing fees as income at the time of the loan securitization transaction, even though the income would not be earned for many years. The practice resulted in United overstating the initial "gain on sale" by at least $90 million from 1996 to 1998, plaintiffs said in the lawsuit. "In order to correct these accounting errors, the company, with Deloitte's knowledge and consent, changed its accounting methodology in the fourth quarter of 1998," they claim. "Deloitte concealed this change ... by misrepresenting that the assumptions which figured into the gain on sale calculation had suddenly changed." It was unclear from court documents when arguments would begin in court. The suit points out that under state law, its claims first must go before a public accountant review panel. Buese, the plaintiffs' attorney, also acknowledged that Deloitte has a year to examine the suit and could take that entire amount of time. (Saturday State-Times/Morning Advocate (Baton Rouge, LA.), March 10, 2001) DIGEX, INCORPORATED: Announces Settlement Hearing for DE Securities Suit ------------------------------------------------------------------------ Digex, Incorporated (Nasdaq: DIGX), is republishing a notice which appeared in the "Wall Street Journal" on March 7, 2001. IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY IN RE: DIGEX, INC. CONSOLIDATED SHAREHOLDERS LITIGATION CIVIL ACTION NO. 18336 NC SUMMARY NOTICE OF PENDENCY OF CLASS AND DERIVATIVE ACTION, PROPOSED SETTLEMENT AND SETTLEMENT HEARING TO: ALL RECORD AND BENEFICIAL OWNERS OF DIGEX, INCORPORATED CLASS A COMMON STOCK (OTHER THAN THE DEFENDANTS IN THE ABOVE- CAPTIONED ACTION AND THEIR AFFILIATES) AT ANY TIME DURING THE PERIOD FROM AND INCLUDING AUGUST 31, 2000 THROUGH AND INCLUDING THE EFFECTIVE DATE OF THE MERGER BETWEEN WORLDCOM, INC. AND INTERMEDIA COMMUNICATIONS, INC., INCLUDING ANY AND ALL OF THEIR RESPECTIVE SUCCESSORS IN INTEREST, ASSIGNEES OR TRANSFEREES, IMMEDIATE AND REMOTE (THE "CLASS"). YOU ARE HEREBY NOTIFIED that the plaintiffs and the defendants in the above-captioned consolidated class action and shareholder derivative lawsuit (the "Action") have entered into an agreement to settle this Action. PLEASE BE FURTHER ADVISED that pursuant to an Order of the Court of Chancery of the State of Delaware, dated March 5, 2001, a hearing will be held on April 6, 2001 at 2:00 p.m., before The Honorable William B. Chandler, III, in the Court of Chancery, 1020 North King Street, Wilmington, Delaware (the "Settlement Hearing"): (i) to determine whether a Stipulation of Settlement dated March 2, 2001 (the "Stipulation"), and the terms and conditions of the Settlement proposed in the Stipulation (the "Settlement"), are substantively and procedurally fair, reasonable, adequate and in the best interests of Digex, Incorporated ("Digex") and the Class; (ii) to determine whether the Class should be certified in the Action; (iii) to determine whether certain plaintiffs should be certified as representatives of the Class; (iv) to determine whether final judgment should be entered dismissing the Action as to all defendants named therein and their affiliates and with prejudice as against plaintiffs, all members of the Class, and all present, past and future shareholders of Digex (the "Order and Final Judgment"); (v) to hear and determine any objections to the Settlement and/or the application for attorneys' fees by plaintiffs' counsel; (vi) if the Court approves the Stipulation and the Settlement and enters the Order and Final Judgment, to determine whether it should award attorneys' fees and expenses to plaintiffs' attorneys pursuant to the application described herein; and (vii) to hear such other matters as the Court may deem necessary and appropriate. The Action and the Settlement address claims arising out of the proposed merger (the "Merger") between WorldCom, Inc. ("WorldCom") and Intermedia Communications, Inc. ("Intermedia") pursuant to which WorldCom will acquire voting control of Digex. In connection with the Merger, WorldCom required that the Digex board of directors grant a waiver to exempt WorldCom from the restrictions of Section 203 of the Delaware General Corporation Law ("Section 203"). The Digex board of directors (which included three directors and an executive officer of Intermedia (the "Individual Defendants")), over the objections of the special committee of the Digex board of directors (the "Special Committee"), granted WorldCom the requested Section 203 waiver. Numerous lawsuits were subsequently filed by Digex stockholders challenging the actions by Intermedia and the Individual Defendants, as well as by WorldCom, in connection with the Merger and the Section 203 waiver. Pursuant to the Settlement: (i) WorldCom will make a payment of freely tradeable WorldCom common stock, either registered or exempt from registration under the Securities Act of 1933, having a total value of one hundred and sixty-five million dollars ($165,000,000) into a settlement fund for distribution (after a deduction for the fees and expenses of plaintiffs' attorneys in the Action) to certain members of the plaintiff Class (the "Settlement Fund"); (ii) WorldCom will reimburse Digex up to fifteen million dollars ($15,000,000) for fees and expenses incurred by Digex in connection with the evaluation of various potential transactions involving Digex and in connection with the Settlement; (iii) the consideration payable by WorldCom to Intermedia's shareholders in connection with the Merger will be reduced by modification of the exchange ratio initially agreed upon in the Merger; (iv) WorldCom and Digex will enter into certain sales channel, funding, facilities, and network agreements; and (v) Intermedia and WorldCom will amend the certificate of incorporation of Digex to establish a procedure for the consideration by independent Digex directors of certain types of transactions between WorldCom and Digex. In consideration for these substantial benefits, the parties to the Action and the Special Committee have agreed, subject to consummation of the Merger and the approval of the Settlement by the Court, to dismiss all claims made by and that could have been made by Digex, plaintiffs or the Class relating to the Merger and the Section 203 waiver, including all claims asserted in the Action. At or before the Settlement Hearing, Plaintiffs' counsel will apply to the Court for an award of attorneys' fees and expenses in an amount equal to 15% of the Settlement Fund, which, based upon a Settlement Fund value of $165,000,000, would be $24,750,000. WorldCom, Intermedia and the Individual Defendants have agreed not to oppose this fee request. Digex and the Special Committee have reserved all rights regarding the fee request, and the Special Committee has indicated that it intends to oppose the fee request as excessive. Plaintiffs believe that the Special Committee lacks standing to raise this issue. ANY CLASS MEMBER WHO WISHES TO BE HEARD ON THE FEE APPLICATION SHOULD STATE ITS POSITION IN A FILING WITH THE COURT PURSUANT TO THE PROCEDURES SET FORTH IN THE NOTICE. If you currently own shares of Digex Class A common stock or have owned or may own shares of Digex Class A common stock at any time from and including August 31, 2000 through and including the effective date of the Merger, your rights may be affected by the Settlement. A member of the Class who wishes to contest either the Settlement or the application for fees and expenses by plaintiffs' counsel may do so by following the procedure set forth in the Notice of Pendency of Class and Derivative Action, Proposed Settlement and Settlement Hearing under the heading "RIGHT TO APPEAR AT SETTLEMENT HEARING." If you have not received a detailed Notice of Pendency of Class and Derivative Action, Proposed Settlement and Settlement Hearing, you may obtain copies by calling Tania C. Almond, Director, Investor Relations, Digex, Incorporated, at 240-456-3800. PLEASE DO NOT CONTACT THE COURT OR THE REGISTER IN CHANCERY. Brokerage firms, banks and other persons or entities who are members of the Class in their capacities as record owners, but not as beneficial owners, are requested to send this notice promptly to beneficial owners. Dated: March 5, 2001 BY ORDER OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE HOLOCAUST VICTIMS: Schroeder to meet German industry leaders Wednesday ---------------------------------------------------------------------- Chancellor Gerhard Schroeder will meet German industry leaders Wednesday for talks on a deadlocked national plan to compensate Nazi slave laborers, his spokesman said. The planned talks follow a New York judge's refusal last week to dismiss a lawsuit against German banks over concerns that funding for the plan was uncertain. German companies have refused to hand over any part their half of a 10 billion mark (dlrs 4.8 billion) fund until the U.S. class-action lawsuits on Holocaust claims which prompted them to back a national compensation fund are quashed. Lawmakers, Jewish leaders and victims' organizations have accused industry of contributing to the holdup by so far raising only 3.6 billion marks (dlrs 1.7 billion) for the fund. Doubts that companies will contribute the full sum ''must be fully cleared up'' before Schroeder travels to Washington at the end of the month for talks with President George W. Bush, spokesman Uwe-Karsten Heye said. The U.S. court ruling raised new doubts about when an estimated 1 million elderly survivors of Nazi forced and slave labor, mostly non-Jews from eastern Europe, will receive compensation. (AP Worldstream, March 12, 2001) INVESTMENT BANKS: 7 Wall St. Banks Sued Over Initial Offerings -------------------------------------------------------------- Lawyers acting on behalf of investors have accused seven investment banks of colluding in violation of antitrust laws in their allocation of sought-after initial public stock offerings. In a class-action lawsuit, they charged that in return, the investment banks demanded large brokerage commissions and commitments to artificially support the prices of shares after the offerings. The Securities and Exchange Commission and the United States attorney's office in Manhattan are already investigating the market for I.P.O.'s, an official close to the investigation confirmed. Lawyers in this latest case said that while other class-action suits have been filed since the investigation became public in December, those were all based on the offering of one stock, VA Linux Systems. The lawyers said that this suit, filed in United States District Court in Manhattan, will ultimately cover many offerings, and is the first to accuse underwriters of initial public offerings collaborating in violation of antitrust laws. One of the lawyers involved in the latest suit is Christopher Lovell of the firm Lovell & Stewart, who won a notable victory in 1998 in a class-action suit that also charged antitrust violations. That suit, which yielded a settlement for investors of more than $1 billion, accused Wall Street firms of price-fixing in Nasdaq stocks. Mr. Lovell said wrongdoings in the I.P.O. market were similar to those charged in the Nasdaq case. "In the Nasdaq suit, we said leading brokerage firms were engaging in anticompetitive practices," he said in an interview. "In this case, we are saying the same thing." The lawsuit accuses the brokerage firms of allocating shares in initial public offerings to certain investors on the condition that those investors agree to compensate the underwriters "in the form of dramatically increased brokerage commissions or other brokerage compensation." Those commissions would typically be equal to a third of the gains made by the customer from the shares they received in the initial offering, the suit said. It goes on to describe what it calls a "tie-in purchase," requiring investors in initial stock offerings to buy additional shares in the companies after the companies go public. The suit further charges that these purchases were made at "specified escalating price levels which were designed to push up and inflate the price of the class security to increasingly higher levels." This process, the suit said, is known as "laddering a stock." The investment banks, who, the suit said, communicated with one another regarding such arrangements, "successfully increased their individual and collective underwriters' compensation and revenues to levels above those that would have existed in a competitive market free from defendants' unlawful agreement." The I.P.O. case's probable lead plaintiff, Glen Billing, purchased shares in an Internet software company, Marimba, after its initial public offering in April 1999. Marimba's shares reached a high of $66.43 soon after the offering, and then fell, closing on Friday at $5.16. The suit also refers to initial public offerings of United Parcel Service and Ariba. The lawyers plan to file more suits this week, said Howard Sirota, the other lawyer involved in the case, under federal securities laws charging similar violations relating to trading in VA Linux, as well as dozens of other stocks. "In the succeeding days, I'll be filing cases as fast as I can," said Mr. Sirota, adding he could prove that investors lost far more than the $1 billion in the Nasdaq case. The firms named as defendants in the suit are Credit Suisse First Boston; Goldman, Sachs; Lehman Brothers; Merrill Lynch; Morgan Stanley Dean Witter; BancBoston Robertson Stephens and Salomon Smith Barney. (The New York Times, March 12, 2001) KEY BANK: Judge Allows Investors' Suit That Alleges Bank Aided Criminal ----------------------------------------------------------------------- People who lost money they entrusted to Clifford Levesque and his Mainely Payroll business might be able to recover some of it from Key Bank. A Cumberland County Superior Court justice is allowing the unusual lawsuit against Key Bank to go forward. The bank handled business accounts for Mainely Payroll, of Augusta, and other operations run by Levesque and his son Michael. Justice Thomas D. Warren refused to dismiss a complaint filed by 33 plaintiffs against Key. However, he did rule for the bank in some areas, dismissing charges of negligence, breach of duty, breach of contract, breach of trust and liability for nondisclosure. Claims that still could go to trial are those charging the bank with aiding and abetting Levesque and Mainely Payroll in criminal activities. Jeffrey A. Thaler, lead attorney for the former Mainely Payroll clients, said the judge's decision carries significance beyond the state because there are very few cases in the country that involve charges of banks aiding and abetting criminal behavior. Levesque's scheme - in which he failed to forward clients' payroll-tax money to the Internal Revenue Service and the state and instead used it for business and personal expenses - unraveled in late 1995 and early 1996. The lawsuit charges that Key Bank failed to take action when it knew Levesque and Mainely Payroll were conducting improper business practices. It asserts that Levesque, a former Key Bank employee, diverted money from the Mainely Payroll account to other Key Bank accounts. And it contends Key Bank knew about the problems, including money diverted to pay for overdrafts by a business owned by Levesque's son. Levesque's businesses went bankrupt, and he and his son went to federal prison after pleading guilty to criminal fraud. Federal prosecutors said the fraud and subsequent losses for all the companies, which were still obligated to cover payroll taxes, reached $2.3 million. Among the plaintiff companies in the lawsuits are Augusta Fuel & Plumbing, Apgar Imaging Systems and GroundAlf Inc., all of Augusta; Maine Eye Care Associates of Waterville; Jenkins Inc. of Readfield; and Cushnoc Bank and Trust, which later became part of Northeast Bank. "Our clients are Maine business women and men who have waited for years to have their day in court," said Thaler. "They are heartened that the judge has agreed they may now proceed and let a jury of Maine citizens decide the case." Thaler said Warren indicated that the case could reach the jury trial list in late August or early September. (Portland Press Herald, March 9, 2001) LAYOFFS: Workers Fight Back Taking Former Employers to Court ------------------------------------------------------------ A growing number of workers who feel they've been treated unfairly during recent job cuts now are fighting back by bringing lawsuits against their former employers. The lawsuits are being filed against both tech and traditional companies, with many of the downsized workers claiming they weren't given adequate advance notice of a downsizing. Some say they're owed back pay, promised bonuses or stock options. "It's important to take action if a company has violated an employment law," says Matthew Finkle, 31, of Norwalk, Conn., who was laid off in November from Walker Digital and is now suing. "My intent is not a personal vendetta, but if they broke the law, they should be held accountable." Many of the claims hinge on a little-known federal statute involving notification of job cuts. Under the Worker Adjustment and Retraining Notification Act of 1988 (WARN), which originally was aimed at protecting manufacturing workers, most employers must give at least 60 days' notice regarding a plant closing or mass layoff. Employees who haven't received notice can be eligible for 60 days' pay. But because there are many exceptions to the act ---- companies may not be covered if they've encountered sudden unexpected business circumstances, for example, or if they have fewer than 100 employees -- it remains to be seen how successful New Economy workers who sue will be. Still, the lawsuits are mounting: Walker Digital of Stamford, Conn., is being sued by the Connecticut attorney general, who claims the company violated the federal law requiring notice. "We think the lawsuit is totally without merit," says Kevin Goldman, a spokesman for the business-development firm. Walker Digital dismissed about 100 employees in November. Laid-off employees of Chris-Craft Boats in Sarasota, Fla., have hired a lawyer to represent them in bankruptcy court because they say they did not get all the pay owed them. The firm is a division of Outboard Marine, which filed for bankruptcy protection in December and dismissed workers. Inacom is being sued by laid-off workers who claim they weren't given advance notice of the job cuts. About 5,000 workers may be represented if the case is certified as a class action, lawyers say. "We're getting more calls on this issue," says Mark Fancher, a lawyer in Detroit for the plaintiffs. A lawyer for the Atlanta-based computer supplier and consulting firm denied it was obligated to provide notice. Legal experts say the recent cases may just be the start. One reason? Severance pay. Companies generally provide severance as a way to give themselves legal protection because workers are required to sign away their right to sue in order to get the money. Many start-ups, however, have not been able to afford severance. (USA Today, March 12, 2001) MITSUBISHI CORP: Shareholder Accuses of Cover-up of Driver Complaints --------------------------------------------------------------------- A shareholder on Monday sued 11 executives at Mitsubishi Motors Corp. for 1.18 billion yen (dlrs 9.8 million) in damages, accusing them of being responsible for a cover-up of driver complaints that led to massive recalls and corporate losses. The lawsuit, filed in Tokyo District Court, is a rare assertion of shareholders' rights in Japan, where such lawsuits, although gradually rising, are a far cry from class-action cases in the United States. In the Japanese legal system, the money, if awarded by the court, will be paid to the company and not to the shareholder. ''To stay silent would have been to go against society,'' said plaintiff Isao Yotsuya, a 63-year-old retired engineer, who bought 2,000 shares in Mitsubishi Motors about five years ago. Yotsuya, who is also a member of a grassroots group advocating shareholders' rights, said he decided to invest in Mitsubishi Motors after it came out with a new cleaner engine. ''I thought it might be a fun way to spend my allowance,'' he said. But Yotsuya was appalled when he heard last year that Mitsubishi Motors had been hiding thousands of driver complaints about defects for more than 20 years. Following those revelations, Mitsubishi Motors a Tokyo-based automaker that is 34 percent owned by DaimlerChrysler last summer recalled 620,000 vehicles for failing brakes, leaking fuel, malfunctioning clutches and other flaws after acknowledging a systematic cover-up. And last month it announced a worldwide recall of 1.3 million vehicles thousands of them the same vehicles from the earlier recall. Mitsubishi Motors has acknowledged it purposely gave incorrect information to government authorities and repaired vehicles by getting in touch with buyers individually to avert recalls. Mitsubishi Motors said in a statement Monday that it could not comment on a lawsuit filed against its executives. ''Companies may be for profit, but they also have social responsibility,'' said Junzo Tajima, one of Yotsuya's lawyers. ''Cars are products requiring high levels of technology that could endanger lives.'' Tajima said the top executives at Mitsubishi targeted in the lawsuit committed illegal acts and betrayed consumers' trust by failing to check on the company's products adequately. The lawyers said the executives were board members since 1995 in the car and truck divisions, who were in positions to have known about the cover-up. The damages requested are not estimates of the losses suffered by the company as a result of the cover-up and subsequent recalls, as the main purpose of the lawsuit was to raise awareness about managerial accountability and legal compliance rather than money, they said. Mitsubishi earmarked 11 billion yen (dlrs 91 million) for last summer's recall and forecast a loss of 140 billion yen (dlrs 1.2 billion) for the fiscal year ending in March. The latest recall will cost 17 billion yen (dlrs 141 million) more, according to the automaker, so the losses may turn out to be greater. Mitsubishi's monthly sales in Japan have fallen by double-digit percentages since the recall problem surfaced. ''For a long time, regular people who were shareholders never said anything,'' said Kansai University professor Koji Morioka, a leader in Japan's fledgling shareholders' ombudsman movement. ''The idea of shareholders taking action against a company simply didn't exist.'' (AP Worldstream, March 12, 2001) NIKE INC: Bernard M. Gross Announces Securities Lawsuit Filed in Oregon ----------------------------------------------------------------------- Law Offices Bernard M. Gross, P.C. gives notice that a class action lawsuit is filed in the United States District Court for the District of Oregon on behalf of all persons who purchased or otherwise acquired the common stock of Nike Inc. ("Nike" or the "Company")(NYSE:NKE) between December 20, 2000 and February 26, 2001 (the "Class Period"). The Complaint charges Nike and certain of its executive officers with violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder arising from material misstatements and omissions made during the Class Period. Specifically, the Complaint alleges that during the Class Period, defendants repeatedly issued materially false and misleading statements regarding its third quarter earnings and revenues. Defendants knew or recklessly disregarded the material facts that Nike was having problems since the summer with its demand and supply chain management system which caused it to sustain reduced revenues and profits in the third quarter. The truth finally emerged on February 26, 2001, when Nike issued a press release entitled "Nike Revises Third Quarter and Fiscal Year 2001 EPS Guidance." In this release, Nike reported that it expects to earn between$0.34 and $0.38 per share for the third quarter ending February 28, 2001, versus its previously stated guidance of $0.50 to $0.55 per share. Donald Blair, Vice President and Chief Financial Officer stated at a conference call on February 28, 2001 that "these supply chain issues resulted in significant amounts of excess inventory of some footwear models, while other models have been in short supply or delivered late. Also, during this time period, certain officers and directors sold their shares of Nike stock for proceeds in excess of $12 million. Contact: Law Offices Bernard M. Gross, P.C. Susan Gross, Esq. Deborah R. Gross, Esq. Telephone: 866/561-3600 (toll free) 800/849-3120 (toll free) or 215/561-3600 NIKE, INC: Savett Frutkin to File Securities Lawsuit in Oregon -------------------------------------------------------------- Savett Frutkin Podell & Ryan, P.C. hereby gives notice that a class action complaint was to be filed March 9 in the United States District Court for the District of Oregon located at 1000 S.W. Third Avenue, Portland, OR 97204-2902, on behalf of a class of persons who purchased the Class B common stock of Nike, Inc. (NYSE:NKE) during the period between December 20, 2000 and February 26, 2001 ("Class Period") and who were damaged thereby. The complaint charges Nike and its senior officers, Philip Knight, Thomas Clarke, Mark Parker and Gary DeStefano, with violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder. The complaint alleges that defendants issued materially false and misleading information about the Company's revenues and profits which resulted in artificially inflated prices for the Company's common stock. Specifically, on December 19, 2000 Nike reported second quarter earnings and reaffirmed the Company's earnings target of growth in the mid-teens for the full fiscal year and second quarter revenue increase to $2.2 billion as well as a net income increase to $119 million. As a result of the positive statements made in Nike's earnings release, the price of Nike common stock increased to $49.125 from $47.5625 on December 19, 2000. The next day, on December 20, 2000, Nike held a conference call with analysts, during which defendant Knight further said he remained optimistic. On January 16, 2001 Nike filed its Form 10-Q with the SEC and reported that selling and administrative expenses increased for both the second quarter and fiscal year-to-date period as compared to the prior year which was attributable to incremental spending for market and operational initiatives undertaken to achieve future revenue growth and profitability. The truth about the Company's revenues and profits was disclosed after the close of the market on February 26, 2001 when the Company issued a press release revising downward its third quarter and fiscal year 2001 EPS guidance. Nike also conducted a conference call at 5:00 p.m. that same day and stated that its third quarter 2001 earnings would be lower than expected due to a planning and inventory system problem which resulted in product shortages and excesses as well as late deliveries. After the February 26, 2001 disclosure, the market price of Nike Class B common stock plummeted 19.5 percent or $9.57 to close at $ 39.60 per share on February 27, 2001. Contact: SAVETT FRUTKIN PODELL & RYAN, P.C. Barbara A. Podell Robert P. Frutkin Renee C. Nixon 215/923-5400 or 800/993-3233 E-mail: mail@sattlaw.com OAKLAND POLICE: Jerry Brown Under Fire As City Copes With Scandal ----------------------------------------------------------------- US News and World Report (3/19, Tharp) reports, "Has 'Governor Moonbeam' turned into 'Mayor Make My Day'? That's what some Oaklanders are asking about Jerry Brown as their city deals with its biggest police scandal since clashes with the Black Panthers in the 1960s. Four former officers, known on the streets of West Oakland as 'the Riders,' were fired in December and January after allegations of kidnapping and beating suspects, planting dope, and other abuses. Residents have filed class action lawsuits, prosecutors have dismissed some cases handled by the four cops, and the FBI and district attorney's office are investigating." US News adds, "The scandal has been seismic for the 700-plus force, but it has also marked a dramatic shift in Brown's image. Suddenly, this Jesuit-trained mayor seems more like 'Dirty Harry' than the political progressive he was known as during most of his three decades in politics." (The Bulletin's Frontrunner, March 12, 2001) ORACLE CORP: Milberg Weiss Files Securities Suit in California -------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/oracle/)announced on March 9 that a class action has been commenced in the United States District Court for the Northern District of California on behalf of purchasers of Oracle Corp. ("Oracle") (Nasdaq:ORCL) publicly traded securities during the period between Dec. 15, 2000 and March 1, 2001 (the "Class Period"). The suit has been filed on behalf of an institutional plaintiff. The complaint charges Oracle and Lawrence J. Ellison ("Ellison") with violations of the Securities Exchange Act of 1934. Oracle supplies software for enterprise information management. The complaint alleges that at the beginning of the Class Period, defendants represented that Oracle would have sequential EPS growth of 9%, or$0.12, and revenue of over $2.9 billion for its Q3 2001. Defendants assured investors that Oracle's new 11i Suite required no programming systems integration to implement the product and that using the product internally saved the Company $1 billion. However, defendant Ellison actually knew that the Suite was fraught with massive technical problems, including giant gaps in its CRM modules, and required expensive systems integration work to implement. Ellison also knew that Oracle's so-called billion dollar savings was not the result of the synergies created by Oracle's 11i product, but rather, his decision to terminate more than 2,000 employees, many of whom would "support" Oracle's new software. Throughout January and February 2001, defendants repeatedly stated that Oracle's Q3 2001 estimates were easily achievable, that Oracle's pipeline was "never stronger," its applications growth was "accelerating," its database and application sales were rapidly growing and that the slowing economy was showing no impact on Oracle's Q3 2001 performance. During this period defendant Ellison sold nearly $900 million worth of his own Oracle shares at prices as high as $32 per share, or 50% higher than the price to which Oracle shares dropped as Oracle's true prospects began to reach the market. On March 1, 2001, Oracle revealed that, contrary to prior assurances by defendants of Oracle's continuing "strong" revenue and EPS growth, including defendants' assurances less than two weeks earlier that demand remained strong, Oracle would post a major revenue shortfall and EPS declines, sending Oracle's shares into a free fall. This disclosure shocked the market, causing Oracle's stock to decline to less than $17 per share before closing at $16.88 per share on March 2, 2001, on record volume of more than 221 million shares. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach at 800/449-4900 wsl@mwbhl.com ORACLE CORP: Pittsburgh Law Firm Announces Class Action Suit Filed in CA ------------------------------------------------------------------------A class action has been commenced in the United States District Court for the Northern District of California on behalf of purchasers of Oracle Corp. ("Oracle") (Nasdaq: ORCL) publicly traded securities during the period between Dec. 15, 2000 and March 1, 2001 (the "Class Period"). The complaint charges Oracle and Lawrence J. Ellison ("Ellison") with violations of the Securities Exchange Act of 1934. Oracle supplies software for enterprise information management. The complaint alleges that at the beginning of the Class Period, defendants represented that Oracle would have sequential EPS growth of 9%, or $0.12, and revenue of over $2.9 billion for its Q3 2001. Defendants assured investors that Oracle's new 11i Suite required no programming systems integration to implement the product and that using the product internally saved the Company $1 billion. However, defendant Ellison actually knew that the Suite was fraught with massive technical problems, including giant gaps in its CRM modules, and required expensive systems integration work to implement. Ellison also knew that Oracle's so-called billion dollar savings was not the result of the synergies created by Oracle's 11i product, but rather, his decision to terminate more than 2,000 employees, many of whom would "support" Oracle's new software. Throughout January and February 2001, defendants repeatedly stated that Oracle's Q3 2001 estimates were easily achievable, that Oracle's pipeline was "never stronger," its applications growth was "accelerating," its database and application sales were rapidly growing and that the slowing economy was showing no impact on Oracle's Q3 2001 performance. During this period defendant Ellison sold nearly $900 million worth of his own Oracle shares at prices as high as $32 per share, or 50% higher than the price to which Oracle shares dropped as Oracle's true prospects began to reach the market. On March 1, 2001, Oracle revealed that, contrary to prior assurances by defendants of Oracle's continuing "strong" revenue and EPS growth, including defendants' assurances less than two weeks earlier that demand remained strong, Oracle would post a major revenue shortfall and EPS declines, sending Oracle's shares into a free fall. This disclosure shocked the market, causing Oracle's stock to decline to less than $17 per share before closing at $16.88 per share on March 2, 2001, on record volume of more than 221 million shares. Contact: Alfred G. Yates, Jr., Esq., 800-391-5164 or 412-391-5164, or fax, 412-471-1033, or yateslaw@aol.com RENT-A-CENTER: EEOC Joins Nationwide Sex Discrimination Suit ------------------------------------------------------------ The Equal Employment Opportunity Commission on March 12 moved to intervene in a lawsuit filed by 21 women, current and former employees of Rent-A-Center, a rent to own business. The women are part of a suit which seeks to establish a nationwide class of all former and current employees of Rent-A-Center and which alleges a pattern of discrimination against women by Rent-A-Center, including sexual harassment, failure to hire, failure to promote women, and wrongful discharge. The EEOC performed a nationwide investigation of the treatment of women by Rent-A-Center, examined the employment numbers of Rent-A-Center and conducted interviews with its managers. In a finding dated September 19, 2000, the EEOC found reasonable cause to believe that Rent-A-Center discriminated against women in promotions, hiring, terms and conditions of employment, discharge, constructive discharge, and other aspects of store operations, and that managers destroyed employment records in violation of federal regulations. In its determination following the nationwide investigation, the EEOC stated: "In September 1998, the acquired business known as Rent-A-Center had a workforce that was approximately 21.8% female overall, with approximately 8,800 employees. In September 1998, The Renter's Choice workforce was approximately 2% female, with approximately 3,300 employees. In September 1999, approximately one year after the workforces of both companies had been combined, the number of women employed by Renter's Choice (which by then had changed its name to Rent-A-Center) was approximately 9.8% female, with a workforce of approximately 11,300 employees. The total number of women had dropped to 1,100, down nearly 900 women employees from the number that the two businesses had employed separately." The women who brought this suit are a group of former and current employees of Rent-A-Center from throughout the country. They are represented by Mary Anne Sedey of Sedey and Associates and Jerome Schlichter of Schlichter, Bogard and Denton, both of St. Louis, Missouri. When contacted, Mr. Schlichter stated: "Previously, after conducting a nationwide investigation, examining Rent-A-Center's employment practices, the EEOC made a determination that there was reasonable cause to believe that Rent-A-Center had discriminated across the board against women in employment, promotions, hiring, conditions of employment, and discharge. Now it has filed a motion to intervene on behalf of the women we represent and in support of our request for nationwide certification of a class of all women formerly and currently employed by Rent-A-Center. This is an unusually strong statement by the government, by the EEOC and supports what we have been contending all along, which is that this company has a very serious problem with its treatment of female employees. The problem is reflected in the minimal number of women employed by the company in the first place and compounded by their treatment on the job." According to the allegations of the Complaint, the suit alleges that women were subjected to harassment and negative comments about their gender, offensive questions about sexual matters, terminated as a result of pregnancy and subject to abusive language. According to the Complaint, one woman was told "women are lucky to be employed". Another woman alleged that while she was pregnant, her manager repeatedly called to get her back to work and called her physician asking him to induce labor. The suit seeks $410 million in damages including back pay and interest, as well as punitive damages for the class. For more information contact Jerome Schlichter of the law firm of Schlichter, Bogard & Denton at 314-621-6115, 100 S. 4th Street, Suite 900, St. Louis, Missouri, 63102, or jschlichter@uselaws.com. Contact: Jerome Schlichter of Schlichter, Bogard & Denton, 314-621-6115, or jschlichter@uselaws.com STEWART ENTERPRISES: Announces Securities Lawsuits Withdrawn ------------------------------------------------------------ Stewart Enterprises, Inc. (Nasdaq NMS: STEI) announced on March 9 that the plaintiffs in the securities litigation that was pending against the Company in the United States Court of Appeals for the Fifth Circuit have voluntarily withdrawn their appeal, effectively ending the litigation. William E. Rowe, president and chief executive officer of the Company said: "We are pleased that the plaintiffs have withdrawn this litigation. From the beginning, the Company has said that these claims were without merit. The Company defended itself vigorously and did not pay anything to the plaintiffs in connection with the withdrawal. We are glad to have this litigation behind us." The plaintiffs withdrew their appeal relating to 16 putative securities class action lawsuits filed in the fall of 1999 against the Company, certain of its directors and officers, and the lead underwriters in the Company's January 1999 common stock offering. In December 2000, the United States District Court for the Eastern District of Louisiana granted motions, filed by the Company and the other defendants, dismissing the complaint against all defendants for failure to state a claim. The plaintiffs subsequently filed a notice of appeal with the United States Court of Appeals for the Fifth Circuit, which has now been withdrawn. Founded in 1910, Stewart Enterprises, Inc. is the third largest provider of products and services in the death care industry in North America, currently owning and operating 614 funeral homes and 161 cemeteries in North America, South America, Europe and the Pacific Rim. SULLIVAN: AL High Ct Reverses Verdict for Property Contamination Damage ----------------------------------------------------------------------- The Alabama Supreme Court has reversed a jury verdict entered against two textile companies and a power company for property damage caused by contaminants. The plaintiffs are owners of property located near an artificial lake. The panel found insufficient scientific evidence and lack of an intentional act to hold the companies liable. Russell Corp. et al. v. Sullivan et al., Nos. 1981974, 1981095 and 1981096 (Ala., Jan. 12, 2001). Russell Corp. and Avondale Mills operated textile plants in Alexander City, Ala. As part of their operations, the plants deposited wastewater containing dyes, salts, acid, surfactants and heavy metals directly into the Sugar Creek Wastewater Treatment Plant. At least one type of dye used has been shown to have carcinogenic properties. After the treatment, it is discharged into Sugar Creek at the rate of five to six million gallons a day. The output flows through two creeks before reaching Lake Martin. The plaintiffs are all residents of the Raintree subdivision located on the lake. The municipality of Alexander City installed a chlorination/dechlorination facility at the Sugar Creek plant to remove the dye from the water. This process combined the waste with oxygen and bacteria, creating a sludge, which could be removed from the water. Joe Sullivan and several other owners of homes adjacent to Lake Martin sued Russell, Avondale, Alexander City and Alabama Power Co., which used the lake to generate power. The suit alleged trespass and nuisance arising out of the discharge of the chemicals. Alexander City was dismissed from the suit before it went to trial. A Jefferson Circuit Court jury awarded plaintiffs $155,000 in compensatory damages and $52 million in punitive damages against Russell, Avondale and APCo. The state appeals court reversed, and rendered judgment for the defendants. The plaintiffs then appealed to the Alabama Supreme Court. The court held that an indirect trespass occurs when the trespasser releases a foreign polluting matter beyond the boundaries of his or her property, knowing to a substantial certainty that it will invade the property. To prove indirect trespass, a plaintiff must establish four elements: the invasion affected an interest in the exclusive possession of his property; an intentional doing of the act resulted in the invasion; the consequences were reasonably foreseeable; and substantial damage resulted. The state high court said there is a question as to whether water actually splashed onto the plaintiffs' property. The plaintiffs acknowledge that they did not sue the defendants merely because water from Lake Martin splashed onto their land. Instead, they argue that the trespass occurred because chemicals originating at Russell and Avondale's plants were in the water that splashed upon their land. The court said that the plaintiffs' expert never tested the water near the subdivision, the sediment from the lake floor or the plaintiffs' soil. Plaintiffs also claimed that Russell and Avondale created a nuisance by dumping toxic sludge into the lake. In Alabama, a nuisance can be private or public. To recover damages for a public nuisance, the court said the plaintiffs had to show they suffered a special injury not common to the general public. Since they were unable to show the sludge washed on to their property, their claim must fail, the court ruled. Present Opinion On application for rehearing to the Alabama Supreme Court by Russell, Avondale and APCo, the court ruled that the trial court erred in denying the companies' motion for a judgment as a matter of law. The court said that the plaintiffs' claims alleging trespass and nuisance as to APCo must be considered separately from those claims against Russell and Avondale because APCo did not participate in the discharge of foreign materials into Lake Martin. Trespass, the court said, requires an intentional act by the defendant. There was no agency relationship between APCo, on one hand, and Russell and Avondale on the other. Therefore, the court said, there was no intentional act to support a claim of trespass. As for the nuisance claim, the plaintiffs, the court said, failed to show that APCo had a duty to control any discharge into Lake Martin; thus, the claim fails. On the claims against Russell and Avondale Mills, the supreme court ruled that several conclusions urged by the plaintiffs are unsupported by evidence. Based on these unsupported conclusions, "drawn from a series of inferences ungrounded in scientific data," the plaintiffs asked the jury to infer that: -- The chemicals that they allege were present rose to the top of the water; -- At the moment they rose to the surface, the water was at or above the 490-foot contour line; and -- The water then splashed onto the plaintiffs' properties, although no evidence of chemical contamination of the plaintiffs' properties was ever presented. The court held, "Even if we were to hold that the experts' conclusions, which were not based on scientific data gained from tests performed at the site of the alleged contamination, supported a finding that toxic chemicals were present in some portion of Lake Martin, the jury, in order to find for the plaintiffs, would nevertheless have had to base its verdicts upon multiple inferences." The plaintiffs failed to prove substantial damage caused by the presence of any chemical, the court explained. Therefore, the failure to present such evidence entitled Russell and Avondale to a judgment as a matter of law on the trespass claims. (Toxic Chemicals Litigation Reporter February 9, 2001) TACO BELL: Workers in Oregon Win Back Pay Lawsuit ------------------------------------------------- Thousands of Taco Bell workers in Oregon have won a class-action lawsuit that accused the restaurant chain of illegal labor practices that included shaving time cards, an attorney said. Paul Breed, an attorney representing the workers, said Taco Bell must pay back wages to all employees involved in the suit, but did not give an estimate. Among the illegal practices, he said in a news release, was claiming that employees were taking breaks when they were not, routinely shaving 5 to 10 minutes off time cards so it would not be noticed by workers but would save the company several hours of pay during each payroll period. "Taco Bell was found guilty of systematically engaging in the illegal alteration of pay records," Breed said. "I'm not talking accounting errors here. Taco Bell took time and wages from their workers without their knowledge," he said. There was no immediate comment from a Taco Bell spokeswoman at company headquarters in Irvine, Calif. More than 14,000 Taco Bell workers and former employees in Oregon were eligible to file claims before the end of March 2000 in the class-action lawsuit over unpaid overtime, including restaurant "cleaning parties." A similar lawsuit in Washington state settled in 1997 resulted in $2.75 million in payments to more than 2,100 current and former workers. Taco Bell, Pizza Hut and KFC are part of Tricon Global Restaurants Inc., a former PepsiCo subsidiary based in Louisville, Ky. (The Associated Press State & Local Wire, March 12, 2001) TEAM COMMUNICATIONS: Cauley Geller Files Securities Lawsuit in CA ----------------------------------------------------------------- The Law Firm of Cauley Geller Bowman & Coates, LLP announced on March 11 that it has filed a class action in the United States District Court for the Central District of California on behalf of all individuals and institutional investors that purchased the publicly traded securities of TEAM Communications Group, Inc. (Nasdaq: TMTV - news) between May 18, 2000 and February 12, 2001, inclusive (the "Class Period"). The complaint charges TEAM Communications and certain of its officers and directors with violations of the Securities Exchange Act of 1934. TEAM Communications currently owns and distributes over 4,000 hours of programming worldwide, in addition to producing a wide variety of programming for leading U.S. and international broadcasters. The complaint alleges that during the Class Period, TEAM Communications reported favorable but false financial results, causing its stock to trade at artificially inflated levels of as high as $12 per share. Then, on February 13, 2001, prior to the market opening, TEAM Communications shocked the investment community with a press release which revealed that the Company expected to record a Q4) charge equivalent to more than five times all the income it reported during the Class Period. It also acknowledged that certain of its acquisition and distribution activities may have "lacked economic substance." On this news, TEAM Communications' shares dropped to as low as $ 375, or more than 88% lower than its Class Period high of $12. Contact: Sue Null or Charlie Gastineau, both of Cauley Geller Bowman & Coates, 1-888-551-9944 TEAM COMMUNICATIONS: Charles J. Piven Announces Securities Lawsuit Filed ------------------------------------------------------------------------ Law Offices Of Charles J. Piven, P.A. announced on March 10 that a private securities action requesting class action status has been initiated on behalf of purchasers of Team Communications Group, Inc. (NASDAQ: TMTV) who purchased the common stock of Team Communications Group, Inc. during the period May 18, 2000 through and including February 12, 2001. No class has yet been certified in the above action. Until a class is certified, you are not represented by counsel unless you retain one. If you purchased the stock listed above during the class period, you have certain rights. To be a member of the class you need not take any action at this time, and you may retain counsel of your choice. Contact: Law Offices Of Charles J. Piven, P.A., Baltimore Charles J. Piven, 410/986-0036 TEAM COMMUNICATIONS: Milberg Weiss Files Securities Suit in California ---------------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/team/)announced on March 9 that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of TEAM Communications Group, Inc. (NASDAQ:TMTV) publicly traded securities during the period between May 18, 2000 and February 12, 2001 (the "Class Period"). The complaint charges TEAM Communications and certain of its officers and directors with violations of the Securities Exchange Act of 1934. TEAM Communications currently owns and distributes over 4,000 hours of programming worldwide, in addition to producing a wide variety of programming for leading U.S. and international broadcasters. The complaint alleges that during the Class Period, TEAM Communications reported favorable but false financial results causing its stock to trade at artificially inflated levels of as high as $12 per share. Then, on 2/13/01, prior to the market opening, TEAM Communications shocked the investment community with a press release which revealed that the Company expected to record a Q4 00 charge equivalent to more than five times all the income it reported during the Class Period. It also acknowledged that certain of its acquisition and distribution activities may have "lacked economic substance." On this news, TEAM Communications' shares dropped to as low as $ 375, or more than 88% lower than its Class Period high of $12. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach, 800/449-4900 wsl@mwbhl.com TWINLAB CORPORATION: Announces Settlement of Securities Lawsuit in NY--------------------------------------------------------------------- Twinlab Corporation (NASDAQ: TWLB) announced on March 9 that it has reached an agreement in principle to settle a series of shareholder securities class action lawsuits filed in the U.S. District Court for the Eastern District of New York in late 1998 and early 1999. Under the agreement, which is subject to approval by the court, the company will pay $26 million, all of which is covered by existing insurance. A Twinlab spokesperson commented, "while we vigorously deny any wrongdoing, we believed it best to put these lawsuits behind us and move on." Twinlab Corporation, headquartered in Hauppauge, N.Y., is a leading manufacturer and marketer of high quality, science-based, nutritional supplements, including a complete line of vitamins and minerals, nutraceuticals, herbs and sports nutrition products. U OF TORONTO: Retired Professors Sue for Back Pay and Fair Pensions ------------------------------------------------------------------- Phyllis Grosskurth, internationally recognized biographer and retired professor of English from the University of Toronto, and a group of other retired women professors, launch class action lawsuit against the University of Toronto to recover back pay and address resulting gender inequality in pensions that has left some of Canada's most distinguished pioneering academic women in poverty. Distinguished academic pioneers at the University of Toronto were passed over in a pay equity settlement involving over $1 million made in 1991 by the University of Toronto. Women professors who retired before that day had their pensions calculated on the basis of salaries that reflected pay discrimination between them and their male colleagues performing similar work. As a result, they now struggle to live on inadequate pensions. The women have been trying for months to get recognition from the University for their plight, with no results. A direct appeal to President Birgeneau by distinguished scholars Phyllis Grosskurth and Ursula Franklin, both members of the Order of Canada, was rejected. Professor Grosskurth and several retired colleagues are thus now filing a class action on behalf of all women professors who retired before 1991. The University estimates that there may be as many as 88 retirees. In an action to be filed and served March 12, the plaintiffs are seeking on behalf of all the women recovery of the back pay which they feel is owing because of years of salary discrimination. Throughout their careers, the University was bound by Ontario's equal pay legislation, but many of the plaintiffs were paid thousands of dollars less in salary than male colleagues. Success in the action would mean that the pensions of these distinguished pathbreakers would be calculated on the basis of the true value of their academic work. Pension reforms being sought by the University of Toronto Faculty Association in a current round of negotiations with the University, and the newly established Retired Academics and Librarians of the University of Toronto ("RALUT") has also called for better pensions for retirees. For many of the women, the situation is urgent, and they believe they have no choice but to act now. Mary Eberts of Eberts Symes Street & Corbett has been retained for the civil action and is available for further comments by telephone at (416) 920-3030 (x301). Professor Grosskurth and other plaintiffs, Ms. Eberts and a representative of RALUT will be in attendance at the press conference. A copy of the Statement of Claim will be available for reporters. (Canada NewsWire, March 9, 2001) UNISYS CORP: Pa. Ap. Ct. Reinstates Claims of 20,000 Retirees ------------------------------------------------------------- The following press release was issued March 10 by Sandals & Langer, LLP: In a landmark ruling released Friday, March 9, the U.S. Court of Appeals in Philadelphia reinstated for trial the claims of approximately 20,000 retirees of Unisys Corporation (UIS), who claim that the company and its predecessors falsely misled them into believing they would receive lifetime medical benefits paid by the company as part of their retirement benefits. The decision is the second ruling by the court of appeals in the landmark class action case (In re Unisys Corp. Retiree Medical Benefits ERISA Litigation) challenging the company's 1992 decision to unilaterally terminate longstanding programs of company-paid retiree medical benefits. In its first ruling in 1995, the appeals court upheld the legal validity of the retirees' claims that computer-maker Unisys, the product of the 1986 merger of Sperry and Burroughs Corporations, had violated its strict fiduciary duties by repeatedly misrepresenting to employees that they and their spouses would receive lifetime, company-paid medical benefits after they retired. That ruling was based on evidence that "the company, both actively and affirmatively, systematically misinformed its employees about the duration of their benefits by stating over and over again, without qualification, that their benefits would continue for life." The trial court had called this company behavior a "systematic campaign of confusion." In the ruling, the appeals court reversed the trial court's later dismissals of claims of many retirees based on two technical grounds -- the statute of limitations and the circumstances of their termination of employment. On the first point, the court ruled that it was possible for the retirees to show that company misrepresentations about the promised medical benefits was "fraud or concealment" that prevented the company from using the statute of limitations as a defense. On the second point, the appeals court reversed the ruling that only employees who had retired "voluntarily" had valid legal claims. The appeals court disagreed, saying that the company's misrepresentations "could result in important decision making [by the retirees] based on a mistaken belief that they possessed guaranteed lifetime benefits," such as decisions about other medical coverage, employment, and personal finances. The court ruled that the harm resulting from these decisions could also form a basis for a legal claim against the company. Many of the retirees involved in the suit dedicated 20 to 30 or more years to the company. They are pioneers of the United States computer industry who helped develop the first commercial computers. Their lead attorney, Alan Sandals of Philadelphia, reacted as follows to the ruling: "We are gratified that the Third Circuit Court of Appeals has again taken the lead in emphasizing that employer misrepresentations about retirement benefits are serious and cause real harm. The federal law, ERISA, prohibits this, and courts will protect citizens when these abuses occur." In 1994 and 1997, settlements totaling $125 million were reached on the claims of approximately 8500 other retirees. The court's 35-page decision is available on its internet website: http://pacer.ca3.uscourts.gov/recentop/week/991929.txt. Contact: Alan M. Sandals of Sandals & Langer, direct, 215-825-4005, or main number, 215-825-4000 (normal business hours), or mobile, 215-219-3170 ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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