/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010523.MBX C L A S S A C T I O N R E P O R T E R Wednesday, May 23 2001, Vol. 3, No. 101 Headlines 1-800 CONTACTS: Settles For Unspecified Amount ANADARKO PETROLEUM: Royalty Lawsuit in Kansas Goes to Trial in October BANKERS TRUST: Facing Suits For Fraud, Negligence & Breach Issues BANK PLUS: Asserts Lawsuit Filed in Los Angeles is Abusive BAUSCH & LOMB: Shareholders Sue For Alleged Securities Act Violations CAMBREX CORP.: Mylan Laboratories Agrees to Pay $140 MM in Settlements CAPITAL SENIOR: Motion To Dismiss Putative Plaint Pending CNET NETWORKS: Discovery Nears Completion in Ziff-Davis Inc. Suit CNET NETWORKS: SOFTBANK And Hippeau Dismissal Being Finalized in NY SC COLLEGELINK.COM: Shareholder Suit Fosters Management Counterclaims CYTEC INDUSTRIES: Unwittingly Becomes Part of Suit After Aiding Inquiry FORD MOTOR: Sued Over Claims F-150 Trucks Have"Upgraded" Radiators JOHNSON&JOHNSON: Five Year-Old ACUVUE Contact Lens Case Far From Over MASCO CORPORATION: Appeal Will Cite Error in Trial Court's Decision MEMBERWORKS INC.: Sued in Minnesota For Violation of Privacy Policies MEMBERWORKS INC.: Faces Suit For Breach of Ohio Consumer Protection Law METRIS COMPANIES: Court Has Yet to Certify a Class in Minnesota Suit NAVIGANT CONSULTING: $23 M Settlement Subject to Appeal By Objectors NEWPORT NEWS: Party In Four Separate Shareholders Suits in Delaware NORTHWEST AIRLINES: Filing Deadline For Claims in "Snow Event" Extended OLYMPIC CASCADE: Subsidiary's Answer to Complaint in NY Due This Month OMTOOL LTD.: $6 Million Settlement Awaits Final Approval From Court PROVIDIAN FINANCIAL: Settlement of Credit Card Lawsuit to Reach $105 MM SECURE COMPUTING: No Discovery or Trial Dates Set For Five Lawsuits TACO BELL: Settlement With Ex-Managers in California Awaits Court Nod TAKEDA CHEMICAL: Faces Lawsuit in Boston Along With US Partner Abbott TALK AMERICA: Insists Shareholder Suit in Pennsylvania is Without Merit TORCHMARK CORP.: Wants Hinton Case Consolidated With Moore in Alabama TRAVELERS PROPERTY: California Case, Parts of 10 Others Dismissed UAL CORPORATION: Discrimination Suits Returned to District Court US LIQUIDS: Court Grants Partial Dismissal of Securities Suit in Texas VISHAY INTERTECHNOLOGY: Moves For Stay in California Lawsuit WASTE MANAGEMENT: Motion to Dismiss Fraud Suit in Texas Still Pending WASTE MANAGEMENT: Delaware F.C. Rulings on Transfer and Remand Pending WORLDCOM INC.: Settlement Pact is Final as Deadline For Appeal Expires ********* 1-800 CONTACTS: Settles For Unspecified Amount ---------------------------------------------- On July 14, 1998, Craig S. Steinberg, O.D., a professional corporation d.b.a. City Eyes Optometry Center, filed a purported class action on behalf of all California optometrists against 1-800 CONTACTS, INC. and its directors in Los Angeles County Superior Court. In April 2001, the Company settled this claim for an unspecified amount. The settlement did not materially impact the Company's results of operations. ANADARKO PETROLEUM: Royalty Lawsuit in Kansas Goes to Trial in October ---------------------------------------------------------------------- A class action lawsuit entitled Gilbert H. Coulter, et al. v. Anadarko Petroleum Corporation has been certified in the 26th Judicial District Court, Stevens County, Kansas. In this action, the royalty owners contend that royalty was underpaid as a result of the deduction for certain post-production costs in the calculation of royalty. The Company believes that its method of calculating royalty was proper and that its gas was marketable in the condition produced, and thus plaintiffs' claims are without merit. This case was certified as a class action in August 2000. This matter is now set for trial on October 29, 2001 BANKERS TRUST: Facing Suits For Fraud, Negligence & Breach Issues ----------------------------------------------------------------- Since January 2001, Bankers Trust Company, the principal subsidiary of BANKERS TRUST CORPORATION, has been named as one of numerous defendants in more than a dozen actions (four of which are brought as class actions) filed in the Superior Court of the State of California, County of Los Angeles, all of which have been or are in the process of being assigned to a single judge. Pursuant to the Court's orders, plaintiffs have served two amended model complaints, one denominated as a class action (Stuber, et al. v. Merrill Lynch Pierce Fenner & Smith, Inc., et al) and the other designated as an individual action (Gomes, et al. v. Merrill Lynch Pierce Fenner & Smith, Inc., et al). The actions allege claims of breach of contract, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, tortuous interference with contract, negligence, fraudulent conveyance, constructive fraud, reformation, unfair business practices, and unjust enrichment as well as specific performance and declaratory relief in connection with certain individual and master structured settlement trusts established for the most part in the early 1980s in connection with the settlement of personal injury litigation. Bankers Trust Company served as trustee of certain of these trusts during a portion of the period 1994-1998. The complaints seek unspecified compensatory and punitive damages and certain other relief. The Corporation believes that it has meritorious defenses and intends to defend these matters vigorously. BANK PLUS: Asserts Lawsuit Filed in Los Angeles is Abusive ---------------------------------------------------------- On October 19, 1998, a purported class action was filed against Bank Plus Corporation and its current and immediately preceding chief executive officers. The case was originally entitled Howard Gunty Profit Sharing Plan, both individually and on behalf of all others similarly situated, Plaintiffs v. Richard M. Greenwood, Mark K. Mason, Bank Plus Corporation, and Does I through 50, inclusive, Defendants, Los Angeles Superior Court, Central Judicial District, Case No. BC199336 (Gunty I). This action originally alleged Bank Plus failed to make adequate public disclosure concerning losses in the Bank's credit card operations during the period from August 14, 1998 (when the Company filed its quarterly report on Form l0-Q for the second quarter of 1998) through September 22, 1998 (when the Company issued a press release concerning its credit card losses). In February 1999, an amended complaint was filed in the Los Angeles Superior Court, Central Judicial District, Case No. BC199336, entitled Howard Gunty Profit Sharing Plan and Robert E. Yelin, both individually and on behalf of the Yelin Family Trust U/A, both individually and on behalf of all others similarly situated, Plaintiffs, v. Richard M. Greenwood, Mark K. Mason, Bank Plus Corporation, and Does 1 through 50, inclusive (Gunty II). The amended complaint purports to expand the class period to extend from March 30, 1998 through September 22, 1998. The complaint and amended complaint each include claims for negligent misrepresentation, common law fraud, statutory fraud and violations of the California Corporations Code. The originally proposed representative plaintiff has been determined by the trial court to be unsuitable to serve as class representative. A second proposed representative plaintiff has been refused permission to intervene in this case on statute of limitations grounds, a ruling which is on appeal. Plaintiffs' counsel has proposed pursuing other potential class action representatives through a letter solicitation process. The Company has opposed the solicitation process on several grounds, including the ground that the lawsuit is an abusive class action. The trial court authorized the solicitation process, but with conditions that the plaintiffs' lawyers found objectionable. The plaintiffs' lawyers and the Bank both sought relief from the California Court of Appeal, through writs of mandamus, to modify the trial court's order regarding the solicitation process. On April 18, 2001, the Court of Appeal issued an opinion stating that the trial court's previous findings that the original plaintiff was a "professional plaintiff" and that the case was being driven by attorneys signaled a potential for abuse in this action. Therefore, the Court of Appeal directed the trial court to vacate its prior orders and to reassess its decision to continue the class certification hearing and to permit any solicitation. To this end, the Court of Appeal suggested the trial court schedule a hearing on plaintiffs' motion for class certification, and directed the trial court to weigh the prior findings that the original plaintiff was a "professional plaintiff" and not an appropriate representative, any further evidence of abuse, the rights of the parties, and the policies underlying class action procedures. The Court of Appeal concluded that if after balancing these factors the trial court determines that plaintiffs established a prima facie proper class action, the trial court could then determine whether to allow any solicitation, weighing any abuses or potential abuses against the rights of the parties and the integrity of the litigation process. Alternately, if the trial court concludes that the action is an abusive class action, it need not permit any solicitation at all or it may refuse to certify the class. The Company intends to continue to assert that this is an abusive class action. In the event the trial court permits any solicitation to occur, the Company intends to continue to assert all defenses to class certification even if plaintiffs' counsel are able to propose new class representatives, and further intends to continue to assert that any claims made on behalf of the expanded class asserted in Gunty II are barred and preempted by the Securities Litigation Uniform Standards Act of 1998, and that such preemption may extend to the entire case depending on the nature of the rulings of the trial court. In addition, should any purported class of any scope be certified, the Company intends to vigorously defend itself on the merits. In this respect, the Company believes, among other things, that its communications to the public were timely and accurate and that it did not engage in any market activity, which would generate liability under the California Corporations Code. BAUSCH & LOMB: Shareholders Sue For Alleged Securities Act Violations --------------------------------------------------------------------- On April 13, 2001, a shareholder class action lawsuit was filed in the U.S. District for the Western District of New York, against Bausch & Lomb Inc. and its Chairman and CEO, William M. Carpenter. The complaint alleges that the value of the company's stock was inflated artificially by alleged false and misleading statements about expected financial results. The plaintiff seeks to represent a class of shareholders who purchased company common stock between April 13, 2000 and August 24, 2000. No substantive action has taken place in this matter. The company intends to defend itself vigorously against these claims CAMBREX CORP.: Mylan Laboratories Agrees To Pay $140 MM in Settlements ---------------------------------------------------------------------- Cambrex Corporation and its subsidiary Profarmaco S.r.l. were named as defendants in a proceeding instituted by the Federal Trade Commission on December 21, 1998, in the United States District Court for the District of Columbia. The complaint alleges exclusive license agreements which Profarmaco entered into with Mylan Laboratories, Inc. covering the drug master files for (and therefore the right to buy and use) two active pharmaceutical ingredients (API), lorazepam and clorazepate, were part of an effort on Mylan's part to restrict competition in the supply of lorazepam and clorazepate and to increase the price charges for these products when Mylan sold them as generic pharmaceuticals. The complaint further alleges these agreements violate the Federal Trade Commission Act, and that Mylan, Cambrex, Profarmaco, and Gyma Laboratories of America, Inc., Profarmaco's distributor in the United States, engaged in an unlawful restraint of trade and conspired to monopolize and attempted to monopolize the markets for the generic pharmaceuticals incorporating the APIs. A lawsuit making similar allegations against the Company and Profarmaco, and seeking injunctive relief and treble damages, has been filed by the Attorneys General of 31 states in the United States District Court for the District of Columbia on behalf of those states and persons in those states who were purchasers of the generic pharmaceuticals. The Company and Profarmaco have also been named in purported class action complaints brought by private plaintiffs in various state courts on behalf of purchasers of lorazepam and clorazepate in generic form, making allegations essentially similar to those raised in the FTC's complaint and seeking various forms of relief including treble damages. On February 9, 2001, a federal court in Washington, DC entered an Order and Stipulated Permanent Injunction as part of a settlement of the FTC and Attorneys General's suits. Under these settlement documents Mylan has agreed to pay over $140 million on its own behalf and on behalf of most of the other defendant companies including Cambrex and Profarmaco. Recently, the federal court granted preliminary approval of the settlement of the attorney general's suits and a hearing date has been set for November 29, 2001. In the Order and Injunction, the settling defendants also agreed to monitor certain future conduct. The Company strongly believes its licensing arrangements with Mylan are in accordance with regulatory requirements and will vigorously defend the various other lawsuits and class actions. CAPITAL SENIOR: Motion to Dismiss Putative Plaint Pending --------------------------------------------------------- On or about October 23, 1998, Robert Lewis filed a class action complaint on behalf of certain holders of assignee interests in NHP Retirement Housing Partners I Limited Partnership in the Delaware Court of Chancery against NHP, CAPITAL SENIOR LIVING CORPORATION, Capital Senior Living Properties 2-NHPCT, Inc. and Capital Realty Group Senior Housing, Inc. Lewis purchased ninety Assignee Interests in NHP in February 1993 for $180. The complaint alleges, among other things, that the Defendants breached, or aided and abetted a breach of, the express and implied terms of the NHP Partnership Agreement in connection with the sale of four properties by NHP to Capital Senior Living Properties 2-NHPCT, Inc. The complaint seeks, among other relief, rescission of the sale of those properties and unspecified damages. The Company believes the complaint is without merit and is vigorously defending itself in this action. The Company has filed a Motion to Dismiss in this case, which is currently pending. The Company is unable to estimate any liability related to this claim, if any. CNET NETWORKS: Discovery Nears Completion in Ziff-Davis Inc. Suit ----------------------------------------------------------------- Following a decline in the price per share of Ziff-Davis Inc. (a company acquired by Cnet Networks Inc. in October 2000) common stock leading up to October 1998, eight securities class action suits were filed against Ziff-Davis and certain of its directors and officers in the United States District Court for the Southern District of New York. The complaints alleged that defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 in connection with the registration statement filed by Ziff-Davis with the Securities and Exchange Commission relating to the initial public offering of Ziff- Davis' stock on April 28, 1998. More particularly, the complaints alleged that the registration statement contained false and misleading statements and failed to disclose facts that could have indicated an impending decline in Ziff- Davis' revenue. The complaints sought, on behalf of a class of purchasers of Ziff- Davis common stock from the date of the IPO through October 8, 1998, unspecified damages, interest, fees and costs, rescission and injunctive relief, such as the imposition of a constructive trust upon the proceeds of the IPO. On January 28, 1999, the court entered an order consolidating the actions, appointing lead plaintiff's counsel and requiring the filing of a consolidated amended complaint. The consolidated amended complaint was filed on March 15, 1999 and only alleges claims under Section 11 of the Securities Act of 1933. On May 20, 1999, defendants moved to dismiss the consolidated amended complaint. That motion was denied on June 27, 2000. Discovery is nearing completion. Although the outcome of this case cannot be predicted, CNET believes that there are substantial defenses to the claims. CNET currently cannot estimate its ultimate liability, if any, with respect to this case. CNET NETWORKS: SOFTBANK And Hippeau Dismissal Being Finalized in NY SC ---------------------------------------------------------------------- On October 6, 2000, two former employees of Ziff-Davis Inc., a company acquired by CNET Networks Inc. in October 2000, filed a purported class action lawsuit in the New York Supreme Court, New York County, against Ziff-Davis, ZDNet, Inc., SOFTBANK, Inc. and Eric Hippeau. The complaint alleges breach of contract, detrimental reliance and unjust enrichment resulting from (i) the allegedly wrongful shortening of exercise periods of certain Ziff-Davis, ZDNet and SOFTBANK options and (ii) the allegedly wrongful revocation of other Ziff-Davis and ZDNet options. The complaint seeks unspecified damages, fees and costs on behalf of all persons who were holders of employee stock options in Ziff-Davis, ZDNet, or SOFTBANK as of April 13, 2000 (excluding Hippeau). On November 20, 2000, defendants Ziff-Davis, ZDNet and Eric Hippeau, the only defendants that have been served, moved to dismiss the action. Plaintiffs voluntarily dismissed the action with regard to SOFTBANK and Hippeau on January 26, 2001, and, on March 12, 2001, indicated an intention to seek voluntary dismissal of the entire action. Papers concerning the dismissal are being finalized COLLEGELINK.COM: Shareholder Suit Fosters Management Counterclaims ------------------------------------------------------------------ On April 12, 2001, a group Collegelink.com Inc. shareholders commenced a purported class action litigation against the Company for claims relating to the Company's failure to register for resale the shares issued to these shareholders in connection with the August 10, 1999 acquisition of ECI, Inc. The shareholders allege that such registration was required by a registration agreement between them and the Company. Management intends to vigorously defend the Company against the claims raised in the shareholders' complaint and has asserted counterclaims. Because this case commenced so recently, neither management nor the Company's general counsel are able to predict the outcome of the case or its possible effect on the financial position of the Company. CYTEC INDUSTRIES: Unwittingly Becomes Part of Suit After Aiding Inquiry ----------------------------------------------------------------------- In January 1999 Cytec Industries Inc. received a subpoena to testify before, and provide documents to, a federal grand jury in California investigating the carbon fiber and prepreg industry. The Company manufactures prepregs as part of its advanced composites product line. The Company had no reason to believe that it was a target of the grand jury investigation. After the grand jury investigation was commenced, the Company and the other companies subpoenaed to testify before the grand jury were named as defendants in two civil antitrust class actions in state and federal courts in California on behalf of purchasers of carbon fiber, which the complaints defined to include prepregs manufactured from carbon fiber. In each case the complaint alleges that the defendants, manufacturers of carbon fiber and/or prepregs manufactured therefrom, conspired to fix the prices of their products. The Company believes it has meritorious defense to the claims asserted in these actions. FORD MOTOR: Sued Over Claims F-150 Trucks Have"Upgraded" Radiators ------------------------------------------------------------------ In April 2001, two purported class actions were filed alleging Ford Motor Company defrauded purchasers of 1999-2001 model year Ford F- 150 trucks by falsely representing that certain option packages included "upgraded" radiators. Plaintiffs allege that approximately 400,000 trucks that were intended to have larger radiators were actually built with standard radiators. One of the cases, filed in state court in New York, purports to represent a nationwide class, and seeks an order requiring installation of larger radiators and other damages. The second case, filed in state court in Texas, purports to represent purchasers in Texas, and seeks unspecified damages. Both cases allege breach of warranty and violation of state consumer protection laws. JOHNSON&JOHNSON: Five Year-Old ACUVUE Contact Lens Case Far From Over --------------------------------------------------------------------- Johnson & Johnson Vision Care revealed in a regulatory document recently filed with the Securities and Exchange Commission that it is a defendant in a nationwide consumer class action brought on behalf of purchasers of its ACUVUE brand contact lenses. The plaintiffs in this action, which was filed in 1996 in New Jersey State Court, allege that Vision Care sold its 1-DAY ACUVUE lens at a substantially cheaper price than ACUVUE and misled consumers into believing these were different lenses when, in fact, they were allegedly "the same lenses." Plaintiffs are seeking substantial damages and an injunction against supposed improper conduct. The Company believes these claims are without merit and is defending the action vigorously. MASCO CORPORATION: Appeal Will Cite Error in Trial Court's Decision -------------------------------------------------------------------- In May 1998, a civil suit was filed in the Grays Harbor County, Washington Superior Court against Behr Process Corporation, a subsidiary of MASCO CORPORATION. The case involves four exterior wood coating products, which represent a relatively small part of Behr's total sales. The plaintiffs allege, among other things, that after applying these products, the wood surfaces suffered excessive mildewing in the very humid climate of western Washington. The trial court certified the case as a class action, including all purchasers of the products who reside in nineteen counties in western Washington. Behr denies the allegations. Although Behr believes the subject products have been purchased by thousands of consumers in western Washington, consumer complaints in the past have been relatively small compared to the total volume of products sold. In May 2000, the court entered a default against Behr as a discovery sanction. Thereafter, the jury returned a verdict awarding damages to the named plaintiffs. The damages awarded for the eight homeowner claims (excluding one award to the owners of a vacation resort) ranged individually from $14,500 to $38,000. The awards were calculated using a formula based on the product used, the nature and square footage of wood surface and certain other allowances. Under the verdict, the same formula will be used for calculating awards on claims that may be submitted by the subject purchasers of these products. In July 2000, the court awarded additional damages of $10,000 per claim to the eight homeowner claims under the Washington Consumer Protection Act. This increased the total damages awarded on the homeowner claims to approximately $263,000. The court denied the plaintiffs' request for an award of additional damages on claims that may be submitted by other class members. In addition, the court granted the plaintiffs' motion for attorneys' fees. Behr is appealing the judgment. At this time, the Company is not in a position to estimate reliably the number of class members, the number of claims that may be filed or the awards that class members may seek. Although Behr is not able to estimate the amount of any potential liability, Behr believes there have been numerous rulings by the trial court that constitute reversible error and that there are valid defenses to the lawsuit. MEMBERWORKS INC.: Sued in Minnesota For Violation of Privacy Policies --------------------------------------------------------------------- In July 1999, a purported class action was instituted by plaintiffs Kathryn Rosebear and Anne Bergman against Memberworks Inc. and other defendants in the United States District Court, District of Minnesota. The suit, which seeks unspecified monetary damages, alleges the Company and the other defendants violated their privacy policies and Minnesota consumer law. The Company believes the allegations made in this lawsuit are unfounded and the Company will vigorously defend its interests against this suit. MEMBERWORKS INC.: Faces Suit For Breach of Ohio Consumer Protection Law ----------------------------------------------------------------------- In January 2001, a purported class action was instituted by plaintiff Brandy L. Ritt against Memberworks Inc. and other defendants in the Court of Common Pleas in Cuyahoga County, Ohio. The suit, which seeks unspecified monetary damages, alleges that the Company and the other defendants violated various provisions of Ohio's consumer protection laws in connection with the marketing of certain membership programs offered by the Company. The Company believes the claims asserted against it are unfounded and the Company will vigorously defend its interest against this suit. METRIS COMPANIES: Court Has Yet to Certify a Class in Minnesota Suit -------------------------------------------------------------------- In July 2000 an Amended Complaint was filed in Hennepin County Court in Minneapolis, Minnesota against Metris Companies Inc. and its subsidiaries Metris Direct, Inc. and Direct Merchants Bank. The complaint seeks damages in unascertained amounts and purports to be a class action complaint on behalf of all cardholders who were issued a credit card by Direct Merchants Bank and were allegedly assessed fees or charges that the cardholder did not authorize. Specifically, the complaint alleges violations of the Minnesota Prevention of Consumer Fraud Act, the Minnesota Deceptive Trade Practices Act and breach of contract. The Company filed an answer to the complaint in August 2000. To date, the complaint has not been certified as a class action claim. The Company believes it has numerous substantive legal defenses to these claims and is continuing to vigorously defend the case. NAVIGANT CONSULTING: $23 Mil Settlement Subject to Appeal by Objectors ---------------------------------------------------------------------- In August 2000 Navigant Consulting Inc. agreed with the appointed lead plaintiff, the Policemen and Firemen Retirement System of the City of Detroit, to settle for $23 million the consolidated securities law class actions then pending in the federal district court in the Northern District of Illinois, subject to court approval and certain other conditions. The settlement calls for the dismissal, with prejudice, of the Consolidated Class Actions and a release of the Company and the Company's former and current officers and directors, among others. Under the final settlement agreement, the Company contributed $16.5 million into escrow pending such approval, and Genesis Insurance Company, one of its insurers, contributed $6.5 million under an agreement reached with the Company. The Company is seeking to recover from Genesis an additional $0.5 million as reimbursement for certain attorneys' fees. The Company is also seeking to recover additional funds under a policy issued by a second insurer, and it has agreed to share any such recovery with the class on a 50/50 basis, net of costs. As previously disclosed, four objections to the proposed settlement were received. On March 22, 2001, the court granted its final approval for the settlement. Such final approval is subject to appeal by one or more of the objectors. NEWPORT NEWS: Party in Four Separate Shareholders Suits in Delaware ------------------------------------------------------------------- Newport News Shipbuilding Inc. disclosed in a latest regulatory document filed with the Securities and Exchange Commission that the following complaints have been filed in the Court of Chancery of the State of Delaware, in and for New Castle County, against the Company and members of the Company Board: Date Filed Case Name and Civil Action No. May 9, 2001 Patricia Heinmuller, Trustee v. the Company and Members of the Company Board, C.A. No. 18871 May 10, 2001 Ellis Investments, Ltd. v. Members of the Company Board and the Company, C.A No. 18873 May 10, 2001 David Bovie v. Members of the Company Board and the Company, C.A. No. 18874 May 11, 2001 Efrem Weitschner v. Members of the Company Board and the Company, C.A. No. 18875 Each of the four complaints purports to be filed by a stockholder of the Company and includes a request for a declaration that the action be maintained as a class action. Each seeks, among other things, injunctive relief, unspecified damages and fees of attorneys and experts. NORTHWEST AIRLINES: Filing Deadline For Claims in "Snow Event" Extended ----------------------------------------------------------------------- Lawrence S. Charfoos, co-lead counsel for plaintiffs in the "Northwest Winter Snow Event" class action lawsuit, announced Monday that the court has re-opened the claim filing deadline for a period of 60 days, beginning May 18, 2001, so that passengers who missed the filing deadline, or passengers who claim not to have been aware that such a lawsuit had been filed, can file "late claims." Ruling on the motion filed by counsel to re-open the time period for filing claims, Judge Daphne Means Curtis has ordered the claim filing period be re-opened for a 60-day period, expiring on July 17, 2001. The judge also ordered that a residual fund of $50,000 be carved out of the original settlement. This fund will be maintained for one year from the end of the 60-day deadline to allow for any claims filed after the 60-day deadline has expired. These changes to accommodate late filers will cause a slight reduction in the amount available to the timely filers. "Although we believe everyone in America was aware that a class action lawsuit was filed against Northwest Airlines for stranding thousands of people at Detroit Metropolitan Airport during the 'winter snow event of January, 1999,' since the settlement Order was signed on April 24, 2001, we have received approximately 100 phone calls and late claims from passengers who believe they should be allowed to file late claims," said Charfoos. He notes that even though notice was published in the Wall Street Journal, The Detroit News, The Detroit Free Press, and posted on Yahoo and Excite message boards, and letters of notification were mailed to every passenger for whom counsel had manifest addresses, "in the interest of absolute fairness, we felt it was prudent to ask the court to extend the time for filing late claims." Charfoos also points out that many of the people who have called asserting "late claims" were stranded in cities other than the City of Detroit or were on airplanes that had flight numbers that were not included in the class action claims. "Because we do not know exactly how many of the late claimers may have valid claims had they been timely filed, we are attempting to 'bend over backwards' to make sure that every member of the class, our clients, are fairly served," Charfoos added. "Ironically," explained Charfoos, "this short delay will result in the faster payment of claims as the protesting late-filers have agreed to dismiss their appeals (two-year delay) in exchange for our implementing this late filing procedure." Individuals who believe they have a claim and have not yet filed should call the Claims Administrator, Rust Consulting, at 877-576-9745 and request a claim form. OLYMPIC CASCADE: Subsidiary's Answer to Complaint in NY Due This Month ---------------------------------------------------------------------- Olympic Cascade Financial Corporation disclosed in a recent regulatory filing with the Securities and Exchange Commission that it has been named together with others as a defendant in a consolidated class action lawsuit filed against Complete Management, Inc. No specific amount of damages has been sought against National Securities Corporation, a wholly owned subsidiary of the Company, in the complaint. In June 2000, National filed to dismiss this action. In March 2001, the United States District Court for the Southern District of New York denied National's motion to dismiss. National's answer to the complaint is due in May 2001, in which it will set forth its defenses. National believes that its defenses are valid and will vigorously defend this action. OMTOOL LTD.: $6 Million Settlement Awaits Final Approval From Court ------------------------------------------------------------------- On October 5, 1999, a purported securities class action complaint was filed against Omtool Ltd. and certain of its officers and directors. As of March 31, 2001, the Company reached an agreement-in-principle to settle the lawsuit. The terms of the proposed $6 million settlement include a contribution by the Company's directors' and officers' liability insurance carriers of $4.3 million, and a contribution by the Company of $1.7 million. The settlement is subject to negotiation and execution of a definitive settlement agreement, and final approval by the federal district court in New Hampshire. There can be no assurances, however, that the settlement will be consummated or approved by the Court. The Company continues to believe that the lawsuit is without merit, and, in the event the settlement is not consummated or approved, the Company intends to continue defending the lawsuit vigorously. PROVIDIAN FINANCIAL: Settlement of Credit Card Lawsuit to Reach $105 MM ----------------------------------------------------------------------- Beginning May 1999, a number of lawsuits were filed against Providian Financial Corporation, and in some cases against certain of the Company's subsidiaries, by current and former customers of the Company's banking subsidiaries. A consolidated putative class action lawsuit (In re Providian Credit Card Litigation) was filed in August 1999 in California state court in San Francisco against the Company, Providian National Bank, and certain other subsidiaries of the Company, and sought unspecified damages, including actual and punitive damages, attorneys' fees and injunctive relief. The complaint alleged unfair and deceptive business practices, including failure to credit payments in a timely fashion, adding products and charging fees without customer authorization, changing rates and terms without proper notice or authorization, and misleading or deceptive sales practices. Similar actions filed in other California counties were transferred to San Francisco County and coordinated with the Consolidated Action. Several putative class actions, containing substantially the same allegations as those alleged in the Consolidated Action, were also filed in federal court. The Federal Judicial Panel on Multidistrict Litigation transferred these actions to the Eastern District of Pennsylvania. In December 2000, the Company reached an agreement to settle the Consolidated Action and the Multidistrict Action. The Court preliminarily approved the classwide settlement on April 20, 2001. The Company estimates the total value of the settlement at approximately $105 million, including attorneys' fees and restitution in the form of cash and in-kind payments. The Company recorded a net pre-tax charge of $36.7 million to non-interest expense during the fourth quarter of 2000 in connection with such settlement. SECURE COMPUTING: No Discovery or Trial Dates Set For Five Lawsuits ------------------------------------------------------------------- On April 2, 9, 12, 14 and 20, 1999, purported class action complaints were filed in the United States District Court for the Northern District of California by Myron Goldstein, Herbert Silverberg, William Preiner, Charles McInnis, and George H. Rosenquist and Melvin Freedenberg, respectively, against SECURE COMPUTING CORPORATION, and its present or former officers Jeffrey Waxman, Timothy McGurran, Patrick Regester, Gary Taggart, Howard Smith and Christine Hughes. Each complaint alleges that defendants made false and misleading statements about the Company's business condition and prospects during a purported class period of November 10, 1998 to March 31, 1999, and asserts claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. Each complaint seeks damages of an unspecified amount. By stipulated Order dated August 19, 1999, the Court consolidated these actions, appointed lead plaintiffs, and approved the retention of lead counsel. On January 7, 2000, plaintiffs served a consolidated corrected compliant. On August 18, 2000, Plaintiff's served a First Amended Complaint. Defendants' motion to dismiss that Complaint is now pending. There has been no discovery to date and no trial is scheduled in any of these actions. We believe that we have meritorious defenses to these actions and intend to defend them vigorously. TACO BELL: Settlement With Ex-Managers in California Awaits Court Nod --------------------------------------------------------------------- On October 2, 1996, a class action lawsuit against Taco Bell Corp., entitled Mynaf, et al. v. Taco Bell Corp., was filed in the Superior Court of the State of California of the County of Santa Clara. The lawsuit was filed by two former restaurant general managers and two former assistant restaurant general managers purporting to represent all current and former Taco Bell restaurant general managers and assistant restaurant general managers in California. The lawsuit alleged violations of California wage and hour laws, involving unpaid overtime wages, and violations of the State Labor Code's record-keeping requirements. The complaint also included an unfair business practices claim. Plaintiffs claimed individual damages ranging from $10,000 to $100,000 each. On September 17, 1998, the court certified a class of approximately 3,000 current and former assistant restaurant general managers and restaurant general managers. Taco Bell petitioned the appellate court to review the trial court's certification order. The petition was denied on December 31, 1998. Taco Bell then filed a petition for review with the California Supreme Court, and the petition was subsequently denied. Class notices were mailed on August 31, 1999 to over 3,400 class members. Trial began on January 29, 2001. Before conclusion of the trial, the parties reached an agreement to settle this matter, and entered into a stipulation of discontinuance of the case. This settlement agreement is subject to approval by the court of the terms and conditions of the agreement and notice to the class with an opportunity to object and be heard. TAKEDA CHEMICAL: Faces Lawsuit in Boston Along With US Partner Abbott --------------------------------------------------------------------- Takeda Chemical Industries, Ltd., Japan's largest drug maker, is facing a class action lawsuit filed in a federal court in Boston, the Reuters News Agency reported Monday. The lawsuit named as defendants Takeda, Abbot Laboratories Inc. and the two drug makers' 50-50 joint venture TAP Pharmaceuticals Products Inc. The suit alleges that the two drug makers have illegally inflated the price of a drug used to treat prostate cancer. News of the lawsuit brought Takeda's shares down by 2.18 percent at 5,840 yen, underperforming a 1.93 percent increase in the benchmark Nikkei stock average, the news agency said. A Takeda spokesman said Monday the company could not comment on the latest lawsuit because it has not received the document. TALK AMERICA: Insists Shareholder Suit in Pennsylvania is Without Merit ----------------------------------------------------------------------- On June 16, 1998, a purported shareholder class action was filed in the United States District Court for the Eastern District of Pennsylvania against Talk America Holdings Inc. and certain of its officers alleging violation of the securities laws in connection with certain disclosures made by the Company in its public filings and seeking unspecified damages. Thereafter, additional lawsuits making substantially the same allegations were filed by other plaintiffs in the same court. A motion to dismiss was granted as to certain officers of the Company and denied as to the Company. There are currently no officers of the Company who are a party to these actions. On July 19, 2000, a class was certified. The Company believes the allegations in the complaints are without merit and intends to defend the litigations vigorously. TORCHMARK CORP.: Wants Hinton Case Consolidated With Moore in Alabama --------------------------------------------------------------------- On March 15, 2001, a purported class action litigation was filed against Liberty National Insurance Holding Company (the former conformed name of TORCHMARK CORPORATION) in the United States District Court for the District of South Carolina (Hinton v. Liberty National Life Insurance Company, Civil Action No. 3-01-68078), containing allegations largely similar to the Moore case filed in the Federal District Court for the Northern District of Alabama. Liberty was described in the suit as successor in interest of New South Life Insurance Company, an insurer acquired out of receivership by an entity, which was subsequently acquired by Peninsular Life Insurance Company. In 1985, Liberty reinsured a block of insurance business from Peninsular, including business formerly written by New South. Liberty has requested indemnification in the Hinton litigation from Peninsular and its successors in interest and is also seeking a change of venue to consolidate the Hinton case with the Moore case currently pending in Federal District Court in Alabama. TRAVELERS PROPERTY: California Case, Parts of 10 Others Dismissed ----------------------------------------------------------------- Beginning in January 1997, sixteen purported class actions and one multi-party action were commenced in various courts against certain subsidiaries of Travelers Property Casualty Corporation, dozens of other insurers and the National Council on Compensation Insurance. The allegations in the actions are substantially similar. The plaintiffs generally allege that the defendants conspired to collect excessive or improper premiums on certain loss-sensitive workers' compensation insurance policies in violation of state insurance laws, antitrust laws, and state unfair trade practices laws. Plaintiffs seek unspecified monetary damages. Actions have been commenced in the following jurisdictions: (i) Georgia (El Chico Restaurants, Inc. v. The Aetna Casualty and Surety Company, et al. and FFE Transportation Services, Inc. et al. v. NCCI, et al.); (ii) Tennessee (El Chico Restaurants, Inc. v. The Aetna Casualty and Surety Company, et al.); (iii) Florida (Bristol Hotel Management Corp., et al. v. The Aetna Casualty and Surety Company, et al.); (iv) New Jersey (Foodarama Supermarkets, Inc., et al. v. The Aetna Casualty and Surety Company, et al.); (v) Illinois (Hill-Behan Lumber Co v. Hartford Insurance Co. et al. and CR/PL Management Co., et al. v. Allianz Insurance Company Group, et al.); (vi) Pennsylvania (Foodarama Supermarkets, Inc. v. The Aetna Casualty and Surety Company, et al.); (vii) Missouri (Hill-Behan Lumber Corp., et al. v. Hartford Insurance Co., et al.); (viii) California (Dal-Tile Corp., et al. v. NCCI, et al.); (ix) Texas (Sandwich Chef of Texas, Inc., et al. v. Reliance National Insurance Company, et al.); (x) Alabama (Alumax Inc., et al. v. Allianz Insurance Company, et al.); (xi) Michigan (American Association of Retired Persons, et al. v. National Surety Corp., et al.); (xii) Kentucky (Payless Cashways, Inc. et al. v. National Surety Corp. et al.); (xiii) New York (Burnham Service Corp. v. NCCI, et al.); and (xiv) Arizona (Albany International Corp. v. American National Fire Insurance Company, et al.). The Company has vigorously defended all of these cases, and intends to continue doing so. The trial courts have ordered dismissal of the entire California case, and partial dismissals of ten others: those pending in Tennessee, Florida, New Jersey, Illinois (both cases), Pennsylvania, Missouri, Alabama, New York and Arizona. The trial courts in Georgia, Kentucky, Texas, and Michigan have denied defendants' motions to dismiss. The Pennsylvania and New Jersey courts have denied class certification. Appeals are currently pending from the dismissal orders in California and New York, and from the class certification ruling in New Jersey. UAL CORPORATION: Discrimination Suits Returned to District Court ---------------------------------------------------------------- A class action lawsuit against United Air Lines, Inc., a principal subsidiary of UAL Corporation, was filed February 7, 1992 in federal district court in California, alleging that United' s former flight attendant weight program, in effect from 1989 to 1994, unlawfully discriminated against flight attendants on the grounds of sex, age and other factors, and seeking monetary relief. On April 29, 1994, the class was certified as to the sex and age claims. Following extensive motion practice, on March 10, 1998, the district court dismissed all the claims against United. Following an appeal to the Court of Appeals for the Ninth Circuit, a three-judge panel of the Ninth Circuit, on June 21, 2000, overturned the ruling and held that United's former weight program violated the law. The court ruled that the plaintiffs were entitled to judgment as a matter of law on their claims for discrimination based on sex and that a trial was required for determination on their claims for age discrimination. In addition, the appellate court reversed the dismissal of all individual class representative claims of discrimination and the case was remanded to the district court for further proceedings. United's petition for en banc review by an 11-judge panel was denied on August 11, 2000. On December 8, 2000, United petitioned for a review of the Ninth Circuit decision by the U.S. Supreme Court, but that petition was denied on March 5, 2001. In accordance with the appellate court ruling, the case will go back to the district court for further proceedings with respect to the age discrimination claims and for a determination of damages with respect to the sex discrimination claims. US LIQUIDS: Court Grants Partial Dismissal of Securities Suit in Texas ---------------------------------------------------------------------- During the third quarter of 1999, six purported securities class action lawsuits were filed against US Liquids Inc. and certain of its officers and directors in the United States District Court for the Southern District of Texas, Houston Division. These lawsuits have been consolidated into a single action styled IN RE: U S LIQUIDS SECURITIES LITIGATION, Case No. H-99-2785, and the plaintiffs have filed a consolidated complaint. The consolidated complaint alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 on behalf of purchasers of the Company's common stock in the March 1999 public offering and violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder on behalf of purchasers of the Company's common stock during the period beginning on May 12, 1998 and ending on August 25, 1999. The plaintiffs generally allege the defendants made false and misleading statements and failed to disclose allegedly material information regarding the operations of the Company's Detroit facility and the Company's financial condition in the prospectus relating to the March 1999 stock offering and in certain other public filings and announcements made by the Company. The remedies sought by the plaintiffs include designation of the action as a class action, unspecified damages, attorneys' and experts' fees and costs, rescission to the extent any members of the class still hold common stock, and such other relief as the court deems proper. During 2000, the Company filed a motion to dismiss the plaintiffs' consolidated complaint. In January 2001, the court entered an Order of Partial Dismissal which dismissed the claims asserted by the plaintiffs under Sections 10(b) and 20(a) and Rule 10b-5 of the Exchange Act, but granted the plaintiffs leave to file an amended complaint. The deadline for filing an amended complaint has passed and the plaintiffs have advised the court that, while preserving all of their rights regarding the claims under Sections 10(b) and 20(a) of the Exchange Act, they will proceed on the current complaint as affected by the Order of Partial Dismissal. Accordingly, it is the Company's understanding that the lawsuit is proceeding with respect to the claims asserted under Sections 11, 12(a)(2) and 15 of the Securities Act only. VISHAY INTERTECHNOLOGY: Moves For Stay in California Lawsuit ------------------------------------------------------------ In February and March 2001, several purported class action complaints were filed in the Court of Chancery in and for New Castle County, Delaware and the Superior Court of the State of California against Vishay Intertechnology, Inc., Siliconix, and the directors of Siliconix in connection with the Company's announced proposal to purchase all issued and outstanding shares of Siliconix not already owned by the Company. The class actions, filed on behalf of all non-Vishay Siliconix shareholders, allege, among other things, that the Company's proposed offer is unfair and a breach of fiduciary duty. One of the Delaware class actions also contains derivative claims against the Company on behalf of Siliconix alleging self-dealing and waste because the Company purportedly usurped Siliconix's inventory and patents, appropriated Siliconix's separate corporate identity, and obtained a below-market loan from Siliconix. The Company has not yet responded to the complaints in the Delaware actions. On April 9, 2001, Vishay and those defendants that have been served moved for a stay of the California actions. That motion is returnable on June 22, 2001. In management's opinion, the ultimate resolution of the above-mentioned matter is not expected to have a material adverse effect on the Company's consolidated financial condition or results of operations. WASTE MANAGEMENT: Motion to Dismiss Fraud Suit in Texas Still Pending --------------------------------------------------------------------- On July 6 and July 29, 1999, Waste Management Inc. announced that it had lowered its expected earnings per share for the three months ended June 30, 1999. On August 3, 1999, the Company provided additional information regarding its expected earnings for that period, including that its reported operating income for the three months ended March 31, 1999 might have included certain unusual pretax income items. More than 30 lawsuits based on one or more of these announcements were filed against the Company and certain of its current and former officers and directors, which have been consolidated into a single action pending in the United States District Court for the Southern District of Texas. On May 8, 2000, the court entered an order appointing the Connecticut Retirement Plan and Trust Funds as lead plaintiff and appointing the law firm of Goodkind Labaton Rudoff & Suchrow LLP as lead plaintiff's counsel. The lead plaintiff filed its Amended Consolidated Class Action Complaint on July 14, 2000. The Complaint pleads claims on behalf of a putative class consisting of all purchasers of Company securities (including common stock, debentures and call options), and all sellers of put options, from June 11, 1998 through November 9, 1999. The Complaint also pleads additional claims on behalf of two putative subclasses: (i) the "Merger Subclass," consisting of all Waste Management Holdings stockholders, who received Company common stock after it merged with WM Holdings, and (ii) the "Eastern Merger Subclass," consisting of all Eastern Environmental Services, Inc. stockholders who received Company common stock pursuant to the merger transaction with Eastern. Among other things, the plaintiff alleges that the Company and certain of its current and former officers and directors: (i) made misrepresentations in the registration statement and prospectus filed with the SEC in connection with the WM Holdings Merger, (ii) made knowingly false earnings projections for the three months ended June 30, 1999, (iii) failed to adequately disclose facts relating to its earnings projections that the plaintiff claims would have been material to purchasers of the Company's common stock, and (iv) made separate and distinct misrepresentations about the Company's operations and finances on and after July 29, 1999, culminating in the Company's pre-tax charge of $1,763 in the third quarter of 1999. The plaintiff also alleges that certain of the Company's current and former officers and directors sold common stock between May 10, 1999 and June 9, 1999 at prices known to have been inflated by material misstatements and omissions. The plaintiff in this action seeks damages with interest, costs and such other relief as the court deems proper. Defendants filed a motion to dismiss on October 3, 2000, which is pending. The Company believes it has substantial defenses to the putative class action and continues to assert these defenses in the court in which the action is pending. At the same time, the Company has considered, and will continue to consider, potential settlement options that are appropriate and in the Company's best interest. WASTE MANAGEMENT: Delaware F.C. Rulings on Transfer And Remand Pending ---------------------------------------------------------------------- On June 29, 2000, a putative class action was filed against Waste Management Inc. in Delaware state court by a class of former Eastern stockholders falling within the scope of the Eastern Merger Subclass described above. The plaintiffs allege that the Company stock they received in exchange for their Eastern shares was overvalued for the same reasons alleged in the consolidated class actions in Texas. On August 4, 2000, the Company removed the case from the state court to federal court and asked to have the case transferred to the Texas federal court where the consolidated Texas class action is pending. On September 1, 2000, the plaintiffs asked to remand the case to the Delaware state court, which the Company opposed. The plaintiffs also asked the Delaware federal court not to consider the Company's motion to transfer the case to Texas until it rules on the motion to remand. All motions currently are pending. The case is at an early stage, and the extent of possible damages, if any, cannot yet be determined. WORLDCOM INC.: Settlement Pact is Final as Deadline For Appeal Expires ---------------------------------------------------------------------- Between September 5, 2000 and October 4, 2000, thirteen purported class action and/or derivative suits were filed against Intermedia, Digex, directors of Digex and, in some cases, WORLCOM INC., in the Court of Chancery of the State of Delaware. These actions were captioned: (i) Yassin v. Intermedia et al., C.A. No. 18290-NC; (ii) Hug v. Intermedia et al., C.A. No. 18289-NC; (iii) Taam Assocs. v. Intermedia et al., C.A. No. 18291-NC; (iv) Reynoldson v. Intermedia et al., C.A. No. 18311-NC; (v) Prince v. Intermedia et al., C.A. No. 18304-NC; (vi) Turberg v. Intermedia et al., C.A. No. 18322-NC; (vii) Reiner v. Digex et al., C.A. No. 18297-NC; (viii) Kalabsa v. Digex et al., C.A. No. 18317-NC; (ix) TCW Technology L.P. v. Intermedia, et al., C.A. No. 18336-NC; (x) Steinberg et al. v. Ruberg, et al., C.A. No. 18293-NC; (xi) Crandon Capital Partners v. Ruberg, et al., C.A. No. 18310-NC; (xii) Kansas Public Employees Retirement Serv. v. Intermedia, et al., C.A. No. 18390-NC; and (xiii) Sinha v. Ruberg, et al., C.A. No. 18391-NC. Each of these complaints alleged that Intermedia and some or all of the directors of Digex breached their fiduciary duties to the minority stockholders of Digex in connection with the merger and several complaints alleged that WorldCom aided and abetted that purported breach of fiduciary duty. In response to a motion by TCW Technology, the Chancery Court granted expedited discovery and scheduled a hearing for November 29, 2000, to consider TCW Technology's motion for a preliminary injunction of the merger. On October 17, 2000, the Chancery Court ordered all 13 purported derivative and class action lawsuits listed above to be consolidated into a single action and appointed TCW Technology and Kansas Public Employment Retirement Systems as the lead plaintiffs and their lawyers as lead counsel. The Chancery Court also directed the lead counsel to file a consolidated amended complaint on behalf of all plaintiffs. Pursuant to the Chancery Court's instructions, on October 19, 2000, the lead counsel filed a "Consolidated Class Action and Derivative Complaint" captioned In re Digex, Inc. Shareholders Litigation, Consol. C.A. No. 18336-NC. The consolidated complaint named as defendants Intermedia, six of Digex's eight directors, and WorldCom. Digex was named as a "nominal defendant" in the consolidated action. The consolidated complaint alleged that the director defendants and Intermedia breached their fiduciary duties by causing Digex to provide confidential information to Intermedia's financial advisor, by allegedly planning and structuring the merger to benefit Intermedia at the expense of Digex's minority stockholders, and by allegedly usurping a corporate opportunity of Digex. The consolidated complaint further alleged that certain directors of Digex breached their fiduciary duties when they voted to waive the potential application of Section 203 as to WorldCom. The consolidated complaint also asserted that WorldCom and, with respect to claims against the directors, Intermedia, aided and abetted certain of these breaches of fiduciary duty. The consolidated complaint sought to enjoin, preliminarily and permanently, the waiver of the applicability of Section 203 and the consummation of the merger, and also requested damages on behalf of the class and Digex. Following expedited discovery, the parties filed briefs with the Chancery Court on plaintiffs' motion for a preliminary injunction. The Chancery Court heard arguments at a hearing held on November 29, 2000. Following the hearing, the Chancery Court directed the parties to file supplemental briefs regarding whether Section 203 would apply to WorldCom as a result of the merger. On December 13, 2000, the Chancery Court denied plaintiffs' motion for preliminary injunctive relief, concluding that the plaintiffs were unlikely to succeed on the merits of their claim that the defendants usurped a Digex corporate opportunity. The Chancery Court further noted that it had determined, at least preliminarily, that after a full trial on the merits, the plaintiff minority stockholders would be likely to succeed in showing that the defendant Digex directors breached their fiduciary duties in connection with their decision to vote in favor of the Section 203 waiver and that the plaintiffs could be entitled to a range of potential remedies, including monetary damages. On January 10, 2001, the Chancery Court set a trial date of May 14, 2001, for a trial on the merits of the plaintiffs' claims. On January 22, 2001, plaintiffs filed a "Corrected Amended Consolidated Class Action and Derivative Complaint" that dropped two Digex directors as defendants (Messrs. Knapp and Shull). The amended consolidated complaint also added a claim alleging the defendant directors breached their fiduciary duties by failing to conduct an auction for the sale of Digex as purportedly required by Delaware law. The amended consolidated complaint further added claims against Intermedia for promissory estoppel and equitable estoppel based on Intermedia's alleged representation that any transaction resulting from Intermedia's review of strategic alternatives would include a sale of Digex's minority shares. Although these new claims had not been previously included in the pleadings, the plaintiffs had raised each of these claims in their oral and written arguments before the Chancery Court on the motion for a preliminary injunction. In the December 13, 2000, opinion denying the motion for a preliminary injunction, the Chancery Court found that plaintiffs had not shown a reasonable likelihood of success on the merits of the estoppel claims or the duty to auction claim. Between December 19, 2000, and February 14, 2001, the parties engaged in expedited discovery in preparation for the May 14 trial. During that time, the parties and the Digex special committee also engaged in discussions regarding a possible settlement of the lawsuit. On February 15, 2001, the parties, through their counsel, entered into a memorandum of understanding setting forth the preliminary terms of a settlement of the action. The settlement, which is conditioned on consummation of the merger, will resolve all claims asserted or which could have been raised in the Delaware Digex stockholders litigation. The principal terms of the settlement include, among other things, that: (i) the exchange ratio in the amended merger agreement has been reduced to a fixed exchange ratio of 1.0 shares of WorldCom common stock for each share of Intermedia common stock; (ii) concurrent with the reduction in the exchange ratio, WorldCom agreed to contribute $165 million in freely tradeable WorldCom common stock to a settlement fund upon the closing of the merger; (iii) the settlement fund, less any award of fees and expenses to plaintiffs' counsel, will be distributed to certain members of the class of plaintiffs in the Delaware Digex stockholders litigation; (iv) WorldCom will reimburse Digex for up to $15 million in fees and expenses incurred by Digex in connection with the lawsuit, the evaluation of various potential transactions involving Digex, and the costs of notice and administration in connection with the settlement; (v) WorldCom will enter into certain commercial arrangements with Digex; (vi) Intermedia and WorldCom will take steps to amend the Digex certificate of incorporation to establish certain corporate governance procedures to be followed by the Digex board in future transactions with WorldCom and Intermedia; and (vii) the approval of the merger by the Digex board pursuant to Section 203 will no longer be subject to challenge and WorldCom will not be subject to any restrictions under Section 203 relating to future business combinations with Digex. On March 5, 2001, the parties presented the settlement to the Chancery Court and on that date, the Chancery Court ordered, among other things, that the terms of the settlement be presented to record holders of shares of Digex common stock (other than the defendants in the Delaware Digex stockholders litigation and their affiliates) at any time during the period from and including August 31, 2000, through and including March 2, 2001, through published and mailed notice. At a hearing on April 6, 2001, the Court approved the settlement as presented. The Court entered the order and final judgment. At the April 6, 2001 hearing, the Court also entered a separate award of attorneys' fees and reimbursement of expenses. Under the amended merger agreement, it is a condition to the parties' obligations to complete the merger that, among other things, the order and final judgment become final and unappealable. Under Delaware law, the deadline for filing an appeal of the Chancery Court's order and final judgment approving the settlement expired on May 7, 2001, and no such appeals of that order were filed before that deadline. As a result, the order and final judgment is now final and unappealable. Similarly, no timely appeals were filed with respect to the Chancery Court's separate fee award. ********* 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., Trenton, New Jersey, and Beard Group, Inc., Washington, D.C. Larri-Nil G. Veloso and Lyndsey Resnick, Editors. Copyright 2001. 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. 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