/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010803.mbx C L A S S A C T I O N R E P O R T E R Friday, August 3, 2001, Vol. 3, No. 151 Headlines ALLSTATE CORPORATION: Ex-workers File Suit Over 1999 Firing Policy AMAZON.COM: Morgan Stanley, Net Analyst Included In S.D. NY Lawsuit ASBURY AUTOMOTIVE: One of 600 Dealers Sued Over Improper Tax Charges CALIFORNIA STATE: Faces $350-$800M Potential Liability Over JORDAN Case COLUMBIA CITY: City Pays Fees, Submits Discovery Papers In Lawsuit CREDIT CARD: Storeowner In NH To Sue Over Unpaid ATM Transaction Fee CROWN MEDIA: Stockholders Cry Foul Over Proposed Property Purchase DIGITAL ISLAND: Cauley Geller Commences Suit Against IPO Underwriters ENERGY LITIGATION: Lawyers Score Victory, Keep `Energy Suit' In CA EXODUS COMMUNICATIONS: Dyer & Shuman Files Securities Suit In N.D. CA FIREPOND INC.: Milberg Weiss Files Securities Suit In S.D. New York GRAND TOYS: Lionel Glancy Announces Changes In Fairness Hearing Date IMANAGE INC.: Says It Is Victim Of `Suit Trend' Affecting Tech Industry INDONESIA: Court Rejects Suit's Demand To Dissolve Suharto's Party INSIGHT COMMUNICATIONS: Using Coupons to Settle Late Fee Suit METRO GOLDWIN: Denies Allegations Contained In Suit Over Film Reviews QWEST COMMUNICATION: Spector Roseman Initiates Lawsuit In Colorado RHYTHMS NETCONNECTIONS: Lovell and Sirota File Suit In S.D. New York TRIGON BLUE: Court Gives Go Ahead For Lawsuit, Class Status Possible WORLD FINANCIAL: Faces Florida Suit For Fraudulent Billing Practices ********* ALLSTATE CORPORATION: Ex-workers File Suit Over 1999 Firing Policy ------------------------------------------------------------------ Twenty-seven former employees sued Allstate Corporation Wednesday, claiming they represent about 6,400 former agents fired by the Company to save on annual benefits costs, the Associated Press reported. The suit alleges that the employee lay-off was part of the restructuring plan instituted in November 1999 to save money and push out workers older than 40. The program was meant to save hundreds of millions of dollars annually in benefits. The suit also accuses the company of pressuring employed agents, for 10 years now, to become independent contractors in order to effectively halt their benefits. An Allstate spokesman said the Company believes the restructuring plan was lawful and permissible. Lawyers for the plaintiffs disagree and expect to collect hundreds of millions of dollars in damages. Allstate is the largest publicly held insurance company in the United States and No.2 overall behind State Farm. AMAZON.COM: Morgan Stanley, Net Analyst Included In S.D. NY Lawsuit ------------------------------------------------------------------- Schiffrin & Barroway, LLP has included Morgan Stanley Dean Witter & Co. and its Internet analyst in a suit it filed recently against Amazon.com, Inc. The law firm accused the analyst Mary Meeker of not maintaining a "Chinese Wall" between herself and Morgan Stanley's investment banking business, which would insure objectivity when she made recommendations and positive statements about Amazon. The suit charges Morgan Stanley and Meeker of issuing false and misleading statements and failed to disclose material information concerning Meeker's relationship with Amazon, Puget Sound Business Journal reported Wednesday. Among the complaints listed in the suit: * Contrary to Morgan Stanley's public representations, Meeker's main job at Morgan Stanley during the period in question was attracting and retaining investment banking clients for Morgan Stanley; * Meeker's ratings, recommendations, and positive statements regarding Amazon were not based on objective analyses, but rather on her desire to attract and retain Amazon as a Morgan Stanley banking client; * Meeker's compensation was directly tied to the amount of investment banking business she generated for Morgan Stanley. The suit is pending in the U.S. District Court for the Southern District of New York, representing purchasers of Amazon shares between Aug. 1, 1998, and Jan. 22, 2001. ASBURY AUTOMOTIVE: One of 600 Dealers Sued Over Improper Tax Charges -------------------------------------------------------------------- U.S. No.1 car dealer Asbury Automotive Group, Inc. disclosed recently that it was currently named in a class action suit involving more than 600 automobile dealerships. According to a Securities and Exchange Commission report, the suit accuses the car dealers of improperly charging consumers a vehicle inventory tax in addition to the purchase price of the vehicle. The Texas Automobile Dealers Association has assumed defense of the Case, the Company said. There is no allegation as to the amount of damages claimed and no determination has been made as to the potential liability, the Company added. "In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company," the report said. Asbury is the largest privately-owned dealership group in the US, selling more than 150,000 new and used cars annually. The company sells about 30 auto brands through nine major dealership groups (about 90 locations) in Arkansas, Florida, Georgia, Mississippi, Missouri, North Carolina, Oregon, Texas, and Virginia. Its strategy includes buying majority interests in multi-location dealerships with at least $150 million in annual sales, transforming each into a joint venture. CALIFORNIA STATE: Faces $350-$800M Potential Liability Over JORDAN Case ----------------------------------------------------------------------- The State of California is exposed to a liability of about $350 million that could reach up to $800 million if fees are refunded in full, J.P. Morgan Series Trust reported to the Securities and Exchange Commission recently. In October 1999, the Court of Appeals upheld a trial court judgment for the plaintiffs in the JORDAN case, and the State has declined to appeal further. Although refunds through the court actions could be limited by a three-year statute of limitations, with a potential liability of about $350 million, the Governor has proposed refunding fees collected back to the initiation of these fees in 1990. JORDAN, ET AL. V. DEPARTMENT OF MOTOR VEHICLES, ET AL. and JOSEPHS V. ZOLIN, ET AL. challenges the validity of the Vehicle Smog Impact Fee, a $300 fee that is collected by the Department of Motor Vehicles from vehicle registrants when a vehicle without a California new-vehicle certification is first registered in California. The JORDAN plaintiffs contend that the fee violates the interstate commerce and equal protection clauses of the United States Constitution as well as Article XIX of the State Constitution. The JOSEPHS case is a class action civil rights case brought against the current and former directors of the Department of Motor Vehicles in their individual capacities claiming the collection of the Vehicle Smog Impact Fee violates the interstate commerce, equal protection, and privileges and immunities clauses of the United States Constitution. J.P. Morgan Series Trust, formerly known as JPM Series Trust, is one of the members of J.P. Morgan Chase & Co., the second-largest bank in the US behind Citigroup. COLUMBIA CITY: City Pays Fees, Submits Discovery Papers In Lawsuit ------------------------------------------------------------------ All the discovery material has been handed over and the fees paid in the class action lawsuit of John Ussery and Brad Collins vs. the City of Columbia, Tennessee, says Bill Bates, who is representing the city, according to the recent report in The Tennessean. Circuit Court Judge Stella Hargrove held the city of Columbia in contempt and fined it $550 and attorneys' fees of $2,100 when the city failed to comply with her order that it produce documents for discovery in the pending suit filed by Columbia's police officers and firefighters. The date of August 9th had been set as the deadline for the city to file a motion asking Judge Hargrove to set aside the sanctions she imposed when the city failed to comply with her order for discovery. The lawsuit contends, according to Bill Bates, that the city breached its contract with the police officers and the firefighters by not giving them a pay increase as required by the city's policy manual. CREDIT CARD: Storeowner In NH To Sue Over Unpaid ATM Transaction Fee -------------------------------------------------------------------- An owner of the only general store in Sanbornton Town, New Hampshire is contemplating a class action suit against Credit Card Center of Philadelphia and Newcourt Financial USA Inc., The Citizen Online reported recently. Bernard Salvador claims that both companies, particularly Credit Card Center, have not paid him any leasing fees for the ATM machine in his store for the past six months. And when he demanded to buy out the lease, the firm wanted more than twice what he paid for it nearly three years ago. It cost him $4,500 to obtain the machine. The firm quoted him a $9,700 buy-out price, which he considers unfair, the report said. Under a purchase/lease arrangement entered into by Salvador and the two firms, the Credit Card Center was obligated to pay him $1.50 for every transaction. Salvador is now asking other storeowners who do business with the same firms to join him in the lawsuit. Credit Card Center has also recently figured in similar cases now pending in Illinois and Pennsylvania. The 700-member Pennsylvania Tavern Owners Association has a pending suit against Credit Card Center and the leasing firms it was doing business with. CROWN MEDIA: Stockholders Cry Foul Over Proposed Property Purchase ------------------------------------------------------------------ Stockholders of pay television channel owner and operator Crown Media Holdings, Inc. believe the company's proposed purchase of 700 film titles and related property and rights from Hallmark Entertainment Distribution is entirely unfair. Crown Media, its directors, Hallmark Cards, Hallmark Entertainment Distribution, and Hallmark Entertainment have been served a common stockholders suit for damages, rescission and other relief. It was filed before the 2001 Annual Meeting of Stockholders, held June 7. Allegedly, the proposed acquisition of the films is "the product of an unfair process designed to be advantageous to Hallmark Cards as the controlling stockholder, that the price being paid to Hallmark Entertainment Distribution is not entirely fair and that the proxy statement failed to make certain disclosures," as stated in the Company's Securities and Exchange Commission file. In principle, the parties have agreed to settle the lawsuit. The proposed settlement provides that the purchase price for the films and related assets will be reduced by 425,000 shares of Crown Media Holdings. However, it remains subject to a number of requirements, including entering into a definitive settlement stipulation, certification of a class consisting of all owners of Crown Media common stock (excluding the defendants), and final court approval. While it will likely take a number of months to obtain final court approval of the settlement, the proposed settlement permits the films transaction to be completed in the interim. DIGITAL ISLAND: Cauley Geller Commences Suit Against IPO Underwriters --------------------------------------------------------------------- Cauley Geller Bowman & Coates, LLP filed recently a class action suit against the underwriters of Digital Island Corp. over various securities violations, the Pacific Business News reported. The suit names as defendants the following: (i) Bears, Stearns & Co., (ii) Lehman Brothers Inc., and (iii) BancBoston Robertson Stephens Inc. The law firm alleges that the underwriters violated the Securities Exchange Act of 1934 by failing to disclose to buyers of Digital Island securities that they "solicited and received excessive and undisclosed commissions from certain investors in exchange for which the defendants allocated to those investors material portions of the restricted number of Digital Island shares" in the company's initial public offering of stock. In addition, the Arkansas law firm also alleges that the underwriters entered into agreements with customers to allocate IPO shares in return for customers agreeing to buy more shares in the aftermarket at predetermined prices. Digital Island specializes in strategies designed to increase the delivery and download speed of corporate Web site content to customers. ENERGY LITIGATION: Lawyers Score Victory, Keep `Energy Suit' In CA ------------------------------------------------------------------ Lawyers pressing for a California State court hearing of a class action lawsuit against power companies won a significant victory recently, the San Diego Union-Tribune reported Wednesday. According to the report, the lawyers successfully got a federal ruling keeping the case in California. "This means a California jury, not (federal) bureaucrats are going to decide if the generators did something illegal," the newspaper quoted Michael Aguirre as saying. Aguirre's firm as well as that of Levine, Steinbergy, Miller & Huver and Milberg Weiss Bershad Hynes & Lerach, LLP have been batting for a jury trial in the state court. EXODUS COMMUNICATIONS: Dyer & Shuman Files Securities Suit In N.D. CA --------------------------------------------------------------------- The law firm of Dyer & Shuman, LLP commenced a class action in the United States District Court for the Northern District of California on behalf of purchasers of Exodus Communications, Inc. (Nasdaq:EXDS) publicly traded securities during the period between March 30, 2001, and July 20, 2001. The Complaint charges Exodus and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The suit further alleges the defendants were alarmed by the dramatic decline in Exodus' share price, which had declined from over $28 per share in late January to $10 per share by mid-March 2001. The suit claims defendants then formulated a plan to halt the erosion of Exodus' share price and re-inflate it as well. Exodus' high stock price depended upon the appearance of its phenomenal growth rate. By March 2001, the Complaint alleges, defendants were aware that Exodus' business was falling victim to both the general economic slowdown and the bursting of the Internet bubble. Realizing that the public disclosure of Exodus' slowing growth rate would cause Exodus' stock price to decline, it is alleged that defendants issued a series of false and misleading statements designed to keep Exodus' stock price high while certain defendants sold over 441,667 shares of Exodus' common stock for proceeds of over $4.1 million. On June 20, 2001, Exodus allegedly revealed that, contrary to defendants' prior statements regarding the Company's results for the second quarter 2001 and for the 2001 fiscal year, its revenue would be significantly below expectations (and actually declined sequentially) due to a decrease in the rate of new customer installations, an increase in the rate of cancellations, reduction of orders from existing customers and an increase in reserves related to Internet company failures. This revelation shocked the market, causing Exodus' stock to plummet over 30% to $1.59 per share the following trading day on record volume of more than 185 million shares. For further information, contact: Dyer & Shuman, LLP through John M. Martin by Phone: 800/711-6483 or E-mail: jmartin@dyershuman.com FIREPOND INC.: Milberg Weiss Files Securities Suit In S.D. New York ------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP filed early this week a class action lawsuit on behalf of purchasers of the securities of Firepond, Inc. (NASDAQ:FIRE) between February 3, 2000 and December 6, 2000, inclusive. The action is pending in the United States District Court, Southern District of New York against the following defendants: (i) Firepond, (ii) FleetBoston Robertson Stephens, (iii) Klaus P. Besier and (iv) Paul K. McDermott. The complaint alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On or about February 3, 2000, Firepond commenced an initial public offering of 5,000,000 of its shares of common stock at an offering price of $22 per share. In connection therewith, Firepond filed a registration statement, which incorporated a prospectus, with the SEC. The complaint further alleges that the Prospectus was materially false and misleading because it failed to disclose, among other things, that: (i) Robertson Stephens had solicited and received excessive and undisclosed commissions from certain investors in exchange for which Robertson Stephens allocated to those investors material portions of the restricted number of Firepond shares issued in connection with the Firepond IPO; and (ii) Robertson Stephens had entered into agreements with customers whereby Robertson Stephens agreed to allocate Firepond shares to those customers in the Firepond IPO in exchange for which the customers agreed to purchase additional Firepond shares in the aftermarket at pre-determined prices. For additional information, contact: Milberg Weiss Bershad Hynes & Lerach LLP through Steven G. Schulman or Samuel H. Rudman by Phone: 800/320-5081 by E-mail: firepondcase@milbergNY.com or visit the firm's Website: www.milberg.com GRAND TOYS: Lionel Glancy Announces Changes In Fairness Hearing Date -------------------------------------------------------------------- The law firm of Lionel Z. Glancy announced recently that the United States District Court for The Southern District of New York has changed the date for the fairness hearing of the settlement agreement inked by Grand Toys International, Inc. and those who purchased or otherwise acquired its common stock during the period August 1, 1999 through August 27, 1999. The Court has also extended the class members' time to file proof of claims and to file objections to the settlement or request for exclusion. The new dates are as follows: (i) Last day for class members to serve and file requests for exclusion from the class: September 7, 2001. (ii) Last day for class members to file objections to the proposed settlement or the request for attorneys' fees by class counsel: September 7, 2001. (iii) Court hearing to consider fairness of the settlement and the request for attorneys' fees: September 24, 2001, at 10:00 a.m. (iv) Last day to file proof of claim: November 23, 2001. In all other respects the notice dated June 5, 2001 remains in full force and effect. For more information, contact: Michael Goldberg, Esq. by Mail: 1801 Avenue of the Stars, Suite 311, Los Angeles, California 90067 or by Phone: (310) 201-9150 IMANAGE INC.: Says It Is Victim Of `Suit Trend' Affecting Tech Industry ----------------------------------------------------------------------- iManage, Inc. (Nasdaq: IMAN), a leading provider of e-business content and collaboration management software, recently said it will mount a strong defense against the lawsuits now pending in New York. The Company believes it is just a victim of a vicious wave of class action suits alleging securities violations. Several purported class suits are pending against the Company and certain of its directors and officers, as well as certain underwriters of its November 17, 1999 initial public offering. The cases have been filed in the United States District Court for the Southern District of New York. "These complaints appear to be similar in nature to cases filed against numerous other companies in the same court, alleging that the underwriters of the companies' stock had undisclosed arrangements with purchasers of the companies' stock in connection with their public offerings," the Company noted. "iManage believes that the claims against it and its directors and officers are without merit and will vigorously defend against them," the Company said. INDONESIA: Court Rejects Suit's Demand To Dissolve Suharto's Party ------------------------------------------------------------------ The Indonesian Supreme Court recently rejected the demands of a class action lawsuit filed by a group of non-government organizations seeking dissolution of former president Suharto's party, called Golkar, for alleged 1999 electoral violations, said a recent Agence France-Presse report. "We hereby rule that the suit is not granted," Chief Judge Asma Samak Ibrahim told the session, which was held under tight security in Jakarta and marred by noisy pro- and anti-Golkar protests. Golkar, in 1999, contested the election in which it had received the second largest number of votes in the polls, after the Indonesian Democracy Party of Struggle of President Megawati Sukarnoputri. A section in the 1999 electoral law stipulates that each political party contesting the election is allowed to receive not more than 15 million rupiah from an individual, and not more than 150 million rupiah from a company or group. Judges trying the suit said there was inadequate evidence that the Golkar party had breached the limit of campaign funds parties contesting the 1999 elections were allowed to receive. Golkar chairman Akbar Tanjung, who attended the trial along with several party executives, commented on the verdict to reporters: "This means that Golkar has always followed regulations." But one of the plaintiffs, former political prisoner and politician Sri Bintang Pamungkas, blamed the verdict on loopholes in Indonesia's legal system: "The Supreme Court's verdict shows a weakness in our legal system, which bases its considerations on written evidence." INSIGHT COMMUNICATIONS: Using Coupons to Settle Late Fee Suit -------------------------------------------------------------- Cable television operator Insight Communications, in order to settle a class action lawsuit over late charges, has executed a settlement agreement with its Indiana customers, the Associated Press reported. The settlement is expected to become final by October 11 when it receives approval by the Morgan County Superior Court. Insight, and before it TCI Communications Inc., had been charging customers $5 if they paid their bill 30 days late. The settlement lowers the late fee to $2.95. The settlement, if approved, will release Insight from any damages resulting from the $5 late fee. And, the settlement also awards $6.5 million in attorney fees and costs to about 25 law firms. Under other terms of the settlement, Insight will give its Indiana customers coupons for free movies or a month of premium channel viewing. Additionally, a mailing sent to all Insight customers in Indiana said that if the settlement is approved, customers will receive a coupon for two pay-per-view movies. If the customer does not have the converter box needed to use pay-per- view, the coupon can be used for one free month of the HBO, Showtime or Cinemax channels, or three months of the Starz or Encore Channels. People who are no longer cable subscribers but who have paid a $5 late fee will be sent a check for $6.95 or equivalent credit against any balance owed if they submit a written claim form. METRO GOLDWIN: Denies Allegations Contained In Suit Over Film Reviews --------------------------------------------------------------------- The lion stands its ground. "We deny any wrongdoing or unlawful activity," says Metro-Goldwin- Mayer, Inc. in response to a recent class action lawsuit filed against the company and eight of its subsidiaries. The suit, filed on July 3 by Brian Rector, Citizens for Truth in Movie Advertising (CTMA), and others, pins MGM to deceptive and unfair business practices, fraudulent concealment, fraudulent inducement, false and misleading advertising, and claims under the Consumers Legal Remedies Act. The suit sprung from the studio's use of reviewer quotes in film advertisements without disclosing that the reviewers allegedly received things of value from the studio in connection with press junkets and publicity efforts. Nine other major studios were sued by the plaintiffs in identical but separate class action lawsuits. Restitution and disgorgement of all monies attributable to the alleged wrongdoing are being sought, as well as compensatory and punitive damages and an injunction requiring the studios to make certain disclosures in their advertising. MGM discloses in its Securities and Exchange Commission filing, "We will defend ourselves vigorously against plaintiffs' claims." QWEST COMMUNICATION: Spector Roseman Initiates Lawsuit In Colorado ------------------------------------------------------------------ The law firm of Spector, Roseman & Kodroff, P.C. commenced a suit in the United States District Court for the District of Colorado on behalf of purchasers of the stock Qwest Communications International Inc. (NYSE: Q-news) securities during the period from March 22, 2001 through July 23, 2001. The complaint charges Qwest and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that on March 22, 2001, defendants Joseph Nacchio and Robin Szeliga appeared at a UBS Warburg hosted senior management meeting where they falsely claimed that they would legitimately achieve 1Q01 and FY01 EPS of $0.11 and $0.59, respectively. On April 24, 2001, Qwest reported its financial results for 1Q01, including revenue growth of 12% and EBITA growth of 16%. Subsequent to these statements, Qwest's stock price increased, trading as high as $41.83 on April 30, 2001. Specifically, Qwest's 1Q01 results and its statements regarding those results as well as the statements regarding the success of the integration with U.S. West Inc. and the company's strong expense controls were materially false and misleading due to the company's improper valuation of KPNQwest in violation of Generally Accepted Accounting Principles (as the value of its investment in KPNQwest had already declined months earlier), and due to the following undisclosed facts: (a) Qwest's 1Q01 earnings were better than expectations primarily due to its change in the discount rate to calculate its pension obligations, increasing Qwest's 1Q01 results by at least $0.03; (b) Qwest's 1Q01 earnings were better than expectations due to defendants' failure to properly "write-down" the value of Qwest's holdings in KPNQwest, which was materially overstated as a result; (c) Qwest's 1Q01 earnings were increased by $0.01-$0.02 due to its aggressive use of capitalization to classify tens of millions of dollars of interest and software development costs as assets rather than expenses, which would contribute to decreased earnings in future quarters; (d) there was no way Qwest's future earnings would be nearly as strong as represented due in part to the accounting manipulations defendants engaged in which would adversely affect future results, as expenses were being deferred to future quarters and years; and (e) Qwest's selling, general and administrative expenses were only 22% of sales, not due to tight expense controls as represented, but to improper classification of SG&A expenses as cost of sales. Subsequently, on July 20, 2001, Qwest admitted that its classification of costs had been incorrect such that cost of sales had been overstated and SG&A expenses had been understated. As a result of defendants' issuance of alleged material and misleading statements (including a false 1Q01 financial statement), Qwest's stock traded as high as $41.83 per share. The individual defendants took advantage of this inflation, selling 1,255,000 shares of their Qwest stock for proceeds of $49.5 million. Ultimately, on July 24, 2001, Qwest conceded that it recorded a write- down of over $3.1 billion, primarily related to its ownership in KPNQwest. Upon this disclosure, Qwest's shares dropped once again, trading below $27. For further details, contact: Robert M. Roseman by Phone: 888-844-5862 by E-mail: classaction@srk-law.com or visit the firm's Website: www.spectorandroseman.com RHYTHMS NETCONNECTIONS: Lovell and Sirota File Suit In S.D. New York -------------------------------------------------------------------- The law firms of Lovell & Stewart, LLP and Sirota & Sirota, LLP filed a class action lawsuit Wednesday on behalf of all persons and entities who purchased, converted, exchanged or otherwise acquired the common stock of Rhythms Netconnections, Inc. (OTC BB:RTHM.OB) between April 6, 1999 and July 31, 2001, inclusive. The lawsuit asserts claims under Section 11, 12 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder and seeks to recover damages. The action, Dydo v. Rhythms Netconnections, Inc., is pending in the U.S. District Court for the Southern District of New York, Docket No. 01-CV-7084 (SAS), and has been assigned to the Hon. Shira A. Scheindlin, U.S. District Judge. The complaint alleges that Rhythms Netconnections, Inc., Catherine M. Hapka, its President and CEO, and Scott C. Chandler, its CFO, violated the federal securities laws by issuing and selling Rhythms Netconnections stock pursuant to the initial public offering and secondary offering without disclosing to investors that at least three of the underwriters of the Rhythms Netconnections offerings had solicited and received excessive and undisclosed commissions from certain investors. In exchange for the excessive commissions, the complaint alleges, Merrill Lynch, Pierce, Fenner & Smith, Inc. and Salomon Smith Barney, Inc., which acted as co-lead underwriters of both the IPO and the secondary offering and FleetBoston Robertson Stephens, Inc., which acted as one of the underwriters of the IPO, allocated Rhythms Netconnections shares to customers at the IPO price of $21.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $21.00, the defendant underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices as the price of Rhythms Netconnections stock rocketed upward (a practice known on Wall Street as "laddering") was intended to (and did) drive Rhythms Netconnections's share price up to artificially high levels. This artificial price inflation, the complaint alleges, enabled both the defendant underwriters and their customers to reap enormous profits by buying Rhythms Netconnections stock at the $21.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $75.00 during its first day of trading. The complaint further alleges that Rhythms Netconnections was able to price the secondary offering of its stock at the artificially high price of $29.00 per share due to the continued effects of the foregoing violations. Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, the defendant underwriters required their customers to "kick back" some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact based on how much profit each investor had made from his or her IPO stock allocation. The complaint further alleges that defendants violated the Securities Act of 1933 because the Prospectus distributed to investors and the Registration Statement filed with the SEC in order to gain regulatory approval for the Rhythms Netconnections offerings contained material misstatements regarding the commissions that the underwriters would derive and had derived from the IPO and failed to disclose the additional commissions and "laddering" scheme discussed above. For more details, contact: Lovell & Stewart, LLP through Christopher Lovell, Victor E. Stewart or Christopher J. Gray by Phone: 212/608-1900 or by E-mail: sklovell@aol.com or contact: Sirota & Sirota, LLP through Howard B. Sirota or Saul Roffe by Phone: 212/425-9055 or by E-mail: info@sirotalaw.com TRIGON BLUE: Court Gives Go Ahead For Lawsuit, Class Status Possible --------------------------------------------------------------------- A federal judge has ruled that the lawsuit of the American Chiropractic Association and the Virginia Chiropractic Association -- together with numerous doctors of chiropractic and their patients -- against Trigon Blue Cross/Blue Shield of Virginia, one of the largest health plans in the country, may move forward. In a significant decision, Judge James P. Jones of the U.S. District Court in Abingdon, VA, ruled that 6 of the 8 counts against Trigon, if proven, are sufficient to support a judgment. The six counts that will move forward include: (i) conspiracy to restrain interstate trade; (ii) attempt to monopolize the market; (iii) tortious interference with business expectancy; (iv) attempt to cause injury to business under state law; (v) breach of contract; and (vi) conspiracy to injure doctors of chiropractic in their trade or practice. A count under the RICO statute and a state insurance equality law claim were removed from the case. Jones made his ruling after extensive briefing by Trigon and the lawyers representing the ACA, VCA, five doctors of chiropractic and 18 chiropractic patients. The doctor and patient plaintiffs in the case are also exploring the possibility of expanding the legal action into a class action lawsuit. Survival of the count of tortious interference with business expectancy holds the possibility that the plaintiffs could recover punitive damages, while survival of the anti-trust count could result in recovery of three times the actual amount of damages and attorney fees. The court's ruling opens the door to the discovery phase of the trial, which will include detailed examination of Trigon documents and the taking of sworn depositions of Trigon executives, policy makers, third- party physicians -- including medical directors -- and other third parties with whom they deal. The ACA and VCA filed suit against the managed care giant in August 2000, calling the case "the most significant legal action ever taken by our profession against the insurance industry." The lawsuit charges Trigon with a long list of "unlawful anticompetitive" acts against the chiropractic profession. The ACA and VCA, and the other plaintiffs, contend that the Trigon companies discouraged doctors of chiropractic from offering treatment to patients by "setting unconscionably inadequate reimbursements for services." Specifically, the lawsuit contends that Trigon has imposed a $500 cap on spinal manipulation that principally penalizes patients of doctors of chiropractic; has reimbursed doctors of chiropractic 40 percent less than medical doctors for the same or similar services; has paid doctors of chiropractic for the lowest level treatment code possible, despite the fact that a higher level treatment had been performed; and has refused to reimburse for the services of chiropractic assistants. By working with competitive medical physicians to make its conditions difficult or economically impossible to accept, the official complaint alleges, "Trigon is forcing doctors of chiropractic to reject Trigon's agreements," and thereby forces them outside of mainstream health care reimbursement programs. In addition, Trigon has steered potential patients away from chiropractic care by "denigrating chiropractic treatment and by unreasonably limiting the coverage of chiropractic treatment under health care plans that it administers." WORLD FINANCIAL: Faces Florida Suit For Fraudulent Billing Practices -------------------------------------------------------------------- World Financial Network National Bank informed the Securities and Exchange Commission in a recent regulatory filing that it is facing a putative class action in Florida. The Bank said that the suit was filed by its cardholders alleging that the its billing practices are false, misleading, deceptive, and breaches state and federal laws governing cardholder contracts. The plaintiffs have not specified the amount of damages they are seeking, leaving instead the court proceedings to determine it. The suit is currently pending in the U.S. District Court for the southern District of Florida, Miami Division. "We cannot provide assurance that an ultimate result against the bank in either of these actions would not have a material adverse effect on the bank's ability to generate new receivables or to service the receivables," the Company said. ********* 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. Enid Sterling, Larri-Nil 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. 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. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *