/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/020531.mbx C L A S S A C T I O N R E P O R T E R Friday, May 31, 2002, Vol. 4, No. 107 Headlines CALLAWAY GOLF: Discovery Proceeds In Consumer Suit In TN State Court COLUMBIA NATURAL: Dismissal Motion Partially Granted in Royalties Suit COLUMBIA NATURAL: Asks KS Court To Dismiss Suit Over Land Royalties LOCKFORMER COMPANY: More Suits Expected Over TCE Contamination in IL MENORAH GARDENS: FL Court To Hear Class Certification Arguments in Suit PHARMACEUTICAL COMPANIES: States Spurn Private Lawyers' Help in Suit SHELL CANADA: Apologizes For Gas Additive Causing Fuel Pump Problems UST INC.: Faces Suits For Antitrust Violations Over Tobacco Products VERISIGN INC.: Faces Another Suit Over Fraudulent Advertising in CA *Indian Trust Fund In Need of Serious Reforms, No Solutions In Sight Securities Fraud ALCATEL SA: Schiffrin & Barroway Lodges Securities Fraud Suit in NY ANTIGENICS INC.: Plaintiffs Amend Suit To Add New Claims in S.D. NY CENDANT CORPORATION: Makes Final Payment of Landmark Suit Settlement CHINA: Court Allows Shareholders To File Suits Under Certain Conditions DELTEK SYSTEMS: Agrees To Settle Securities Suit in MN Federal Court DYNEGY INC.: Alfred Yates Commences Securities Fraud Suit in S.D. TX EDISON INTERNATIONAL: Plaintiffs Intend To Appeal CA Suit Dismissal EDISON SCHOOLS: Cohen Milstein Commences Securities Suit in S.D. NY EXCITE@HOME: Prepares To Auction Off Final Remains of Internet Service LANTRONIX CORPORATION: Milberg Weiss Commences Securities Suit in CA MIRANT CORPORATION: Milberg Weiss Commences Securities Suit in N.D. GA NEOFORMA INC.: Plaintiffs File Amended Securities Fraud Suit in S.D. NY NORTHROP GRUMMAN: Appeals Court Upholds Dismissal of Securities Suits OAK TECHNOLOGY: Appeals Court Yet to Rule on Securities Suit Appeal PARTSBASE INC.: Agrees To Settle For $1.5M Securities Suit in S.D. FL PARTSBASE INC.: Sued Over CEO's Proposal To Acquire Stock in FL Court PERRINI CORPORATION: Plaintiffs Appeal Dismissal of Securities Suit REHABCARE GROUP: Milberg Weiss Commences Securities Suit in E.D. MO SALOMON SMITH: Stull Stull Commences Securities Fraud Suit in S.D. NY SALOMON SMITH: Cohen Milstein Lodges Securities Fraud Suit in S.D. NY VERISIGN INC.: Schatz & Nobel Commences Securities Fraud Suit in CA ********* CALLAWAY GOLF: Discovery Proceeds In Consumer Suit In TN State Court -------------------------------------------------------------------- Discovery is commencing in the consumer class action against Callaway Golf Company and Callaway Golf Sales Company in the Circuit Court of Sevier County, Tennessee. The suit was filed on behalf of consumers in Tennessee and Kansas who purchased selected Callaway Golf products on or after March 30, 2000. Specifically, the complaint alleges that the Company adopted a New Product Introduction Policy governing the introduction of certain of the Company's new products in violation of Tennessee and Kansas antitrust and consumer protection laws. The suit seeks damages, restitution and punitive damages. The Company intends to vigorously defend against the suit. COLUMBIA NATURAL: Dismissal Motion Partially Granted in Royalties Suit ---------------------------------------------------------------------- A New York state court granted in part Columbia Natural Resources, Inc.'s motion to dismiss the class action filed by Vivian K. Kershaw against them, over royalties on oil and gas leases. The suit alleges that Ms. Kershaw owns an interest in an oil and gas lease in New York and that the defendants have underpaid royalties on those leases by, among other things, failing to base royalties on the price at which natural gas is sold to the end user and by improperly deducting post-production costs. The suit seeks class action status on behalf of all royalty owners in oil and gas leases operated by the Company. The Company removed the case to New York Federal Court in March 2000, but the Court remanded it to the State Court. The Company asked the Court to dismiss the suit, but the Court partially granted and partially denied the motion in September 2001. The Company intends to defend against the suit vigorously. COLUMBIA NATURAL: Asks KS Court To Dismiss Suit Over Land Royalties ------------------------------------------------------------------- Columbia Natural Resources, Inc., along with other natural gas measurers asked Stevens County State Court in Kansas to dismiss the amended class action pending since September 1999, against over 200 natural gas measurers, mostly natural gas pipelines, including the Company and fourteen affiliated entities. The suit alleges that the defendants submitted false royalty reports to the government (or caused others to do so) by mismeasuring the volume and heating content of natural gas produced on federal land, Indian lands and all oil and gas leases. The suit asserts: (1) breach of contract claim, (2) negligent or intentional misrepresentation, (3) civil conspiracy, (4) common carrier liability, (5) conversion, (6) violation of a variety of Kansas statutes and (7) other common law causes of action. The suit was filed on behalf of a nationwide class of similarly situated gas producers, royalty owners, overriding royalty owners, working interest owners and certain state taxing authorities. The defendants had previously removed the case to Federal Court, but in January 2001, the Federal Court remanded the case to State Court. In June 2001, the plaintiff voluntarily dismissed nine of the thirteen Columbia entities. Discovery relating to personal jurisdiction has begun. The four remaining Company entities along with other defendants filed a joint motion to dismiss the amended complaint, which is currently pending. LOCKFORMER COMPANY: More Suits Expected Over TCE Contamination in IL -------------------------------------------------------------------- Owners of Lockformer Company agreed a week ago to settle a federal class action brought by residents who said their wells were contaminated by a chemical from its metal fabricating plant in Lisle, Illinois, the Chicago Tribune reports. However, still to be decided are two lawsuits seeking compensation for damages brought by homeowners who live north and south of those who were involved in last week's US$10 million settlement. Suits also have been filed blaming the Company for the death of a Lisle resident from kidney cancer and for still another resident's kidney disease. Yet another lawsuit, brought by Illinois Attorney General Jim Ryan, DuPage County State Attorney's Office and Lisle, charges various environmental infractions. The defendants in these various lawsuits are the Company, its parent division Met-Coil and their parent company Mestek Inc. Except for Attorney General Ryans', the suits also include the owner of the Company's former chemical supplier, Honeywell International Inc. Last week's preliminary settlement was reached at a trial in the class action brought by 186 homeowners living south of the Ogden Avenue plant. They sued for damages after trichloroethylene (TCE) was found in wells supplying their homes with drinking water. The settlement will likely become final in June. Shawn M. Collins, the Naperville attorney who represented those homeowners, said he hopes a settlement can be negotiated in the second federal class action, which he filed last August on behalf of about 1,000 other residents. Those homeowners live in an area stretching farther south, where the Illinois Environmental Protection Agency also found contaminated wells. MENORAH GARDENS: FL Court To Hear Class Certification Arguments in Suit ----------------------------------------------------------------------- Lawyers suing on behalf of hundreds of families with loved ones buried in the Menorah Gardens cemeteries in Broward and Palm Beach counties, will have their day in court in a hearing to determine whether the lawsuit against owner Service Corporation International will be certified as a class action, the South Florida Sun-Sentinel reported. The lawyers are expected to lay out the key elements of their case, and the stakes will be raised if class-action status is granted, because it broadens the number of people who will be party to a verdict or settlement. The lawsuit, filed in December, alleges that bodies were buried in the wrong places, that some were unearthed to make room for new burials and that others were stacked on top of each other instead of being buried side-by-side. This lawsuit led to a series of investigations and still other lawsuits. Among those expected to testify at the hearing in Broward Circuit Court are state investigators, family members of those buried in the cemeteries and an expert in Jewish burial law. PHARMACEUTICAL COMPANIES: States Spurn Private Lawyers' Help in Suit -------------------------------------------------------------------- In the 1990s, a group of private lawyers teamed with state attorneys general to force the tobacco industry to agree to a $206 billion settlement to compensate states for treating ill smokers. In return, the lawyers received hundreds of millions of dollars in contingency fees, The Wall Street Journal reported. Now, some of these same lawyers are hoping to join the states again in a growing spate of litigation aimed at forcing the pharmaceutical industry to lower the cost of drugs. However, the lawyers are finding few clients, so far. "I am philosophically opposed to providing contingency-fee payments to private attorneys to resolve matters of public-interest law," says Delaware Attorney General Jane Brady. Ms. Brady says she declined a request from Nevada officials to join two lawsuits brought by that state recently, in part because Nevada had hired an outside law firm on a contingency basis. The suits accused more than a dozen pharmaceutical companies of manipulating prices. Nevada is being represented by the Seattle firm of Hagens Berman, which represented 13 states in the 1998 tobacco settlement. The pharmaceutical companies in the Nevada cases have said that their actions are legal. AARP is expected to announce that it is joining ongoing drug pricing lawsuits brought by a Boston-based consumer group, rather than retain Richard Scruggs, an attorney who represented nearly 30 states in the tobacco litigation. Earlier this year, Mr. Scruggs asked AARP, an advocacy group formerly known as the American Association of Retired Persons, to join him in similar suits against the pharmaceutical industry. Some state prosecutors believe the private lawyers are motivated by the prospect of large monetary settlements, rather than what the states are seeking from the pharmaceutical industry: adoption of a transparent method of pricing prescription drugs. Moreover, there is lingering ill will between some states and lawyers over the size of legal fees in the tobacco suits. "We are not in the litigation simply for money," said Ohio Attorney General Betty Montgomery. She is chairing a newly created task force of nearly 40 state prosecutors exploring a series of lawsuits against the pharmaceutical industry, an effort reminiscent of the coordinated campaign that led to the tobacco-industry settlement. Task force members have discussed the pros and cons of hiring outside contingency-fee attorneys, with most state prosecutors opposed to the idea, Ms. Brady and other state officials say. Instead, Ms. Montgomery says the task force members may create, in effect, a multistate in-house legal team. AARP will join lawsuits brought by Prescription Access Litigation Project. Interestingly, the Project has hired several class-action law firms to bring the cases, including one that was involved in the tobacco litigation: San Francisco-based Lieff Cabraser Heimann & Bernstein. Stephen Rosenfeld, the consumer group's senior legal adviser, says he plans to steer clear of the missteps of the tobacco litigation, which he calls a "case study in failure." Those cases were too much about money and did not bring about changes in the way tobacco companies sell cigarettes, Mr. Rosenfeld says. SHELL CANADA: Apologizes For Gas Additive Causing Fuel Pump Problems -------------------------------------------------------------------- Shell Canada has paid for some repairs and apologized to customers for a gasoline additive that damaged fuel pumps and gauges, the Company said recently, according to Associated Press Newswires. A class action, filed by Dorothy Young of Port Alberni, British Columbia, accuses the Company of failing to notify consumers about the problem, which has affected thousands of vehicles in the past year. The additive clogged fuel pumps, caused fuel lights to blink empty when the tank was full, and sent fuel gauges swinging back and forth. The suit alleges that the Company sold the gasoline that damaged her vehicle and tried to keep the problem quiet. By failing to recall or replace the suspect fuel, the lawsuit says, the Company participated in an "intentional misrepresentation and/or concealment" that intended to avoid paying compensation. The additive was removed from sale in March, Company spokesman Jeffrey Mann said, and the Company issued a letter on March 22, notifying 508 retailers of a phone line to handle claims of problems from the additive. Since then, the Company has settled more than 2,000 claims, Mr. Mann said. The Company stated in a press release that it stands behind its products, "All of our fuels meet or exceed Canadian standards as well as our own stringent internal specifications." UST INC.: Faces Suits For Antitrust Violations Over Tobacco Products -------------------------------------------------------------------- UST Inc. faces several class actions alleging violations of antitrust laws in five states, on behalf of purchasers of the Company's smokeless tobacco products. Four of the suits were filed in: (1) Tennessee State Court, on behalf of indirect purchasers of the Company's smokeless tobacco products from April 1996 through March 28,2000; (2) New Mexico State Court, on behalf of indirect purchasers of the Company's smokeless tobacco products from April 1996 through March 28,2000; (3) West Virginia State Court, on behalf of indirect purchasers of the Company's smokeless tobacco products from April 1996 to December 31, 2000; and (4) Kansas State Court, on behalf of indirect purchasers of the Company's smokeless tobacco products from January 1, 1990 through January 25, 2002 The suits allege that the Company has violated the antitrust laws (sole claim in Kansas), unfair or deceptive trade practices statutes and the common law of those states. The Company also faces a similar class action filed in the United States District Court for the District of Columbia by wholesalers/ distributors of the Company's smokeless tobacco products. The suit alleges that the Company engaged in conduct that violates the federal antitrust laws, including Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act, and that the Company engaged in this conduct unilaterally and in concert with "its co-conspirators." The Company believes that it has meritorious defenses in this regard, and that the ultimate outcome of these suits will not have a material adverse effect on its consolidated financial position. VERISIGN INC.: Faces Another Suit Over Fraudulent Advertising in CA ------------------------------------------------------------------- VeriSign, Inc. faces another class action, alleging the Mountain View, California-based Internet domain name registrar harmed consumers with unsavory, aggressive advertising ploys that pushed its services. The suit, filed last week in Los Angeles Supreme Court, charges that the Company sent direct mail to the customers of competing registrars that falsely implied that their domain names were about to expire, and that they must pay $29 to have their domain name transferred to the Company. "On or about April 25, 2002, Verisign began sending a 'Domain Name Expiration Notice' to thousands of consumers of its competitors," the lawsuit maintained. "The 'Domain Name Expiration Notice' carried an artificial 'deadline' for reply of May 15, 2002, and thereby has implied that certain domain names of targeted potential costumers are about to expire. In fact, there is no necessary relation between the reply deadline noted in the 'Domain Name Expiration Notice' and the actual expiration date of the domain name." The suit charges that, because of the expense of unnecessarily changing domain name registrars, the campaign will cause "irreparable damage unless VeriSign is enjoined from continuing their unconscionable and deceptive advertising campaign of sending out these 'renewal' notices that seek to trick domain-name owners into unwittingly transferring their accounts to VeriSign." *Indian Trust Fund In Need of Serious Reforms, No Solutions In Sight -------------------------------------------------------------------- For more than a century, ranchers, miners and loggers have contracted with the government to harvest timber, graze cattle and extract oil, gas and minerals from Indian land. The money paid to the government is supposed to be forwarded to each landowner, each one an Indian. However, from the beginning, the government paid little attention to which landowner was owed what, Newsday recently reported. As Indians died and land was divided among heirs, accounting problems grew exponentially. This is now one of the most intractable accounting messes in US history. Congress has tried to fix the system and failed. Accounting firm Arthur Andersen was paid $20 million in the early 1990s to reconcile tribal accounts and failed. The Interior Department, which oversees the Bureau of Indian Affairs, tried to fix the system. It, too, has failed and ended up in court with individual account holders. Evidence made it clear that relevant documents were shredded and e-mails deleted. Two Clinton cabinet members have been found in contempt of court, and now Interior Secretary Gale Norton and 40 deputies face contempt charges in a class action brought by the Indian account holders. That case, one of the largest class actions in history in terms of plaintiffs, was filed six years ago to secure a reckoning of 300,000 accounts belonging to individual American Indians. In separate litigations, various tribes are seeking similar treatment for about 1,400 tribal accounts. The government, the American Indians contend, still cannot provide an accurate balance sheet for a single one. Plaintiffs in the class action, led by Elouise Cobell, treasurer of the Blackfeet Indians in Montana, say they are owed at least $10 billion. US District Judge Royce Lamberth already has found the government breached its fiduciary duty to the Indians and he is considering how the system might be repaired and will later determine damages. However, there is no consensus on how to accomplish either an accounting dating back more than a century or a long-term fix for the future, or even a settlement. Secretary Norton wants to create an agency to overhaul the trust fund. Ms. Cobell wants the Judge to appoint an independent receiver, which would focus solely on the individual accounts. A task force of 36 tribal leaders is considering calling for a body akin to a Resolution Trust Corp., which restored the savings and loan industry in the 1980s. How did the fund get to this point of chaos? The problem dates to the early 19th century, when the government began putting tribal land in trust. With the 1887 Dawes Act, the government began breaking up Western tribal land into allotments to individual Indians. The Dawes Act was actually a means of obtaining land for white settlers. Typically, the government would declare land "surplus" and pay the Indians a pittance during the break-up process. Within 50 years, American Indians lost more than 135,000 square miles. The remaining 57 million acres, 47 million of which is tribal land, is held in trust by the government. Companies or individuals who want to extract the oil or minerals from the property or graze cattle on it, sign leases with the local Bureau of Indian Affairs Superintendent and pay the Office of Trust Fund Management, which manages the accounts. Over the years, the government gave the accounts low priority, spreading records across dozens of poorly kept warehouses, where fires, floods and insects destroyed them. Compounding the problem is the fact that most Indians die without wills, leaving a judge to divide the land among the heirs. Today, there is a backlog of more than 20,000 probate cases. Property inspections are not conducted on time, or are not carried out at all. There is no way to ensure that account holders are receiving the highest value for their leases and there is no way to know when money is owed an account holder. So it was, when, in 1996, Ms. Cobell decided to sue to force the government to account for all royalties due since 1887 to individual Indians and their heirs. Ms. Cobell asserts that if all royalties due for individual accounts since 1877 were totaled, they would amount to more than $100 billion. Securities Fraud ALCATEL SA: Schiffrin & Barroway Lodges Securities Fraud Suit in NY ------------------------------------------------------------------- Schiffrin & Barroway, LLP initiated a securities class action in the United States District Court for the Southern District of New York on behalf of all purchasers of the common stock of Alcatel SA relating to the Company's Class O common shares (Nasdaq:ALAO) in or traceable to the initial public offering of the ADSs conducted by the Company on or about October 20, 2000, and all persons other than defendants who purchased the Company's Class A common shares (NYSE:ALA) and Class O common shares in the form of ADSs between October 20, 2000 and May 29, 2001, inclusive. The complaint charges the Company and certain of its officers and directors with issuing a false and misleading prospectus on October 20, 2000, and by making material misrepresentations to the market between October 20, 2000 and May 29, 2001. Specifically, the complaint alleges that on October 20, 2000, the Company issued a prospectus for the sale of Class O stock in the form of American Depositary Shares (ADSs) that purportedly would track the performance of its Optronics Division. The prospectus was materially false and misleading, as alleged in the complaint, because it failed to disclose: (1) that demand for the Company's optical components was weakening as Alcatel and the Optronics Division's other customers were experiencing severe and persistent business slowdowns; (2) that the purportedly increasing demand for the Optronics Division's optical components was the result of a massive inventory build at the Optical Division's primary customer, Alcatel, and at the Company's external customers; (3) that the Company was amassing hundreds of millions of dollars of obsolete inventory which would have to be written-off; and that (4) in light of the decreasing demand for optical components, the Company was not in a position to successfully promote sales of all product lines to outside customers. Subsequently, on May 29, 2001, the Company issued an unexpected and severe profit warning and separately announced that it expected to report a second-quarter loss of approximately $2.6 billion. Following this announcement, the price of Company Class O common shares, in the form of ADSs, declined by 11% from a closing price of $21.26 on May 29, 2001 to a closing price of $18.92 on May 30, 2001. Similarly, Company Class A common shares, in the form of ADSs declined by 8.8% from $27.14 to 24.74. For more details, contact Marc A. Topaz or Stuart L. Berman by Phone: 888-299-7706 (toll free) or 610-822-2221 by E-mail: info@sbclasslaw.com or visit the firm's Website: http://www.sbclasslaw.com ANTIGENICS INC.: Plaintiffs Amend Suit To Add New Claims in S.D. NY ------------------------------------------------------------------- Plaintiffs in the securities class actions against Antigenics, Inc. in the United States District Court for the Southern District of New York filed an amended suit in April 19,2002, naming the Company, its Chairman and Chief Executive Officer Garo Armen, and two investment banking firms that served as underwriters in its initial public Offering. The suit was filed on behalf of purchasers of the Company's stock between February 3, 2000 and December 6, 2000. The suit against alleges that the brokerage arms of the investment banking firms charged secret excessive commissions to certain of their customers in return for allocations of Company stock in the offering. The suit also alleges that shares of Company stock were allocated to certain of the investment banking firms' customers based upon an agreement by such customers to purchase additional shares of stock in the secondary market. The complaint alleges that the Company is liable under Section 11 of the Securities Act of 1933, as amended (the Securities Act), and Mr. Armen is liable under Sections 11 and 15 of the Securities Act because the Company's registration statement did not disclose these alleged practices. In addition to the claims in the earlier complaint, the amended suit alleges that the Company and Mr. Armen violated Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by making false and misleading statements and/or omissions in order to inflate the Company's stock price and conceal the investment banking firms' alleged secret arrangements. The amended complaint further alleges that Mr. Armen, as a "control person" of the Company, violated Section 20 of the Securities Exchange Act. In a disclosure to the Securities and Exchange Commission, the Company stated that the suit was virtually identical to hundreds of class actions filed against 300 other issuers, their underwriters, and their directors and officers. These cases have been coordinated under Judge Shira Scheindlin of the Southern District of New York. The Company intends to defend against these claims vigorously. CENDANT CORPORATION: Makes Final Payment of Landmark Suit Settlement -------------------------------------------------------------------- Cendant Corporation announced its final payment on a record US$3.2 billion securities fraud settlement, which stemmed from a class action against the real estate and travel company, Associated Press Newswires reported today. A spokesman for Cendant said the payment was about $1.2 billion. Last year, a federal appellate court endorsed a record $3.2 billion settlement that the New York-based Company and its accounting firm, Ernst & Young LLP, made with the stockholders relating to accounting irregularities at the former units of CUC International. The alleged accounting fraud, which the Company disclosed nearly four years ago, led to a one-day, $14 billion stock plunge and class actions from shareholders. A judge approved the settlement in March 2000, after at least 64 securities fraud lawsuits were consolidated. CUC, which sold memberships in discount buying clubs, merged with HFS Inc., franchiser of brand names such as Ramada, Avis and Century 21, in December 1997, to form the Company, which is based in New York. In March, the federal prosecutor in Connecticut said that Walter Forbes and E. Kirk Shelton, both former executives at CUC and accused of inflating the value of the Company, will be tried in United States District Court in New Haven, Connecticut. CHINA: Court Allows Shareholders To File Suits Under Certain Conditions ----------------------------------------------------------------------- China's judicial system, as a general rule, shuns the class action as a vehicle for shareholders to bring a lawsuit. Judges of the Chinese Supreme People's Court say that grouping all the angry shareholders under a class action is considered politically dangerous, reports ABIX (the Australasian Business Intelligence). However, a small breakthrough came recently, when the Supreme Court, while still barring class actions generally, decided to let shareholders sue in a class action, so long as the listed companies have been sanctioned by the Chinese securities regulator, and only for cases of releasing fraudulent statistics. Still, just one case has come up for trial, even though thousands of lawsuits have been filed. This change of heart, as it were, came about when China's Communist Party made plans to allow the public to buy more than the regulated 30 percent of individual company shares. This recent leniency is part of a plan to fund a crucial social security program. A reason for the establishment of the stock markets in China is to enable the Government to raise money for the state-owned corporations. DELTEK SYSTEMS: Agrees To Settle Securities Suit in MN Federal Court -------------------------------------------------------------------- Deltek Systems, Inc. (NASDAQ: DLTK) reached an agreement to settle the class action brought by Carl Brown, a Company shareholder, against the Company and the six members of its Board of Directors, regarding the Company's acceptance of an offer to take Deltek private. The suit was initiated in early May 2002, in the District Court for the Second Judicial District in Ramsey County, Minnesota, alleging that in connection with proposed going private transaction, the directors breached their fiduciary duty and duty of disclosure to Company shareholders. Shortly after filing the complaint, the plaintiff filed a motion for preliminary injunction asking that the special meeting of Company shareholders and the going private transaction be enjoined. On May 13, 2002, the defendants removed the action to the United States District Court for the District of Minnesota, and thereafter filed a motion to dismiss or, in the alternative, to transfer venue to the United States District Court for the Eastern District of Virginia. The defendants also requested an expedited hearing on that motion. On May 14, 2002, the plaintiff filed a motion to remand the case to the Minnesota state court. The defendants filed their opposition to that motion on May 17, 2002. During the course of the litigation proceedings summarized above, counsel for plaintiff and the defendants began to engage in discussions concerning possible settlement of the litigation. Those discussions culminated when counsel for the plaintiff and the defendants executed late on May 28, 2002 a memorandum of understanding setting forth the agreement in principle that had been reached between the parties. Under the terms of the memorandum of understanding, the parties will, as soon as possible, enter into a stipulation of settlement that will be presented to the state court for Minnesota and which will provide, among other things: (1) for certification of a class of Company shareholders; (2) for entry of a judgment dismissing the litigation with prejudice: (3) a release and settlement of all claims against the defendants; (4) that defendants expressly deny that they committed or threatened to commit any violations of law or breaches of duty; and (5) that the defendants are entering into the settlement in order to eliminate the burden and expense of further litigation and to facilitate consummation of the going private transaction, which is in the best interests of plaintiff and the class. The final settlement of the litigation is subject to, among other things, execution of a formal stipulation of settlement, notice to members of the class and court approval of the settlement. Upon final approval of the settlement and the dismissal of the lawsuit, defendants have agreed, subject to certain conditions, to pay certain of plaintiff's attorneys' fees and costs. DYNEGY INC.: Alfred Yates Commences Securities Fraud Suit in S.D. TX -------------------------------------------------------------------- Alfred G. Yates, Jr. initiated a securities class action in the United States District Court for the Southern District of Texas on behalf of purchasers of the securities of Dynegy, Inc. (NYSE:DYN) between April 17, 2001 and April 25, 2002, inclusive. The complaint charges the Company and certain of its officers and directors with issuing false and misleading statements. Specifically, the complaint alleges, among other things, that during the class period, the defendants: (1) made false and misleading public disclosures regarding its cash flows from operations, and (2) failed to disclose information material to investors, including the details of its "Project Alpha," a transaction involving two special purpose entities and a partnership the Company created for the purposes of increasing cash flow from operations and decreasing tax costs. As a result of defendants' misleading statements and omissions during the class period, the price of the Company's common stock traded at artificially inflated prices. For more details, contact Alfred G. Yates, Jr. by Mail: 519 Allegheny Building, 429 Forbes Avenue, Pittsburgh PA by Phone: 800-391-5164 by Fax: 412-471-1033 or by E-mail: yateslaw@aol.com. EDISON INTERNATIONAL: Plaintiffs Intend To Appeal CA Suit Dismissal ------------------------------------------------------------------- Plaintiffs in the consolidated securities class action against Edison International and Southern California Edison (SCE) intend to appeal the United States District Court in Los Angeles, California's decision to dismiss the suit for failure to state a claim. The suit was commenced in October 2000, asserting securities fraud claims arising from alleged improper accounting for the energy-cost undercollections, on behalf of a class of persons who purchased the Company's common stock between July 21, 2000, and April 17, 2001. In September 2001, SCE and the Company filed a motion to dismiss for failure to state a claim, which the court granted, with prejudice in March 2002. The Company intends to vigorously defend against the suit. EDISON SCHOOLS: Cohen Milstein Commences Securities Suit in S.D. NY ------------------------------------------------------------------- Cohen, Milstein, Hausfeld & Toll, PLLC initiated a securities class action in the United States District Court for the Southern District of New York against Edison Schools, Inc. (Nasdaq: EDSN) on behalf of all persons or entities that purchased the Company's common stock between the period of November 11, 1999 through May 14, 2002. The complaint alleges that the defendants, including Company auditor, PricewaterhouseCoopers, LLP, made material misrepresentations and omissions of material facts concerning the Company's financial condition and business performance during the relevant time. According to the complaint, the defendants knew or recklessly disregarded that the Company was overstating revenues. In February 2002, it was revealed that the Company was improperly recognizing revenue and a May 14, 2002 SEC cease and desist order forced the Company to admit to these actions. For more details, contact Andrew N. Friedman or Diana Steele by Mail: 1100 New York Avenue, NW West Tower, Suite 500, Washington, DC 20005 by Phone: 888-240-0775 or 202-408-4600 by E-mail: afriedman@cmht.com or dsteele@cmht.com or visit the firm's Website: http://www.cmht.com EXCITE@HOME: Prepares To Auction Off Final Remains of Internet Service ----------------------------------------------------------------------Bankru pt Excite@Home Corporation will auction off the last pieces of its defunct high-speed Internet access service, putting the finishing touches on a fire sale that has extracted about $60 million from a business valued at $28 billion three years ago, Associated Press Newswires reports. The Company's investors plan to pursue lawsuits blaming the Company's demise on the alleged misdeeds of its former cable partners, chiefly AT&T, Comcast and Cox Communications. The damages could run as high as $9 billion, according to a group of about 200 Company shareholders fighting to become the lead representatives in a class action filed in a New York federal court. The shareholders' only real hope for recovering any of their losses seems to hinge on the class action contending that AT&T, Comcast and Cox abused their positions on the Company's Board to dupe the investors. AT&T, which once owned 73 percent of the Company's voting stock, has repeatedly denied this allegation in court documents filed in the bankruptcy case. Besides saddling creditors and investors with billions in losses, the Company's downfall wiped out the jobs of its 3,000 employees and infuriated many of its more than four million subscribers. The company has generated just under $60 million from asset sales negotiated since September of last year, with the largest chunks coming from the sale of its online portal, Excite.com, and its holding in Japan. The liquidation of assets, coupled with the additional fees that it charged the cable partners and the cash it had in its bank account before the bankruptcy, is expected to give the Company somewhere between $250 million and $320 million to distribute to its creditors. The Company's bondholders may receive as much as $177.2 million of the $750 million owed them, while the unsecured creditors may get as much as $142.8 million of the estimated $500 million owed them, leaving, the shareholders to pursue recovery from the class action. LANTRONIX CORPORATION: Milberg Weiss Commences Securities Suit in CA -------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class action in the United States District Court for the Central District of California on behalf of purchasers of Lantronix Inc. (NASDAQ:LTRX) publicly traded securities during the period between April 25, 2001 and May 15, 2002. The suit charges the Company and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The Company designs, develops, and markets network device servers. The complaint alleges that during the class period, defendants caused the Company's shares to trade at artificially inflated levels through the issuance of false and misleading financial statements. As a result of this inflation, the Company was able to complete a secondary offering of eight million shares, raising proceeds of $64 million on July 17, 2001. The defendants' alleged wrongful course of business include: (1) artificially inflated the price of the Company's stock during the class period; (2) deceived the investing public, including plaintiff and other class members, into acquiring the Company's securities at artificially inflated prices; (3) allowed certain of the individual defendants to sell more than $13 million worth of the shares held/controlled by them and allowed the Company to sell $50 million worth of its own stock; and (4) permitted the Company to grow and benefit economically from the wrongful course of conduct. The Company and its top officers inflated the price of the Company's stock in order to pursue an accelerated securities sale program. Defendants knew that concealing the Company's joint venture and the true impact it would have on the Company provided the only way that they could foster the perception in the business community that the Company was a "growth company," i.e., the only way the Company could post the revenue and earnings per share growth claimed by defendants. For more details, contact William Lerach by Phone: 800-449-4900 by E-mail: wsl@milberg.com or visit the firm's Website: http://www.milberg.com MIRANT CORPORATION: Milberg Weiss Commences Securities Suit in N.D. GA ---------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class action on behalf of purchasers of the securities of Mirant Corporation (NYSE: MIR) between January 19, 2001 and May 6, 2002, inclusive, in the United States District Court for the Northern District of Georgia against: (1) S. Marce Fuller (Chief Executive Officer), (2) Raymond Hill (Chief Financial Officer), (3) Richard Pershing (Executive Vice President and CEO of Mirant North America) and (4) James A. Ward (Principle Accounting Officer) The complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between January 19, 2001 and May 6, 2002. According to the complaint, the Company reaped illegal profits in California by artificially manipulating energy prices through a variety of improper tactics. The Company's fraudulent practices have resulted in investigations by both the Attorney General of the State of California, and the Federal Energy Regulatory Commission, as well as a number of lawsuits filed by California, and consumers. As now revealed, during the class period, while the Company announced quarter-after-quarter of outstanding growth, and assured investors that problems in the California market had been properly accounted for, the Company, in fact, failed to: (i) provide for the return of illegally obtained revenue, through a charge to earnings; (ii) provide for professional fees associated with the investigations arising from the fraud through a charge to earnings; and (iii) disclose the fact that the illegally obtained revenue was subject to forfeiture and that investigations surrounding the illegally obtained revenue would result in the expenditure of material amounts for legal and professional fees. As a result, defendants' class period financial statements were materially overstated, and failed to comply with generally accepted accounting principles (GAAP). For more details, contact Steven G. Schulman or Samuel H. Rudman by Mail: One Pennsylvania Plaza, 49th fl., New York, NY 10119-0165 by Phone: 800-320-5081 by E-mail: Mirantcase@milbergNY.com or visit the firm's Website: http://www.milberg.com NEOFORMA INC.: Plaintiffs File Amended Securities Fraud Suit in S.D. NY ----------------------------------------------------------------------- Plaintiffs in the securities suits against Neoforma, Inc. filed an amended and consolidated suit in the United States District Court for the Southern District of New York. The consolidated suit was filed on behalf of the purchasers of the Company's common stock from January 24,2000 to December 6, 2000 against the Company and: (1) Merrill Lynch, Pierce, Fenner & Smith, (2) Bear Stearns, (3) FleetBoston Robertson Stephens, (4) Robert J. Zollars, Chairman and Chief Executive Officer, and (5) Frederick Ruegsegger, former Chief Financial Officer, The amended suit alleges that the underwriters solicited and received "undisclosed compensation" from investors in exchange for allocations of stock in the Company's IPO, and that some investors in the IPO allegedly agreed with the underwriters to buy additional shares in the aftermarket to artificially inflate the price of the Company's stock. The Company and its officers are named in the suits pursuant to Section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, for allegedly failing to disclose in its IPO registration statement and prospectus that the underwriters had entered into the arrangements describe above. The Company states that the suit is similar to suits filed against approximately 300 other issuers and their underwriters, all of which are included in a single coordinated proceeding in the Southern District of New York. The Company is defending against this action vigorously. NORTHROP GRUMMAN: Appeals Court Upholds Dismissal of Securities Suits --------------------------------------------------------------------- The United States Ninth Circuit Court of Appeals affirmed the United States District Court for the Central District of California's dismissal of a consolidated securities class action against Northrop Grumman Corporation. The suit arose from five securities class actions, namely: (1) Fanni v. Northrop Grumman Corp., et al., (2) Schnee v. Northrop Grumman Corp., et al., (3) Florida State Board of Admin. v. Northrop Grumman Corp., et al., (4) Burroughs v. Northrop Grumman Corp., et al., and (5) Miller, et al. v. Northrop Grumman Corp., et al., The Federal Court consolidated the Fanni, Schnee and Florida State Board of Admin. suits into one action, and the Burroughs and Miller suits into another action. The Court then dismissed the Fanni consolidated actions with prejudice in April 2000, and dismissed the Burroughs consolidated actions with prejudice in October 2000. OAK TECHNOLOGY: Appeals Court Yet to Rule on Securities Suit Appeal ------------------------------------------------------------------- The United States Sixth District Court of Appeals has not issued a decision on the appeal filed by plaintiffs in the consolidated securities class action against Oak Technology, Inc. over a California state court's decision granting summary judgment in favor of the Company. The suit was filed against the Company and various of its current and former officers and directors on behalf of all persons who purchased or acquired the Company's common stock for the period July 27, 1995 through May 22, 1996. The suit, filed in the Santa Clara County Superior Court in Santa Clara, California, alleged violations of California securities laws and statutory deceit provisions as well as breaches of fiduciary duty and abuse of control. After several rounds of demurrers, the Court dismissed all claims except the California Corporations Code Sections 25400/25500 cause of action against the Company, four officers and the Company's investment bankers and securities analysts. In July 1998, the Court provisionally certified a national class of all persons who purchased the Company's stock during the class period. The Court later granted the Company's motion for summary judgment and entered judgment in favor of the Company. The plaintiffs then appealed the Court's decision, which is currently under review by the Sixth District Court of Appeal. Additionally, various of the Company's current and former officers and directors are defendants in three consolidated derivative actions pending in Santa Clara County Superior Court in Santa Clara, California. The suit assert a claim for breach of fiduciary duty and a claim under California securities law based upon the officers' and directors' trading in securities of the Company. The suit has been stayed pending resolution of the above-described class action. Based on its current information, the Company believes the suits to be without merit and will defend its position vigorously. Although it is reasonably possible the Company may incur a loss upon conclusion of these claims, an estimate of any such loss cannot be made. PARTSBASE INC.: Agrees To Settle For $1.5M Securities Suit in S.D. FL --------------------------------------------------------------------- Partbase, Inc. reached a US$1.5 million settlement of the consolidated securities class action pending against it in the United States District Court for the Southern District of Florida. The suit was filed on behalf of purchasers of the Company's publicly traded common stock during the period from the Initial Public Offering on March 22, 2000 through April 25, 2000. The suit alleges that the IPO prospectus filed by the Company with the Securities and Exchange Commission and distributed to investors was false and misleading. The prospectus allegedly failed to disclose, among other things, the fact that the Company had approximately 3,000 paying members. The complaint also asserts that the Company misled investors by representing in the prospectus that it had more than 13,000 paying members. The complaint further alleges that this misrepresentation, along with others specified in the complaint, allowed the Company to inflate the price of the stock in the IPO well beyond its true value On May 8, 2002, the Company reached an agreement in principle for the settlement of the suit. The memorandum of understanding provides for, among other things, a settlement amount of $1.5 million in cash, plus interest, payable to the class under an insurance policy and for the plaintiffs' dismissal of the suit with prejudice as well as a broad form of release in favor of the Company and the other defendants in the suit. This will have the effect of barring all claims by the plaintiffs and the members of the class other than those who opt out, arising out of the purchase and sale of the Company's common stock in its initial public offering. The final settlement is subject to the preparation and execution of definitive settlement documents and court approval. The Company has been vigorously defending the action, and has admitted no wrongdoing as part of the settlement. PARTSBASE INC.: Sued Over CEO's Proposal To Acquire Stock in FL Court --------------------------------------------------------------------- Patsbase, Inc. faces a securities class action relating to a proposal from its chairman, CEO and majority stockholder Robert Hammond and a limited partnership controlled by Mr. Hammond to acquire the remaining shares of the Company's common stock, approximately 5,000,000 shares or approximately 36 % of the shares currently outstanding, that Mr. Hammond does not own or control at a price of $1.02 per share. The suit was filed in the Circuit Court in and for Palm Beach County, Florida against the Company and certain of its current officers and directors. The suit alleges the directors have breached their fiduciary duty to the plaintiffs and the purported class and seeks to enjoin the Company from entering into the proposed transaction. The Company intends to vigorously defend against the suit. Nevertheless, an unfavorable resolution of this or substantially similar lawsuits could have a material adverse effect on the Company in one or more future periods. PERRINI CORPORATION: Plaintiffs Appeal Dismissal of Securities Suit ------------------------------------------------------------------- Plaintiffs in the securities class action against Perrini Corporation appealed a New York court's decision dismissing the suit in the United States Second Circuit Court of Appeals. The suit was originally filed in May 2001 against the Company and several of its current and former directors in the Supreme Court of the State of New York, County of New York, on behalf of holders of the Company's $21.25 Convertible Exchangeable Preferred Stock. The suit asserts claims for: (1) breach of contract, (2) breach of fiduciary duty, (3) fraud and (4) negligent misrepresentation The suit principally alleges that the defendants improperly authorized the exchange of Series B Preferred Stock for Common Stock without first paying all accrued dividends on the $21.25 preferred stock. More specifically, the suit alleges that the Company and its Defendant Directors violated the terms of the $21.25 Preferred Stock when, in March 2000, the Company authorized the exchange of Series B Preferred Stock for Common Stock. The suit further alleges that the defendants issued a false and misleading prospectus in 1987 relating to the issuance of the $21.25 Preferred Stock. In May 2001, the suit was transferred from the Supreme Court of New York to the United States District Court for the Southern District of New York. The plaintiffs then filed an amended complaint whereby the plaintiffs limited their suit to an action for breach of contract against the Company and an action for breach of fiduciary duty against the defendant directors. The Company moved to dismiss all of the plaintiffs' claims. On March 2002, the Federal Court dismissed all claims against the Company and the defendant directors. Plaintiffs then appealed this decision. REHABCARE GROUP: Milberg Weiss Commences Securities Suit in E.D. MO ------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class action on behalf of purchasers of the securities of RehabCare Group, Inc. (NYSE:RHB) between February 7, 2001 and January 21,2002 inclusive, in the United States District Court for the Eastern District of Missouri against the Company and: (1) H. Edwin Trusheim (Chairman of the Board) and (2) Alan C. Henderson (CEO, President and Director) The suit charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between February 7, 2001 and January 21, 2002. The complaint alleges that, among other things, defendants issued a series of materially false and misleading statements concerning the Company's supplemental staffing division. The suit alleges these statements were materially false and misleading because they failed to disclose that the supplemental staffing division was experiencing serious operational problems with information systems critical for matching supply with demand, poor employee training and retention, and that its revenues and earnings were declining as a result. On January 21, 2002, the Company issued a press release announcing that earnings for its fourth quarter 2001 would be less than half than they had reiterated in late October and that the Company would take a charge of $8.5 to $9.5 million, $3 million of which was for a reorganization of the staffing division. In reaction to the Company's disclosure, as alleged in the complaint, the price of its common stock plummeted by 25% over one trading day on heavy volume, falling from $25.21 per share to $18.70 per share. Prior to the disclosure of the adverse facts described above, as alleged in the complaint, the Company completed a secondary offering of common stock, raising $50 million for the Company and more than $8 million for Company insiders. In addition, Company insiders also sold $4,568,209 worth of common stock during the class period at artificially inflated prices. For more details, contact Steven G. Schulman or Samuel H. Rudman by Phone: 800-320-5081 by E-mail: rehabcarecase@milbergNY.com or visit the firm's Website: http://www.milberg.com SALOMON SMITH: Stull Stull Commences Securities Fraud Suit in S.D. NY --------------------------------------------------------------------- Stull Stull & Brody initiated a securities class action in the United States District Court for the Southern District of New York, on behalf of purchasers of the common stock of WorldCom, Inc. (NASDAQ:WCOM) between May 15, 1999 and April 21, 2002, inclusive against Salomon Smith Barney, Inc. and its star telecommunication research analyst, Jack Grubman, who are charged with issuing misleading analyst reports about WorldCom. Specifically, the complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, by the issuance of analyst reports regarding WorldCom which recommended the purchase of WorldCom common stock and which set price targets for WorldCom common stock without any reasonable factual basis. Furthermore, when issuing their WorldCom reports, defendants failed to disclose significant, material conflicts of interest which they had, in light of their use of Mr. Grubman's reputation and his WorldCom analyst reports, to obtain investment banking business for Salomon. Furthermore, in issuing their WorldCom reports, in which they were recommending the purchase of WorldCom stock, defendants failed to disclose material, non-public, adverse information which they possessed about WorldCom as well as their true opinion about WorldCom. For more details, contact Tzivia Brody by Mail: 6 East 45th Street, New York,NY 10017 by Phone: 800-337-4983 by Fax: 212-490-2022 or by E-mail: SSBNY@aol.com SALOMON SMITH: Cohen Milstein Lodges Securities Fraud Suit in S.D. NY --------------------------------------------------------------------- Cohen, Milstein, Hausfeld & Toll, PLLC initiated a securities class action in the United States District Court for the Southern District of New York on behalf of purchasers of Global Crossing, Ltd. (OTCBB:GBLXE.OB) common stock between May 24, 1999, and Oct. 4, 2001, inclusive, against Salomon Smith Barney, Inc. and its well known telecommunications analyst Jack Grubman for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The suit alleges that defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, by the issuance of analyst reports regarding Global Crossing, which recommended the purchase of its common stock and set price targets for its common stock without any reasonable factual basis. When issuing their Global Crossing reports, defendants failed to disclose significant, material conflicts of interest which they had, in light of their use of Mr. Grubman's reputation and his Global Crossing analyst reports, to obtain investment banking business for Salomon. For more details, contact Steven J. Toll or Robert Smits by Mail: 1100 New York Avenue, NW, West Tower, Suite 500 Washington, DC 20005 by Phone: 888-240-0775 or 202-408-4600 by E-mail: stoll@cmht.com or rsmits@cmht.com or visit the firm's Website: http://www.cmht.com VERISIGN INC.: Schatz & Nobel Commences Securities Fraud Suit in CA ------------------------------------------------------------------- Schatz & Nobel PC initiated a securities class action in the United States District Court for the Northern District of California on behalf of all persons who purchased the common stock or publicly traded options of VeriSign, Inc. (Nasdaq: VRSN) between January 25, 2001 and April 25, 2002, inclusive. Also included are all those who acquired the Company's shares through its acquisition of Illuminet Holdings, Inc. (formerly Nasdaq: ILUM). The suit alleges that the Company, a provider of internet security software, and three of its top officers misled the investing public during the class period by disseminating materially false and misleading statements regarding the Company's revenue and assets. Specifically, a substantial portion of the Company's revenue was derived from sales to small companies in which the Company had invested. Thus, the revenue recognized from these "barter transactions" was questionable and an inaccurate indicator of he Company's product demand. In addition, the individual defendants misrepresented the Company's condition in order to sell $26 million worth of their own stock and to acquire companies such as Illuminet Holdings. On April 25, 2002, when the Company disclosed that its revenues would be less than analysts expectations and were not in accordance with Generally Accepted Accounting Principles, its shares dropped from $18.24 to $9.98 per share. For more details, contact Nancy A. Kulesa by Phone: 800-797-5499 by E-mail: sn06106@aol.com or visit the firm's Website: http://www.snlaw.net ********* 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, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2002. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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