/raid1/www/Hosts/bankrupt/CAR_Public/020918.mbx
C L A S S A C T I O N R E P O R T E R
Wednesday, September 18, 2002, Vol. 4, No. 185
Headlines
AMERICAN AIRLINES: Travel Agents Suit Axed on Jurisdictional Grounds
ARTHUR ANDERSEN: Judge Approves Settlement Of Baptist Foundation Claims
BAKER HUGHES: Appeals Court Upholds Dismissal of Securities Fraud Suit
BROADVISION INC.: CA Federal Court Dismisses Securities Fraud Lawsuit
DENTSPLY INTERNATIONAL: Faces Several Antitrust Lawsuits Over Trubyte
EDISON INTERNATIONAL: Plaintiffs Withdraw Appeal of CA Suit Dismissal
FLORIDA: Boca Raton Pension Funds Consider Securities Fraud Lawsuits
HASTINGS ENTERTAINMENT: Agrees To Settle Securities Fraud Lawsuits
HERBALIFE INTERNATIONAL: Final Approval For Settlement Set For Nov 2002
HERBALIFE INTERNATIONAL: Asks CA Court To Dismiss Suit Over Marketing
HOTEL INDUSTRY: Lawsuits Commenced Over Sneakily Added Taxes and Fees
INDONESIA: Consumers To File Suit V. State-Owned Firm Over Blackouts
LEASECOMM CORPORATION: Agrees To Settle Fraud Suit Over Leases in CA
LEASECOMM CORPORATION: CA Court Stays Suit on Forum Selection Clause
METRIC PARTNERS: Case Management For Fraud Suit Set November 2002 in CA
PHARMACEUTICAL COMPANIES: Judge Unseals Evidence in Drug-tampering Case
READ-RITE CORPORATION: Plaintiffs Appeal Decision Extinguishing Claims
READ-RITE CORPORATION: Plaintiffs Appeal Dismissal of Securities Suit
RESOURCES ACCRUED: DE Court Approves $9M Settlement of Harborista Suit
SMITHKLINE BEECHAM: Sued Over Patent Protection For Arthritis Drug
SOUTHWALL TECHNOLOGIES: Sued For Defective Insulated Glass Units in CA
STARBUCKS CORPORATION: CA Court Approves Overtime Wage Suit Settlement
TOBACCO LITIGATION: Sues Attorneys General Association Over Advertising
TOBACCO LITIGATION: Miami Court Verdict To Determine Future Appeals
XOMA LTD.: Parties Execute Agreement, Dismiss CA Securities Fraud Suit
*Investors Suing Over Corporate Fraud Aim For Payment From Executives
New Securities Fraud Cases
AON CORPORATION: Bernstein Liebhard Commences Securities Suit in IL
CUTTER & BUCK: Milberg Weiss Commences Securities Fraud Suit in W.D. WA
CUTTER & BUCK: Cauley Geller Commences Securities Fraud Suit in W.D. WA
CUTTER & BUCK: Hagens Berman Commences Securities Fraud Suit in WA
ESS TECHNOLOGY: Glancy & Binkow Launches Securities Fraud Suit in CA
HEALTHSOUTH CORPORATION: Cauley Geller Commences Securities Suit in AL
HEALTHSOUTH CORPORATION: Rabin & Peckel Commences Securities Suit in AL
HEALTHSOUTH CORPORATION: Lowey Dannenberg Lodges Securities Suit in AL
HEALTHSOUTH CORPORATION: Schatz & Nobel Lodges Securities Suit in AL
MERRILL LYNCH: Rabin & Peckel Commences Securities Fraud Suit in NY
MERRILL LYNCH: Schatz & Nobel Commences Securities Fraud Suit in NY
MORGAN STANLEY: Rabin & Peckel Commences Securities Fraud Suit in NY
UNDERWRITERS LITIGATION: Milberg Weiss Commences Municipal Bonds Suit
WORLDCOM INC.: Federman & Sherwood Commences ERISA Lawsuit in OK
*********
AMERICAN AIRLINES: Travel Agents Suit Axed on Jurisdictional Grounds
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The ailing US airline industry received a big relief from the US Court
of Appeals for the Third Circuit when the latter affirmed last week a
lower court decision dismissing a purported class action against four
US-based airlines.
The appellate court ruled that the plaintiffs, Latin American and
Caribbean travel agents, failed to demonstrate that the alleged
conspiracy of the airlines to lower sales agents' commissions had
adversely affected the domestic travel market.
This case was originally filed before the US District Court for the
Eastern District of Pennsylvania by Turicentro, S.A., Centro America
Travel Agencie, Ltd, Negocios Globo, S.A. and Fronteras del Aire, S.A.,
who also claimed to be representing all those similarly situated.
Named as defendants were:
(1) American Airlines, Inc.,
(2) Continental Airlines, Inc.,
(3) Delta Airlines, Inc.,
(4) International Air Transport Association and
(5) United Airlines, Inc.
In July 1999, the International Air Transport Association, through its
Passenger Tariff Coordinating Conference committee, reduced the
commissions paid to accredited agents in Central America and Panama to
a flat rate of seven percent. Previous commission rates had varied
from country to country and ranged as high as 11%.
On December 1999, however, an alliance of the principal Central
American airlines, announced it would pay Central American travel
agents only six percent commissions. The next day, American Airlines
announced it would pay six percent commissions on tickets sold in
Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and
Panama. Soon thereafter, Continental Airlines, United Airlines, and
Delta Airlines followed suit.
The plaintiffs, two San Jose, Costa Rica travel agencies and two
Managua, Nicaragua travel agencies, alleged that the four major United
States air carriers violated the Sherman Antitrust Act by conspiring to
lower travel agents' commissions, a form of horizontal price fixing
constituting a per se violation of the antitrust laws.
They contended that the reduced commissions allegedly affected United
States commerce because reservations on the four defendant airlines
account for a substantial portion of the business of Latin American and
Caribbean travel agents. Plaintiffs claimed loss of substantial
commissions, causing one member of the proposed class to close its
business. They requested treble damages.
In contending that the district court had subject matter jurisdiction
over the suit, the plaintiffs cited the Foreign Trade Antitrust
Improvements Act (FTAIA).
The appellate court, however, disagreed with plaintiffs' position on
the matter of jurisdiction and ruled that the FTAIA does in fact
prohibit the suit and the claims therein. The court cited Section 402
of the law, which provides, thus, "(The Sherman Act) shall not apply to
conduct involving trade or commerce (other than import trade or import
commerce) with foreign nations unless:
(i) such conduct has a direct, substantial, and reasonably
foreseeable effect on trade or commerce which is not trade or
commerce with foreign nations, or on import trade or import
commerce with foreign nations or on export trade or export
commerce with foreign nations, of a person engaged in such
trade or commerce in the United States;
(ii) such effect gives rise to a claim under the provisions of (the
Sherman Act) other than this section.
The court ruled that for this provision to have any effect, the
plaintiffs must demonstrate that the defendants were involved in
importing activities and that as a result of their anticompetitive acts
they reduced imports of goods or services into the United States. The
plaintiffs failed to do so. The court said "no items or services were
brought into the United States by the payments (of commission) alone."
In addition, the court said the plaintiffs failed to satisfy an
important requirement in these types of suit - a clear demonstration of
"direct, substantial and reasonably foreseeable anticompetitive effects
on U.S. domestic commerce."
"Plaintiffs claim that collusion by United States air carriers to fix
commissions paid to foreign travel agents satisfies the statutory
language. But that allegation does not characterize an 'effect' on
United States commerce . That certain activities might have taken place
in the United States is irrelevant if the economic consequences are not
felt in the United States economy," the court said.
"Fixing the commissions paid foreign travel agents might constitute an
illegal conspiracy. But this conspiracy only targets the commissions
foreign travel agents would receive for work performed outside the
United States. United States antitrust laws only apply when a price-
fixing conspiracy affects the domestic economy," the court added.
The appellate court issued this ruling September 9, 2002.
ARTHUR ANDERSEN: Judge Approves Settlement Of Baptist Foundation Claims
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An Arizona judge gave his final approval to the $238 million settlement
of claims against Arthur Andersen LLP and a Phoenix law firm connected
with work they did for the failed Baptist Foundation of Arizona (BFA),
the Dow Jones Business News reports.
"I am well aware that time is running out," said Maricopa County
Superior Court Judge Edward Burke. Judge Burke indicated that the
cases are not complete winners for the plaintiffs - that there are
questions about the solvency of Arthur Andersen, among other
considerations. The investors need the money, however, and many of
them are elderly.
John Coffey, lead attorney for the BFA Liquidation Trust, said the
biggest threat to the settlement dollars reaching investors' hands is
the possibility that Judge Burke's ruling will be appealed and the
process dragged out.
Mr. Coffey said that if Andersen declares bankruptcy, "some lawyer" no
doubt would argue that the $217 million Andersen has placed in escrow
should be made available to the accounting firm's own creditors. "We
believe we have put things in place to make (payment of the settlement)
as air tight as possible," said Mr. Coffey. "But we would rather not
have to make that argument" at an Andersen bankruptcy proceeding.
Those raising objections to the settlement are mostly opposed to
continuing forward without knowing how the proceeds will be divided
among various secured and unsecured creditors as well as the attorneys.
Judge Burke scheduled a November 25 hearing on the allocation of the
settlement funds. Attorneys for the trust and the investors in the
class action will mail out notices, along with their proposals for
dividing up the funds, on October 4, to the involved parties.
The $217 million settled the class action, which alleged that auditors
turned a blind eye to fraudulent activity, allowing it to continue.
The settlement also settled cases brought by the state of Arizona and
an administrative action at the state accountancy board. BFA's law
firm of Jennings, Strauss and Salmon settled for the additional $21
million in the settlement pot.
Approximately 10,000 investors, many elderly, lost about $570 million
in the 1999 collapse of BFA, which was a non profit foundation designed
to raise money for Baptist causes, while at the same time paying
returns to investors.
BAKER HUGHES: Appeals Court Upholds Dismissal of Securities Fraud Suit
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The United States Fifth Circuit Court of Appeals upheld a lower court's
dismissal of a securities class action pending against Baker Hughes,
Inc. filed by purported shareholders shortly after the Company's
December 8, 1999 announcement regarding the accounting issues that the
Company discovered at its Baker Hughes INTEQ division.
These suits, which sought unspecified monetary damages, were
consolidated in the United States District Court for the Southern
District of Texas pursuant to the Private Securities Litigation
Reform Act of 1995.
The Company filed motions to dismiss the suits, which the court
granted. The plaintiffs then filed an appeal to the Fifth Circuit.
BROADVISION INC.: CA Federal Court Dismisses Securities Fraud Lawsuit
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The United States District Court in Northern California dismissed a
securities class action pending against BroadVision Inc. (Nasdaq:BVSN).
The complaint in the dismissed lawsuit had alleged the Company and
certain officers of the company had violated federal securities laws by
disseminating false and misleading statements concerning the Company's
4th quarter 2000 financial results, the release of its new product, its
business and its prospects for 2001 and beyond.
"We are very pleased with the Court's decision. We believed all along
that the lawsuit was unwarranted, and the Court's decision allows us to
focus all of our energy on running our business," said Dr. Pehong Chen,
president and CEO.
DENTSPLY INTERNATIONAL: Faces Several Antitrust Lawsuits Over Trubyte
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Dentsply International, Inc. faces several class actions filed against
it after the Antitrust Division of the United States Department of
Justice initiated an antitrust investigation regarding the policies and
conduct undertaken by the Company's Trubyte Division with respect to
the distribution of artificial teeth and related products in June 1995.
In January 1999, the first complaint was filed by the Department of
Justice against the Company in the United States District Court in
Wilmington, Delaware alleging that the Company's tooth distribution
practices violate the antitrust laws and seeking an order for the
Company to discontinue its practices.
Three follow on private class action suits on behalf of dentists,
laboratories and denture patients in seventeen states, respectively,
who purchased Trubyte teeth or products containing Trubyte teeth, were
filed and transferred to the United States District Court in
Wilmington, Delaware.
The class action filed on behalf of the dentists has been dismissed by
the plaintiffs. The private party suits seek damages in an unspecified
amount. The Company filed motions for summary judgment in all of the
above cases.
The court denied the Company's motion for summary judgment regarding
the Department of Justice action, granted the motion on the lack of
standing of the patient class action and granted the motion on the lack
of standing of the laboratory class action to pursue damage claims.
In an attempt to avoid the effect of the Court's ruling, the attorneys
for the laboratory class action filed a new complaint naming the
Company and its dealers as co-conspirators with respect to the
Company's distribution policy. The Company filed a motion to dismiss
this re-filed complaint, which the court granted.
The attorneys for the patient class have also filed a new action to
avoid the effect of the court's ruling, in the United States District
Court in Delaware.
Four private party class actions on behalf of indirect purchasers were
filed in California state court. These cases are based on allegations
similar to those in the Department of Justice case. In response to the
Company's motion, these cases have been consolidated in one Judicial
District in Los Angeles. A similar private party action was filed in
Florida.
The trial in the government's case was held in April and May 2002 and
the post-trial briefing will occur during the summer of 2002. It is
unlikely a decision will be made by the Court until late in 2002. It
is the Company's position that the conduct and activities of the
Trubyte division do not violate the antitrust laws.
EDISON INTERNATIONAL: Plaintiffs Withdraw Appeal of CA Suit Dismissal
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Plaintiffs in the securities class action withdrew their appeal of the
dismissal of a securities class action filed against Edison
International and Southern California Edison (SCE) in the United States
District Court for the Southern District of California.
The suit involved securities fraud claims arising from alleged improper
accounting for the energy-cost under collections. The second amended
complaint was supposedly filed on behalf of a class of persons who
purchased the Company's common stock between July 21, 2000, and April
17, 2001.
On September 17, 2001, SCE and the Company filed a motion to dismiss
for failure to state a claim. On March 8, 2002, the district court
issued an order dismissing the complaint with prejudice.
The plaintiffs initially filed an appeal but later stipulated they
wanted to dismiss their appeal. On April 26, 2002, the federal court
of appeals approved the parties' stipulation and ordered the appeal
dismissed with prejudice.
FLORIDA: Boca Raton Pension Funds Consider Securities Fraud Lawsuits
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Like countless investors nationwide, Boca Raton, Florida's pension
plans have suffered heavy stock market losses on corporations with
questionable accounting practices and other financial problems, The
Palm Beach Post reports.
Now, for the first time in the city's history, the two pension plans
that hold the retirement savings of about 1,500 current and former
municipal employees are suing the devalued companies to recoup some of
the pension plans' losses. The two plans lost a combined $3.5 million
between October 1 and May 31, on five stocks, including WorldCom, Qwest
and Kmart.
The Boca Raton Police & Firefighters Pension Board plans to sue Reliant
Energy in a federal class action in Houston, according to the board's
lawyer, Michael Pucillo. Reliant is under investigation by the
Securities and Exchange Commission (SEC) for alleged accounting
improprieties. Moody's Investors Services recently cut Reliant's
credit rating to junk-bond status.
The Police & Firefighters Pension Plan and the General Employees
Pension Plan lost more than $470,000 on Reliant in the eight months
ending May 31. The General Employees Pension Board is still
considering its legal options.
The police and firefighters board likely will allege securities fraud
based on misleading earnings information. In securities class actions,
booming industry these days, investors typically charge corporations,
their executives and board members of deceiving investors with
misleading information.
HASTINGS ENTERTAINMENT: Agrees To Settle Securities Fraud Lawsuits
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Hastings Entertainment, Inc. (Nasdaq: HAST), a leading multimedia
entertainment superstore retailer, today announced that an agreement in
principle has been reached with respect to the shareholder class action
lawsuits filed against the Company in fiscal 2000. The settlement,
which is subject to execution of a final settlement agreement and
approval by the court, requires a payment of $5.75 million.
Amounts remaining under the Company's director and officer insurance
policy after payment of litigation expenses are expected to cover a
substantial portion of the settlement. The Company estimates that
amounts remaining under the policy after all litigation expenses will
be approximately $3.25 million and has recorded a loss contingency of
$2.5 million, or $0.22 per diluted share.
The loss contingency has been recorded in the Company's financial
statements as of July 31, 2002 contained in its Quarterly Report on
Form 10-Q filed September 12, 2002. The financial statements will show
a loss of $0.14 per diluted share for the second quarter of fiscal
2002.
"Although we believe there was no merit to the allegations brought by
the Plaintiffs," stated John H. Marmaduke, President and Chief
Executive Officer, "we felt a settlement was in the best interest of
our shareholders, especially considering the amount of time, money and
attention management has had to devote to defending these lawsuits. We
are pleased to put an end to this process and return our focus to
running our business."
"While confident of our position in the litigation, the litigation was
a continuing drain on the Company's limited resources, resources that
should be focused on our business," stated Dan Crow, Vice President and
Chief Financial Officer. "In the end, we reluctantly concluded that
the interests of the shareholders and the Company would best be served
by settling these claims as it became apparent there was a risk that
estimated legal costs to continue litigating the matter could have
exceeded the settlement amount we were offered."
HERBALIFE INTERNATIONAL: Final Approval For Settlement Set For Nov 2002
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The District Court of Clark County in the State of Nevada has set the
hearing for final approval of the settlement of a class action filed
against Herbalife International, Inc. for November 1,2002.
The suit was commenced in April 2002 against the Company, its Board of
Directors and one former director, alleging claims of breach of
fiduciary duty arising out of the announced merger transaction between
the Company and WH Holdings. The suit was later amended to include a
claim based on alleged misrepresentations and omissions in the
Company's Preliminary Proxy, filed May 7, 2002.
The defendants moved to dismiss the suit, but the court denied the
motion on July 17, 2002, and ordered expedited discovery. On July 21,
2002, after completion of document discovery and a deposition of the
head of the Special Committee appointed by the board to negotiate the
merger, the parties entered into a memorandum of understanding to
settle the action.
A stipulation of settlement was filed with the court on August 2, 2002,
seeking preliminary court approval of the settlement, requesting
approval of notice to the putative class and seeking a date for final
approval of the settlement.
The stipulation sets out the terms of the settlement, including a
detail of the changes reflected in the final definitive proxy statement
sent to the Company's stockholders made by the Company as a consequence
of the litigation, and includes an agreement by the Company to pay,
subject to court approval, plaintiff's counsel's requested fee of
$650,000.
As part of the settlement, defendants will receive a dismissal of the
action with prejudice and full and complete releases of potential
liability. Defendants continue to deny liability, and there is no
admission of fault or liability on the part of the defendants in the
settlement. The court entered the preliminary approval of the
settlement on August 6, 2002.
HERBALIFE INTERNATIONAL: Asks CA Court To Dismiss Suit Over Marketing
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Herbalife International, Inc. asked the United States District Court
for the Central District of California to dismiss the class action
pending against it and certain of its distributors. have been named as
defendants, relating to its marketing plan.
The suit alleges that specified marketing plans employed by the
distributor defendants are illegal, and that the Company has permitted
the use of these marketing plans and/or failed to supervise its
distributors' conduct to prevent violations of law by them.
The complaint does not challenge the legality of the Company's
marketing system. The complaint seeks to state causes of action under
RICO and various state and other federal laws.
The Company has filed a motion to dismiss but no hearing date has been
set. The Company believes that it has meritorious defenses to the
allegations contained in the lawsuit. However, an adverse result in
this litigation could have a material adverse effect on the Company's
financial condition and operating results.
HOTEL INDUSTRY: Lawsuits Commenced Over Sneakily Added Taxes and Fees
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American hotels are now slapping fees on almost everything imaginable
in the latest round of price rises that already has prompted two civil
class actions, according to the Sun Herald. Hefty fees and taxes
tacked on to airline tickets when flying out of Sydney are bad enough,
but travelers heading for the United States are being doubly stung.
In many cases, these extra charges add up to more than $100 for a
three-night stay. US hotels have been progressively introducing fees
for different services over the past few years. Mini-bars and
telephone calls have long been the source of sneakily imposed fees.
However, since September 11, charges have been escalating as hotel
chains try to stave off financial losses after their large corporate
clients stayed away in droves.
Fee increases were considered a safer option than raising room rates to
compensate for lower occupancy. Many loyal customers when they finally
returned to do business would be outraged at the raised room rates.
However, many of these newly created fees are being added sneakily into
bills at checkout with no warning of their existence.
These include (in addition to tipping) charges to cover luggage
handling, facilities use, health club and spa use, poolside towels and
chaise lounges, room service, security, higher electricity costs, valet
parking, newspapers (once left outside the door free of charge) and
coffee makers.
One of the two class actions brought nationwide has resulted in an
out-of-court settlement. It involved the Wyndham International chain,
owner of one of three Florida hotels at the center of the action over
hidden energy charges slapped on checkout bills last year to cover
increased electricity costs.
As customers were not told in advance of the $2.50 to $3 nightly
charge, it was "clearly deceptive and contrary to state law" to be
quoted one price and charged another, Florida Attorney General Robert
Butterworth said.
Wyndham decided against fighting the case because it was not confident
its employees had given proper notification of the charge "in each and
every instance." The chain agreed instead to give all guests who paid
the fee last year a $15 rebate off a future guest night.
The other class action has been filed in the New York Supreme Court
against Starwood Hotels, the parent company of Sheraton and Westin
Hotels. At issue is a charge of $12.78 listed as "room tax" by
Sheraton Bay Harbour Beach Resort. The complaint says, among other
things, that since it was not required by any government authority, the
charge is not a tax.
There are some signs that the fee "racket" is easing following the bad
publicity. Some five-star hotels are marketing themselves as fee
inclusive.
INDONESIA: Consumers To File Suit V. State-Owned Firm Over Blackouts
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Consumers of electricity provided by the state-owned electricity
company PLN have expressed their intention to file a class action for
power blackouts on Thursday and Friday of last week, which resulted,
they allege, in billions in economic losses, according to a report by
the Jakarta Post.
"We have received dozens of complaints from people over the power
outage, and many of them expressed their wish to file a class-action
lawsuit against PLN," said Tulus Abadi, an executive of the Indonesian
Consumers Foundation (YLKI).
The power blackout was caused by a problem with the high-voltage
transmission connecting two relay stations in Cibinong, Banten. Mr.
Tulus stressed that the power blackout was the last straw in a string
of power outage incidents experienced by the electricity consumers.
The Company often has cut the power supply nearly every day in many
areas without providing information regarding the outages to the
consumers.
"Another thing is that the fluctuating voltage has caused damage to
electronic goods. So far, the consumers frequently have suffered
losses without compensation," said Mr. Tulus.
PLN president Eddy Widiono apologized for the weekend blackouts. He
indicated, however, PLN's reluctance to provide its customers any
compensation. According to the newly endorsed Electricity Law,
compensation would only be given if the blackout occurs for three
consecutive days.
Mr. Tulus, however, said he was optimistic that the people's class
action would be successful, because it is backed up by Law No. 8/1999
on Consumer Protection. He cited as an example the case involving the
arbitrary increase of the Liquefied Petroleum Gas price by the state-
owned oil and gas company Pertamina.
The consumers won the legal action in the district court level. The
Jakarta High Court is still studying Pertamina's appeal over the
decision.
LEASECOMM CORPORATION: Agrees To Settle Fraud Suit Over Leases in CA
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Leasecomm Corporation agreed to settle a purported class action pending
in the Superior Court of the State of California, County of San Mateo
against it, its parent company MicroFinancial, Inc. as well as a number
of other defendants with whom Leasecomm and MicroFinancial are alleged
to have done business, directly or indirectly.
The suit sought certification of a subclass of those class members who
entered into any lease agreement contracts with Leasecomm for the
purposes of financing the goods or services allegedly purchased from
other defendant entities. The class action complaint alleges multiple
causes of action, including:
(1) fraud and deceit,
(2) negligent misrepresentation,
(3) unfair competition,
(4) false advertising,
(5) unjust enrichment,
(6) fraud in the inducement and the inception of contract,
(7) lack of consideration for contact and
(8) breach of the contractual covenant of good faith and fair
dealing
On February 1, 2002, the parties entered into stipulation of settlement
to the suit. The stipulation of settlement will be effective only if
and when it is approved by the San Mateo Superior Court as fair and
reasonable to the members of the plaintiff class and as a good faith
settlement pursuant to Section 877.6 of the California Code of Civil
Procedure. It is unclear at this point how long this process will
take.
LEASECOMM CORPORATION: CA Court Stays Suit on Forum Selection Clause
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The Superior Court for the State of California, County of Orange agreed
to stay the class action pending against Leasecomm Corporation, its
parent company Microfinancial, Inc. and another entity known as
Prospecting Services of America, Inc. (PSOA).
The suit was filed on behalf of a class of customers who were allegedly
solicited by PSOA to enter into leases with Leasecomm for the lease of
a "virtual link point gateway" and "I-phone." Plaintiffs alleged that
PSOA made numerous misrepresentations and omissions during the course
of solicitation for which Leasecomm and MicroFinancial Incorporated
should be responsible.
On January 25, 2002, the trial court granted the motion of Leasecomm
and MicroFinancial to stay the claims against them, on the grounds that
the forum selection clause contained in the lease agreements required
plaintiffs to litigate any claims against those entities in
Massachusetts.
In the event that this matter cannot be resolved, Leasecomm and
MicroFinancial intend to vigorously defend the action. Because of the
uncertainties inherent in litigation, the Company cannot predict
whether the outcome will have a material adverse effect on the
Company's results of operations or consolidated financial position.
METRIC PARTNERS: Case Management For Fraud Suit Set November 2002 in CA
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Case management conference for the class action against Metric Partners
Growth Suite Investors, LP has been set for November 22, 2002 at the
San Francisco County Superior Court.
GP Credit Co., LLC filed this purported class action against the
Partnership, Metric Realty, SSR Realty Advisors, Inc. and certain of
SSR's affiliates and current and former employees and a class of all
limited partners of the Partnership. The suit alleges, among other
things, that the SSR Parties fraudulently caused GSI to distribute
$16.8 million to the limited partnerships.
GP, which claims to have purchased a claim owned by Nashville Lodging
Company (NLC), is demanding general and punitive damages from the
Partnership and the SSR Parties and damages from the LPs with regard to
the portion of this $16.8 million distribution received by each LP.
Process was served on all non-LP defendants in March and April 2002,
and answers have been filed on behalf of all such defendants. The
Partnership vows to vigorously oppose the suit.
PHARMACEUTICAL COMPANIES: Judge Unseals Evidence in Drug-tampering Case
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Jackson County Circuit Judge Lee Wells, who is presiding over the first
of 400 civil suits filed by hundreds of cancer victims, uncorked last
week documents in a drug-tampering case, which many say could reveal
how much pharmaceutical companies knew about the practice.
Citing plaintiffs' attorney Michael Ketchmark, the Associated Press
said Judge Wells ordered all but three documents related to the case
unsealed. These documents were presented in the case of Robert
Courtney who in February pleaded guilty to charges of diluting cancer
medication.
The lawsuits claim drug makers Bristol-Myers Squibb and Eli Lilly & Co.
knew or should have known that Mr. Courtney was watering down cancer
drugs as early as 1998, but failed to stop him. The report says the
first of the lawsuits is scheduled for trial October 7. Legal
arguments in the other cases are nearly identical, so rulings in the
first case are likely to determine the fate of the other suits.
The drug companies could not be reached for comments but they have in
the past raised concerns that the release of the documents before the
trial would make it impossible to find an impartial jury.
READ-RITE CORPORATION: Plaintiffs Appeal Decision Extinguishing Claims
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Plaintiffs in the consolidated class action pending against Read-Rite
Corporation appealed the Superior Court of the State of California,
Santa Clara County's decision granting the Company's motion to
extinguish state claims under the doctrine of resjudicata.
The suit was initially commenced in December 1996 by Joan D. Ferrari
and Mark S. Goldman against the Company and certain of its officers and
directors, alleging that the defendants made false and misleading
statements concerning the Company's business condition and prospects
and seeking an unspecified amount of damages.
On May 16, 1997, the court sustained the demurrer of certain defendants
to the entire complaint, and sustained the demurrer of the remaining
defendants, including the Company, to certain causes of action. The
remaining causes of action in the suit allege violations of the
California Corporations Code.
The remaining defendants later filed a motion for judgment on the
pleadings seeking to use the final judgment in similar actions against
the Company in federal court to extinguish the state claims under the
doctrine of resjudicata. A hearing on that motion occurred on January
22, 2001, and the court entered an order granting the motion.
The plaintiffs promptly appealed the order. On March 20, 2002,
plaintiffs/appellants filed their opening appellate brief. Defendants
filed their opposition brief on June 18, 2002. Plaintiffs have not yet
filed their reply brief.
READ-RITE CORPORATION: Plaintiffs Appeal Dismissal of Securities Suit
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Plaintiffs in the consolidated securities class action pending against
Read-Rite Corporation appealed the United States District Court for the
Northern District of California's decision dismissing the suit with
prejudice.
Two purported class actions were initially filed against the Company
and certain of its officers and directors by Ferrari and Goldman and by
James C. Nevius and William Molair, respectively.
Both complaints alleged that the defendants made false and misleading
statements concerning the Company's business condition and prospects
and alleged violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and SEC Rule 10b-5 and sought an unspecified
amount of damages.
The court later consolidated the two suits. In October 2000, the court
ordered that the consolidated suit be dismissed without leave to amend
and that both actions be dismissed with prejudice.
The plaintiffs in both suits filed notices of appeal, which have been
consolidated. The plaintiffs filed their opening briefs on July 8,
2002, while the defendants filed their opposing briefs on August 28,
2002.
The Company believes it and the individual defendants have meritorious
defenses in the suit. The Company also believes the final disposition
of the claims set forth in these actions will not have a material
adverse effect on the Company's business, results of operations and
financial condition.
RESOURCES ACCRUED: DE Court Approves $9M Settlement of Harborista Suit
----------------------------------------------------------------------
The Delaware Chancery Court approved the US$9 million settlement
agreement for the class action pending against Resources Accrued
Mortgage Investors 2 LP (as a nominal defendant) and:
(1) Presidio AGP Corp.,
(3) NorthStar Capital Investment Corporation,
(4) Charbird Enterprises, LLC, and
(5) RAM Funding, Inc.
The suit seeks, among other things, monetary damages resulting from
purported breaches of fiduciary duties and breaches of the
Partnership's partnership agreement in connection with the March 1999
sale of the second loan made by the Partnership to Harborista
Associates, LP and the marketing of Harbor Plaza, the office building
which secured the Harborista Loan.
In addition, the action alleges breaches of fiduciary duty in
connection with the purported failure of the Partnership to distribute
cash and the purported failure of the Partnership to enforce the
provisions of the loan secured by the Sierra property.
On January 22, 2002, the parties entered into a settlement agreement
that:
(i) provides for a $9,000,000 payment by the defendants to the
Partnership; and
(ii) requires that the Partnership distribute to its partners the
$9,000,000 payment, less fees and expenses awarded by the
court to plaintiff's counsel (which amount is not expected to
exceed approximately 20% of the settlement amount).
The settlement agreement is subject to the approval of the court. The
objection period expired on April 1, 2002 and a hearing on the approval
of the settlement agreement was scheduled for April 15, 2002.
At the hearing on April 15, 2002, due to objections to the proposed
settlement, it was not approved by the court and a decision was
postponed to a later date. On June 4, 2002, the court approved the
settlement agreement.
SMITHKLINE BEECHAM: Sued Over Patent Protection For Arthritis Drug
------------------------------------------------------------------
A class action was filed recently in federal court in Boston against
pharmaceutical SmithKline Beecham, now part of GlaxoSmithKline, The
Boston Globe reports, accusing the Company of unlawfully obtaining and
maintaining patent protection for its arthritis drug, Relafen.
The lawsuit alleges the Company's actions deprived patients of cheaper
generic alternatives and resulted in fixing an artificially high price.
For the year ending June 30, 2001, the lawsuit says the drug generated
more than $265 in sales for SmithKline Beecham.
The suit was brought on behalf of consumers and third-party payers,
including commercial and government insurers, who purchased Relafen
from August 8, 1998, to the present.
SOUTHWALL TECHNOLOGIES: Sued For Defective Insulated Glass Units in CA
----------------------------------------------------------------------
Southwall Technologies, Inc. faces a class action pending in the United
States District Court for the Northern District of California, on
behalf of all entities and individuals in the United States who
manufactured and/or sold and warranted the service life of insulated
glass units manufactured between 1989 and 1999 which contained the
Company's Heat Mirror film and were sealed with a specific type of
sealant manufactured by Bostik, Inc., which the suit names as co-
defendant.
The plaintiff alleges that the sealant provided by the co-defendant was
defective, resulting in elevated warranty replacement claims and
costs, and asserts claims against the Company for:
(1) breach of an implied warranty of fitness,
(2) misrepresentation,
(3) fraudulent concealment,
(4) negligence,
(5) negligent interference with prospective economic advantage,
(6) breach of contract,
(7) unfair business practices and
(8) false or misleading business practices
The plaintiff seeks recovery of $100 million for damages allegedly
resulting from elevated warranty replacement claims, restitution,
injunctive relief, and non-specified compensation for lost profits.
The Company believes all of the claims to be without merit. The action
is in the early stages, thus an estimate of the Company's loss exposure
cannot be made.
STARBUCKS CORPORATION: CA Court Approves Overtime Wage Suit Settlement
----------------------------------------------------------------------
The United States District Court in California granted preliminary
approval to the settlement proposed by Starbucks Corporation to settle
two class actions, alleging overtime wage violations.
The suits were initially commenced in June 2001, against the Company in
the Superior Courts of California, Alameda and Los Angeles Counties,
respectively. Each lawsuit subsequently was removed to the United
States District Court, Northern District of California and Central
District of California, respectively.
Each of the lawsuits was filed by two plaintiffs who are current or
former store managers and assistant store managers on behalf of
themselves and other similarly situated store managers, assistant store
managers and retail management trainees.
The lawsuits alleged that the Company improperly classified such
employees as exempt under California's wage and hour laws and sought
damages, restitution, reclassification and attorneys fees and costs.
On April 19, 2002, the Company announced that it had reached an
agreement to settle the lawsuits to fully resolve all claims brought by
the plaintiffs without engaging in protracted litigation. On July 19,
2002, the court preliminarily approved the settlement.
TOBACCO LITIGATION: Sues Attorneys General Association Over Advertising
-----------------------------------------------------------------------
Lorillard Tobacco Company commenced a suit against the National
Association of Attorneys General, the latest move in a battle over
anti-smoking advertisements by the American Legacy Foundation, The Wall
Street Journal reports.
The Company said that its lawsuit, filed in a Delaware state court,
accuses the National Association of Attorneys General of "breach of
fiduciary duty" in that the association has failed to act against the
American Legacy Foundation for violating a 1998 industry settlement
with states.
Cheryl Healton, president and chief executive of the American Legacy
Foundation, said, "This is simply the latest, in over a year of
pressure tactics and legal maneuvers by Lorillard to challenge Legacy's
groundbreaking and effective public-information campaign to reduce
youth smoking."
The foundation was created as part of a $206 billion settlement between
attorneys general and big tobacco companies to organize a national
effort to educate the public about the dangers of smoking. The Company
contends that Legacy broke a provision of the settlement forbidding
"any personal attack on, or vilification of," tobacco companies. The
Company charges that it was vilified in a radio ad that is part of the
foundation's campaign.
TOBACCO LITIGATION: Miami Court Verdict To Determine Future Appeals
-------------------------------------------------------------------
A Miami judge has reduced a recent verdict in favor of a flight
attendant by more than 90 percent. The ruling will provide a basis for
an appeal that should clarify how such cases are tried in the future,
Philip Morris U.S.A. said in a statement.
"The judge's decision to reduce the verdict in the French case to
$500,000 is important for several reasons," said William S. Ohlemeyer,
vice president and associate general counsel for Philip Morris
Companies. "First, the court recognized that the evidence did not
justify the award, and second, the ruling will now clear the way for an
appeal in which we will ask an appellate court to set clear rules for
any future trials."
A key issue in the appeal will be a challenge to an earlier court order
interpreting the Broin class action settlement agreement that
improperly prevented the company from challenging key claims during
trial.
"Even with these limitations, the most recent jury to consider similar
claims in a flight attendant case last week returned a verdict for the
companies," Mr. Ohlemeyer said.
In the French case, a jury awarded flight attendant Lynn S.H. French $2
million for damages she has suffered in the past and an additional $3.5
million for damages she will suffer in the future. The court today
reduced that award to $500,000, and that judgment will now be appealed.
XOMA LTD.: Parties Execute Agreement, Dismiss CA Securities Fraud Suit
----------------------------------------------------------------------
Parties in the class action pending against XOMA Ltd in the California
Superior Court in San Diego County executed a settlement agreement for
the suit, which was initially commenced in January 2002, against the
Company, Genentech, Ltd. and certain unidentified "John Doe"
defendants.
The plaintiff purports to assert claims under the California Unfair
Competition Act, seeking injunctive relief and other equitable remedies
in connection with the defendants' alleged misrepresentations and
omissions concerning the anticipated timetable for the filing of the
XanelimT Biologics License Application (BLA).
In March 2002, the Company filed a demurrer and a motion to strike the
suit. Thereafter, Genentech filed its own demurrer and joined in the
Company's motion to strike the suit.
In May 2002, the plaintiff responded to the demurrers and motion to
strike by filing an amended suit, which tracks in material respects the
allegations contained in the plaintiff's original suit, but expands the
time period at issue to include the April 5, 2002 press release issued
by Genentech and the Company.
On June 14, 2002, the parties executed a settlement agreement.
Pursuant to the June 14, 2002 agreement, the plaintiff voluntarily
dismissed the California state court action with prejudice on June 26,
2002.
*Investors Suing Over Corporate Fraud Aim For Payment From Executives
---------------------------------------------------------------------
For years, executives who get sued for defrauding investors have
managed to avoid "handing over their Ferraris or mansions in
settlements, letting their company or its insurer pick up the tab
instead," the San Jose Mercury News writes in a recent report.
However, that is beginning to change, driven by a backlash from large
investors (like the pension funds), some maverick judges and the
insurance companies, who are tiring of doling out thousands of
settlements, averaging $16 million each. The new resolve - make the
officers pay out of their own pockets.
"We want to help create an environment where corporate officers will
think twice before committing fraud," said Christopher Waddell, the
chief counsel for the California State Teachers' Retirement System
(CalSTeRS).
In a highly unusual incentive, CalSTeRS and two other large California
pension funds have offered to pay their lawyers higher fees in a case
against WorldCom if they get money from former chief executive Bernie
Ebbers or 14 other executives.
Most of the hundreds of investor class actions filed every year are
settled in a lawyerly game of "What have you got?" with corporations
willing to pay settlements to avoid a runaway jury verdict against them
in court. Many executives say of these lawsuits that they are little
more than legal extortion that should not cost them personally, writes
the San Jose Mercury News.
However, even the most arguably guilty executives almost never pay a
penny of their own money - Investors' attorneys do not push for it
because it drags out the settlement process, and time is money.
In a study of a dozen $100 million-plus class action settlements since
1995, by Joseph Grundfest, a Stanford University Law School professor,
only two included contributions from executives, representing only a
fraction of the total settlements.
Professor Grundfest, a former SEC commissioner, said that if the trend
toward individual accountability takes hold, "It may turn out to be one
of the best things that has ever happened with regard to deterrence."
He said the judges and investors are finally waking up to what law
enforcement has known since an 18th century British jurist pointed it
out: "You cannot put a corporation in jail; there is no body to kick,
and no soul to damn."
However, points out the San Jose Mercury News, things are beginning to
change and plaintiffs are looking for souls to damn. The change is
being wrought, in part, because the giant institutional investors such
as pension funds are getting more involved in the class action process,
and they have an agenda to deter fraud.
The 1995 law change said that the investor with the largest loss,
rather than the first one to file a lawsuit, should generally be the
lead plaintiff. That means pension funds often end up in that role,
picking the law firm and dictating the goals in the class actions.
Thus, the three earlier mentioned groups, the large institutional
plaintiffs, maverick judges and the insurers, have their reasons for
seeing to it that the executives pay their share of the investor fraud
settlements.
For example, when the pension funds sued WorldCom in July over $318
million in investment losses, they offered famed class action firm
Milberg Weiss Bershad Hynes & Lerach 14.5 percent of any settlement,
up from 12 percent, if they squeezed a "significant" portion of the
money out of the personal assets of any individual defendant.
The few instances in which some judges have begun to resist letting
executives off the hook in settlements are notable, the newspaper
reports. In one of these, a class action against two executives of now
bankrupt NorthPoint Communications, as well as the company, influential
San Francisco Federal Judge William Alsup admonished lawyers not to
bring him any settlement offer to sign unless they also tried to get
some contribution from the two executives named as defendants in the
case, not just the company's insurance carrier.
"There will be no settlement approved in this case until you depose
every one" of the defendants, said Judge Alsup on July 18. "Find out
where their houses are, their cars, their bank accounts, everything
they've got that can be used to respond to judgment . If somebody wants
to serve as an officer or director, then they are putting their net
assets on the line as far as I am concerned."
The same judge, in November, told lawyers suing chip designer Transmeta
that they must investigate the financial resources of certain
executives if they propose a settlement that uses all or most of the
company's insurance money. In an order to the lawyers, he said many
defendants have "large net worths" that arguably should go toward a
settlement in such cases.
While Judge Alsup declined to discuss the cases, some light was shed on
his thinking by some of his comments in the Northpoint case. "I have
learned, from looking at the news for the last six months, that there
ought to be some accountability," he said. "I feel I have made
mistakes approving settlements where the excuse is . `We settled for
everything in the insurance policy.And then I say, 'Well, did you check
to see if the individuals have assets?' And it is always a lackluster
response."
Attorneys for corporations and for investors said Judge Alsup's
comments are likely to spur other judges to compel executives to draw
from their personal assets, according to the newspaper. Judge Alsup
sits on the high-profile federal court for the Northern District of
California, which regularly ranks first or second behind New York in
number of such cases filed. "I think it will spill over to the other
judges," agreed Patrick Coughlin, a partner at Milberg Weiss.
The insurance companies are also contributing to the change in some
cases by resisting writing huge checks, causing investors' attorneys to
take a harder look at getting money from the executives. Typically,
directors' and officers' liability insurance pays anywhere from a few
million to several hundred million dollars to defend against investor
lawsuits or get rid of them by settling.
Now, insurers in a few cases are claiming they have the right not to
pay if the insurance was obtained fraudulently. Enron's insurers, for
example, are trying to rescind coverage by saying Enron provided
fraudulent data in the insurance application.
In another high-profile case, which was recently settled against
appliance maker Sunbeam, alleging revenue inflation, it looked as if
the insurers were not going to pay, said Robert Kornreich, an attorney
for the investors. Investors insisted that Sunbeam's former chief
executive, "Chainsaw" Al Dunlap, and other executives, personally
contribute more than $15 million to the $141 million settlement.
Probably, no one wants to "damn any souls," remembering the words of
the 18th century British jurist, but what seems to be the intention
here is to create a climate and structure of accountability, which will
serve as a deterrence upon executives for the commission of fraud,
thereby enhancing corporate well-being, as well as that of the economic
community.
New Securities Fraud Cases
AON CORPORATION: Bernstein Liebhard Commences Securities Suit in IL
-------------------------------------------------------------------
Bernstein Liebhard & Lifshitz LLP initiated a securities class action
lawsuit on behalf of all persons who purchased or acquired Aon
Corporation (NYSE: AOC) securities between May 4, 1999 to August 6,
2002, inclusive. The action is pending in the United States District
Court for the Northern District of Illinois, Eastern Division.
The complaint alleges that throughout the class period, the Company
issued a series of materially false and misleading statements regarding
the Aon's earnings and financial performance. The complaint alleges,
among other things, that:
(1) these statements were materially false and misleading because
they failed to disclose and/or misrepresented that the Company
had materially overstated its net income by $27 million in
1999, by $24 million in 2000 and by $5 million in the first of
2002;
(2) Aon lacked adequate internal controls and was therefore unable
to determine its true financial condition.
On August 7, 2002, the company shocked the investing community when it
announced, among other things, that the Securities and Exchange
Commission (SEC) had been investigating its financial results and was
questioning many aspects of the Company's financial statements.
The Company also stated that, if the SEC required, it will have to
restate its earnings for the past three years and reduce its net income
by the numbers stated above. Following this announcement, shares of
the Company fell over 30% to close at $14.77 per share.
For more details, contact Ms. Linda Flood, Director of Shareholder
Relations by Mail: 10 East 40th Street, New York, New York 10016 by
Phone: 800-217-1522 or 212-779-1414 or by E-mail: AOC@bernlieb.com.
CUTTER & BUCK: Milberg Weiss Commences Securities Fraud Suit in W.D. WA
-----------------------------------------------------------------------
Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class
action in the United States District Court for the Western District of
Washington on behalf of purchasers of Cutter & Buck, Inc.
(NASDAQ:CBUKE) publicly traded securities during the period between
June 23, 2000 and August 12, 2002.
The complaint charges the Company and certain of its officers and
directors with violations of the Securities Exchange Act of 1934. The
Company designs and markets upscale men's and women's sportswear and
outerwear under the Cutter & Buck brand. The Company sells its
products primarily through golf pro shops and resorts, corporate
accounts, specialty retail, and Company-owned retail stores.
The complaint alleges that during the class period, defendants caused
Company shares to trade at artificially inflated levels through the
issuance of false and misleading financial statements.
On August 12, 2002, the Company issued a press release entitled,
"Cutter & Buck Announces Discovery of Accounting Irregularities in
Fiscal Years 2000 and 2001; Reports Resignation of Chief Financial
Officer; Announces Preliminary First Quarter Fiscal Year 2003 Operating
Results." On this news, the stock dropped to below $4 per share on
volume of more than 468,000 shares.
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
CUTTER & BUCK: Cauley Geller Commences Securities Fraud Suit in W.D. WA
-----------------------------------------------------------------------
Cauley Geller Bowman & Coates, LLP initiated a securities class action
in the United States District Court for the Western District of
Washington on behalf of purchasers of Cutter & Buck, Inc. (Nasdaq:
CBUKE) publicly traded securities during the period between June 23,
2000 and August 12, 2002, inclusive.
The complaint charges the Company and certain of its officers and
directors with violations of the Securities Exchange Act of 1934. The
Company designs and markets upscale men's and women's sportswear and
outerwear under the Cutter & Buck brand. The Company sells its
products primarily through golf pro shops and resorts, corporate
accounts, specialty retail, and Company-owned retail stores.
The complaint alleges that during the class period, defendants caused
Company shares to trade at artificially inflated levels through the
issuance of false and misleading financial statements.
On August 12, 2002, the Company issued a press release entitled,
"Cutter & Buck Announces Discovery of Accounting Irregularities in
Fiscal Years 2000 and 2001; Reports Resignation of Chief Financial
Officer; Announces Preliminary First Quarter Fiscal Year 2003 Operating
Results." On this news, the stock dropped to below $4 per share on
volume of more than 468,000 shares.
For more details, contact Jackie Addison, Sue Null or Ellie Baker by
Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone: 888-551-9944
by E-mail: info@cauleygeller.com or visit the firm's Website:
http://www.cauleygeller.com
CUTTER & BUCK: Hagens Berman Commences Securities Fraud Suit in WA
------------------------------------------------------------------
Cutter & Buck (Nasdaq:CBUKE), the Seattle manufacturer known for its
upscale men's and women's sportswear and outerwear, is now the target
of a class action filed by a group of investors claiming the company
intentionally misreported sales figures in an attempt to manipulate its
stock price, according to Seattle law firm Hagens Berman.
The suit, filed on behalf of investors by Seattle attorney Steve
Berman, comes on the heels of a disclosure that the company will
restate its audited financial statements for fiscal years 2000 and
2001. The suit names Cutter & Buck, as well as former Chief Executive
Officer Harvey Jones and Chief Financial Officer Stephen Lowber as
defendants.
The suit was filed late Friday, Sept. 13 in the US District Court in
Seattle. If approved as a class action, it would represent thousands of
investors who purchased Cutter & Buck stock from June 23, 2000 to Aug.
12, 2002.
According to company documents, new chief executive Fran Conley
discovered a problem when reviewing the company books and shortly
thereafter accepted the resignation of CFO Stephen Lowber. Former CEO
Harvey Jones resigned in April.
"The company admits in its own statements that former executives
manipulated sales figures, likely in a scheme to boost incentive pay,"
Mr. Berman said. "Moving products around while booking the sales is
simply a version of the old scam -- the shell game."
The complaint states that the company booked $5.8 million worth of
product sales as revenue when in fact the products were sent to a
distributor under a consignment agreement. Then, after the sales
period ended, the distributor returned the unsold portion of the
products.
"The only people who knew that Cutter & Buck weren't selling as much as
they claimed were the insiders," Mr. Berman said. "Not fulfilling
their duty to fully disclose what they knew cost investors a great
deal."
Mr. Berman added that SEC regulations regarding these issues are very
clear, and is confident that the court will agree with the suit's
contentions. "When it comes to SEC regulations, you don't get a
mulligan," Mr. Berman said of the golf-apparel manufacturer.
The stock fell 14 percent when the disclosure was made, from $4.02 to
$3.44. Since then, the stock price has eroded to $3.25 a share. The
company is also facing delisting from the Nasdaq National Market.
For more details, contact Steve Berman by Phone: 206-623-7292 by E-
mail: steve@hagens-berman.com or visit the firm's Website:
http://www.hagens-berman.com
ESS TECHNOLOGY: Glancy & Binkow Launches Securities Fraud Suit in CA
--------------------------------------------------------------------
Glancy & Binkow LLP commenced a securities class action in the United
States District Court for the Northern District of California on behalf
of of all persons who purchased securities of ESS Technology, Inc.
(Nasdaq:ESST) between January 23, 2002 to September 12, 2002,
inclusive.
The suit charges the Company and certain of its officers and directors
with violations of federal securities laws. Among other things,
plaintiff claims that defendants' material omissions and the
dissemination of materially misleading statements regarding the nature
of the Company's revenue and business prospects caused its stock price
to become artificially inflated, inflicting damages on investors.
The complaint alleges that defendants failed to disclose the declining
demand, downward price pressure and increasing commodification of the
Company's core product, DVD-processor chips, as new competitors gained
market share.
The effect of these problems and the true nature of the Company's
business prospects were revealed on the last day of the class period,
and the next day the Company's stock plunged more than 30%.
For more details, contact Kevin Ruf by Mail: 1801 Avenue of the Stars,
Suite 311, Los Angeles, California 90067 by Phone: 310-201-9161 or
888-773-9224 or by E-mail to info@glancylaw.com.
HEALTHSOUTH CORPORATION: Cauley Geller Commences Securities Suit in AL
----------------------------------------------------------------------
Cauley Geller Bowman & Coates, LLP added allegations to the securities
class action pending in the United States District Court for the
Northern District of Alabama, Southern Division, on behalf of
purchasers of HealthSouth Corporation (NYSE: HRC) publicly traded
securities during the period between January 14, 2002 and August 27,
2002, inclusive.
The firm is adding allegations to the class action lawsuit that the
Company's Chief Executive Officer admitted that the Company knew of
problems with its Medicare billing practices as early as June 6, 2002,
two full months before the date the Company previously disclosed.
The lawsuit alleges that a widespread securities fraud has been
perpetrated against purchasers of HealthSouth Corporation securities
between January 14, 2002 and August 27, 2002. On August 27, 2002, when
the Company announced that certain Medicare "billing changes" would
cause its earnings to fall well below guidance, the price of its common
stock collapsed 58% in two days.
Defendant Richard Scrushy claimed, at the time, that the full impact of
this "new" information was only learned by the Company on August 15,
2002, which explained why the Company did not disclose the information
to investors earlier. These statements were false as William Owens,
the Company's Chief Executive Officer, has now admitted that the
Company knew of a potential problem by at least June 6, 2002, and
defendant George Strong sold nearly $2 million worth of the Company's
stock between June 7- 11, 2002.
The Company and Mr. Scrushy's assertion that they disclosed this
adverse information timely is further undermined by the fact that the
Centers for Medicare and Medicaid (CMS) have stated that the "new"
information "identified" by the Company and Mr. Scrushy was not "new"
information at all, but a mere clarification of existing policy.
Moreover, CMS had never permitted healthcare providers to seek payment
for individual services when such services were, in fact, provided not
to an individual but to a group of individuals, and the Company was
seeking such improper reimbursement nonetheless.
Investors lost millions while Mr. Scrushy sold over $50 million worth
of Company stock at artificially inflated prices before the collapse.
For more details, contact Jackie Addison, Sue Null or Ellie Baker by
Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone: 888-551-9944
by E-mail: info@cauleygeller.com or visit the firm's Website:
http://www.cauleygeller.com
HEALTHSOUTH CORPORATION: Rabin & Peckel Commences Securities Suit in AL
-----------------------------------------------------------------------
Rabin & Peckel LLP initiated a securities class action in the United
States District Court for the Northern District of Alabama, on behalf
of all persons or entities who purchased or otherwise acquired
securities of HealthSouth Corporation (NYSE:HRC) between January 14,
2002 and August 27, 2002, both dates inclusive. The suit names as
defendants the Company and:
(1) Richard M. Scrushy,
(2) William Owens,
(3) George Strong, and
(4) Weston L. Smith
The complaint alleges that defendants violated section 10(b) of the
Securities Exchange Act of 1934 by issuing a series of materially false
and misleading statements and omitting to disclose material adverse
information about the Company's operations and prospects during the
class period.
Specifically, the complaint alleges that defendants misled the market
concerning expectations for revenues and earnings by failing to
disclose the impact on its operations of certain Medicaid reimbursement
policies and, thereby, reimbursement rates to the Company.
Due to facts known to the Company concerning the Medicaid reimbursement
policies and rates, the Company knew throughout the class period that
it was in no position to meet the revenue and earnings guidance it had
given to investors. Thus, those claims were knowingly or recklessly
made without any reasonable basis.
Meanwhile, during the class period, Company insiders, and in particular
Mr. Scrushy, sold over $74 million worth of Company stock.
For more details, contact Eric J. Belfi or Sharon Lee by Phone:
800-497-8076 or 212-682-1818 by Fax: 212-682-1892 by E-mail:
email@rabinlaw.com or visit the firm's Website: http://www.rabinlaw.com
HEALTHSOUTH CORPORATION: Lowey Dannenberg Lodges Securities Suit in AL
----------------------------------------------------------------------
Lowey Dannenberg Bemporad & Selinger, PC initiated a securities class
action in the United States District Court for the Northern District of
Alabama on behalf of purchasers of the securities of HealthSouth Corp.
(NYSE: HRC) from January 14, 2002 through and including August 27, 2002
inclusive.
The complaint alleges that defendants violated the Securities Exchange
Act of 1934 by issuing materially false and misleading statements and
failing to disclose material information during the class period,
thereby artificially inflating the price of Company securities.
Specifically, the complaint alleges that the Company, among other
things, failed to inform investors that:
(1) certain directives of the Centers for Medicare and Medicaid
Services (CMS) would cause the company to lose millions of
dollars in revenues going forward;
(2) the company would have to reorganize - at a great cost to the
Company -- due to the CMS directives; and
(3) that the Company's repeated reassurances regarding the
strength of its fundamentals were lacking in any reasonable
basis.
The complaint alleges that on August 27, 2002, the Company announced
that its 2002 EBITDA would be lower than previously projected by
approximately $175 million, and that the Company disavowed the earnings
guidance that it had previously given to the market for 2002 and 2003.
The Company reported that there had been "substantial confusion"
regarding the CMS directives.
In response to the news, Company stock plummeted by more than 43%, or
$5.26, to close at $6.71, and was among the most heavily traded shares
on the NYSE.
After the Company's lowered projections and disavowal of its earnings
guidance, on August 28, 2002, an article in the Wall Street Journal
reported that analysts were "shocked" at the disclosure, which they
characterized as belated, and that the company had lost its
credibility. During the class period, the individual defendants sold
more $100 million of HRC common stock.
For more details, contact Neil Selinger or Michelle Rago by Mail: The
Gateway, 11th Floor One North Lexington Avenue White Plains, NY 10601-
1714 by Phone: 877-777-3581 (toll free) or by E-mail: ldbs@westnet.com
HEALTHSOUTH CORPORATION: Schatz & Nobel Lodges Securities Suit in AL
--------------------------------------------------------------------
Schatz & Nobel PC initiated a securities class action in the United
States District Court for the Northern District of Alabama on behalf of
all persons who purchased or otherwise acquired the securities of
HealthSouth Corp. (NYSE: HRC) from January 14, 2002 through August 27,
2002, inclusive.
The suit alleges that the Company and certain of its officers and
directors failed to disclose the impact on the Company's earnings and
revenues presented by new directives being issued by the Centers for
Medicare and Medicaid Services (CMS) that reclassified certain
categories of reimbursements.
Due to facts known to the Company concerning Medicaid reimbursement
policies and rates (but undisclosed to investors), the Company had no
reasonable basis for the revenue and earnings guidance given to
investors. Yet, during the class period, two of the Company's top
officers sold over $100 million worth of the Company's stock.
On August 27, 2002, just one day after starting a note offering worth
almost $1 billion, the Company belatedly disclosed that the CMS
directives may result in a $175 million shortfall in earnings from
previously issued guidance for 2002 and that it would no longer provide
guidance for 2002 and 2003 because of supposed uncertainties caused by
the new directives. On this news, Company stock dropped over 43% to
close at $6.71 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.
MERRILL LYNCH: Rabin & Peckel Commences Securities Fraud Suit in NY
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Rabin & Peckel LLP initiated a securities class action in the United
States District Court for the Southern District of New York on behalf
of all persons or entities who purchased or otherwise acquired
securities of Exodus Communications, Inc. (Nasdaq:EXDS) between
December 8, 1999 through June 19, 2001, both dates inclusive. Merrill
Lynch & Co. and Henry Blodget are named as defendants in the complaint.
The complaint charges Merrill Lynch and Henry Blodget with violations
of the Securities Exchange Act of 1934. The complaint alleges that
defendants Merrill Lynch and Mr. Blodget urged investors to purchase
Exodus securities when defendants knew or recklessly disregarded that
such purchases were not a good investment.
The complaint alleges that defendants:
(1) issued "Buy" recommendations on Exodus securities without any
rational economic basis;
(2) failed to disclose that they were issuing "Buy"
recommendations to obtain investment banking business; and
(3) concealed significant, material conflicts of interest that
prevented them from providing independent objective analysis.
Between March 24, 2000 and September 26, 2001, Exodus stock dropped
from approximately $173.32 per share to less than $1 dollar per share.
During this time period, defendants repeatedly reiterated Near-Term
Buy/Long-Term Buy recommendation.
After the Nasdaq suspended trading in Exodus common stock on September
26, 2001, Exodus voluntarily de-listed from Nasdaq and filed for
Chapter 11 bankruptcy shortly thereafter.
For more details, contact Eric J. Belfi or Sharon Lee by Phone:
800-497-8076 or 212-682-1818 by Fax: 212-682-1892 by E-mail:
email@rabinlaw.com or visit the firm's Website: http://www.rabinlaw.com
MERRILL LYNCH: Schatz & Nobel Commences Securities Fraud Suit in NY
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Schatz & Nobel PC initiated a securities class action in the United
States District Court for the Southern District of New York on behalf
of all persons who purchased shares of Merrill Lynch Internet HOLDRs
Trust (Amex: HHH) from September 23, 1999 through April 8, 2002,
inclusive.
As a "basket security," each share of Internet HOLDRs represents an
undivided beneficial ownership in (initially) 20 specified companies in
the internet sector (Underlying Securities) and the price of Internet
HOLDRs was directly related to and moved with the price of the
Underlying Securities.
The suit alleges that, in connection with the initial public offering
of Internet HOLDRs, Merrill Lynch issued materially false and
misleading statements in the Registration Statement and Prospectus.
Specifically, based on e-mails and other internal Merrill Lynch
communications made public as a result of the investigation conducted
by the New York State Attorney General, the suit alleges that Merrill
Lynch and its Internet stock analysts misled investors by issuing
favorable analyst reports regarding the underlying securities when they
allegedly knew that the positive recommendations were unwarranted.
The suit also alleges that defendants failed to disclose a significant
conflict of interest between their investment banking and research
departments. Unbeknownst to the investing public, Merrill Lynch's buy
recommendations (which artificially inflated the stock prices of the
subject Internet companies) were influenced by its efforts to attract
lucrative investment banking business from those same companies.
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.
MORGAN STANLEY: Rabin & Peckel Commences Securities Fraud Suit in NY
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Rabin & Peckel LLP initiated a securities class action in the United
States District Court for the Southern District of New York, on behalf
of all persons or entities who purchased or otherwise acquired
securities in any/or every class of Morgan Stanley Technology Fund
(formerly known as the Morgan Stanley Dean Witter Technology Fund)
(Nasdaq:TEKAX) (Nasdaq:TEKBX) (Nasdaq:TEKCX) (Nasdaq:TEKDX) from the
public offering of the Fund on September 25, 2000 through July 31,
2002, inclusive.
The action is brought against the Fund, Morgan Stanley Dean Witter &
Co. (MSDW), and several of MSDW's subsidiaries for issuing materially
false and misleading statements in violation of federal securities laws
during the class period.
Specifically, the complaint alleges that defendants misrepresented the
conflict of interest arising from defendants purchasing for the Fund's
portfolio the securities of certain companies with which MSDW had
investment banking relationship, and/or which were covered by MSDW
research analysts.
The complaint also alleges that defendants failed to disclose that MSDW
research analysts issued inflated ratings and biased analyst reports
about these companies, thereby artificially inflating the price of the
companies' securities as well as the price of the Fund's securities.
MSDW received lucrative investment banking business from the companies
whose securities were in the Fund's portfolio, and MSDW research
analysts were compensated millions of dollars for their biased coverage
of those companies.
For more details, contact Eric J. Belfi or Sharon Lee by Phone:
800-497-8076 or 212-682-1818 by Fax: 212-682-1892 by E-mail:
email@rabinlaw.com or visit the firm's Website:
http://www.rabinlaw.com.
UNDERWRITERS LITIGATION: Milberg Weiss Commences Municipal Bonds Suit
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Kevin Olson of MunicipalBonds.com represented by Milberg Weiss Bershad
Hynes & Lerach LLP initiated a private attorney general lawsuit has
been filed against major Wall Street brokerages for unfair and
unreasonable fees in the sale of municipal bonds. Defendants in the
case are:
(1) Salomon Smith Barney, Inc.,
(2) UBS Paine Webber, Inc.,
(3) Bear Stearns Companies, Inc. (NYSE: BSC),
(4) Merrill Lynch & Co. (NYSE: MER),
(5) Morgan Stanley Dean Witter & Co.,
(6) Prudential Securities, Inc. (NYSE: PRU),
(7) Charles Schwab & Co., Inc. (NYSE: SCH),
(8) U.S. Bancorp (NYSE: USB), and
(9) Bank of America Corporation (NYSE: BAC).
Plaintiff Kevin Olson of MunicipalBonds.com brings this action on
behalf of the general public as a California private attorney general.
The complaint charges municipal bond brokers with charging excessive
and undisclosed fees on municipal bond transactions with their
customers. Many of these fees are thousands of dollars despite the
fact that municipal brokers' costs for these near riskless transactions
are minimal. Such fees violate California's unfair business practice
statute and Municipal Securities Rulemaking Board rules that require
that municipal brokers deal fairly with its customers and that its
pricing and fees be fair and reasonable.
The complaint seeks an injunction against defendants' imposition of
excessive fees in the secondary market for municipal bonds.
The municipal bond market encompasses approximately $2 trillion in
outstanding bonds and is an integral part of state and municipal
financing. The vast majority of trades in this market are in the
secondary market where bonds originally purchased from a new issue
municipal bond deal are resold and repurchased. In this secondary
market, unfair pricing and excessive fees run rampant. Unfair pricing
costs investors billions of dollars a year.
This lawsuit is designed to remedy these abuses and achieve fair
pricing and full pricing disclosure for buyers and sellers of municipal
bonds in the secondary market.
For more details, contact Stan Mallison of Milberg Weiss Bershad Hynes
and Lerach by Phone: 415-288-4545 or by E-mail:
municipalbonds@milberg.com or Kevin Olson of MunicipalBonds.com by
Phone: 415-922-7870 or by E-mail: Kevin@municipalbonds.com
WORLDCOM INC.: Federman & Sherwood Commences ERISA Lawsuit in OK
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Federman & Sherwood initiated an ERISA/401(k) class action in the
United States District Court for the Western District of Oklahoma on
behalf of current and former employees who are participants and
beneficiaries of the WorldCom, Inc. (OTC Pink Sheets: WCOEQ) Investment
Plus Plan and who held stock in their retirement accounts.
The suit charges that the Company's administrators and directors of the
Plan and the Company's directors and/or officers breached their
fiduciary duties in violation of the Employee Retirement Income
Security Act Sec. 409 (ERISA) (29 U.S.C. Sec. 1109) in a variety of
ways, especially in connection with the Plan's holdings of company
stock.
The suit also claims that the Company is obliged, under ERISA, to make
good to the Plan the losses resulting from the breaches of fiduciary
duty and to provide other appropriate equitable relief to redress the
circumstances described therein.
For more details, contact William B. Federman by Mail: 120 N. Robinson,
Suite 2720, Oklahoma City, OK 73102 by Phone: 405-235-1560 by Fax:
405-239-2112 or by E-mail: wfederman@aol.com
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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
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Copyright 2002. All rights reserved. ISSN 1525-2272.
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