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/raid1/www/Hosts/bankrupt/CAR_Public/021031.mbx C L A S S A C T I O N R E P O R T E R Thursday, October 31, 2002, Vol. 4, No. 216 Headlines APARTHEID LITIGATION: Body Rejects Proposal For Opening Bank Archives AVATEX CORPORATION: Court Approves Securities Fraud Suit Settlement CRACKER BARREL: Faces Suit Over Labor Standards Act Violations in GA CRACKER BARREL: Faces Suit Over Civil Rights Act Violations in N.D. GA CRACKEL BARREL: Faces Collective Suit For FLSA Violations in N.D. GA JASON INTERNATIONAL: Voluntarily Recalls 800 Baths For Fire Hazard MAINE: States Goals Of Consent Decree For The Augusta Mental Institute MICROSOFT CORPORATION: Court Upholds Dismissal of Antitrust Lawsuit MONTANA POWER: Asks For Change In Venue In Securities Fraud Lawsuit ORTHODONTIC CENTERS: LA Court Dismisses With Prejudice Securities Suit POWERCARD INTERNATIONAL: Consumers To Receive Refunds From Net Scheme PRICEWATERHOUSE COOPERS: Will Resolve Suits By Shareholders, Creditors SPRINT CORPORATION: KS Court Denies Motion To Dismiss Securities Suit TOBACCO LITIGATION: Medical Monitoring Trial, Other Matters, Delayed TORONTO SUN: Court Refuses Class Certifications To Suit V. Photographer UNITED AIRLINES: Trial in Travel Antitrust Lawsuit Set For April 2003 UNITED AIRLINES: Sued For Breach of Fiduciary Duty Over 9/11 Attacks VIVENDI UNIVERSAL: French Prosecutors Commence Securities Fraud Probe XTO ENERGY: Enters Court-Ordered Mediation in Gas Royalties Suit in OK *Juries Give Pain-and-Suffering Awards To Avoid Punitive Damages Limits New Securities Fraud Cases CIGNA CORPORATION: Mark McNair Files Securities Fraud Suit in E.D. PA CIGNA CORPORATION: Berger & Montague Commences Securities Suit in PA CIGNA CORPORATION: Much Shelist Lodges Securities Fraud Suit in E.D. PA AMERICAN ELECTRIC: Milberg Weiss Commences Securities Fraud Suit in OH NUI CORPORATION: Bernard Gross Commences Securities Fraud Suit in NJ SALOMON SMITH: Kaplan Fox Commences Securities Fraud Suit in S.D. NY SALOMON SMITH: Pomerantz Haudek Commences Securities Suit in S.D. NY ST. PAUL: Abbey Gardy Commences Suit For Securities Violations in MN TXU CORPORATION: Weiss & Yourman Commences Securities Suit in N.D. TX TXU CORPORATION: Cauley Geller Lodges Securities Fraud Suit in N.D. TX ********* APARTHEID LITIGATION: Body Rejects Proposal For Opening Bank Archives --------------------------------------------------------------------- Switzerland's commission on judicial affairs narrowly rejected a proposal by Greens deputy Pia Hollenstein forcing banks to open their archives to see if they had links with the South African apartheid regime from 1948 to 1993, Agence France Press reports. The commission voted 11-9 to reject the proposal. In a statement, the commission said, "The problem of relations with these regimes that do not respect human rights concerns all nations: it should be dealt with by international organizations within an international frame work." The commission added that the proposal would jeopardize Switzerland's position as a world financial center. The move came about in the wake of a lawsuit filed by prominent rights lawyer Ed Fagan seeking compensation for the victims of South African apartheid from Swiss banks UBS and Credit Suisse, and other American firms. The suits allege that the defendants helped the apartheid regime financially, despite apartheid being declared a crime against humanity, AFP reports. AVATEX CORPORATION: Court Approves Securities Fraud Suit Settlement ------------------------------------------------------------------- The United States District Court for the Northern District of Texas preliminarily approved the settlement in the consolidated securities class action pending against Avatex Corporation and certain of its current and former officers and directors. The suit, filed on behalf of purchasers of the Company's common and formerly outstanding preferred stocks during the period July 19, 1995 through August 27, 1996, which alleges that the Company and the defendant officers and directors made misrepresentations of material facts in public statements or omitted material facts from public statements, including the failure to disclose purportedly negative information concerning the Company's National Distribution Center and Delta computer systems and the resulting impact on its existing and future business and financial condition. In January 2002, the court certified a class of purchasers of common stock as to federal claims and reserved judgment on all other class certification issues. On September 11, 2002, all the defendants, including the Company, entered into a Memorandum of Understanding (MOU) with counsel for the plaintiff class for the settlement of the lawsuit. Pursuant to the MOU, the Company deposited $0.5 million into an escrow account that will be used to fund a portion of a settlement of the lawsuit. On October 11, 2002, the court gave its preliminary approval of an alternative dispute resolution proceeding to determine an appropriate settlement amount as to the defendants other than the Company. These other defendants agreed in the MOU to pay a portion of this additional settlement amount and to waive their claims against the Company to be indemnified for such payment. The Company also agreed in the MOU to assign to the plaintiff class any claims it may have relating to this lawsuit against the Company's insurer, UPIC (and the estate and statutory liquidator of its parent, Reliance), the Texas Property and Casualty Insurance Guaranty Association or any other state's Insurance Guaranty Association, and the Company's excess insurer, Gulf Insurance Company. The Company will have no further liability for the settlement amount or plaintiffs' attorneys' fees. The Company has denied and continues to deny that it committed any act or omission or breach of duty giving rise to any liability in the lawsuit, and the Company has agreed to settle the lawsuit to eliminate the burden and expense of further litigation, in particular because of the cessation of business and liquidation of Reliance. The settlement is subject to execution of definitive settlement documentation and final court approval. CRACKER BARREL: Faces Suit Over Labor Standards Act Violations in GA -------------------------------------------------------------------- Cracker Barrel Old Country Store, Inc. faces a collective action making claims under the federal Fair Labor Standards Act (FLSA) in the United States District Court for the Northern District of Georgia, Rome Division. The suit alleges that certain tipped hourly employees were required to perform excessive non-serving duties without being paid the minimum wage or overtime compensation for that work and that certain hourly employees were required to wait "off the clock," without pay for the wait. In March 2000, the court granted the plaintiffs' motion in the suit to send notice to a provisional class of plaintiffs, defined as all persons employed as servers and all second-shift hourly employees at Cracker Barrel Old Country Store restaurants since January 4, 1996, and 10,838 potential plaintiffs filed "opt-in" forms to the suit. The court could subsequently amend the definition of the collective group, and if amended, the scope of the collective action could either be reduced or increased or, if appropriate, the Court could dismiss the collective aspects of the case entirely. In that last situation, each opt-in plaintiff would have to decide whether or not to pursue an independent action. Extensive discovery with respect to the merits of individual claims, scheduled through December 2002, is being conducted in the suit. Motions with respect to class certification and other issues are expected to be made in early 2003. CRACKER BARREL: Faces Suit Over Civil Rights Act Violations in N.D. GA ---------------------------------------------------------------------- Cracker Barrel Old Country Store, Inc. faces a company-wide class action filed in the United States District Court for the Northern District of Georgia, Rome Division, making claims under Title VII of the Civil Rights Act of 1964 and Section 1981 of the Civil Rights Act of 1866. The suit seeks: (1) certification as a company-wide class action, (2) a declaratory judgment to redress an alleged systemic pattern and practice of racial discrimination in employment opportunities, (3) an order to effect certain hiring and promotion goals and back pay and other related monetary damages. In May 2002, the plaintiffs filed a motion for class certification proposing a class of all current and former employees and applicants for employment who might have suffered discrimination in hiring, promotion, job assignment and cross-training. The briefing process on class certification has been completed, and this matter awaits ruling by the court. No collective group has been finally certified in the suit. CRACKEL BARREL: Faces Collective Suit For FLSA Violations in N.D. GA -------------------------------------------------------------------- Cracker Barrel Old Country Store, Inc. faces a collective action filed in the United States District Court for the Northern District of Georgia, Rome Division, making claims under the federal Fair Labor Standards Act (FLSA). The suit is a purported collective action filed by current and former employees asserting three claims based upon alleged violations of the FLSA: (1) that Personal Achievement Responsibility (PAR) IV level employees are routinely required to perform quasi-managerial duties or duties related to training without receiving minimum wage or overtime compensation for that work; (2) that employees classified as trainers routinely work off the clock to prepare for training sessions at home or on store premises and to conduct pre-training activities; and (3) that store opener employees were mis-classified as salaried exempt and are due overtime compensation. No express amount of monetary damages is claimed in the suit and no substantial discovery has taken place. The Company labeled the suit without merit and intends to vigorously oppose the suit. JASON INTERNATIONAL: Voluntarily Recalls 800 Baths For Fire Hazard ------------------------------------------------------------------ Jason International, Inc. is cooperating with the US Consumer Product Safety Commission (CPSC) by voluntarily recalling about 800 Jason AirMasseur and Air Whirlpool Baths. Air baths release heated bubbles into the water. A heating element on these baths can fail to shut off, posing a fire hazard. The Company has received one report of a fire involving one of these baths, which resulted in minor damage. No injuries have been reported. The baths were sold under the brand name Jason AirMasseur and Air- Whirlpool Baths, which is written on the bath's control keypad. They have a serial number located on the underside of the bath that can be viewed by removing the equipment access panel. Consumers must check with the firm to determine if their bath is included in the recall. Plumbing distributors and kitchen and bath showrooms sold these baths nationwide from January 2002 through September 2002 for about $3,000. For more information, contact the Company's Technical Service Department by Phone: 800-255-5766 between 8 am and 5 pm CT Monday through Friday, or visit the firm's Website: http://www.jasoninternational.com. MAINE: States Goals Of Consent Decree For The Augusta Mental Institute --------------------------------------------------------------------- A key goal in the state of Maine's new mental health plan - and a requirement in the 1990 consent decree, which in turn was the product of a class action - is to shrink the Augusta Mental Health Institute (AMHI), while providing patients who leave it with "services which meet their needs" in the community, the Portland Press Herald reports. A trial was scheduled for late October to determine whether the state has complied with the terms of the AMHI consent decree. The following events preceded this moment of awaiting the court's decision as to whether or not Maine, as it claims, has finally complied with the 1990 consent decree: (1) In 1988, patient population hit 1,500 at AMHI. In August of 1988, five AMHI patients died during a heat wave. Patient advocates charged that the deaths were symptomatic of neglect, abuse and overcrowding; (2) In 1989, a class action was brought against AMHI and the state by about 3,000 past and present patients of the institution; and (3) in 1990, in a consent decree, the state was ordered to reduce the number of beds in AMHI and improve community-based services by September 1, 1995. In 1993, Governor John McKernan's budget slashed funding for mental health services by $4.8 million over the next two years, in violation of the consent decree. Critics complained that the community-based services were not being developed, but that patients still were being released from AMHI. As a result, the state of Maine was held in contempt, in 1994, by Superior Court Judge Bruce Chandler for violating the agreement. The court ordered that the community services to meet the needs of the patients leaving AMHI be in place by mid-1997. In June 1994, Justice Sidney W. Wernick approved a negotiated consent decree tripling the number of people entitled to community-based mental health services. In 1995, plaintiffs and defendants were negotiating toward a new settlement when it was disclosed that the state was planning to close AMHI without notifying the court or the plaintiffs. In March 1996, Justice Nancy D. Mills issued a new contempt order threatening a court-ordered receivership unless several deadlines to improve services to the mentally ill were met in 1996. The state submitted a $39.3 million plan to create what Governor Angus King called "a comprehensive mental-health system worth of the name" in response to Judge Mills' threat to have a receiver appointed to implement the consent decree. In January 1997, for the first time in more than two years, the state mental health officials were free of contempt-of-court charges and no longer faced the prospect of a judge taking over the state mental health system. In April of 1997, Gerald Rodman, the court master who was overseeing operations at AMHI, approved a plan to reduce the size of the state psychiatric hospital from 133 to 118 beds. However, in March 1998, state mental health officials announced that they did not expect to meet the terms of the AMHI consent decree soon. Major parts of the state's system for the mentally ill were still emerging, officials said. In June 1999, the biennial state budget included $6.8 million relating to the AMHI consent decree. In December of the same year, Maine's Department of Health planned to ask the Legislature for money that would total $8 million for the two-year fiscal period and $12.2 million for the next fiscal period. In January 2002, state mental health officials missed a year-end deadline to comply with the requirements of the 1990 consent decree. They said they expect to be in compliance by the end of January. On January 25, 2002, Judge Mills gives patients' advocates 60 days to produce evidence disputing the state's claim that its mental health system complies with the 1990 consent decree. Helen Bailey, one of the representatives for the 3,400 current and former AMHI patients covered by the agreement, says an objection will be filed. In September 2002, the court said it would set a date in late October as a trial date to determine whether the state has complied with the terms of the AMHI consent decree. MICROSOFT CORPORATION: Court Upholds Dismissal of Antitrust Lawsuit ------------------------------------------------------------------- The United States Fourth Circuit Court of Appeals ruled in favor of Microsoft Corporation, Hewlett-Packard and Dell Computer in the class action filed by Gravity Corporation. The Court ruled that Gravity had no legitimate claim against the defendants, the Associated Press reports. Gravity filed the suit in February 1999, alleging that its own litigation support software was being undermined by Microsoft's alleged monopoly and refusal to release details about its programming hooks in Windows. The suit further stated that all three companies and NEC Packard Bell were guilty of "conspiratorial conduct" to lock up the market for operating system software, word processing software and spreadsheet software in violation of the Sherman Act, AP reports. In January 2001, federal judge J. Frederick Motz of Baltimore rejected the suit. Gravity asked for permission to file an amended suit, but the court denied the request, which the appellate court upheld. In its ruling the appellate court states, "Although Gravity alleges that Microsoft's agreements with Compaq and Dell individually produced anti- competitive effects, it does not provide any factual basis to support this allegation." Further, the court ruled that the lawsuit could not proceed because Gravity failed to argue--let alone prove--that Compaq and Dell had unreasonable market power. "Gravity has provided allegations of Microsoft's market power in the relevant software markets, in the form of Microsoft's shares in these markets. Gravity failed, however, to allege facts regarding Compaq's or Dell's market share and concedes that the PC market is 'fiercely competitive' and, therefore, that neither Compaq nor Dell has power in the PC market," the court stated. Judge Roger Gregory dissented in part, saying that Gravity's accusations of wrongdoing were legally substantive enough to deserve an airing in court, AP reports. "These allegations are plainly sufficient to state a claim under the Sherman Act," he said. "The most unfortunate aspect of this case is that, to the extent Gravity's claims have merit, consumers will be left uncompensated," Judge Gregory wrote. Even more, raising the procedural bar for consumers' claims may further stifle technological innovation." MONTANA POWER: Asks For Change In Venue In Securities Fraud Lawsuit ------------------------------------------------------------------- A class action filed by people formerly owning stock in Montana Power Co., should be moved from Butte to Kalispell, says a motion recently filed by defendant Montana Power, in District Court in Butte, because public opinion against the company and its chief executive is intensely negative and would prevent a fair trial in Butte, the Associated Press Newswires reports. The request to move the trial says that surveys of potential jurors in Butte and surrounding counties found a significant prejudice against the company, several other companies connected to Montana Power and the company directors, all named in the class action. The lawsuit was originally filed against Montana Power, several other companies connected to Montana Power, on behalf of eight people who owned shares in Montana Power. It contends shareholders were not given the right to vote on the sale of several former Montana Power holdings, and seeks to nullify those sales. It also asks for the $3 billion in lost stock revenue. There also are separate claims for damage for the approval of millions of dollars of "change of control" payments or "golden parachutes" for top Montana Power executives, as well as other damages. Both Montana Power and Goldman, Sachs & Co., also named in the lawsuit, requested the change of venue. The motion blames media coverage for prejudicing potential jurors and making it impossible for the companies to receive a fair trial in Butte. A lawyer for the stockholders says the plaintiffs would oppose the move because potential jurors in Butte and the surrounding area would be able to put personal feelings aside. "Everybody in Montana has an opinion on this," said Frank Morrison of Whitefish, a former state Supreme Court justice. "It doesn't matter if it's in Great Falls, Billings, Butte or Missoula, a lot of people will have opinions, but they will be willing to set those aside and decide based on what they hear in court." State venue laws allow cases to be filed in the county of most impact, and that is certainly Butte, Silver Bow County, said former Justice Morrison. "The rights and wrongs of this case ought to be decided by the people who were the most affected," he said. ORTHODONTIC CENTERS: LA Court Dismisses With Prejudice Securities Suit ---------------------------------------------------------------------- The United States District Court for the Eastern District of Louisiana ordered dismissed the securities class action pending against Orthodontic Centers of America, Inc. (NYSE: OCA) and: (1) Bartholomew F. Palmisano, Sr., Chairman of the Board, President and Chief Executive Officer, (2) Bartholomew F. Palmisano, Jr., Chief Operating Officer, and (3) Dr. Gasper Lazzara, Jr., former Chairman of the Board The suit, filed on behalf of purchasers of the Company's common stock from April 27, 2000 through March 15, 2001, alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by allegedly recognizing revenue in violation of generally accepted accounting principles and SEC disclosure requirements and by allegedly making false and misleading statements about the Company's financial results and accounting, an earlier Class Action Reporter story states. In its ruling, the court found that the plaintiffs had failed to allege sufficient facts to support their claim that the Company or its officers and directors violated federal securities laws. The court also ruled that the plaintiffs will not be permitted to amend the lawsuit and stated that "the court dismisses plaintiffs' amended complaint with prejudice because `another pleading attempt would be an inefficient use of the parties' and the Court's resources, would cause unnecessary and undue delay, and would be futile." The ruling is subject to the possibility of an appeal by plaintiffs. "We are extremely pleased that the Court has dismissed the lawsuit, which we have always believed to be without merit," said Bartholomew F. Palmisano, Sr., OCA's Chairman, President and Chief Executive Officer. "Our focus has been and will continue to be on building our business and providing high quality services to our affiliated practices." POWERCARD INTERNATIONAL: Consumers To Receive Refunds From Net Scheme --------------------------------------------------------------------- Attorney General Jennifer M. Granholm announced today that Michigan consumers who were cheated through an alleged on-line pyramid scheme into purchasing their own personal Internet "mall" would immediately begin to receive full refunds. The first wave of disbursements totaling $595,425.45 will be paid to 1,390 Michigan residents who purchased the Internet Malls from PowerCard International. PowerCard, which operated under the name KM.NET, aggressively marketed the web malls in Michigan and other states. The malls were supposed to allow the mall website owners to make large profits when Internet surfers used the malls to make purchases. Ms. Granholm said, "These Internet `malls' were nothing but a pyramid scheme meant to bilk money from Michigan consumers. This trick, without any treat, was just a ghoulish rip-off exploiting the popularity of `dot.coms.'" Ms. Granholm filed suit against KM.NET in July 2001 and reached a settlement earlier this year. Michigan, which was the only state to file suit against the company, filed court pleadings in Michigan and Alabama while also monitoring a court proceeding in Maryland. This first wave of payments is for consumers who purchased KM.NET malls during the period beginning March 3, 2000, and ending March 22, 2000, which resulted in the consumer's bank account being electronically debited on or after March 22, 2000. The refunds represent the purchase price of the mall(s) minus any commissions actually received from KM.NET for the sale of Internet shopping malls. Some Michigan consumers purchased multiple malls. The second wave of payments will also cover those who purchased between the same period but will be for those claims requiring further verification. This wave of payments should be paid before the end of the year. Ms. Granholm said, "While a wonderful educational tool, the Internet has become a haven for scams on unsuspecting consumers. We will do everything possible to protect Michigan families from the abuses technology can bring." The settlement administrator anticipates that the total amount of refunds under the Alabama class action settlement will be approximately $2 million. If the settlement administrator has a question regarding a claim, the claimant will be contacted. For more information, contact the settlement administrator by Mail: PO Box 70106, Mobile, Alabama 36670 or by Phone: 251-473-5550. PRICEWATERHOUSE COOPERS: Will Resolve Suits By Shareholders, Creditors ---------------------------------------------------------------------- PricewaterhouseCoopers LLP agreed to pay $21.5 million to resolve lawsuits by Anicom Inc. shareholders and creditors, who accused the accounting firm of acting recklessly by certifying Anicom's financial statements during the years leading up to its January 2001 bankruptcy- court filing, The Wall Street Journal reports. The payment is among the larger settlements to date over an alleged audit failure by Pricewaterhouse, which currently is under regulatory scrutiny related to its prior audits for Tyco International Ltd. In May 2001, the firm agreed to pay about $51 million to settle a class action lawsuit that accused it of botching some previous audits of MicroStrategy Inc.'s financial statements. As in the MicroStrategy case, Pricewaterhouse has settled the Anicom litigation without admitting wrongdoing. The firm's spokesman Stephen Silber said, "We decided to settle the lawsuit to avoid the costs and uncertainties associated with protracted litigation." The $21.5 million payment will be divided among Anicom's bankruptcy estate and its secured lenders and shareholders, including the State of Wisconsin Investment Board, which held Anicom shares and is lead plaintiff in the securities litigation over Anicom's collapse, in a federal district court in Chicago. The plaintiffs' claims against several former executives remain pending. An attorney for the Wisconsin board, Ken McNeil of the Houston law firm Susman Godfrey LLP, said that the recent settlement "will now let us focus trial preparation on the primary target -- the officer and director defendants who typically have primary responsibility for misstated financial statements." The settlement comes about five months after the Securities and Exchange Commission (SEC) sued six former Anicom executives in Chicago, accusing them of accounting fraud. The SEC complaint alleges that they inflated the company's revenue by more than $38 million from January 1998 through March 2000. The executives have denied wrongdoing. SPRINT CORPORATION: KS Court Denies Motion To Dismiss Securities Suit --------------------------------------------------------------------- The United States District Court for the District of Kansas denied Sprint Corporation's motion to dismiss the securities class action filed against it and certain of its officers, alleging violations of federal securities laws. The consolidated suit relates to several statements corporate officers to investors before an April 28, 2000, vote by shareholders of Sprint and WorldCom to merge the two telecommunications giants. Shareholders approved the merger, but the plan was abandoned after the Department of Justice (DOJ) sued under antitrust regulations and the European Commission (EC) announced its opposition, LexisNexis.com reports. Shareholders in the uncertified class action say the merger was doomed to fail from the start and stock prices were thus fraudulent for a class period of Oct. 4, 1999, to Sept. 19, 2000. Shares of Sprint PCS and FON dropped approximately 40 percent and 60 percent during this period, respectively, mealeys.com reports. The court, in its rejection of the motion, stated that failing to tell investors before a shareholder vote that regulators were unlikely to approve a merger was a material omission. Judge Murguia granted in part the Company's motion, related to several forward-looking statements made by executives before the April 2000 vote, because the statements were "mere" predictions and reasonable investors would not rely on that kind of "corporate puffery" to make buying and selling decisions. WorldCom, also a party to the lawsuit, was not part of this decision because of ongoing bankruptcy proceedings. According to the judge, Sprint and WorldCom executives had repeatedly reassured investors that they expected regulatory approval for a merger, LexisNexis reports. If the facts are true as presented by the plaintiffs, the DOJ informed both Sprint and WorldCom in the weeks leading up to the vote that the agency was unlikely to approve a merger, the EC informed both companies that it had serious concerns and the Federal Communications Commission (FCC) suspended its investigation because it required more documentation. Nonetheless, Sprint executives' optimistic statements continued, creating a "material omission," Judge Murguia said. TOBACCO LITIGATION: Medical Monitoring Trial, Other Matters, Delayed -------------------------------------------------------------------- A statewide class action against the nation's biggest tobacco companies, which had been scheduled for trial on Tuesday, has been put off once again, this time by order of the Louisiana Supreme Court, The Times-Picayune reports. The high court has temporarily delayed the proceeding and scheduled a hearing for Wednesday on issues raised by the plaintiffs, including their claim that the tobacco companies should not be allowed to put on evidence that smokers are at least partly responsible for their health problems. The state's 4th Circuit Court of Appeal has ruled that the companies can present such evidence. A new beginning date for the trial, to be held before Civil District Judge Richard Ganucheau, will be set after the high court issues its decision, officials said. An earlier Class Action Reporter story mentioned this suit, brought on behalf of the smokers of Louisiana, in which the smokers are asking the tobacco industry to pay for quit-smoking programs and for medical monitoring for still-healthy smokers. Unlike most lawsuits filed against the industry, the Louisiana case does not seek individual damages for the smokers, the Class Action Reporter states. The Louisiana lawsuit, however, does align itself with the long-running legal claim made by smokers in their earlier suits -- that the industry manipulated the nicotine level of cigarettes to keep smokers addicted -- an allegation that the cigarette makers deny. Once the trial begins, jurors will hear evidence from both sides on this issue. TORONTO SUN: Court Refuses Class Certifications To Suit V. Photographer ----------------------------------------------------------------------- A Toronto judge refused to grant class certification to a lawsuit filed by a former model against former Toronto Sun photographer Norman Betts, asserting claims of sexual misconduct, the Toronto Star reports. Vanessa Fehringer filed the suit against the Sun and Mr. Betts, allegedly on behalf of at least 60 models who claim the photographer acted improperly in photo shoots as far back as the 1970s, according to an earlier Class Action Reporter story. "It's everything from improper touching, to exposing himself, to walking in while they are changing, to threats like, `OK, if you want to make it into the paper, we are going to be taking some nude pictures now,'" Ms. Fehringer's lawyer, Jeffrey Raphael, said recently. "Here are women who relax their normal standards of care - basically in various stages of undress - on the understanding that they would be treated in a professional manner, and that is not what happened." Ms. Fehringer, whose picture was never published, filed a claim in February 2002, alleging inappropriate conduct and remarks by Mr. Betts. Since then, dozens of other former models have come forward with similar complaints, Mr. Raphael said. Mr. Justice Ian Nordheimer, in his ruling, said there were too many different circumstances in the cases involving about 50 women in the suit for it to be done as a group effort, the Toronto Star reports. "It is clear that if this action was certified as a class proceeding it would quickly break down into an individual assessment of each proposed member's particular circumstances," the Superior Court judge said in his 12-page ruling. "We're disappointed with the ruling," Mr. Raphael said in an interview. "We thought this was the ideal case to go forward as a class action." He said it was likely the judge's ruling would be appealed, the Toronto Star reports. "The allegations in this case are quite serious and many of the women will continue to pursue the lawsuit on their own, regardless of this ruling or the outcome of any appeal," Mr. Raphael said. UNITED AIRLINES: Trial in Travel Antitrust Lawsuit Set For April 2003 --------------------------------------------------------------------- Trial in the antitrust class action pending against United Airlines is set for April 28,2003 in the United States District Court in North Carolina. A North Carolina travel agent filed the suit in March 2002, against the Company (and other carriers) initially in state court and then in federal court in North Carolina following the reduction by United (and other carriers) in November 1999 of commission rates payable to travel agents. Plaintiffs allege that United and the other carrier-defendants conspired to fix travel agent commissions in violation of the Sherman Act and seek treble damages and injunctive relief. Subsequent to this initial filing, the case has been expanded by the addition of five new travel agencies, ARTA, and eight new carrier defendants, including two Star Alliance carriers. In addition, the court has allowed the addition of claims related to carriers' commission reduction actions in 1997, 1998, 2001, and 2002. Earlier this year the court granted plaintiffs' motion to certify the case as a class action consisting of all US (and its possessions) travel agencies. Discovery is currently proceeding and is set to close on November 13, 2002. Plaintiffs, in a recent filing, have claimed damages, assuming liability, in the amount of approximately $13 billion dollars, although United's alleged share of this amount has not been determined by plaintiffs. In addition to the above case, United has been named in several other cases filed in the US and Canada, involving commission rates payable to travel agencies. These cases are in their early stages. The Company does not expect the outcome of the suits to have any material effect upon its consolidated financial position or results of operations. UNITED AIRLINES: Sued For Breach of Fiduciary Duty Over 9/11 Attacks -------------------------------------------------------------------- United Airlines faces twenty-five lawsuits filed in the United States District Court for the Southern District of New York related to the September 11, 2001 terrorist attacks. The complaints, filed on behalf of passengers and ground victims, seek monetary damages and allege that the Company breached its duty of care to the passengers or the people and businesses on the ground and that the breach caused the hijacking and subsequent deaths and property destruction. The Company anticipates the filing of additional lawsuits related to the September 11 attacks in the future. VIVENDI UNIVERSAL: French Prosecutors Commence Securities Fraud Probe --------------------------------------------------------------------- Paris prosecutors launched an investigation in Paris about media giant Vivendi Universal, over charges that the Company lied to investors and that Company officers under former Chairman Jean-Marie Messier misled them by issuing false financial information, the Associated Press reports. The beleaguered media company already faces several class actions, filed by both American and French investors, alleging the Company issued "untruthful and fraudulent information" and "presenting an incorrect balance sheet and financial situation." According to Associated Press, the company has incurred billions of dollars in debt, due to a series of costly acquisitions initiated by Mr. Messier. The Company board later ousted Mr. Messier and replaced him with Jean-Rene Fourtou, then vice chairman of Aventis. Prosecutors are trying to determine whether the company published false or misleading information regarding fiscal years 2000 and 2001, court officials said on condition of anonymity. AP reports. XTO ENERGY: Enters Court-Ordered Mediation in Gas Royalties Suit in OK ---------------------------------------------------------------------- XTO Energy, formerly known as Cross Timbers Oil Company, entered into court-ordered mediation with plaintiffs in the class action filed in the District Court of Dewey County, Oklahoma by royalty owners of natural gas wells in Oklahoma. The suit alleges that since 1991, the Company has underpaid royalty owners as a result of reducing royalties for improper charges for production, marketing, gathering, processing and transportation costs and selling natural gas through affiliated companies at prices less favorable than those paid by third parties. No class has yet been certified. The parties have entered into court- ordered mediation and are continuing to discuss the terms of a possible settlement. In the Company's opinion, the suit is not currently expected to be material to the Company's operations or financial position or liquidity. *Juries Give Pain-and-Suffering Awards To Avoid Punitive Damages Limits ----------------------------------------------------------------------- Linda M. Gilbert works as a millwright at the DaimlerChrysler Jefferson North Assembly Plant in Detroit - a millwright is a sort of trouble- shooter. The work is hard, it pays well, and it is unusual to see a woman doing it, according to a report by The New York Times. A jury in Detroit, Michigan, found that Ms. Gilbert's male colleagues had harassed her for years with pornographic messages, vulgar talk and insults. The jury awarded her $21 million, the largest affirmed award for an individual sexual harassment plaintiff in United States history. None of that money was for punitive damages, which, as the word suggests, are intended to punish and deter the defendant rather than compensate the plaintiff. Punitive damages are often said to be the main reason for outsized jury awards. Indeed, Michigan, like a handful of other states, prohibits punitive damages in most cases. Instead, the jury awarded Ms. Gilbert $1 million for potential lost earnings and medical expenses, and $20 million for pain and suffering. Individuals who study jury awards say that creative lawyers, obstructed by all sorts of limitations that have been placed on awarding punitive damages, have shifted their attention to pain and suffering, a little- scrutinized form of compensation for psychic harm. This shift is also true in class actions - although the situations in which pain and suffering will possess sufficient commonality to be shared by a single class of persons, or multiple classes of persons, would have to be carefully formulated. "Plaintiffs' lawyers are repackaging their punitive-damages claims to put the money load into pain-and-suffering damages," said Victor E. Schwartz, co-author of the leading law school textbook on torts. However, the two sorts of damages are meant to be conceptually distinct. "Pain and suffering focuses on the harm done to plaintiff," said Catherine M. Sharkey, a fellow at Columbia Law School. "Punitive damages looks to the conduct of the defendant. It is a separate question whether juries in practice have in mind a certain number and will get there no matter what." In its appeal to the Michigan Supreme Court, DaimlerChrysler argued that the verdict was "a disguised punitive-damages award." Elizabeth Hardy, a company lawyer, says, "There is absolutely no correlation between $21 million and the impact that cartoons and verbal comments have had on this woman." Ms. Gilbert's lawyer, Geoffrey N. Fieger, who had asked the jury for $140 million, says the award merely compensates his client for the effect of the abuse. The award, he said, was justified by years of crushing abuse. Recent United States Supreme Court decisions have encouraged judges to scrutinize punitive awards, while damages for pain and suffering, and other awards that compensate plaintiffs for losses, are treated with deference. In addition, punitive damages recently have become subject to the federal income tax, while pain-and-suffering awards are not. Many states that do allow punitive damages have enacted fixed caps or have limited the permissible ratio between compensatory and punitive damages. Florida does both. In most cases it limits punitive damages to $500,000, or three times the compensatory award, whichever is greater. Other states have diverted punitive awards to their treasuries. Oregon allocates 60 percent of such awards to a state fund for crime victims. The imposition of these limits, and others, Mr. Schwartz says, has driven hundreds of millions of dollars into pain-and-suffering awards. He cited recent verdicts for tens of millions in California, Mississippi and New York, in cases involving injuries in automobile accidents, medical malpractice, asbestos and a heartburn drug. David A. Schkade, a business professor at the University of Texas and a co-author of a recent book on punitive damages, said there had been no systematic study of the trend. There is evidence, however, that there is leakage between different kinds of damages. David W. Leebron, dean of the Columbia Law School, agreed. "When you cut down on one kind of award, you will see a shift in investment to another kind of award, or a shift to other kinds of cases," said Dean Leebron. There are certainly fewer limitations on the rendering of pain-and- suffering awards, and less judicial scrutiny. "The law provides no guidance, in terms of any benchmark, standard figure, or method of analysis, to the jury in the process of determining an appropriate award," Dean Leebron wrote in The New York University Law Review in 1989. "The only judicially articulated standard of review requires that the award `not shock the judicial conscience.'" Nonetheless, the concept of pain and suffering has its own critics. In a 1990 study, Peter W. Huber, a senior fellow at the conservative Manhattan Institute for Policy Research, wrote that "it is easy for plaintiffs to feign or exaggerate psychic injury" and that "even if fear or pain can be proved, they are impossible to price." Without Mr. Huber's intending it, the expression "impossible to price," particularly when linked with proved fear and/or pain, makes such claims attractive to lawyers and, apparently, evocative of juries' understanding and sentiments. Mr. Fieger, who represents Ms. Gilbert, told the jury that her male co-workers had brutalized her, that the abuse, while not physical, caused her to be hospitalized several times and to attempt suicide. Ms. Gilbert told of reporting six incidents to her managers that included a picture of male genitalia taped to her toolbox, a copy of Penthouse magazine left on top of it and a ribald poem posted nearby. DaimlerChrysler told the court that "shop talk and similar vulgar activities are the norm in the plant setting." It emphasized that Ms. Gilbert alleged no physical contact, propositioning for sex or retaliation. The award, DaimlerChrysler said on appeal to the Michigan Supreme Court, is 70 times the size of the largest affirmed sexual- harassment verdict in Michigan history. The company's attorney pointed out to the appeals court, the award is 70 times the maximum award for such claims for compensatory and punitive damages combined, under federal harassment law. The court said that the jurors had awarded less than the $140 million Ms. Gilbert had asked for, proving that "they were exercising their independent abilities to reason." The court also said that the jury was entitled to believe testimony that the harassment made Ms. Gilbert's life joyless, "changing the fundamental chemistry in her brain." Mr. Fieger said, in what might be called a fitting conclusion, had punitive damages been available, "I would have gotten one of those billion-dollar verdicts." New Securities Fraud Cases CIGNA CORPORATION: Mark McNair Files Securities Fraud Suit in E.D. PA --------------------------------------------------------------------- The Law Office of Mark McNair initiated a securities class action against CIGNA Corp. (NYSE:CI), on behalf of, and seeks damages for, shareholders who purchased CIGNA securities between May 2, 2001 and October 24, 2002, inclusive, in the United States District Court for the Eastern District of Pennsylvania against the Company and: (1) H. Edward Hanway (its CEO and Chairman of the Board), (2) James G. Stewart (its CFO and Executive Vice President) and (3) James A. Sears (its Chief Accounting Officer) The case charges that defendants violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the class period which statements had the effect of artificially inflating the market price of the Company's securities. Throughout the class period, plaintiffs allege, the defendants issued press releases announcing impressive earnings growth, while failing to disclose that the Company had not adequately reserved for its reinsurance obligations for its guaranteed minimum death benefits (GMDB). After the market closed on September 3, 2002, the Company issued a press release announcing a $720 million after-tax charge as part of a program to manage its reinsurance exposure for its GMDB obligations. Nevertheless, CIGNA still assured the market that it would meet its third quarter and 2002 financial targets. On October 18, 2002, CIGNA announced that it was taking an additional $315 million charge relating to the Unicover arbitration. Thus, the Complaint alleges, CIGNA's write-downs relating to its discontinued reinsurance business, which the company had downplayed throughout the class period as immaterial, exceeded one billion dollars for the third quarter. Then, on October 24, 2002, the Company announced that it would not meet its third quarter and year 2002 guidance, despite its recent reassurances to the contrary. This revelation further stunned the market and resulted in CIGNA stock's price tumbling 42%, falling from $63.60 per share at the close of October 24 to as low as $36.81 on October 25, on extremely heavy trading volume. For more details, contact Mark McNair by Phone: 877-511-4717 or 202-872-4717 by E-mail: mcnair@justice4investors or visit the firm's Website: http://www.justice4investors.com CIGNA CORPORATION: Berger & Montague Commences Securities Suit in PA --------------------------------------------------------------------- Berger & Montague, PC initiated a securities class action against CIGNA Corp. (NYSE: CI) and some of its officers and directors on behalf of all persons or entities who purchased common stock between May 2, 2001 through October 24, 2002, inclusive, in the United States District Court for the Eastern District of Philadelphia. 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 May 2, 2001 and October 24, 2002. According to the complaint, the Company issued numerous press releases, and filed financial reports with the SEC, regarding its performance during the class period which represented that the Company was experiencing strong growth, that its operating income for 2002 is expected to be $1.1 billion and that its liabilities on its discontinued reinsurance operations were not expected to be material to its liquidity. The complaint alleges that defendants failed to disclose that CIGNA had been under-reserving for its reinsurance obligations, particularly for its reinsurance of guaranteed minimum death benefits, (GMDB), by (at least) hundreds of millions of dollars. In addition, according to the complaint, the statements were materially false and misleading because CIGNA was experiencing declining demand for its offerings, particularly in its Employee Health Care, Life and Disability segment, and its income guidance for 2002 was lacking in any reasonable basis when made. The complaint also alleges the defendants failed to disclose computer integration problems and customer service problems within the Company's Health Care, Life and Disability segments that forced CIGNA to grant substantial margin concessions in order to retain aggrieved customers causing the company to revise third quarter and full year 2002 earnings estimates. The suit further alleges that defendants engaged in the conduct alleged therein because CIGNA was planning to, and on October 16, 2002 did issue $250 million of 6-3/8% notes and that the offering would have been negatively affected if the truth regarding CIGNA's business and financial condition was known. On September 3, 2002, after the market closed, CIGNA issued a press release announcing that it will take a $720 million after-tax ($1.1 billion pre-tax) charge in order to manage its GMDB liabilities, but reaffirmed its previously issued guidance for 2002. In response, credit ratings agencies Standard & Poor's and Fitch reduced CIGNA's credit rating and CIGNA's stock price dropped by 6%. Then, on October 24, 2002, after the close of trading, CIGNA shocked the market by announcing that, contrary to its recent reaffirmations, it would not meet its 2002 earnings guidance due to weakness in its Employee Health Care, Life and Disability segment. Following the downward earnings revisions of October 24, 2002, almost 37,000,000 shares of CIGNA common stock were traded on October 25, 2002 with the price of the Company's shares falling as much as 45% from the October 24, 2002 closing price of $63.60 per share to as low as $34.70. For more details, contact Sherrie R. Savett, Arthur Stock, Casey M. Preston or Kimberly A. Walker by Mail: 1622 Locust Street, Philadelphia, PA 19103 by Phone: 888-891-2289 or 215-875-3000 by Fax: 215-875-5715 by E-mail: InvestorProtect@bm.net or visit the firm's Website: http://www.bergermontague.com CIGNA CORPORATION: Much Shelist Lodges Securities Fraud Suit in E.D. PA ----------------------------------------------------------------------- Much Shelist Freed Denenberg Ament & Rubenstein, PC initiated a securities class action in the United States District Court for the Eastern District of Pennsylvania on behalf of purchasers of the securities of CIGNA Corporation (NYSE:CI) between May 2, 2001 and October 24, 2002, inclusive. The suit names as defendants the Company and: (1) H. Edward Hanway (CEO, President and Chairman), (2) James G. Stewart (CFO) and (3) James A. Sears (Chief Accounting Officer) The defendants allegedly violated the federal securities laws by issuing a series of materially false and misleading statements to the market, causing the market price of CIGNA securities to be artificially inflated. According to the complaint, CIGNA issued numerous press releases, and filed financial reports with the SEC, regarding its performance during the class period. The releases and filings represented that the Company was experiencing strong growth, that its operating income for 2002 is expected to be $1.1 billion and that its liabilities on its discontinued reinsurance operations were not expected to be material to its liquidity. The complaint further alleges that these, and other, representations were materially false and misleading because they failed to disclose that CIGNA had been under-reserving for its reinsurance obligations, particularly for its reinsurance of guaranteed minimum death benefits (GMDB), by (at least) hundreds of millions of dollars. In addition, according to the complaint, the statements were materially false and misleading because CIGNA was experiencing declining demand for its offerings, particularly in its Employee Health Care, Life and Disability segment, and its income guidance for 2002 was lacking in any reasonable basis when made. The suit further alleges that defendants engaged in the conduct alleged therein because CIGNA was planning to, and on October 16, 2002, did, issue $250 million of 6 3/8% notes and that the offering would have been negatively affected if the truth regarding CIGNA's business and financial condition was known. On September 3, 2002, after the market closed, CIGNA issued a press release announcing that it will take a $720 million after-tax ($1.1 billion pre-tax) charge in order to manage its GMDB liabilities, but reaffirmed its previously issued guidance for 2002. In response, credit ratings agencies Standard & Poor's and Fitch reduced CIGNA's credit rating and CIGNA's stock price dropped by 6%. Then, on October 24, 2002, after the close of trading, CIGNA shocked the market by announcing that, contrary to its recent reaffirmations, it would not meet its 2002 earnings guidance due to weakness in its Employee Health Care, Life and Disability segment. In reaction to the announcement, the price of CIGNA common stock plummeted by 42%, falling from a $63.60 per share close on October 24, 2002 to trade as low as $36.81 per share on October 25, on extremely heavy trading volume. For more details, contact Carol V. Gilden by Phone: 800-470-6824 by E- mail: investorhelp@muchshelist.com AMERICAN ELECTRIC: Milberg Weiss Commences Securities Fraud Suit in OH ---------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP initiated a securities class action on behalf of purchasers of the securities of American Electric Power Company, Inc. (NYSE: AEP) between April 24, 2001 and October 9, 2002, inclusive, in the United States District Court, Southern District of Ohio, Eastern Division, against the Company, E. Linn Draper, Jr., and Susan Tomasky. The suit alleges 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 material misrepresentations to the market between April 24, 2001 and October 9, 2002, thereby artificially inflating the price of Company securities. Throughout the class period, as alleged in the complaint, the Company issued materially false and misleading statements regarding its increasing energy trading revenues and earnings. As alleged in the complaint, these statements were materially false and misleading because they failed to disclose, among other things, that: (1) the Company failed to implement appropriate risk management procedures regarding information provided to trade publications; (2) as a result of this failure to implement appropriate risk management procedures, the Company was manipulating price indices used throughout the industry; (3) as a result of this manipulation, the Company gained revenue and profits that it could not maintain absent manipulation; (4) without improper manipulation, the Company could not successfully maintain its energy trading business; and (5) as a result, the energy trading business was not the business opportunity that the Company presented throughout the class period. On October 9, 2002, the last day of the class period, the Company announced that it had fired five of its thirty natural-gas traders, who the Company stated had given false gas pricing data to index publishers. While AEP acknowledged that its traders had not been engaged in "ethical business practices," it claimed that it did not know whether the false data affected the published indices. In fact, no one at AEP asked any of the fired traders why they engaged in the fraudulent activities. As alleged in the complaint, by making this announcement, AEP was essentially admitting that it had failed to institute appropriate oversight measures to prevent the wrongful activity, and by doing so, was able to make substantial profits from its energy selling activities. 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: AEPcase@milbergNY.com or visit the firm's Website: http://www.milberg.com NUI CORPORATION: Bernard Gross Commences Securities Fraud Suit in NJ -------------------------------------------------------------------- The Law Offices of Bernard M. Gross PC initiated a securities class action in the United States District Court for the District of New Jersey on behalf of all persons and entities who purchased or otherwise acquired the common stock of NUI Corporation (NYSE:NUI), between November 8, 2001 and October 17, 2002, inclusive. The suit names as defendants the Company and John Kean, Jr. The complaint charges the Company and Mr. Kean, Jr., President, Chief Executive Director, and a Director and member of the Executive Committee, with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, by issuing a series of materially false and misleading statements to the market during the class period concerning the failure to properly record its fixed cost expenses, accrue necessary pension expenses, and reserve adequate amounts for its self-insured medical benefits in its quarterly unaudited financial statements. As alleged in the suit, throughout the class period, defendants knew that the Company was confronting material problems in its businesses, which were causing the Company to incur greatly increased costs throughout the class period. These costs included significant increases in fixed costs for its telecommunications business, greatly increasing costs of self-insuring for medical benefits, and the tremendous decline in the value of its pension plan assets which would cause NUI to accrue substantial pension expense. These increased material costs were putting a tremendous strain on NUI's operating margins and, if properly and fully accounted for in NUI's financial statements, would cause NUI to suffer greatly reduced earnings per share. The problem presented to defendants by these materially increasing costs and their negative impact on NUI's earnings if properly and fully accounted for and disclosed was exacerbated by the high level of long- term and short-term debt on NUI's balance sheet and the declining earnings NUI began to experience at the outset of the Class Period. Thus, in order to mislead the market with respect to NUI's spiraling costs and negative impact on NUI's margins and earnings, defendants embarked on the scheme and continuing course of conduct during the class period to enable NUI to complete necessary corporate acquisitions using its stock as currency and to complete a public offering of common stock to generate desperately-needed cash to pay down its short-term debt. Finally, when NUI's newly appointed outside auditors were conducting their audit of NUI's financial statements for Fiscal Year 2002, the twelve months ended September 30, 2002, defendants, on October 18, 2002, disclosed the long-withheld truth: NUI would sustain greatly reduced earnings for FY 2002 and FY 2003 because of its spiraling costs, including significantly increased fixed costs to build its back office infrastructure to support its telecommunications business and significant increases in medical and pension benefit expenses due to the increase in the volume of claims and the decline in the equity market. As a result of this disclosure, NUI's share price fell more than 50%, falling $10.17 per share, to close at $10.00 per share on October 18, 2002, on extraordinary volume of 3.2 million shares. For more details, contact Deborah R. Gross or Susan R. Gross by Phone: 866-561-3600 (toll-free) or 215-561-3600 by E-mail: susang@bernardmgross.com or debbie@bernardmgross.com or visit the firm's Website: http://www.bernardmgross.com SALOMON SMITH: Kaplan Fox Commences Securities Fraud Suit in S.D. NY -------------------------------------------------------------------- Kaplan Fox & Kilsheimer LLP initiated a securities class action against Citigroup Inc., Salomon Smith Barney Inc., and Jack Grubman, in the United States District Court for the Southern District of New York on behalf of all persons or entities who purchased the common stock of Williams Communications Group, Inc. (OTCBB:WCGOQ) formerly (Nasdaq:WCGRQ) between October 27, 1997 and November 2, 2001, inclusive. The complaint alleges that Defendants violated the federal securities laws by issuing analyst reports regarding WCG that recommended the purchase of WCG common stock and which set price targets for WCG common stock, without any reasonable factual basis. The complaint further alleges, among other things, that when issuing its WCG analyst reports, defendants failed to disclose significant, material conflicts of interest which it had concerning the WCG reports, because of Salomon's desire to obtain investment banking business from WCG. Throughout the class period, the defendants maintained a "BUY" recommendation on WCG in order to obtain and support lucrative financial deals for Salomon. The class period begins on October 27, 1997, at which time Salomon initiated coverage of WCG common stocks as a "BUY." The Class Period ends on November 2, 2001, the date Defendants belatedly downgraded WCG from a "BUY" to a "NEUTRAL." As a result of defendants' false and misleading analyst reports, WCG common stock traded at artificially inflated levels during the class period. For more details, contact Frederic S. Fox, Donald R. Hall by Mail: 805 Third Avenue, 22nd Floor, New York, NY 10022 by Phone: 800-290-1952 or 212-687-1980 by Fax: 212-687-7714 or by E-mail: mail@kaplanfox.com SALOMON SMITH: Pomerantz Haudek Commences Securities Suit in S.D. NY -------------------------------------------------------------------- Pomerantz Haudek Block Grossman & Gross LLP initiated a securities class action in the United States District Court for the Southern District of New York against Salomon Smith Barney, Inc. and its former telecommunications research analyst Jack B. Grubman on behalf of investors who purchased securities, including the 6% Convertible Subordinated Notes due 2009, of Level 3 Communications, Inc. (Nasdaq:LVLT) during the period from January 4, 1999 through June 18, 2001, inclusive. The lawsuit charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing false and misleading analyst reports on Level 3 in a bid to win or maintain lucrative banking and advisory work from the Company. The complaint alleges that Salomon and Grubman urged investors to purchase Level 3 securities by issuing false and misleading analyst reports rather than providing independent objective analysis. By April 2001, Salomon had received approximately $136 million in investment banking fees from Level 3. As a result of defendants' false and misleading statements, the market price of the Notes was artificially inflated, maintained or stabilized during the class period. On September 30, 2002, New York State Attorney General Eliot Spitzer sued five current and former executives from four different telecommunication companies for repayment of proceeds realized through "profiteering in Initial Public Offerings (IPOs) and phony stock ratings." In addition to allegations of "spinning," the complaint charges that defendants issued favorable but false ratings on existing or potential banking clients, including Level 3, in order to earn lucrative fees involved in underwriting and advisory work. The complaint details how analysts were pressured to issue positive ratings and avoided the bottom two ratings in Salomon's five category rating system. Salomon employees, especially the retail brokers, allegedly understood the fraud being perpetrated on individual investors and called Mr. Grubman a "disgrace" and "investment banking whore." Similarly, on September 23, 2002, NASD issued a press release announcing that it had fined Salomon $5 million for issuing materially misleading research reports on Winstar Communications, Inc. in 2001 that were neither objective nor independent, but instead were the biased, overly-optimistic and uncritical product of collaboration between defendants and Winstar management. In addition to the specific investigations above, Salomon is also the target of broader investigations by NASD, the Securities and Exchange Commission, the House Financial Services Committee and the New York State Attorney General concerning research practices and analyst conflicts; the allocation of hot initial public stock offerings to banking clients, including WorldCom, Inc. executives; and Grubman's surprise upgrade on AT&T Corp. in November, 1999 after years of bearish reports on the company and only months before Salomon was named one of three top underwriters in the $10 billion spin-off of the company's wireless-phone unit. For more details, contact Andrew G. Tolan by Phone: 888-476-6529 (888-4-POMLAW) by E-mail: agtolan@pomlaw.com or visit the firm's Website: http://www.pomerantzlaw.com ST. PAUL: Abbey Gardy Commences Suit For Securities Violations in MN -------------------------------------------------------------------- Abbey Gardy, LLP initiated a securities class action in the United States District Court for the District of Minnesota on behalf of all persons who purchased securities of The St. Paul Companies (NYSE:SPC) between November 5, 2001 and July 9, 2002, inclusive. The suit names as defendants the Company, Chief Executive Officer J.S. Fishman and Chief Financial Officer Thomas A. Bradley. The suit alleges 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 material misrepresentations to the market during the class period thereby artificially inflating the price of Company securities. The suit alleges that during the class period, defendants failed to make adequate disclosures or take adequate reserves concerning litigation filed in 1993 in California state court known as Western MacArthur Co. et al. v. United States Fidelity & Guaranty Co., et al, Case No. 721595-7 (consolidated with Case No. 828101-2, Superior Court of California, Alameda County). Plaintiff claims that although trial of the Western MacArthur litigation commenced in approximately March 2002, the Company first disclosed the existence of the litigation on or about May 15, 2002, but did not disclose or quantify the amount or general magnitude of potential exposure to liability which St. Paul might suffer as a result of the litigation, nor did the Company increase its reserves at that time. On June 3, 2002, the Company announced that a settlement had been reached whereby St. Paul would pay almost $1 billion to satisfy the claims reflected in the litigation, although the Company's SEC filings stated that as of December 31, 2001, the Company's net reserves for asbestos claims was only $367 million. The suit charges that the Company tried to disguise the impact of the Western MacArthur litigation settlement by focusing on the alleged after-tax impact of the litigation and falsely claiming that $150 million of the litigation payments could be charged to the Company's reserves, and that a subsequent SEC filing by the Company reflected St. Paul's failure to take adequate reserves for its potential liability in the litigation. News of the Western MacArthur litigation settlement caused the price of the Company's stock to decline during the class period from a high of $49.20 on November 5, 2001 to a low of $34.65 on July 9, 2002, the last day of the class period. For more details, contact Nancy Kaboolian by Phone: 800-889-3701 by E- mail: nkaboolian@abbeygardy.com or visit the firm's Website: http://www.abbeygardy.com TXU CORPORATION: Weiss & Yourman Commences Securities Suit in N.D. TX --------------------------------------------------------------------- Weiss & Yourman LLP initiated a securities class action against TXU Corp. (NYSE:TXU), and certain of its officers and directors in the United States District Court for the Northern District of Texas, Dallas Division, on behalf of purchasers of TXU securities between April 25, 2002 and October 11, 2002. The complaint charges the defendants with violations of the Securities Exchange Act of 1934. The complaint alleges that defendants issued false and misleading statements which artificially inflated the stock. For more details, contact James E. Tullman, David C. Katz, and/or Mark D. Smilow by Mail: The French Building, 551 Fifth Avenue, Suite 1600, New York, NY 10176 by Phone: 888-593-4771 or 212-682-3025 by E-mail: info@wynyc.com TXU CORPORATION: Cauley Geller Lodges Securities Fraud Suit in N.D. TX ---------------------------------------------------------------------- Cauley Geller Bowman & Coates, LLP initiated a securities class action in the United States District Court for the Northern District of Texas, Dallas Division, on behalf of purchasers of TXU Corporation (NYSE:TXU) publicly traded securities during the period between April 25, 2002 and October 11, 2002, inclusive. The complaint is being amended to include those who purchased TXU securities pursuant to TXU's May 31, 2002 secondary offering of 11 million shares at $51.15 per share and its offering of 8.8 million units of FELINE PRIDES. The complaint charges the Company and certain of its officers and directors and its underwriters with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, arising out of defendants' issuance of false and misleading statements about the Company's business, operating performance and prospects. The complaint alleges that during the class period, defendants represented that the Company could succeed in the competition created by deregulation. Defendants then represented that the Company's European operations were improving, it would succeed in competition in the U.K. market and it was on track to report EPS of $4.35+ and $4.60+ in 2002 and 2003, respectively. As a result of these allegedly false statements, Company stock traded at artificially inflated levels, as high as $56 per share. Due to this inflation, defendants were able to complete a secondary offering of 11.8 million shares of common stock, priced at $51.15 per share and 8.8 million units of FELINE PRIDES (equity linked debt securities), raising nearly a billion dollars in much needed financing. Subsequent to the offering, defendants needed to maintain a high stock price to avoid triggering additional debt and the conversion of preferred stock into common stock pursuant to a partnership agreement. On October 4, 2002, TXU issued an earnings warning, indicating that due to customer attrition and ongoing problems in Europe the Company would report 2002 EPS of only $3.25. On this news, the Company's stock price declined to $27 per share, from more than $40 per share the prior week. However, the stock continued to be inflated as defendants concealed the extreme liquidity problems from which the Company was suffering. Defendants even assured the market that the Company was strong financially and that the dividend was "sound and secure." Then, on October 14, 2002, before the market opened, the Company stunned the market with news that it was cutting its dividend 80%, to $0.125 per share and would no longer support its European operations. The Company's stock price immediately collapsed on this news to as low as $10.10 per share before closing at $12.94, a one day drop of 31%, on volume of 39 million shares. For more details, contact Jackie Addison, Heather Gann or Sue Null 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 ********* 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. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *