/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990316.MBX C L A S S A C T I O N R E P O R T E R Tuesday, March 16, 1999, Vol. 1, No. 28 Headlines EASTMAN KODAK: Class Action Repair Parts Litigation Concluded GENERAL MOTORS: Waiting for Decision on Dismissal of EDS Suit GENERAL MOTORS: Continuing to Defend Defective Brake Pin Suits GENERAL MOTORS: Awaits Decision on Motion to Dismiss Hughes Suit GENERAL MOTORS: Louisiana Court Rekindles Fuel Tank Litigation GENERAL MOTORS: Defending Defective Door Latch Litigation GENERAL MOTORS: 8th Cir. Appeal Pending in Anti-Lock Brake Suits GENERAL MOTORS: Motion to Dismiss Front Seat Air Bag Suit Pending GENERAL MOTORS: Four Defective Paint CasesPend; No Classes Yet HOLOCAUST VICTIMS: Austrian Banks Will Pay $40MM & Release Papers INDIAN TRUST: Interior Officials End Indian Talks ISLE OF CAPRI: Subsidiary Named in Gaming Industry RICO Complaint LASER TECHNOLOGY: Has Not Fully Reviewed Shareholder Complaints MESA AIR: Substantial Payment Made on Shareholder Settlement MOHAWK INDUSTRIES: Continues Defense of Carpet Antitrust Suits NEW YORK: Civil Liberties Group Sues over Drunken-Driving Policy PEGASUS COMMUNICATIONS: Evaluating Response to Late Fee Complaint PLM INTERNATIONAL: ESOP Complaint Goes to Trial in September PLM INTERNATIONAL: March Hearing on Fund Class Certification SEARS, ROEBUCK: Credit Card Customers Receive, on Average, $23.80 TELXON CORPORATION: Counts 26 Shareholder Suits; SEC Inquiring TOWNE BANCORP: Vows to Defend Suits; Cooperating with SEC Inquiry ********* EASTMAN KODAK: Class Action Repair Parts Litigation Concluded ------------------------------------------------------------- In April 1987, Eastman Kodak Co. was sued in federal district court in San Francisco by a number of independent service organizations who alleged violations of Sections 1 and 2 of the Sherman Act and of various state statutes in the sale by the Company of repair parts for its copier and micrographics equipment (Image Technical Service, Inc. et al v. Eastman Kodak Company, "ITS"). The complaint sought unspecified compensatory and punitive damages. Trial began on June 19, 1995 and concluded on September 18, 1995 with a jury verdict for plaintiffs of $23,948,300 ($71,844,900 after trebling). The Company appealed the jury's verdict, and on August 26, 1997 the 9th Circuit Court of Appeals rendered its decision affirming in part, reversing in part, and reversing and remanding on the issue of used equipment damages. The court affirmed the jury's liability rulings, but reduced damages (after trebling) from $71,844,900 to $35,818,200, and narrowed the scope of the injunction under which the Company is required to make parts available. On April 27, 1998, the Supreme Court denied the Company's petition for Supreme Court review, effectively concluding all aspects of the case except plaintiffs' used equipment claim. The Company took a third quarter 1997 pre-tax charge of $46,000,000. Two cases that raise essentially the same antitrust issues as ITS are Nationwide, et al v. Eastman Kodak Company, filed March 10, 1995, and A-1 Copy Center, et al v. Eastman Kodak Company, filed December 13, 1993. Both cases were filed in federal district court in San Francisco. A-1 is a consolidated class action. The complaints in both cases seek unspecified compensatory and punitive damages. On September 16, 1998, the Company and plaintiffs in ITS, Nationwide, and A-1 engaged in a successful mediation, effectively concluding these cases. Under the terms of the mediated settlement, the Company will make payments to plaintiffs in return for plaintiffs' discontinuance of the litigation, with prejudice. A fourth repair parts case, Broward Microfilm, Inc. v. Eastman Kodak Company, a purported national class action which was filed February 27, 1996 in federal district court in Miami, was dismissed without prejudice on May 13, 1998. GENERAL MOTORS: Waiting for Decision on Dismissal of EDS Suit ------------------------------------------------------------- Two suits, Stephen A. Solomon v. General Motors Corporation, et al. and TRV Holding Company v. General Motors Corporation, et al., (collectively "Solomon/TRV"), were filed in Delaware Chancery Court on May 13 and 18, 1994, respectively, challenging GM's split-off of Electronic Data Systems Corporation (EDS). Such actions have been consolidated and a consolidated amended complaint was filed on April 2, 1996. In addition, on May 10, 1996, a second amended and supplemental consolidated complaint (the "Second Amended Complaint") was filed by plaintiffs in this action. Another lawsuit, Ward et al., as Trustees for the Eisenberg Children's Irrevocable Trust II v. General Motors Corporation, et al. (Ward), was filed in Delaware Chancery Court on November 15, 1995. On May 17, 1996, Solomon/TRV and Ward (collectively, "Solomon/TRV/Ward") were consolidated and the Second Amended Complaint was adopted as the complaint for the consolidated action. Solomon/TRV/Ward purports to be a class action brought on behalf of former holders of Class E common stock, $0.10 par value per share (the "Class E Common Stock"), of General Motors against certain present and former directors of General Motors, as well as a double derivative action brought on behalf of EDS against certain present and former directors of General Motors and certain former directors of EDS (all of whom are also directors or officers of General Motors). EDS is named in the complaint only as a nominal defendant with respect to the double derivative action. The Second Amended Complaint alleges that defendants have breached and are continuing to breach their fiduciary duties in connection with their conduct with respect to EDS and the proposed split-off of EDS from General Motors (the "Split-Off"). In particular, the complaint alleges that the process of establishing terms for the Split-Off, including the consideration of alternatives to such transaction and the negotiating process in connection therewith, was unfairly dominated and controlled by General Motors and that the resulting terms unfairly benefit General Motors and its continuing shareholders, including the holders of common stock, $1-2/3 par value per share (the "$1-2/3 Common Stock"), and the Class H common stock, $0.10 par value per share (the "Class H Common Stock"), of General Motors, to the detriment of EDS and the former holders of Class E Common Stock. The complaint also alleges that the split-off would unfairly effect a disposition of EDS because it would not provide for a recapitalization of the Class E Common Stock into $1-2/3 Common Stock at a 120% exchange ratio, as had been provided in the General Motors Certificate of Incorporation upon a disposition by General Motors of substantially all of the business of EDS. Furthermore, the complaint alleges that the solicitation of consents by General Motors with respect to the proposed split-off is wrongfully coercive and the solicitation statement being used in connection therewith is materially deficient. The Second Amended Complaint seeks monetary damages from the defendants, as well as an injunction against further action in connection with the split-off. In addition, the complaint seeks an order appointing independent representatives to act on behalf of and protect the interests of EDS and the former holders of Class E Common Stock. The complaint also seeks an order requiring the defendants to disseminate completely all material information to the former holders of Class E Common Stock in connection with the split-off. On May 10, 1996, the plaintiffs in the consolidated action filed a motion for expedited proceedings, including a request for a hearing on their application for a preliminary injunction against further action in connection with the split-off. As a result of such application, a hearing on the plaintiffs' application for a preliminary injunction had been scheduled for May 30, 1996. On May 23, 1996, after limited discovery, the plaintiffs' counsel informed the court that plaintiffs had concluded that adequate relief could be afforded to the plaintiff class members after the split-off was consummated and were withdrawing their application for expedited proceedings including a preliminary injunction hearing. Thus, plaintiffs abandoned their pursuit of an injunction to prevent consummation of the split-off. On June 7, 1996, having received consent of a majority of the holders of each class of its common stock, General Motors split-off EDS to former General Motors Class E stockholders. (See Tabulation of consents at Item 4, page 36 of the Form 10-Q filed by General Motors for the Quarter Ended June 30, 1996). On December 1, 1997, plaintiffs served a Third Amended and Supplemental Consolidated Complaint which makes essentially the same allegations as the Second Amended Complaint. The complaint seeks monetary damages, including recissory damages, and an accounting for any special benefits obtained by defendants. On December 11, 1997, defendants filed a motion to dismiss the complaint. The parties continue to await a decision by the Court. GENERAL MOTORS: Continuing to Defend Defective Brake Pin Suits -------------------------------------------------------------- On April 26 and 27, 1996, two purported class actions, Keith McGill v. General Motors Corporation and Richard Dolowich v. General Motors Corporation, were filed against General Motors in the Supreme Court of the State of New York, Counties of Bronx and Suffolk, alleging defective rear disc brake caliper pins in the "GM W-Body car". These actions have been consolidated in the Supreme Court of the State of New York, County of Bronx. The Dolowich suit is brought on behalf of all persons and entities in the United States who currently own or lease or previously owned or leased a 1988-1993 Buick Regal, Oldsmobile Cutlass Supreme, Pontiac Grand Prix or Chevrolet Lumina. The McGill suit includes the same model year vehicles, but is brought on behalf of persons and entities residing in the State of New York who purchased or leased such vehicles and still own them. Three additional purported nationwide class actions, brought on behalf of current and previous owners of the same vehicles, have been filed in federal courts in New Jersey, Garcia v. General Motors, and Pennsylvania, Neff v. General Motors and Marcel v. General Motors. Two additional purported class actions involving the same vehicles were filed, one in the Superior Court of New Jersey for Burlington County, Bishop v. General Motors Corporation and another in the United States District Court for the Eastern District of Pennsylvania, Cohen v. General Motors Corporation. Together, the complaints allege violation of state consumer protection laws, fraud, negligent misrepresentation, and breach of express and implied warranty, and seek unspecified amounts of economic damages, punitive damages not less than $20 million, attorneys' fees and costs, and injunctive relief. The Neff, Marcel and Cohen actions have been consolidated in Pennsylvania State Court. The Garcia and Bishop actions have been consolidated in New Jersey State Court. On November 11, 1996, the New Jersey state court rendered a decision certifying a class of all past and present owners of 1988 through 1993 model year Buick Regals, Chevrolet Luminas, Oldsmobile Cutlass Supremes and Pontiac Grand Prix. The New Jersey Appellate Division denied GM's motion for leave to appeal, but noted that the trial court is required to monitor compliance with the requirements to maintain a class. GM intends to vigorously defend this matter. GENERAL MOTORS: Awaits Decision on Motion to Dismiss Hughes Suit ---------------------------------------------------------------- Nine lawsuits were filed in the Delaware Court of Chancery during the first quarter of 1997: Jules Levine v. General Motors Corporation, et al., on February 6, 1997; Steven Verkouteren v. General Motors Corporation, et al., on February 6, 1997; Malcolm Rosenwald v. General Motors Corporation, et al., on February 7, 1997; Richard Strauss v. General Motors Corporation, et al., on February 7, 1997; Jeanette Whited, et al. v. General Motors Corporation, et al., on February 26, 1997; Andrew Carlucci, I.R.A. v. General Motors Corporation, et al., on March 3, 1997; Dr. Joseph Mantel v. General Motors Corporation, et al., on March 5, 1997; John P.McCarthy Profit Sharing Plan v. General Motors Corporation, et al., on March 6, 1997; and Patinkin v. General Motors Corporation, et al., on March 31, 1997. Each suit was denominated as a class action and was purportedly brought on behalf of specified holders of GM Class H common stock against the defendants, General Motors and its directors. The complaints made essentially the same allegations, namely, that the defendants have breached and are continuing to breach their fiduciary and alleged contractual duties to specified holders of GM Class H common stock in connection with the Hughes transactions. All of these lawsuits have been consolidated under the caption, In Re General Motors Class H Shareholders Litigation. Following a hearing on November 24, 1997, the Delaware Court of Chancery denied plaintiffs' request for expedited discovery and for the scheduling of a hearing on a motion for a preliminary injunction. On December 1, 1997, plaintiffs filed a Second Consolidated Amended Complaint which asserts three claims against General Motors and its directors. The first claim alleges that General Motors is breaching contractual obligations to GM Class H common stockholders by effecting a disposition of the defense electronics business of Hughes Electronics without providing for a recapitalization of the GM Class H common stock into $1-2/3 common stock at a 120% exchange ratio, as currently provided for under certain circumstances in the GM Certificate of Incorporation. Plaintiffs contend that any amendment of the GM Certificate of Incorporation as part of the Hughes transactions would be invalid because stockholders are being coerced into approving such a change. Plaintiffs' second claim alleges that GM's directors have breached their fiduciary duties (1) by failing to act in an informed manner and (2) by failing to act independently to protect the interests of both classes of GM common stockholders. In particular, this claim alleges that no processes were employed to ensure that the interests of GM Class H common stockholders were adequately represented in connection with the various aspects of the Hughes transactions. Plaintiffs' third claim is that GM's directors have breached their duty of candor by using false and misleading solicitation materials to obtain approval of the Hughes transactions. This claim alleges, among other things, that the Solicitation Statement fails to disclose the consideration that GM Class H common stockholders would have received in the event the Hughes transactions triggered the provision in the GM Certificate of Incorporation for nondiscretionary recapitalization of GM Class H common stock into GM $1-2/3 common stock at a 120% exchange ratio; misstates that there is substantial uncertainty regarding application of this provision to the Hughes transactions; and misleadingly portrays the Hughes transactions as being fair to GM Class H common stockholders. The complaint alleges that GM Class H common stockholders would be irreparably damaged if the Hughes transactions were to be consummated as structured because they would lose their alleged right to receive a 20% premium in the event of a disposition of Hughes Aircraft. Plaintiffs sought, among other things, an injunction against the consummation of the Hughes transactions, an order requiring defendants to implement certain procedures designed to protect the interests of GM Class H common stockholders, or, in the event the transaction closes (it has now closed), rescission and/or compensatory damages against the defendants. On December 17, 1997, having received consent of a majority of the holders of each class of its common stock, the Hughes transactions were consummated. (See Tabulation of consents at Item 4, page I-13 of the Form 10-K filed by General Motors for the Year Ended December 31, 1997). Also, on December 17, 1997, defendants filed a motion to dismiss the complaint. The parties continue to await a decision by the Court. GENERAL MOTORS: Louisiana Court Rekindles Fuel Tank Litigation -------------------------------------------------------------- Thirty-nine class actions have been filed in state, federal, and Canadian courts against the Corporation, claiming that 1973- 1987 model Chevrolet and GMC full-size pickup trucks are defective because their fuel tanks are mounted below the cab and outside the frame rails. Twenty-four federal court class actions were transferred to the federal court in Philadelphia, Pennsylvania by the Judicial Panel on Multidistrict Litigation. In these actions, plaintiffs claimed that the fuel tank locations make the vehicles unreasonably susceptible to fuel-fed fires following side-impact collisions. Plaintiffs alleged breach of contract and warranty, negligence, fraud and negligent misrepresentation, as well as violation of various state consumer protection laws. The lawsuits seek compensatory and punitive damages and injunctions requiring notice to owners, repairs, retrofitting and "disgorgement" of revenues. An agreement for a nationwide settlement of the class actions pending in federal and state courts received final court approval on December 19, 1996, by a state court in Louisiana. The settlement, which is not expected to have a material effect on the consolidated financial statements of General Motors, provides for owners of 1973 to 1991 full-size pickup trucks and cab chassis with outside-the-frame fuel tanks, as of July 3, 1996, to receive certificates for $1,000 toward the purchase of any new General Motors passenger car or light truck, except Saturns. The certificates can be used for the first 15 months at $1,000 or transferred one time, whereupon the transferee would be able to use the certificate for $500 ($250 if used with a General Motors rebate) toward the purchase of an eligible vehicle until expiration of the 15-month period. After the first 15 months, original recipients of the certificates may use them for an additional 18 months at $500 or transfer them, whereupon the transferee would be able to use the certificates for $250 towards the purchase of an eligible vehicle. For fleets and governmental entities, after the first 15 months, the certificates are reduced to $250 for an additional 35 months, but are not transferable, except to other departments or agencies of the same governmental entity. The settlement also provides for $4.1 million to fund motor vehicle fire safety research. Research funds will be used to benefit motor vehicle safety generally, and research will not be done on the pickup trucks. The court ordered General Motors to pay plaintiffs' attorneys' fees and costs totaling $27.875 million. The Louisiana Court of Appeals reversed on the ground that the findings required to certify a class had not been made and remanded the case to the trial court for the required findings. The Louisiana Supreme Court denied review. On January 20, 1999, the trial court made supplemental findings, recertified the settlement class, and reaffirmed its approval of the settlement. Certificates will not be issued until any appeals are concluded and the approval of the settlement is final. There are also pending individual product liability claims and lawsuits involving allegations of defects in the design of such vehicles resulting in fuel-fed fires following side- impact collisions. GM intends to defend these cases vigorously. GENERAL MOTORS: Defending Defective Door Latch Litigation --------------------------------------------------------- On December 2, 1996, a purported class action, Alma Rosa Rangel, et al. v. General Motors Corporation, was filed in District Court, Webb County, Texas, claiming that the Type III door latches used in approximately 40 million 1978 to 1986 model GM passenger cars and light trucks are defective. Plaintiffs allege breaches of express and implied warranties, negligence and gross negligence, and seek compensatory and punitive damages and attorneys' fees. No determination has been made that the case can proceed as a class action. GM has removed the case to the United States District Court, Southern District of Texas, Laredo Division, and intends to oppose certification of a class. On February 27, 1998, Johnny McLain v. General Motors Corporation was filed in Circuit Court, Walker County, Alabama alleging that Type III door latches used in 1979 to 1986 model GM vehicles are defective. GM removed the case to the United States District Court, Northern District of Alabama, and moved to dismiss that case. GM intends to vigorously defend these cases. GENERAL MOTORS: 8th Cir. Appeal Pending in Anti-Lock Brake Suits ---------------------------------------------------------------- Eleven purported class actions alleging that certain antilock braking systems on 1989 to 1996 light-duty GM trucks are defective were consolidated by the Judicial Panel on Multidistrict Litigation for coordinated pretrial proceedings as In Re General Motors Anti-Lock Brake Products Liability Litigation, USDC, Eastern District of Missouri, Eastern Division. On June 11, 1997, GM's motion to dismiss the consolidated complaint was granted. Plaintiffs have appealed to the federal court of appeals for the Eighth Circuit. GENERAL MOTORS: Motion to Dismiss Front Seat Air Bag Suit Pending ----------------------------------------------------------------- On April 25, 1997, a purported nationwide class action was filed against General Motors Corporation and certain other vehicle manufacturers in the Circuit Court of Coosa County, Alabama, Ellen Smith, et al v. General Motors Corporation, Ford Motor Company, Chrysler Motors Corporation, Sylacauga Auto Plex, et al, claiming that the front seat air bags installed in 1993 to 1997 model vehicles are defective because, when deployed, they are likely to injure small-statured adults and children. The complaint seeks compensatory damages, the cost of repair or replacement of the allegedly defective air bags, plus attorneys' fees. No determination has been made that the matter may proceed as a class action. The defendants have filed a motion to dismiss the complaint which is under consideration by the Court. GM intends to vigorously defend this matter. Two previously reported matters which purported to be class actions asserting claims similar to those in Ellen Smith v. General Motors, et al, have been dismissed with prejudice. GENERAL MOTORS: Four Defective Paint Cases Pend; No Classes Yet --------------------------------------------------------------- Seven separate putative class actions have been filed alleging defects in vehicle paint. Three of those cases have been dismissed. No determination has been made as to whether any of the four pending cases may proceed as a class action: * On March 24, 1995, a purported nationwide class action (Christian Amedee and Louis Fuxan v. General Motors Corporation, et al), was filed in the Civil District Court for the Parish of New Orleans, State of Louisiana, alleging the paint or paint application process used by GM at several unspecified North American assembly plants was defective due to the omission of a surface layer primer, allegedly causing the paint to prematurely delaminate, deteriorate, and peel. Plaintiffs seek unspecified compensatory damages, equitable relief, interest, costs, and attorneys' fees. * On April 8, 1998, the Corporation was served with a putative nationwide class action filed in the Circuit Court of Cook County, Illinois, Chancery Division (Craig Friedman, Robert Bengston and Debra Bengston v. General Motors Corporation). The named plaintiffs purport to represent a class of all persons who now or formerly owned or leased a 1986 through 1997 model year GM vehicle which was painted without a primer surfacer layer and which subsequently experienced paint delamination, and asserts claims for breach of contract, breach of warranty and violation of the Michigan Consumer Protection Act on behalf of that class. The Complaint also identifies a similar putative class limited to Illinois residents for the purpose of asserting a claim under the Illinois Deceptive Trade Practices Act. Plaintiffs allege that vehicles painted using a "high build electrocoat" instead of both a "bottom layer electrocoat applied directly to the sheet metal" and "a spray primer" are subject to paint delamination (peeling) and well as "softening, chipping, and other damage." Plaintiffs seek unquantified compensatory damages, punitive damages, pre-judgment interest, costs and attorneys' fees. The case has been removed to the Federal District Court for the Northern District of Illinois. * On or about July 6, 1998, the Corporation was served with a putative class action complaint filed in the Superior Court for the City and County of San Francisco, California (Eddie Glorioso v. General Motors Corporation). On or about July 23, 1998, the Corporation was served with another putative class action complaint filed in the Superior Court for the County of Almeida, California (Scott Arnold v. General Motors Corporation). The two Complaints are virtually identical. In each, the named plaintiff purports to represent a class of all persons or entities resident in California which then or formerly owned or leased a 1985 through 1997 model year GM vehicle which was painted without a primer surfacer layer and which subsequently exhibited pealing or chipping of the paint. Each complaint asserts claims for breach of express warranty, violation of California's Song Beverly Consumer Warranty Act, and unfair competition and/or fraudulent business practices. Each Complaint requests restitution of all amounts paid by class members for GM vehicles and/or disgorgement of related profits or revenues, equitable relief, actual damages, prejudgment interest, costs and attorneys' fees. HOLOCAUST VICTIMS: Austrian Banks Will Pay $40MM & Release Papers ----------------------------------------------------------------- A large Austrian bank has agreed to pay $40 million and provide reams of ocuments to settle a major class- action suit that charged the bank with aiding the Nazi war machine and profiting by selling Jewish assets during World War II, according to an article appearing in the Jerusalem Post. The agreement, while not on the scale of $1.25 billion settlement with Swiss banks last year, is considered significant, according to attorneys and Jewish leaders, because the documents will give them considerable ammunition in major cases pending against German banks. Creditanstalt, and its parent company Bank Austria, were sued in the same cases as two leading German banks, Deutsche Bank and Dresdner Bank. A unique aspect of the settlement is that it gives the plaintiffs the right to any claims that the Austrian bank might have against the German banks for assets that were forcibly transferred to the German banks after Germany annexed Austria in March 1938. Deutsche Bank formally took control of Creditanstalt after the annexation. "The significance of the settlement is not in the amount being paid, but in the documents being produced and the claims being assigned," said attorney Robert A. Swift of Philadelphia, one of the lead lawyers for the plaintiffs. "This settlement will lead to far larger compensation for Holocaust survivors." Charles Moerdler, a New York attorney who was the lead lawyer for the Austrian banks, declined to return calls from reporters seeking comment. The settlement specifically provides that the Austrian banks admit no liability by signing the settlement. The 37-page settlement resolves three cases filed in the past year against Creditanstalt and Bank Austria. The suits alleged that the bank aggressively participated in a scheme to profit from the slave labor inflicted by the Nazi regime and its allies. The plaintiffs also asserted that the bank obtained, concealed, and profited from assets looted or "Aryanized" by the Nazi regime. Within months after the suits were filed, Austrian officials indicated that they wanted to expeditiously resolve the cases. The settlement provides that the Austrian banks will provide $30 million for a humanitarian fund, some of which will go to survivors, and another $10 million for an administrative fund and interim claim fund. INDIAN TRUST: Interior Officials End Indian Talks ---------------------------------------------------------------- Philip Brasher, writing for the Associated Press, reports that Interior Department officials upset by congressional criticism have broken off talks with Indian leaders on settling claims on billions in Indian trust funds. Senate Indian Affairs Committee Chairman Ben Nighthorse Campbell, R-Colo., said last week the department's action "sends a dangerous message to witnesses that exercising their right to free speech could result in reprisals from the federal government." As previously reported (CAR 25-Feb-1999), Interior Secretary Bruce Babbitt and Treasury Secretary Robert Rubin were found in contempt of court last month in connection with a lawsuit over the government's handling of the funds. On March 3, Mr. Brasher relates, Interior officials canceled a meeting with tribal leaders a few hours after the hearing by two Senate committees, including Campbell's. Interior's assistant secretary for Indian affairs, Kevin Gover, said he did not like the tone of the tribal representatives' testimony. "You can't call me a liar in the morning and that afternoon ask me to trust you," said Gover, himself an Indian. "We're not sure there is enough trust between the two parties to continue to negotiate without some kind of congressional involvement." Tribal leaders say his response was childish. "I came 1,400 miles to give the testimony and meet with the Bureau of Indian Affairs. They told us their feelings were hurt and they didn't want to meet," said Charles Tillman, chief of Oklahoma's Osage Nation. A spokeswoman for Babbitt said he had nothing to do with canceling the negotiations. "We're hopeful that a process can be set up for productive meetings in the future," Stephanie Hanna said. The Department of the Interior manages $2.5 billion belonging to tribes and another $500 million owned by individual Indians. The money includes lease revenue, royalties and court settlements. The funds were mismanaged for decades, and lawyers for the Indians say the government could be liable for billions of dollars in claims. Tillman is on the board of a group that has been negotiating with the department on a way to settle claims on the tribal accounts. The accounts belonging to individual Indians are the subject of a class-action lawsuit. The biggest single account, worth $500 million, is the proceeds of a court judgment won by the Sioux tribes as compensation for their loss of the Black Hills. The federal judge handling that litigation said he was tired of lies and bureaucratic foot- dragging and found Babbitt and Rubin in contempt of court over their delay in turning over account records. ISLE OF CAPRI: Subsidiary Named in Gaming Industry RICO Complaint ----------------------------------------------------------------- In its latest quarterly report filed with the Securities and Exchange Commission, ISLE OF CAPRI CASINOS, INC., indicates that a subsidiary has been named, along with numerous manufacturers, distributors and gaming operators, including many of the country's largest gaming operators (the "Gaming Industry Defendants"), in a consolidated class action lawsuit pending in Las Vegas, Nevada. The suit alleges that the Gaming Industry Defendants violated the Racketeer Influenced and Corrupt Organizations Act by engaging in a course of fraudulent and misleading conduct intended to induce people to play their gaming machines based upon a false belief concerning how those gaming machines actually operate, as well as the extent to which there is actually an opportunity to win on any given play. The suit seeks unspecified compensatory and punitive damages. The actions are in the discovery and preliminary motion stages. The Company is unable at this time to determine what effect, if any, the suit would have on its financial position or results of operations. However, the Gaming Industry Defendants are committed to vigorously defend all claims asserted in the consolidated action. LASER TECHNOLOGY: Has Not Fully Reviewed Shareholder Complaints --------------------------------------------------------------- On February 10, 1999, a securities class action entitled Moshe Rosenfeld, On Behalf of Himself and All Others Similarly Situated, vs. Laser Technology, Inc., David Williams, Pamela Sevy, Dan N. Grothe and H. DeWorth Williams, was filed in the United States District Court, District of Colorado (Case no. 99- Z-266). The Complaint alleges that the Company and certain of its officers and directors violated federal securities laws, particularly Sections 10(b) and 20 of the Securities Exchange Act of 1934, as amended (the "1934 Act"). Specifically, the complaint alleges that the Company's financial statements were false and misleading during the "class period" (February 12, 1996 to December 23, 1998) and that the Company made certain false or misleading statements regarding the Company's financial statement during this period. The individual named defendants are directors and/or executive officers of the Company. The action appears to have followed and be premised on the resignation of the Company's independent accountant, BDO Seidman, LLP ("BDO"), on December 21, 1998, and the resignation of three members of the Audit Committee of the Board of the Board of Directors. The resigning members of the Audit Committee were members of the Special Audit Committee (the "Special Committee"), who also resigned from the Board of Directors on January 7, 1999 as a result of disagreements between management and the Special Committee. BDO also withdrew its opinions on the previously issued certified financial statements for the fiscal years 1993, 1994, 1995, 1996 and 1997. At the time of BDO's resignation, the Special Committee was conducting an independent investigation into the Company's accounting records and alleged irregularities relating to the Company's accounting records. Following the announcement of the resignation of BDO and withdrawal of five years of audited financial statements, the American Stock Exchange suspended trading in the Company's shares on December 23, 1998. On January 7, 1999, a Special Meeting of the Board of Directors (the "Special Meeting") was held for the purpose of receiving the report and recommendations from the Special Committee. At the Special Meeting, the Special Committee made several proposals including, but not limited to, asking for the resignation of the Company's Chief Executive Officer and Chief Financial Officer. Following the presentation by the Special Committee of its findings and proposed actions, those directors not serving on the Special Committee made a counter proposal. Without responding to the counter-proposal, the individuals on the Special Committee then informed the Board of Directors of their intent to resign from the Special Committee and from the Board of Directors. In its complaint, the plaintiff contends that the resignation of BDO and the three directors is due to the Company's alleged unreliable and misleading financial statements. Plaintiff's complaint further alleges violations of Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder. The action specified the period from February 12, 1996 through December 23, 1998 as the "class period." The Company has not had ample time to fully review the complaint nor to determine the extent of any possible liability or material damage to the Company. The Company further believes that the allegations set forth in the complaint are groundless and without merit and it intends to vigorously defend against the action. The Company is aware of at least five additional class action suits that have been filed recently against the Company. As of the date hereof, the Company has received two of the complaints in the five actions, and the Company believes that the actions parallel the one described above. The Company intends to vigorously defend against all of the actions. MESA AIR: Substantial Payment Made on Shareholder Settlement ------------------------------------------------------------ During 1994, seven shareholder class action complaints were filed in the United States District Court for the District of New Mexico against MESA AIR GROUP, INC., certain of its present and former corporate officers and directors, its independent auditor, and certain underwriters who participated in Mesa's June 1993 public offering of Common Stock. During October 1995, the Court certified a class consisting of persons who purchased Mesa stock between January 28, 1993 and August 5, 1994. These complaints were consolidated by court order, and in May, 1996, the court granted, in part, a motion to dismiss. Thereafter, a third amended consolidated complaint was filed alleging that during the class period the defendants caused or permitted Mesa to issue publicly misleading financial statements and other misleading statements in the registration statement for the June 1993 public offering, annual and quarterly reports to shareholders, press releases and interviews with securities analysts. In May 1998, Mesa entered into a memorandum of understanding with the plaintiffs to settle the litigation. While Mesa and its corporate officers and directors believe they have substantial and meritorious defenses against the plaintiff's allegations and have defended their position vigorously, they have agreed to a settlement to avoid ongoing litigation and associated costs. The memorandum of understanding provides for a total of $8 million to be paid to the class plaintiffs on behalf of the defendants. Mesa paid a substantial portion of the settlement. Mesa accrued an additional $2.5 million as of September 30, 1998 and on December 1, 1998, the settlement was approved by the Court and the cases were dismissed. "A substantial portion of the ultimate settlement was provided by Mesa's previous accrual to vigorously defend this litigation," the Company says in its latest annual report on Form 10-K. MOHAWK INDUSTRIES: Continues Defense of Carpet Antitrust Suits -------------------------------------------------------------- In December 1995, MOHAWK INDUSTRIES, INC., and four other carpet manufacturers were added as defendants in a purported class action lawsuit, In re Carpet Antitrust Litigation, pending in the United States District Court for the Northern District of Georgia, Rome Division. The amended complaint alleges price fixing regarding polypropylene products in violation of Section One of the Sherman Act. In September 1997, the Court determined that the plaintiffs met their burden of establishing the requirements for class certification and granted the plaintiffs' motion to certify the class. MOHAWK INDUSTRIES, INC., is a party to two consolidated lawsuits captioned Gaehwiler v. Sunrise Carpet Industries, Inc. et. al. and Patco Enterprises, Inc. v. Sunrise Carpet Industries, Inc. et. al.; both of which were filed in the Superior Court of the State of California, City and County of San Francisco in 1996. Both complaints were brought on behalf of a purported class of indirect purchasers of carpet in the State of California and seek damages for alleged violations of California antitrust and unfair competition laws. The complaints filed do not specify any amount of damages but do request for any unlawful conduct to be enjoined and treble damages plus reimbursement for fees and costs. In October 1998, two plaintiffs, on behalf of an alleged class of purchasers of nylon carpet products, filed a complaint in the United States District Court for the Northern District of Georgia against the Company and two of its subsidiaries as well as a competitor and one of its subsidiaries. The complaint alleges that the Company acted in concert with other carpet manufacturers to restrain competition in the sale of certain nylon carpet products. The Company has filed an answer and denied the allegations in the complaint and set forth its defenses. In February 1999, a similar complaint was filed in the Superior Court of the State of California, City and County of San Francisco, on behalf of a purported class based on indirect purchases of nylon carpet in the State of California and alleges violations of California antitrust and unfair competition laws. The complaints described above do not specify any specific amount of damages but do request injunctive relief and treble damages plus reimbursement for fees and costs. The Company believes it has meritorious defenses and intends to vigorously defend against these actions. NEW YORK: Civil Liberties Group Sues over Drunken-Driving Policy ---------------------------------------------------------------- The New York Civil Liberties Union sued the city of New York last week over a new policy to seize the cars of people accused of drunken driving. Norman Siegel, the organization's executive director, called the policy "unfair, excessive and un-American." A class-action lawsuit by the group was filed on behalf of 72 people who lost their cars because of the policy that went into effect Feb. 22. Under Mayor Rudolph Giuliani's policy, suspects with a blood-alcohol level exceeding New York state's legal limit of .10 will lose their cars as the "instrumentalities of a crime," and the vehicles might not be returned. PEGASUS COMMUNICATIONS: Evaluating Response to Late Fee Complaint ----------------------------------------------------------------- In November 1998 PEGASUS COMMUNICATIONS CORP. was sued in Indiana for allegedly charging DBS subscribers excessive fees for late payments. The plaintiffs, who claim to represent a class consisting of residential DIRECTV customers in Indiana, seek unspecified damages for the purported class and modification of our late-fee policy. "We are in the process of evaluating our response and are unable to estimate the amount involved or to determine whether this suit is material to us. Similar suits have been brought against DIRECTV and various cable operators in other parts of the United States," the Company indicates in its latest annual report filed on Form 10-K. PLM INTERNATIONAL: ESOP Complaint Goes to Trial in September ------------------------------------------------------------ In November 1995, a former employee of PLM International, Inc., filed and served a first amended complaint (the complaint) in the United States District Court for the Northern District of California (Case No. C-95-2957 MMC) against the Company, the PLM International, Inc. Employee Stock Ownership Plan (ESOP), the ESOP's trustee, and certain individual employees, officers, and directors of the Company. The complaint contains claims for relief alleging breaches of fiduciary duties and various violations of the Employee Retirement Income Security Act of 1974 (ERISA) arising principally from purported defects in the structure, financing, and termination of the ESOP, and for defendants' allegedly engaging in prohibited transactions and interfering with plaintiff's rights under ERISA. Plaintiff seeks monetary damages, rescission of the preferred stock transactions with the ESOP and/or restitution of ESOP assets, and attorneys' fees and costs under ERISA. In January 1996, the Company and other defendants filed a motion to dismiss the complaint for lack of subject matter jurisdiction, arguing the plaintiff lacked standing under ERISA. The motion was granted and in May 1996, the district court entered a judgment dismissing the complaint for lack of subject matter jurisdiction. Plaintiff appealed to the U.S. Court of Appeals for the Ninth Circuit seeking a reversal of the district court's dismissal of his ERISA claims, and in an opinion filed in October 1997, the Ninth Circuit reversed the decision of the district court and remanded the case to the district court for further proceedings. The Company filed a petition for rehearing, which was denied in November 1997. The Ninth Circuit mandate was filed in the district court in December 1997. In February 1998, plaintiff was permitted by the district court to file a second amended complaint in order to bring the fourth, fifth, and sixth claims for relief as a class action on behalf of himself and all similarly situated people. These claims allege that the Company and the other defendants breached their fiduciary duties and entered into prohibited transactions in connection with the termination of the ESOP and by causing the ESOP to sell or exchange the preferred shares held for the benefit of the ESOP participants for less than their fair market value. Also in February 1998, the defendants filed a motion to dismiss the fourth, fifth, and sixth claims relating to the termination of the ESOP, and the seventh claim relating to defendants' alleged interference with plaintiff's rights under ERISA, all for failure to state claims for relief. The district court, in an order dated July 14, 1998, granted this motion and dismissed the fourth through seventh claims for relief. In June 1998, the defendants filed a motion for summary judgment seeking a ruling that the first two claims for relief, which allege breaches arising out of the purchase and sale of stock at the inception of the ESOP, are barred by the applicable statute of limitations. In an order dated July 14, 1998, the district court granted in part and denied in part this motion and ruled that these claims for relief are barred by the statute of limitations to the extent that they rely on a theory that the automatic conversion feature and other terms and conditions of the purchase and sale of the preferred stock violated ERISA, but are not so barred to the extent that they rely on a theory that the purchase and sale of the preferred stock at the inception of the ESOP was for more than adequate consideration. On September 30, 1998, plaintiff filed a motion to certify as final, and enter judgment on, the two July 14, 1998 orders. This motion was denied. Defendants filed their answer to the second amended complaint on September 18, 1998, denying the allegations contained in the first, second, and third claims for relief. The trial regarding these remaining claims is set for September 27, 1999. The Company believes it has meritorious defenses to these claims and plans to continue to defend this matter vigorously. PLM INTERNATIONAL: March Hearing on Fund Class Certification ------------------------------------------------------------ PLM International, Inc., and various of its affiliates are named as defendants in a lawsuit filed as a purported class action on January 22, 1997 in the Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action). Plaintiffs, who filed the complaint on their own and on behalf of all class members similarly situated, are six individuals who invested in certain California limited partnerships (the Partnerships) for which the Company's wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general partner, including PLM Equipment Growth Funds IV, V, and VI, and PLM Equipment Growth & Income Fund VII (Fund VII). The state court ex parte certified the action as a class action (i.e., solely upon plaintiffs' request and without the Company being given the opportunity to file an opposition). The complaint asserts eight causes of action against all defendants, as follows: fraud and deceit, suppression, negligent misrepresentation and suppression, intentional breach of fiduciary duty, negligent breach of fiduciary duty, unjust enrichment, conversion, and conspiracy. Additionally, plaintiffs allege a cause of action against PLM Securities Corp. for breach of third party beneficiary contracts in violation of the National Association of Securities Dealers rules of fair practice. Plaintiffs allege that each defendant owed plaintiffs and the class certain duties due to their status as fiduciaries, financial advisors, agents, and control persons. Based on these duties, plaintiffs assert liability against defendants for improper sales and marketing practices, mismanagement of the Partnerships, and concealing such mismanagement from investors in the Partnerships. Plaintiffs seek unspecified compensatory and recissory damages, as well as punitive damages, and have offered to tender their limited partnership units back to the defendants. In March 1997, the defendants removed the Koch action from the state court to the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97- 0177-BH-C) based on the district court's diversity jurisdiction, following which plaintiffs filed a motion to remand the action to the state court. Removal of the action to federal court automatically nullified the state court's ex parte certification of the class. In September 1997, the district court denied plaintiffs' motion to remand the action to state court and dismissed without prejudice the individual claims of the California plaintiff, reasoning that he had been fraudulently joined as a plaintiff. In October 1997, defendants filed a motion to compel arbitration of plaintiffs' claims, based on an agreement to arbitrate contained in the limited partnership agreement of each Partnership, and to stay further proceedings pending the outcome of such arbitration. Notwithstanding plaintiffs' opposition, the district court granted defendants' motion in December 1997. Following various unsuccessful requests that the district court reverse, or otherwise certify for appeal, its order denying plaintiffs' motion to remand the case to state court and dismissing the California plaintiff's claims, plaintiffs filed with the U.S. Court of Appeals for the Eleventh Circuit a petition for a writ of mandamus seeking to reverse the district court's order. The Eleventh Circuit denied plaintiffs' petition in November 1997, and further denied plaintiffs subsequent motion in the Eleventh Circuit for a rehearing on this issue. Plaintiffs also appealed the district court's order granting defendants' motion to compel arbitration, but in June 1998 voluntarily dismissed their appeal pending settlement of the Koch action, as discussed below. On June 5, 1997, the Company and the affiliates who are also defendants in the Koch action were named as defendants in another purported class action filed in the San Francisco Superior Court, San Francisco, California, Case No. 987062 (the Romei action). The plaintiff is an investor in PLM Equipment Growth Fund V, and filed the complaint on her own behalf and on behalf of all class members similarly situated who invested in certain California limited partnerships for which FSI acts as the general partner, including the Partnerships. The complaint alleges the same facts and the same nine causes of action as in the Koch action, plus five additional causes of action against all of the defendants, as follows: violations of California Business and Professions Code Sections 17200, et seq. for alleged unfair and deceptive practices, constructive fraud, unjust enrichment, violations of California Corporations Code Section 1507, and a claim for treble damages under California Civil Code Section 3345. On July 31, 1997, defendants filed with the district court for the Northern District of California (Case No. C-97-2847 WHO) a petition (the petition) under the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims and for an order staying the state court proceedings pending the outcome of the arbitration. In connection with this motion, plaintiff agreed to a stay of the state court action pending the district court's decision on the petition to compel arbitration. In October 1997, the district court denied the Company's petition to compel arbitration, but in November 1997, agreed to hear the Company's motion for reconsideration of this order. The hearing on this motion has been taken off calendar and the district court has dismissed the petition pending settlement of the Romei action, as discussed below. The state court action continues to be stayed pending such resolution. In connection with her opposition to the petition to compel arbitration, plaintiff filed an amended complaint with the state court in August 1997, alleging two new causes of action for violations of the California Securities Law of 1968 (California Corporations Code Sections 25400 and 25500) and for violation of California Civil Code Sections 1709 and 1710. Plaintiff also served certain discovery requests on defendants. Because of the stay, no response to the amended complaint or to the discovery is currently required. In May 1998, all parties to the Koch and Romei actions entered into a memorandum of understanding (MOU) related to the settlement of those actions (the monetary settlement). The monetary settlement contemplated by the MOU provides for stipulating to a class for settlement purposes, and a settlement and release of all claims against defendants and third party brokers in exchange for payment for the benefit of the class of up to $6.0 million. The final settlement amount will depend on the number of claims filed by authorized claimants who are members of the class, the amount of the administrative costs incurred in connection with the settlement, and the amount of attorneys' fees awarded by the Alabama district court. The Company will pay up to $0.3 million of the monetary settlement, with the remainder being funded by an insurance policy. The parties to the monetary settlement have also agreed in principal to an equitable settlement (the equitable settlement), which provides, among other things: (a) for the extension of the operating lives of Funds V, VI, and VII by judicial amendment to each of their partnership agreements, such that FSI, the general partner of each such partnership, will be permitted to reinvest cash flow, surplus partnership funds, or retained proceeds in additional equipment into the year 2004, and will liquidate the partnerships' equipment in 2006; (b) that FSI is entitled to earn front-end fees (including acquisition and lease negotiation fees) in excess of the compensatory limitations set forth in the NASAA Statement of Policy by judicial amendment to the partnership agreements for Funds V, VI, and VII; (c) for a one-time redemption of up to 10% of the outstanding units of Funds V, VI, and VII at 80% of such partnership's net asset value; and (d) for the deferral of a portion of FSI's management fees. The equitable settlement also provides for payment of the equitable class attorneys' fees from partnership funds in the event that distributions paid to investors in Funds V, VI, and VII during the extension period reach a certain internal rate of return. Defendants will continue to deny each of the claims and contentions and admit no liability in connection with the proposed settlements. The monetary settlement remains subject to numerous conditions, including but not limited to: (a) agreement and execution by the parties of a settlement agreement (the settlement agreement), (b) notice to and certification of the monetary class for purposes of the monetary settlement, and (c) preliminary and final approval of the monetary settlement by the Alabama district court. The equitable settlement remains subject to numerous conditions, including but not limited to: (a) agreement and execution by the parties of the settlement agreement, (b) notice to the current unitholders in Funds V, VI, and VII (the equitable class) and certification of the equitable class for purposes of the equitable settlement, (c) preparation, review by the Securities and Exchange Commission (SEC), and dissemination to the members of the equitable class of solicitation statements regarding the proposed extensions, (d) disapproval by less than 50% of the limited partners in Funds V, VI, and VII of the proposed amendments to the limited partnership agreements, (e) judicial approval of the proposed amendments to the limited partnership agreements, and (f) preliminary and final approval of the equitable settlement by the Alabama district court. The parties submitted the settlement agreement to the Alabama district court on February 12, 1999, and the preliminary class certification hearing is scheduled for March 24, 1999. If the district court grants preliminary approval, notices to the monetary class and equitable class will be sent following review by the SEC of the solicitation statements to be prepared in connection with the equitable settlement. The monetary settlement, if approved, will go forward regardless of whether the equitable settlement is approved or not. The Company continues to believe that the allegations of the Koch and Romei actions are completely without merit and intends to continue to defend this matter vigorously if the monetary settlement is not consummated. SEARS, ROEBUCK: Credit Card Customers Receive, on Average, $23.80 ----------------------------------------------------------------- As reported last week, Sears, Roebuck and Co. has agreed to settle a class-action lawsuit by paying millions of dollars in cash and coupons to 11 million credit card holders. When credit card balances were transferred to a subsidiary, Sears National Bank, the new bank increased the credit card's annual percentage rate. Under the settlement, which still must be approved in U.S. District Court, Sears will pay $72 million in cash and coupons to about 3 million customers -- about $23.80 each. TELXON CORPORATION: Counts 26 Shareholder Suits; SEC Inquiring -------------------------------------------------------------- In December 1998 and January and February 1999, a total of 26 class actions were filed in the United States District Court, Northern District of Ohio, by certain alleged stockholders of Telxon Corp. on behalf of themselves and purported classes consisting of Telxon stockholders, other than the defendants and their affiliates, who purchased stock during the period May 8, 1998 and January 27, 1999 or various portions thereof. The named defendants are the Company, President and Chief Executive Officer Frank E. Brick, and Senior Vice President and Chief Financial Officer Kenneth W. Haver. On February 9, 1999, the plaintiffs filed a Motion to Consolidate all of the actions. The complaints allege claims for "fraud on the market" arising from alleged misrepresentations and omissions with respect to the Company's financial performance and prospects and an alleged violation of generally accepted accounting principles by improperly recognizing revenues. Each complaint seeks certification of its purported class, unspecified compensatory damages, interest, attorneys' fees and costs. The defendants believe that these claims lack merit and they intend to vigorously defend these actions. Defendants anticipate filing a Motion to Dismiss. By letter dated December 18, 1998, the Staff of the Division of Enforcement of the Securities and Exchange Commission advised the Company that it was conducting a preliminary, informal inquiry into trading of the securities of the Company at or about the time of the Company's December 11, 1998 press release announcing that the Company would be restating the revenues for its second fiscal quarter ended September 30, 1998. In cooperation with the informal inquiry, the Company has voluntarily provided certain responsive information to the Staff. On January 20, 1999, the Commission issued a formal Order Directing Private Investigation And Designating Officers To Take Testimony with respect to the referenced trading and specified accounting matters, pursuant to which a subpoena duces tecum was served on the Company on February 11, 1999 requiring the production of specified documents. The Company has delivered documents to, and intends to continue cooperating fully with, the Staff. On May 8, 1998, two class action suits were filed in the Court of Chancery of the State of Delaware, in and for the County of New Castle, by certain alleged stockholders of Telxon on behalf of themselves and purported classes consisting of Telxon stockholders, other than defendants and their affiliates, relating to an alleged offer by Symbol Technologies, Inc. ("Symbol") to acquire the Company. The named defendants are Telxon and its Directors at the time, namely, Frank E. Brick, Robert A. Goodman, Dr. Raj Reddy, John H. Cribb, Richard J. Bogomolny, and Norton W. Rose. The plaintiffs allege that on April 21, 1998, Symbol made an offer to purchase Telxon for $38.00 per share in cash and that on May 8, 1998, Telxon rejected Symbol's proposal. Plaintiffs further allege that Telxon has certain anti-takeover devices in place purportedly designed to thwart hostile bids for the Company. Plaintiffs charge the Director defendants with breach of fiduciary duty and claim that they are entrenching themselves in office. The plaintiffs seek certification of the purported class, unspecified compensatory damages, equitable and/or injunctive relief requiring the defendants to act in specified manners consistent with the defendant Directors' fiduciary duties, and payment of attorney's fees and costs. The parties have stipulated that the plaintiffs will file an Amended Complaint and that the defendants will answer only the Amended Complaint. On June 2, 1998, the Court ordered consolidation of the above-captioned cases. This action is in its early stages, with no scheduling order having been issued by the Court; discovery has not yet commenced. The defendants believe that these claims lack merit and intend to vigorously defend the consolidated action. TOWNE BANCORP: Vows to Defend Suits; Cooperating with SEC Inquiry ----------------------------------------------------------------- In the third quarter of 1998, two class action lawsuits were filed in the U.S. District Court for the Northern District of Ohio, Western Division, against TOWNE BANCORP, INC., its directors, its corporate stock transfer agent, and (in one suit) its Directors' and Officers' insurer. The suits allege violation of various Federal and State laws in connection with the Company's offering of common stock. The suits request unspecified damages and costs. The Company has agreed to indemnify its directors and officers for costs assumed by them in connection with such lawsuits. The Company intends to vigorously defend itself in connection with these lawsuits. The Company has received an informal inquiry from the Securities and Exchange Commission, Midwest Regional Office, Division of Enforcement regarding the initial public offering of the Company's common shares. In connection with the informal inquiry, the Division of Enforcement has requested that the Company furnish certain documents relating to the offering. The Company intends to fully cooperate with the informal inquiry. The Company cautions investors that, in the event the Division of Enforcement determines that there is a basis for an enforcement action and elects to pursue such an action against the Company, its officers or directors, the defense costs associated with, and any resulting judgments from any enforcement action will have a material adverse affect on the Company. ********* 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., Princeton, NJ, and Beard Group, Inc., Washington, DC. Peter A. Chapman, Editor. Copyright 1999. All rights reserved. ISSN XXXX-XXXX. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *