/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990407.MBX C L A S S A C T I O N R E P O R T E R Wednesday, April 7, 1999, Vol. 1, No. 44 Headlines AMERICAN BINGO: Video Gaming Ruled Not to be an Illegal Lottery BMC SOFTWARE: Spector & Roseman File Securities Complaint BOCA RATON: Florida City May Ban Religious Monuments on Graves CAMBRIDGE CORP.: Bernstein Liebhard Files Massachusetts Suit CAMBRIDGE TECHNOLOGY: Wolf Haldenstein Files Massachusetts Suit CHS ELECTRONICS: Fleming & Associates File Complaint in Florida COMPAQ COMPUTER: Spector & Roseman File Complaint in Texas COMPAQ COMPUTER: Weinstein Kitchenoff Files Complaint in Texas COMPLETE MANAGEMENT: Schatz & Nobel File Complaint in New York GAMETECH INTERNATIONAL: May 24 Hearing on Motion to Dismiss GLENBOROUGH REALTY: Supreme Court May End REIT Litigation LASER TECHNOLOGY: Pomerantz Haudek Files Complaint in Colorado LOUISIANA PACIFIC: ABT Hardboard Litigation and Cost Allocation MBNA AMERICA: Discloses Trade Practices Suits in Note Offering NORTH FACE: Milberg, Weiss Files Complaint in Colorado OKLAHOMA PRISONS: April Hearing for Medical Neglect Case ORBITAL SCIENCES: Pomerantz Haudek Files Complaint in Virginia PARTY CITY: Wolf Popper Files Complaint in New Jersey SMART CHOICE: Milberg Weiss Files Complaint in Florida SUN HEALTHCARE: Medicare Problems Create "Cottage Industry" SUN HEALTHCARE: Pomerantz Haudek Files Complaint in New Mexico Y2K LITIGATION: Changing Diversity Rule May Swamp Federal Courts ********* AMERICAN BINGO: Video Gaming Ruled Not to be an Illegal Lottery --------------------------------------------------------------- In 1997 a subsidiary of AMERICAN BINGO & GAMING CORP. was named a defendant (among many other video gaming operators) in a legal action in the Federal U.S. District Court in Columbia, South Carolina filed by video poker players. This action alleges various wrongful acts by the defendants, including allegations that certain of the defendants' video gaming operations in South Carolina: i) comprise a lottery, which violates the state constitution; ii) violate the state's daily net video gaming machine payout limit of $125 per player; iii) violate the state's single premise rule which only allows up to five video gaming machines per premise; and iv) violate the state's prohibition against beer and wine permit holders allowing gambling or games of chance. The plaintiffs in this action are attempting to have this action certified as a class action lawsuit. The plaintiffs seek to recover the money lost from playing video poker and to restrict or otherwise limit in various respects the manner in which video gaming operations are conducted in South Carolina. The District Judge certified questions for an advisory opinion of the South Carolina Supreme Court regarding whether video gaming constitutes an illegal lottery in South Carolina. The Supreme Court issued an opinion in November 1998 stating that video gaming does not constitute an illegal lottery. Other issues in this case are still pending in the District Court. The Company believes that this action is completely without merit and will defend itself vigorously. If this case were to be decided against the Company, it would likely have a material adverse effect on the financial position and operations of the Company. BMC SOFTWARE: Spector & Roseman File Securities Complaint --------------------------------------------------------- Spector & Roseman, P.C. filed a class action lawsuit on behalf of purchasers of the common stock of BMC Software, Inc. (Nasdaq: BMCS), between April 16, 1998 and Feb. 25, 1999. The complaint charges BMC and certain of its officers and directors with violating the federal securities laws by materially misstating BMC's financial results. It alleges that BMC acquired BGS Software in February 1998, and accounted for the transaction as a pooling of interests. The pooling of interest method of accounting requires that the financial results of the "pooled" companies be combined for financial statement reporting purposes. However, defendants chose not to include BGS's results in BMC's financial statements as they were required to do, thus overstating BMC's reported financial results. Later, defendants admitted that BGS's results should have been included in BMC's financial reports, and as a result, they were restating BMC's prior reported financial results. The complaint alleges that defendants knew, or were reckless in not knowing that BMC's reported financial results were overstated. Moreover, BMC's materially inflated earnings, revenue and growth rate caused BMC's stock price to be artificially inflated. Prior to the announcement of the restatement, certain defendants sold more than 216,000 shares of their own BMC stock, netting proceeds in excess of $10 million. BOCA RATON: Florida City May Ban Religious Monuments on Graves -------------------------------------------------------------- The Associated Press reported that a federal judge ruled that the city of Boca Raton can tear down crosses, stars of David and other monuments on grave sites in the city's municipal cemetery because the decorations are not essential for religious practice. The ruling was reported to be the first of its kind in the nation, and the first under Florida's Religious Freedom Restoration Act of 1998, which says governments cannot impose a "substantial burden" on people's freedom of religious expression. The AP says that Judge Kenneth Ryskamp ruled that families who decorated the final resting places of their loved ones with religious symbols, plants, stones and other items will not have their religious rights trampled if they cannot keep the decorations. According to the story, Boca Raton permits only a horizontal plaque at the foot of each grave in the city cemetery. The city reportedly claimed the religious monuments were an obstacle for maintenance workers and violated long- standing but seldom-enforced rules against vertical decorations. The Associated Press explained that about 400 families sued the city to stop the removal of the items. "We clearly are going to appeal," said Howard Simon, executive director of the American Civil Liberties Union of Florida, which had filed the class- action lawsuit. The AP noted that the judge offered several reasons for ruling against the families, who claimed they were never given a copy of the cemetery's regulations. First, he said, there are Catholic and Jewish cemeteries with similar regulations prohibiting large or vertical grave coverings or statues, and those cemeteries haven't been found to impede religious expression. The judge also said the families do not own the cemetery plots; rather, they own the rights to burial in that public land. According to the AP story, Beverly Pohl, an attorney for the city, said the city may remove the items, but probably will hold off until the appeals are exhausted. CAMBRIDGE CORP.: Bernstein Liebhard Files Massachusetts Suit ------------------------------------------------------------ A securities class action lawsuit was commenced by Bernstein Liebhard & Lifshitz, LLP on behalf of purchasers of the common stock of Cambridge Corporation (Nasdaq: CATP) between November 25, 1998 and March 18, 1999, in the United States District Court for the District of Massachusetts. The complaint charges Cambridge and certain of its officers and directors with violations of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint alleges that the defendants issued materially false and misleading statements and failed to disclose material facts in the Company's public filings and public statements. As a result of these misrepresentations and omissions, the price of Cambridge's common stock was artificially inflated CAMBRIDGE TECHNOLOGY: Wolf Haldenstein Files Massachusetts Suit --------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP has filed a class action lawsuit in the United States District Court for the District of Massachusetts on behalf of all purchased common stock issued by Cambridge Technology Partners, Inc. (Nasdaq: CATP) during the period November 25, 1998 through March 18, 1999. The Complaint alleges that the defendants violated the federal securities laws (Section 10(b) and 20(a) of the Securities Exchange Act of 1934) by misrepresenting or failing to disclose material information about Cambridge's results of operations, financial condition and the failure of its reorganization plan which resulted in the continued slow sales. As a result of defendants' false and misleading statements and omissions, the price of Cambridge's stock was artificially inflated. Later, the Company announced that its reorganization plan was not having the benefits defendants stated it had and that as a result its sales were still well down. Meanwhile defendants took advantage of the stock's artificially inflated price to sell significant amounts of their own holdings for proceeds of over $3,139,000. CHS ELECTRONICS: Fleming & Associates File Complaint in Florida --------------------------------------------------------------- Fleming & Associates, L.L.P. and the Law Offices of Mark McNair have filed a class action lawsuit against CHS Electronics, Inc. (NYSE: HS) charging CHS with overstating its revenues and earnings. The case was filed in the United States District Court for the Southern District of Florida, Miami Division on behalf of all who purchased the common stock of CHS during the period June 19, 1998 through and March 19, 1999. The action charges CHS and certain officers and directors with issuing a series of false and misleading statements concerning CHS's revenue and net income. Such material misstatements and deceptions by CHS and the individual defendants forced the Company to restate its 2Q and 3Q of Fiscal 1998 as well as its preliminary results for its 4Q. CHS has admitted that it overstated vendor rebates for the 2Q, 3Q and 4Q and that some of the overstated vendor rebates were supported by "invalid documentation." Because of the issuance of such false and misleading statements, the price of CHS common stock was artificially inflated. On March 22, 1999, CHS's stock price fell to $3.938, down 79.2% from its recent high of $19. COMPAQ COMPUTER: Spector & Roseman File Complaint in Texas ---------------------------------------------------------- Spector & Roseman, P.C. filed a class action lawsuit on behalf of persons who purchased shares of Compaq Computer Corporation (NYSE:CPQ) common stock between Jan. 27, 1999 and February 25, 1999. The lawsuit has been commenced in the United States District Court for the Southern District of Texas. Plaintiffs charge Compaq, its President and Chief Executive Officer, Eckhard Pfeiffer, and its Chief Financial Officer, Earl L. Mason, with violating the federal securities laws by misrepresenting or failing to disclose material information regarding weakening demand in certain market sectors which led to slower sales of Compaq's products in those markets. The complaint alleges that at the same time that Compaq was experiencing a slow down in sales to small and medium size businesses, particularly in North America and Europe, defendants repeatedly made statements to the market directly and through securities analysts that demand for Compaq's products and services remained strong. Mr. Mason and other executives of the Company took advantage of the inflated stock price by selling hundreds of thousands of Compaq shares while those shares were trading at inflated prices. When Compaq belatedly revealed the slow down to the market, the price of Compaq shares plummeted, and investors who purchased shares of Compaq common stock suffered losses. COMPAQ COMPUTER: Weinstein Kitchenoff Files Complaint in Texas -------------------------------------------------------------- Weinstein Kitchenoff Scarlato & Goldman Ltd. and Caddell & Chapman filed a class action lawsuit on behalf of persons who purchased shares of Compaq Computer Corporation (NYSE: CPQ) common stock between January 27, 1999, and February 25, 1999. The lawsuit has been commenced in the United States District Court for the Southern District of Texas. The complaint charges Compaq, its President and Chief Executive Officer, Eckhard Pfeiffer, and its Chief Financial Officer, Earl L. Mason, with violating the federal securities laws by misrepresenting or failing to disclose material information regarding a slowdown in sales of Compaq products in certain market sectors in North America and Europe. It alleges that despite the known slowdown in sales, defendants repeatedly made statements to the market, directly and through securities analysts, that demand for Compaq's products and services remained strong. The complaint further alleges defendants' violations of law caused the price of Compaq stock to be artificially inflated. When Compaq belatedly revealed the sales slowdown, the price of Compaq shares plummeted. Recent investors who purchased shares of Compaq common stock have been damaged by defendants' wrongful conduct. However, Mr. Mason and other Compaq executives benefited by selling hundreds of thousands of their personal Compaq shares just prior to the revelation of the sales slowdown. COMPLETE MANAGEMENT: Schatz & Nobel File Complaint in New York -------------------------------------------------------------- A class action complaint was filed by Schatz & Nobel, P.C. in the United States District Court for the Southern District of New York on behalf of all purchasers of securities (stock, debentures or bonds) of Complete Management Inc. (OTC:CPMI) from May 1, 1996 to August 13, 1998. The Complaint charges that CMI and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, knowingly or recklessly making misrepresentations about the Company's financial condition. The Complaint alleges that CMI improperly recognized revenue on uncollectible receivables from its largest customer, Greater Metropolitan Medical Services ("GMMS"), a related party, in violation of Generally Accepted Accounting Principles. As a result of this conduct, CMI announced on August 19, 1998 that it would be writing off $28.9 million in management fees due from GMMS and would be severing its relationship with them. The Complaint further alleges that by making these material misrepresentations, the Defendants artificially inflated the price of the Company's common stock. The auditor of CMI's financial statements and various underwriters of securities issued by CMI in public offerings are also named as defendants. GAMETECH INTERNATIONAL: May 24 Hearing on Motion to Dismiss ----------------------------------------------------------- On February 13, 1998, a purported securities class action complaint, WEISS V. GAMETECH INTERNATIONAL, INC., No. 98-0268 PHX-ROS, was filed in the United States District Court for the District of Arizona against the Company and certain officers and directors alleging that defendants violated Section 11 of the Securities Act of 1933 by making false misleading statements and omissions in GameTech's Form S-1 Registration Statement in connection with the Company's public offering on November 25, 1997. Two other complaints making nearly identical factual allegations have been consolidated with the WEISS action for all purposes as IN RE GAMETECH, INC. SECURITIES LITIGATION, Master File No. Civ. 98-0268 PHX-ROS. On July 17, 1998, the Court appointed "lead plaintiff" and co-lead counsel. On September 21, 1998, plaintiffs filed a consolidated complaint, alleging a claim against the Company and the individual defendants under Section 11 of the Securities Act and a claim against the individual defendants under Section 15 of the Securities Act, based upon the conduct alleged in the original complaints. Plaintiffs seek an unspecified amount of damages. On November 5, 1998, defendants moved to dismiss the complaint. Defendants' motion to dismiss is scheduled to be heard by the Court on May 24, 1999. There has been no discovery to date and no trial is scheduled in this action. Defendants believe that there is no merit to plaintiffs' allegations and intend to defend the action vigorously. GLENBOROUGH REALTY: Supreme Court May End REIT Litigation --------------------------------------------------------- Glenborough Realty Trust, Inc., and Glenborough Properties, L.P., settled a class action complaint filed on February 21, 1995 in connection with the consolidation of various limited partnerships into a newly-formed REIT. Certain parties objected to the settlement, but the settlement has been approved (or review denied) by the Superior Court of the State of California in and for San Mateo County, the California state court of appeals, and the California Supreme Court. In August 1998 the objecting parties filed a petition for writ of certiorari in the Supreme Court of the United States. The Company and the co-defendants filed a brief in opposition to the petition. The Supreme Court of the United States has not yet granted or denied the petition The plaintiff in the case is Anthony E. Blumberg, an investor in Equitec B, one of the Partnerships included in the Consolidation, on behalf of himself and all others (the "Blumberg Action") similarly situated. The defendants are GC, Glenborough Realty Corporation ("GRC"), Robert Batinovich, the Partnerships and the Company. The complaint alleged breaches by the defendants of their fiduciary duty and duty of good faith and fair dealing to investors in the Partnerships. The complaint sought injunctive relief and compensatory damages. The complaint alleged that the valuation of Glenborough Corporation was excessive and was done without appraisal of Glenborough Corporation's business or assets. The complaint further alleged that the interest rate for the Notes to be issued to investors in lieu of shares of Common Stock, if they so elected was too low for the risk involved and that the Notes would likely sell, if at all, at a substantial discount from their face value (as a matter entirely distinct from the litigation and subsequent settlement, the Company, as it had the option to, paid in full the amounts due plus interest in lieu of issuing Notes). On October 9, 1995 the parties entered into an agreement to settle the action. The defendants, in entering into the settlement agreement, did not acknowledge any fault, liability or wrongdoing of any kind and continue to deny all material allegations asserted in the litigation. Pursuant to the settlement agreement, the defendants will be released from all claims, known or unknown, that have been, could have been, or in the future might be asserted, relating to, among other things, the Consolidation, the acquisition of the Company's shares pursuant to the Consolidation, any misrepresentation or omission in the Registration Statement on Form S-4, filed by the Company on September 1, 1994, as amended, or the prospectus contained therein ("Prospectus/Consent Solicitation Statement"), or the subject matter of the lawsuit. In return, the defendants agreed to the following: (a) the inclusion of additional or expanded disclosure in the Prospectus Consent Solicitation Statement, and (b) the placement of certain restrictions on the sale of the stock by certain insiders and the granting of stock options to certain insiders following consummation of the Consolidation. Plaintiff's counsel indicated that it would request that the court award it $850,000 in attorneys' fees, costs and expenses. In addition, plaintiffs' counsel indicated it would request the court for an award of $5,000 payable to Anthony E. Blumberg as the class representative. The defendants agreed not to oppose such requests. On October 11, 1995, the court certified the class for purposes of settlement, and scheduled a hearing to determine whether it should approve the settlement and class counsel's application for fees. A notice of the proposed settlement was distributed to the members of the class on November 15, 1995. The notice specified that, in order to be heard at the hearing, any class member objecting to the proposed settlement must, by December 15, 1995, file a notice of intent to appear, and a detailed statement of the grounds for their objection. Objections were received from a small number of class members. The objections reiterated the claims in the original Blumberg complaint, and asserted that the settlement agreement did not adequately compensate the class for releasing those claims. One of the objections was filed by the same law firm that brought the BEJ Action described below. At a hearing on January 17, 1996, the court heard the arguments of the objectors seeking to overturn the settlement, as well as the arguments of the plaintiffs and the defendants in defense of the settlement. The court granted all parties a period of time in which to file additional pleadings. On June 4, 1996, the court granted approval of the settlement, finding it fundamentally fair, adequate and reasonable to the respective parties to the settlement. However, the objectors gave notice of their intent to appeal the June 4 decision. All parties filed their briefs and a hearing was held on February 3, 1998. On February 17, 1998, the Court of Appeals rejected the objectors' contentions and upheld the settlement. The objectors filed with the California Supreme Court a petition for review, which was denied on May 21, 1998. On August 18, 1998, the objectors filed a petition for writ of certiorari in the Supreme Court of the United States. On September 18, 1998, the Company and the co- defendants filed a brief in opposition to the petition. The Supreme Court has not yet granted or denied the petition. BEJ Equity Partners. On December 1, 1995, a second class action complaint relating to the Consolidation was filed in Federal District Court for the Northern District of California (the "BEJ Action"). The plaintiffs in the BEJ Action have voluntarily stayed the action pending resolution of the Blumberg Action. The plaintiffs in the BEJ Action are BEJ Equity Partners, J/B Investment Partners, Jesse B. Small and Sean O'Reilly as custodian f/b/o Jordan K. O'Reilly, who as a group held limited partner interests in certain of the Partnerships included in the Consolidation known as Outlook Properties Fund IV, Glenborough All Suites Hotels, L.P., Glenborough Pension Investors, Equitec Income Real Estate Investors-Equity Fund 4, Equitec Income Real Estate Investors C and Equitec Mortgage Investors Fund IV, on behalf of themselves and all others similarly situated. The defendants are GRC, GC, the Company, GPA, Ltd., Robert Batinovich and Andrew Batinovich. The Partnerships are named as nominal defendants. This action alleges the same disclosure violations and breaches of fiduciary duty as were alleged in the Blumberg Action. The complaint sought injunctive relief, which was denied at a hearing on December 22, 1995. At that hearing, the court also deferred all further proceedings in this case until after the scheduled January 17, 1996 hearing in the Blumberg Action. Following several stipulated extensions of time for the Company to respond to the complaint, the Company filed a motion to dismiss the case. Plaintiffs in the BEJ Action voluntarily stayed the action pending resolution of the Blumberg Action; such plaintiffs can revive their lawsuit. It is management's position that the BEJ Action, and the objections to the settlement of the Blumberg Action, are without merit, and management intends to pursue a vigorous defense in both matters. LASER TECHNOLOGY: Pomerantz Haudek Files Complaint in Colorado -------------------------------------------------------------- Pomerantz Haudek Block Grossman & Gross LLP filed suit against Laser Technology, Inc. (Amex: LSR) and certain corporate insiders in the United States District Court for the District of Colorado on behalf of all purchasers of Laser Technology securities during the period of January 25, 1996 through December 23, 1998. The Complaint alleges that, by issuing false and misleading statements to the public, Laser Technology and certain corporate executives violated the federal securities laws and thereby artificially inflated the value of the Company's securities and damaged class members who acquired such securities. As result of the Company's announcement that its independent public accountants had resigned, trading of Laser Technology's common stock halted on December 23, 1998. It was only on March 22, 1999, that the trading halt was finally lifted. On December 28, 1998, the Company reported that their auditor had resigned because it could "no longer rely on management's representations" and was "unwilling to be associated" with the Company's previously issued financial reports. A March 17, 1999 Company press release stated further that due to accounting improprieties uncovered by an internal investigation relating to certain transactions and payments, the Company's then President and CEO had resigned from the Company's Board of Directors as did the CFO, effective February 24, 1999. LOUISIANA PACIFIC: ABT Hardboard Litigation and Cost Allocation --------------------------------------------------------------- ABT Building Products Corporation (acquired by LOUISIANA PACIFIC CORP. in January 1999), ABTco, Inc., a wholly owned subsidiary of ABT, Abitibi-Price Corporation, a predecessor of ABT, and certain affiliates of Abitibi have been named as defendants in a conditionally certified class action filed in Alabama state court and six other putative class action proceedings filed in various state courts from 1995 to 1998 and brought on behalf of various persons or purported classes of persons (including nationwide classes) who own or have purchased or used hardboard siding manufactured or sold by the ABT Entities or the Abitibi Entities. In general, the plaintiffs in these proceedings have alleged unfair business practices, breach of warranty, fraud, misrepresentation, negligence, and other theories related to alleged defects, deterioration, or other failure of such hardboard siding, and seek unspecified compensatory, punitive, and other damages, attorneys' fees and other relief. In addition, Abitibi has been named in certain other actions, which may result in liability to ABT under the allocation agreement between ABT and Abitibi described below. Except in the case of certain of the putative class actions that have been stayed, the ABT Entities have filed answers in these proceedings that deny all material allegations of the plaintiffs and assert affirmative defenses. L-P intends to cause the ABT Entities to defend these proceedings vigorously. ABT and Abitibi have agreed to an allocation of liability with respect to claims relating to (1) siding sold by the ABT Entities after October 22, 1992, and (2) siding sold by the Abitibi Entities on or before, or held as finished goods inventory by the Abitibi Entities on, October 22, 1992. In general, ABT and Abitibi have agreed that all amounts paid in settlement or judgment (other than any punitive damages assessed individually against either the ABT Entities or the Abitibi Entities) following the completion of any claims process resolving any class action claim (including consolidated cases involving more than 125 homes owned by named plaintiffs) shall be paid (a) 100% by ABT insofar as they relate to ABT Board, (b) 65% by Abitibi and 35% by ABT insofar as they relate to Abitibi Board, and (c) 50% by ABT and 50% by Abitibi insofar as they cannot be allocated to ABT Board or Abitibi Board. In general, amounts paid in connection with class action claims for joint local counsel and other joint expenses, and for plaintiffs' attorneys' fees and expenses, are to be allocated in a similar manner, except that joint costs of defending and disposing of class action claims incurred prior to the final determination of what portion of claims relate to ABT Board and what portion relate to Abitibi Board are to be paid 50% by ABT and 50% by Abitibi (subject to adjustment in certain circumstances). ABT and Abitibi have also agreed to certain allocations (generally on a 50/50 basis) of amounts paid for settlements, judgments and associated fees and expenses in respect of non-class action claims relating to Abitibi Board. ABT is solely responsible for such amounts in respect of claims relating to ABT Board. MBNA AMERICA: Discloses Trade Practices Suits in Note Offering -------------------------------------------------------------- In its draft prospectus prepared in connection with the issuance of $693,750,000 in Credit Card Receivable-Backed Certificates, MBNA AMERICA BANK NATIONAL ASSOCIATION discloses the existence of two pending class action suits against it: (A) In May 1996, Andrew B. Spark filed a lawsuit against MBNA Corporation, MBNA and certain of its officers and its subsidiary, MBNA Marketing Systems, Inc. The case is pending in the United States District Court for the District of Delaware. This suit is a purported class action. The plaintiff alleges that MBNA's advertising of its cash promotional annual percentage rate program was fraudulent and deceptive. The plaintiff seeks unspecified damages including actual, treble and punitive damages and attorney's fees for an alleged breach of contract, violation of the Delaware Deceptive Trade Practices Act and the federal Racketeer Influenced and Corrupt Organizations Act. (B) In February 1998, a class was certified. In October 1998, Gerald D. Broder filed a lawsuit against MBNA Corporation and MBNA in the Supreme Court of the State of New York, County of New York. This suit is a purported class action. The plaintiff alleges that MBNA's advertising of its cash promotional annual percentage rate program was fraudulent and deceptive. The plaintiff seeks unspecified damages including actual, treble and punitive damages and attorneys fees for an alleged breach of contract, common law fraud and violation of New York consumer protection statutes. MBNA Corporation believes that its advertising practices are proper under applicable federal and state law and intends to defend these actions vigorously. It is not clear at this point in time what effect, if any, these cases will have with respect to the Certificate holders' interests, and MBNA cautions potential investors. NORTH FACE: Milberg, Weiss Files Complaint in Colorado ------------------------------------------------------ Milberg, Weiss, Bershad, Hynes & Lerach LLP filed a class action lawsuit in the United States District Court for the District of Colorado against The North Face, Inc. (Nasdaq: TNFI) and certain of its officers and directors for violations of the Securities Exchange Act of 1934. The lawsuit is brought on behalf of all who purchased North Face common stock between April 25, 1997 and March 4, 1999 OKLAHOMA PRISONS: April Hearing for Medical Neglect Case -------------------------------------------------------- The Tulsa World reported that attorneys for inmates are expected to try show next month that the Oklahoma Department of Corrections has blood on its hands and indifference in its heart when it comes to medical care. According to the story, U.S. District Judge Michael Burrage of the Eastern District in Muskogee agreed to an April hearing on an emergency request from Tulsa attorneys Louis Bullock and Thomas Seymour for federal control of state prison medical operations, alleging that the department's actions led to inmate deaths and needless suffering. The attorneys will have to prove that the department showed deliberate indifference to inmates for whom it was charged with providing medical care, said Guy Hurst, chief of litigation for Oklahoma Attorney General Drew Edmondson, who is helping represent the Oklahoma Department of Corrections. Deliberate indifference is more severe than negligence, Hurst said in the Tulsa World story. It requires the plaintiffs to show not that the Department of Corrections made bad decisions, but that the department didn't even try to take care of inmates. The Tulsa World explained that the case stems from a 1972 class action lawsuit, Battle vs. Anderson, that was filed by inmates who successfully alleged a variety of complaints, including inadequate medical care. The state had been operating under court orders to improve conditions. According to the report, one of the witnesses who is expected to be called is Dr. Robert Greifinger, one of three joint consultants agreed on by both the department and Bullock to review medical conditions in state prisons. Greifinger issued a report in July 1998 detailing horrendous conditions in medical care. During five days in May 1998, Greifinger and the other experts toured Joseph Harp Correctional Center in Lexington, Lexington Correctional Center, Mabel Bassett Correctional Center in Oklahoma City and Oklahoma State Penitentiary in McAlester. The Tulsa World noted that Greifinger's findings include: ---Inmate J.F. at Oklahoma State Penitentiary saw a physician on Aug. 27, 1997, who identified masses in his chest and larynx. A biopsy revealed cancer. A CT scan was ordered, but "for some reason did not happen. Staff alleges that he refused. The patient was lost to follow-up and had no more care for his cancer. It is not clear if he knew he had cancer." ---"There were two inmates in the OSP infirmary with the rare condition of Huntington's chorea," the report said. A chorea is a nervous system disorder characterized by irregular jerking movements due to involuntary muscle contractions. Huntington's chorea is hereditary, progressive and accompanied by mental deterioration. "One was in a back cell that was hot with barely any ventilation. The cell was filthy. The inmate was alone with no way to call for assistance. He was getting no socialization, no nursing care, no physical therapy, nor was he getting mental health evaluation or mental health intervention." ---"At OSP, the care and follow-up for inmates with life- threatening conditions (such as cancer of the larynx) is inadequate. In the case of J.F., this care will likely result in premature and painful death. The death of inmate B.W. Jr. at OSP is remarkable for its pain and suffering, without access to modern treatment, without mental care and without nursing attention in an infirmary or nursing home." ---Mabel Bassett inmate M.C. "had a clearly documented history of a lump in her breast on March 4, 1994. The history was ignored completely, despite multiple requests for care. She died of metastatic breast cancer on June 10, 1996, in custody." ---"Several staff members at OSP are practicing beyond the scope of their training and expertise, without sufficient supervision, policy, protocol or other guidance. This is illegal, it violates policy and endangers the inmates." ---Because of DOC restrictions, "old medication from other inmates and nondepartment pharmacies" is retained and used at Lexington Correctional Center. There is no inventory process for the medication. ---Care for diabetes and asthma at all four facilities did not meet nationally accepted standards. "This increases the risk for severe complications, early mortality and increased cost to the state for hospital care and security." ---Care for hypertension at Lexington Correctional Center and Oklahoma State Penitentiary and care for seizure disorder at Mabel Bassett did not meet nationally accepted standards. According to The Tulsa World, during the trial Bullock is expected to call inmates who were on the receiving end of questionable medical care. But what did or did not happen in May 1998 may not necessarily be the deciding factor as to whether the court intervenes, because the department has made changes based on Greifinger's findings since then, Hurst said. Meanwhile, the Governor's Office apparently still hopes that the negotiations process will continue, although no contact with Bullock has been made. Gov. Frank Keating's recently tapped chief negotiator, Chief of Staff Ken Lackey, was reported to say that the state is moving forward to deal with the problem. However, the Tulsa World story noted that Lackey and Bullock have yet to speak with each other. The department, Bullock and Seymour had been negotiating a settlement agreement for more than a year. Efforts stalled last month when the Board of Corrections, citing a need for legislative commitment to provide money, tabled the agreement. According to the story, medical care is just one component of the Battle vs. Anderson suit. Other issues remaining to be resolved include discrimination in housing and jobs, sanitation and fire safety. However, The Tulsa World noted that the price tag for medical services alone could range as high as $12 million. Still, Keating, lawmakers and others reportedly aired concerns that the agreement did not have a complete price tag. Also a source of consternation is that the settlement agreement tapped Bullock and Seymour as monitors to ensure that the department was doing what it said it would do based on the settlement agreement. According to the Tulsa World story, critics say that is a conflict of interest. Lackey reportedly appeared somewhat skeptical of the allegations, saying that if conditions were so deplorable, someone would have come forward under the state's whistle blower act. However, "They (department medical employees) have brought these issues to the (department) administration over the last few years, pointing out the problems in medical service delivery, and were told there was no money to fix it," said Mark Bledsoe, Oklahoma Public Employees' Association government relations coordinator in the Tulsa World report. The employees are frustrated and feel like they are being blamed for things outside of their control, he said. ORBITAL SCIENCES: Pomerantz Haudek Files Complaint in Virginia -------------------------------------------------------------- Pomerantz Haudek Block Grossman & Gross LLP filed a class action suit against Orbital Sciences Corp. (NYSE: ORB) and certain of its officers in the United States District Court Eastern District of Virginia on behalf of purchasers of Orbital common stock between April 21, 1998 through February 16, 1999. The Complaint charges that Orbital and certain of its officers overstated earnings for the first three quarters of 1998 by 70%. In particular, defendants prematurely recorded revenues for long-term contracts, improperly capitalized product improvement costs, and prematurely recognized revenue from license fees on international franchise agreements. On February 16, 1999, Orbital announced that it was restating the first, second, and third quarters of 1998. The restatement involves adjustments to revenues, expenses and earnings in excess of $24 million. Revelation of the restatement caused a 29% decline in the price of Orbital stock. Prior to any public disclosure of Orbital's problems, Orbital's CEO and CFO bailed out of their Company stock reaping over $3.6 million at prices inflated by their misconduct. PARTY CITY: Wolf Popper Files Complaint in New Jersey ----------------------------------------------------- The law firm of Wolf Popper LLP filed a class action lawsuit against Party City Corporation (Nasdaq: PCTY) in the United States District Court for the District of New Jersey. The lawsuit was filed on behalf of persons who acquired Party City securities in the open market between February 26, 1998 through March 18, 1999. The Complaint charges that defendants violated the U.S. securities laws by issuing materially false and misleading statements and by omitting material facts required to be disclosed so as to make the statements issued not materially false and misleading. SMART CHOICE: Milberg Weiss Files Complaint in Florida ------------------------------------------------------ A class action lawsuit was filed by Milberg Weiss Bershad Hynes & Lerach in the United States District Court for the Middle District of Florida on behalf of all persons who purchased the common stock of Smart Choice Automotive, Inc. (Nasdaq: SMCH) between April 15, 1998 and February 26, 1999. The complaint alleges that defendants issued a series of materially false and misleading statements concerning the Company's revenues and results of operations. SUN HEALTHCARE: Medicare Problems Create "Cottage Industry" ----------------------------------------------------------- The Albuquerque Journal reported that investors have filed at least three class-action lawsuits against Sun Healthcare Group, the Albuquerque-based nursing home company. They claim Sun, whose stock sank nearly 95 percent in the past year, knew a change in Medicare payments would mean financial trouble but did not warn investors. The report quoted analyst Murray Innes of Credit Lyonnais Securities as saying that more suits were to be expected. "Once one law firm files a class-action, you can pretty much count on several others." Sun spokeswoman Phyllis Goodman reportedly said class-action lawsuits are "a cottage industry." "This is the business they're in," she said. "These law firms exist to do nothing other than class-action lawsuits." She said one law firm that has filed against Sun announced six other class-action suits the same day. The Albuquerque Journal story noted that the latest suit was filed by two local lawyers, Wayne C. Wolf and Roderick A. Dorr, and the New York firm Schoengold & Sporn. Their complaint alleged that the company "issued to the investing public false and misleading financial statements and press releases thereby artificially inflating Sun's net income." Another lawsuit was filed against the company by five law firms, including Youngdahl & Sadin of Albuquerque. Lawyer Joseph Arshawsky of Youngdahl & Sadin reportedly said he expects to see the cases consolidate and go to trial in a year to 18 months. Additionally, two New York law firms -- Weiss & Yourman and Stull, Stull & Brody -- announced that they filed a suit March 12. In the Journal story, Goodman said the company will fight the lawsuits. "We are continuing to take care of 40,000 patients," she said. "That's what we're working out with our banks and the government." Sun is reportedly trying to renegotiate the terms of loans with major banks, and the company has asked lawmakers to change the payment system. Sen. Pete Domenici's staffers say the New Mexico Republican plans to introduce a bill in mid-April to change the payment system. The Albuquerque Journal noted that stockholders have been debating Sun's situation online on a Yahoo Finance bulletin board, and some call for a change in management. But analyst Rob Mains of Advest in New York reportedly said CEO Andrew Turner's job is probably safe. "It's hard to imagine the company without him," Mains said. "In this situation, no one is safe. But it would be a stretch to blame a lot of the problems on Andy Turner." SUN HEALTHCARE: Pomerantz Haudek Files Complaint in New Mexico -------------------------------------------------------------- Pomerantz Haudek Block Grossman & Gross LLP has filed a class action suit against Sun Healthcare Group, Inc. (NYSE: SHG) and certain officers and directors in the United States District Court for the District of New Mexico on behalf of all purchasers of common stock between June 2, 1998 through February 1, 1999. The Complaint charges that Sun Healthcare and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing materially false and misleading statements concerning the impact that changes in the Medicare reimbursement system brought about by the prospective payment system would have on the Company's business prospects and operating results. Specifically, the Complaint alleges that defendants failed to disclose (a) that profit margins and reimbursement rates for ancillary services would be substantially lower under PPS; (b) that the goodwill of Sun Healthcare's domestic facilities had become impaired as a result of the PPS; and (c) that the financial results of the Company would be materially and adversely impacted because certain operations acquired from Retirement Care Associates by Sun Healthcare had been unprepared for the conversion to PPS. Y2K LITIGATION: Changing Diversity Rule May Swamp Federal Courts ---------------------------------------------------------------- The Daily Record Baltimore reported that two bills in the U.S. Senate and one in the House of Representatives may lower the bar for federal jurisdiction, easing the requirements for diversity of citizenship and the amount in controversy. These measures would permit lawsuits in the federal courts if any defendant and any plaintiff are from different jurisdictions, rather than requiring complete diversity. The federal court would, however, be given the right to send the case back to state court if certain circumstances are met. Some practitioners see merit in the idea, according to the story. "Class action seems to be the way to go for Y2K litigation, and usage of computer programs is becoming so widespread that finding complete diversity is increasingly difficult," said attorney Ned T. Himmelrich, who heads up the Year 2000 practice group at Gordon, Feinblatt, Rothman, Hoffberger & Hollander in Baltimore. "It's an outgrowth of the globalization of the product." However, the Daily Record Baltimore reported that the Administrative Office of the U.S. Courts voted to oppose the measures, S. 96, S. 461 and H.R. 775, at its March conference. "One of the primary objectives of this legislation is to facilitate the resolution of Y2K claims, and this shift of class action litigation holds the potential for overwhelming the federal courts, resulting in substantial costs and delays," the AOC said in a statement. The Daily Record Baltimore quoted John C. Joyce of Lerch, Early and Brewer in Bethesda as saying, "If you dump all the Y2K litigation into the federal court system, it could shut it down." Mr. Joyce also noted that the U.S. Chamber of Commerce has suggested creating a separate system to deal with Year 2000 issues, similar to the bankruptcy courts. "But the question of jurisdiction is addressing the problem after the fact. What the government should be concentrating on now is fixing the problem and creating contingency plans, and H.R. 775 is one of the few Y2K bills that tries to address those issues." The House measure, which is co-sponsored by U.S. Rep. Constance E. Morella, R-Md., of Rockville, reportedly includes provisions that would require parties to make efforts to correct the problem before filing suit, encourage alternative dispute resolution and limit legal fees. According to the Daily Record Baltimore story, the measure is pending in the Judiciary Committee and no action is expected until after legislators return from their Easter district work sessions in April. ********* 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. 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