/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990419.MBX C L A S S A C T I O N R E P O R T E R Monday, April 19, 1999, Vol. 1, No. 52 Headlines ALLIED PILOTS: Sickout Claims May Ground AA Pilots Union AMERICA WEST: Reinhardt & Anderson File Complaint in Arizona COMPAQ COMPUTER: Gross Firm Files Complaint in Texas COMPAQ COMPUTER: Law Firms Identify More Defrauded Victims CURATIVE HEALTH: Berman DeValerio Files Complaint in New York CURATIVE HEALTH: Wolf Haldenstein Files Complaint in New York EVOLVING SYSTEMS: Shareholder Suits Settle For $10 Million FVC.COM: Wolf Haldenstein Files Complaint in California MONARCH DENTAL: Milberg Weiss Files Complaint in Texas MOTT'S INC.: Apple Sweetener Controversy Settlement Pending NETWORK ASSOCIATES Wolf Haldenstein Files Suit in California NETWORK ASSOCIATES: Kaplan Kilsheimer Files Suit in California NETWORK ASSOCIATES: Wechsler Harwood Files Suit in California NETWORK ASSOCIATES: Savett Frutkin Files Suit in California R.J. REYNOLDS: Tobacco Co. Glad Cigarettes Don't Kill Classes SECURE COMPUTING: Cohen Milstein Files Complaint in California STAFFMARK INC.: Stull Stull Files Complaint in Arkansas SUNBEAM: Kirby Mcinerney Files Complaint in Florida Y2K LITIGATION: Firm Thinks Lucent Needs to Fix Telephone Bugs ZONAGEN INC.: Consolidated Texas Securities Litigation Dismissed ********* ALLIED PILOTS: Sickout Claims May Ground AA Pilots Union -------------------------------------------------------- The Fort Worth Star-Telegram reported that the union representing 9,400 pilots at American Airlines, faced with a multimillion-dollar court fine and lawsuits seeking hundreds of millions more, is flying into a financial storm that could threaten its existence. According to the story, the Allied Pilots Association runs into its first squall this week, when U.S. District Judge Joe Kendall is expected to levy a stiff contempt-of-court fine for defying a back-to-work order he issued during the pilots' February sickout. Kendall has already ordered the union to make a $10 million down payment, and he indicated that the actual award might be much larger. The paper reported that the head winds could get even stronger as the union encounters civil lawsuits filed on behalf of travelers whose flights were disrupted by the sickout. The suits seek damages of more than $200 million. The airline told the Fort Worth Star-Telegram it was forced to cancel 6,700 flights over 10 days; as many as 2,500 pilots called in sick. In the story, union officials acknowledge that Kendall's fine alone could empty the union's coffers and that they have given some thought to filing for bankruptcy, although the union has not hired bankruptcy counsel. The Fort Worth Star-Telegram reported that in Kendall's court in February, officials indicated that the union had about $38 million in net assets. American estimated that it lost more than $50 million in the three days the pilots defied the back-to-work order. The civil suits raise the financial stakes, although it is unclear how the plaintiffs would collect if they win. Because the cases venture into largely uncharted legal territory - consumers suing a union for damages - it's also difficult to predict how a judge or jury might decide. But some experts believe that the plaintiffs have a compelling case. Richard Barsness, a professor of management and a labor expert at Lehigh University in Bethlehem, Pa., told the Fort Worth Star-Telegram that the union leaders have put the union "between a rock and a hard place." He reportedly said that if a judge or jury rules that the sickout violates the Railway Labor Act, which sets specific criteria to be met in airline labor disputes, the plaintiffs in the civil suits would be entitled to damages. "The whole premise of the Railway Labor Act is that strikes in the transportation industries aren't in the public interest and the parties have to follow all the steps laid out in the law before they can strike or engage in other forms of self-help," Barsness told the Fort Worth Star-Telegram. Bill Keller of Dallas, a former chairman of the labor employment law section of both the Texas and American bar associations, told the Fort Worth Star-Telegram that the courts are likely to favor the consumers because the "public policy interest" is to prevent disruptions in the nation's commerce. However, the Fort Worth Star-Telegram said that the union contends that the Railway Labor Act will protect it from liability in the lawsuits. The paper explained that the dispute between the union and American management flared over the airline's acquisition of Reno Air late last year. The two sides met several times to try and reach an agreement, but negotiations broke down on Feb. 5. Pilots began calling in sick in unusual numbers the next day. Union leaders reject assertions that the sickout was illegal. They argue that pilots were within their rights because American's management violated their contract. "Our position is straightforward," wrote President Rich LaVoy in a letter to one North Texas businessman who filed a claim in small-claims court against the union. The Fort Worth Star-Telegram wrote that the businessman, Peter Conners, is seeking compensation for the ticket he had to buy on Vanguard Airlines to get home from Chicago after his American flight was canceled. LaVoy wrote: "We believe that our pilots were legally entitled to self-help in response to the unilateral abrogation by American Airlines of the terms of our working agreement. ... Therefore, we recommend that you direct your request for compensation to American Airlines' management." Edgar James, the union's general counsel, has argued forcefully in court, in filings and in communications with union members that consumers are preempted by the Railway Labor Act from receiving damages because of a labor-management dispute that affects flights. In a formal response to one suit, union lawyers cited 20 legal reasons why the plaintiffs lack standing or otherwise aren't entitled to receive damages. Brian Mayhew, a union vice president, told the Fort Worth Star- Telegram that just because Kendall held the union in contempt doesn't mean that he will ultimately rule that the sickout was illegal from its outset. "Temporary restraining orders ordering unions back to work are pretty standard stuff in the airline business," said Mayhew in the report. "A judge is going to be most concerned with getting the planes back in the air. So he'll issue a back-to-work order and then try to push the parties into settling their differences. That doesn't mean that the union was acting illegally when it launched its job action." Issuing the contempt citation on Feb. 13, the Fort Worth Star- Telegram said Kendall referred to the pilots' actions as an "illegal sickout" and that the union is "responsible for the damages these passengers have suffered." Lawyers who filed the civil suits for travelers will keep a close eye on Kendall's hearing this week, which is expected to continue through Tuesday. "Our case does not rise or fall based on the outcome of the contempt damages hearing in Judge Kendall's court," Russel H. Beatie Jr., a Manhattan lawyer who represents a group of New Yorkers and Floridians suing the Allied Pilots in federal court in Dallas, told the Fort Worth Star-Telegram. "But one would assume that Judge Kendall's rulings in the case before him would hold a significant amount of weight in the eyes of the judge and the jury in any civil lawsuits arising from the sickout." Beatie's clients reportedly seek unspecified compensatory and punitive damages for themselves and for every consumer who held a ticket for travel on American between Feb. 3 and Feb. 13, and every shipper who contracted for freight services on American between those dates. Thomas Verticchio, a Chicago lawyer who filed a class-action suit in Tarrant County on behalf of two Chicago-area travelers, Steven Carli and Shon Prejean, echoes Beatie. The Fort Worth Star-Telegram wrote that Verticchio said if Kendall or a jury finds that the pilots violated the law when they launched their sickout, "such a ruling would carry an enormous amount of weight in the civil liability suits." Peter Catalano, a San Francisco attorney representing six Chicago-area residents whose travel was disrupted, goes further, the paper explained. Catalano said flatly that when Kendall slapped the union with a contempt ruling, he proved his case for him. "My burden," Catalano told the Fort Worth Star-Telegram, "is just to present the judge and jury in our case with copies of Judge Kendall's ruling. ... Then I have to convince the court that those affected travelers are entitled to $200 per incident of delay or inconvenience. I don't think it will be particularly hard to convince a judge or jury of that." According to the story, the plaintiffs' lawyers scoff at the union's legal arguments. The union is claiming that the Railway Labor Act is a "get out of jail free card," said John Malesovas of Waco, whose suit on behalf of Fort Worth residents Jim and JoEllen Cashion was originally filed in Tarrant County. "They're saying our claim is over a labor dispute," he told the Fort Worth Star-Telegram. "We're saying it is not. ... This is a simple case of tortious interference by the pilots with the contract of carriage between my clients and American Airlines." The Fort Worth Star-Telegram wrote that all but one of the suits filed against the union have been moved, upon the union's motion, to federal court in Dallas, where they are likely to be consolidated into a single class-action suit before U.S. District Judge Jorge Solis. AMERICA WEST: Reinhardt & Anderson File Complaint in Arizona ------------------------------------------------------------ Reinhardt & Anderson filed a class action complaint in the United States District Court for the District of Arizona on behalf of all persons who purchased the Class B common stock of America West Holdings Corp. (NYSE: AWA) between November 19, 1997, and September 3, 1998. The complaint charges America West and certain officers, directors and controlling shareholders of the Company with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Complaint alleges that by issuing false statements about America West's supposed competitive advantages due to its exceptionally low operating costs, industry-leading aircraft utilization rates, cost savings outsourced aircraft maintenance procedures, improving financial results, record earnings per share together with prospects for continued growth, and using $99 million of the Company's own cash to repurchase 4.8 million shares on the open market, defendants artificially inflated the price of America West stock to an all time high of 31 5/16 on April 21, 1998. It is further alleged that while the price of America West's stock was artificially inflated, the insiders unloaded approximately 97% of their own America West stock in just 90 days. To learn more, contact Randall H. Steinmeyer by telephone at 888-253-5139 or 651-227-9990 or write ralaw@minn.net via email. COMPAQ COMPUTER: Gross Firm Files Complaint in Texas ---------------------------------------------------- The Law Offices Bernard M. Gross P.C. filed a class action lawsuit on April 12, 1999 in the United States District Court for the Southern District of Texas on behalf of investors who purchased common stock of Compaq Computer Corporation (NYSE: CPQ) from January 27, 1999 through April 9, 1999. The Complaint charges CPQ and certain officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Complaint alleges that defendants issued a series of materially false and misleading statements that failed to disclose that defendants knew or recklessly disregarded the material facts that sales to small and medium size businesses in North America and Europe had slowed in January and such slowdown would effect negatively Compaq's earnings and revenues. During this time period, numerous officers of Compaq sold hundreds of thousands of shares of Compaq common stock in advance of the revelation of the truth. To learn more, contact Susan Gross, Esq. or Christopher Reyna, Esq. at 800-258-9349 or 215-561-3600, or write susang@bernardmgross.com or chris@bernardmgross.com via email. COMPAQ COMPUTER: Law Firms Identify More Defrauded Victims ---------------------------------------------------------- Two law firms, Milberg Weiss Bershad Hynes & Lerach, and Hoeffner, Bilek & Eidman, which commenced securities class actions on behalf of purchasers of the common stock of Compaq Computer Corporation (NYSE: CPQ) in March 1999, intend to extend the class period in an amended complaint to include those acquiring the company's securities from January 27, 1999 through April 9, 1999. According to Hoeffner Bilek, after the close of trading on Friday April 9, 1999, Compaq announced that it would post a first quarter profit of about $0.15 per share, less than half of what analysts expected from the Company. On Monday April 12, 1999, in response to this shocking disclosure, the price of Compaq stock plummeted more than 25% to as low as $23-1/8 per share from its previous close of $30-15/16. According to Milberg Weiss, on April 9, 1999 Compaq announced that its earnings for the first fiscal quarter, the three-month period ended March 31, 1999, would be below analyst consensus estimates by a shocking 50%. Following this announcement, Compaq shares plummeted over 22% in value on volume of over 100 million shares. To learn more, contact Thomas E. Bilek, Esq., at Hoeffner Bilek at 713-227-7720, or Steven G. Schulman or Samuel H. Rudman, at Milberg Weiss at 800-320-5081 or endfraud@mwbhl.com via email. CURATIVE HEALTH: Berman DeValerio Files Complaint in New York ------------------------------------------------------------- Berman, DeValerio & Pease LLP, filed a class action lawsuits against Curative Health Services, Inc. (Nasdaq: CURE) in the United States District Court for the Eastern District of New York. The lawsuit is brought for violations of Section 10(b) of the Securities Exchange Act of 1934 on behalf of purchasers of Curative Health Service's common stock during the period June 26, 1996 through April 9, 1999. "The action filed today charges that Curative Health engaged in improper Medicare billings which caused the company's publicly reported revenues and earnings to be materially overstated" said Jeffrey C. Block, one of the partners at Berman DeValerio. On April 7, 1999 it was announced that the United States Department of Health and Human Services had issued a subpoena to Curative Health Services seeking documents relating to its Medicare billing practices. On April 9, 1999 it was revealed that the United States Department of Justice had joined in a lawsuit charging Curative Health Services with Medicare fraud. Curative Health Service's common stock price plummeted in reaction to this news falling from its closing price of $11 3/4 per share before the disclosure of the subpoena to close at $4 11/16 on April 12, 1999, a 60% decline. To learn more, contact Kathryn A. McElroy, Esq., Jennifer L. Finger, Esq., or Jeffrey C. Block, Esq., at bdplaw@bermanesq.com via email, or call 800-516-9926. CURATIVE HEALTH: Wolf Haldenstein Files Complaint in New York ------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit in the United States District Court for the Eastern District of New York on behalf of investors who purchased Curative Health Services, Inc. (NASDAQ: CURE) stock between May 14, 1996, and April 12, 1999. The lawsuit charges Cure and certain officers and directors with violations of the federal securities laws and regulations of the United States. The Complaint alleges that defendants issued false and misleading statements and failed to disclose material facts concerning the Company's financial condition. Specifically, defendants engaged in a concerted course of conduct to defraud Medicare so as to increase the Company's reported revenues by: (a) filing excessive charges with Columbia/HCA Healthcare Corporation which were in turn paid by Columbia to Cure following Columbia's reimbursement by Medicare; (b) shifting costs from non-allowable services to allowable services to assure payment by Medicare; (c) violating the "anti-kickback" statute as a portion of the Company's fees was based on the number of new patients seen in the Company's Wound Care Centers; and (d) failing to disclose that the Company's illegal practices were jeopardizing the Company's ability to remain a viable entity and that, absent the illegal practices described below, the Company would have been unable to recover substantial payments from Medicare. The Company's fraudulent practices were disclosed on or about April 9, 1999, when the United States Department of Justice joined a "whistle blower" lawsuit that had been filed against Columbia. Specifically, the complaint filed in the "whistle blower" action alleges that in 1993, after Medicare decided not to pay for Procuren(R) (a drug used by the Company for the treatment of serious wounds) Columbia and Cure agreed to amend its contracts by increasing fixed management fees more than 400%, by cutting more than half the amount charged by Cure for Procuren(R) and by adding a management fee of $400 per patient. The lawsuit further alleges that the $400 fee violated the Medicare Anti-kickback Act. For additional details, contact Gregory Mark Nespole, Esq., Fred Taylor Isquith, Esq., Shane T. Rowley, Esq. or legal assistant Michael Miske by telephone at 800-575-0735 or write to them at classmember@whafh.com or whafh@aol.com via email. EVOLVING SYSTEMS: Shareholder Suits Settle For $10 Million ---------------------------------------------------------- Evolving Systems, Inc. (Nasdaq: EVOL) announced that it has reached a settlement of the shareholder class action lawsuit pending in the District of Colorado. The aggregate settlement amount is Ten Million Dollars ($10,000,000), in cash. The settlement will be funded by insurance proceeds and by the Company, with the Company paying Two Million Five Hundred Thousand Dollars ($2,500,000), plus legal fees and other expenses incurred by the Company in connection with the lawsuit. The $2,500,000 payment, legal fees and other expenses will be paid out of the Company's cash balances. The settlement is subject to approval by the Court. Evolving Systems provides the telecommunications industry with software products and systems integration for a full range of business and operational support systems and network element software. Since its start in 1985, Evolving Systems has developed a variety of telecom products such as service-order entry and automated provisioning systems, wireless data applications, local number portability solutions and IP telephony technology. To learn more, call David R. Johnson at 303-802-2013, or Jo Ann Washburn at 303-802-1123. FVC.COM: Wolf Haldenstein Files Complaint in California ------------------------------------------------------- On April 12, 1999, Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit in the United States District Court for the Northern District of California on behalf of investors who bought FVC.com, Inc. (Nasdaq: FVCX) stock between January 21, 1999 and April 6, 1999. The lawsuit charges FVC and several of its top officers with violations of the securities laws and regulations of the United States. The complaint alleges that defendants issued a series of false and misleading statements concerning the Company's fourth quarter 1998 results. Specifically, the complaint alleges that the Company knowingly or recklessly overstated the Company's results for the fourth quarters of 1998 by engaging in improper accounting practices in violation of generally accepted accounting practices ("GAAP"). The complaint further alleges that certain defendants availed themselves of their inside knowledge to take advantage of the Company's inflated share price and sell 245,000 of their own shares for gross proceeds of over $3 million. Upon the announcement that results for the fourth quarter would be far below expectations, FVC common stock plunged 59% on eight times average volume. For more information, call Michael Miske, Gregory Nespole, Esq., Fred Taylor Isquith, Esq. or Shane T. Rowley, Esq. at 800-575- 0735 or write classmember@whafh.com or whafh@aol.com by email. MONARCH DENTAL: Milberg Weiss Files Complaint in Texas ------------------------------------------------------ Milberg Weiss Bershad Hynes & Lerach LLP, filed a class action in the United States District Court for the Northern District of Texas on behalf of purchasers of Monarch Dental Corporation (NASDAQ: MDDS) common stock between February 24, 1998 and December 22, 1998. The complaint charges Monarch and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that the defendants stated that Monarch continued to make strategic acquisitions of quality practices and experience solid internal growth as its business fundamentals remained strong and would successfully execute its growth plans for 1998 and beyond as they were pleased with Monarch's financial performance and confident that Monarch would earn $0.58 in 1998. These statements caused the price of Monarch's common stock to increase to a high of nearly $20 per share and permitted the defendants to use Monarch's artificially inflated stock as a currency to acquire numerous dental practices and permit Monarch's venture capital investor to distribute one million Monarch shares to the limited partners of the various entities it controlled who could then sell Monarch shares before they collapsed in price. However, internally at Monarch, the defendants knew that Monarch's business fundamentals were anything but strong, as Monarch had acquired low quality practices, three of its Houston offices were running cash flow negative and its infrastructure was insufficient to competently manage or synthesize the numerous practices it had acquired and that, because of these and other negative factors, Monarch would badly miss its earnings projections of $0.18 and $0.58 for the fourth quarter and year 1998 respectively. When the defendants revealed to the securities markets on December 22, 1998 and March 11, 1999 that Monarch would post a huge $0.38 loss in the fourth quarter as a result of $7.7 million in charges that would nearly wipe out all of Monarch's earnings for the entire year 1998, the price of Monarch stock collapsed and traded below $3 per share, approximately 90% below its recent highs. To learn more, call William Lerach, Alan Schulman or Darren Robbins at 800-449-4900 or write wsl@mwbhl.com via email. MOTT'S INC.: Apple Sweetener Controversy Settlement Pending ----------------------------------------------------------- Three actions are pending in the Superior Court of the State of Connecticut, Judicial District of Waterbury, in which the plaintiffs, on behalf of themselves and others, claim that Cadbury Schweppes, P.L.C., Cadbury Beverages, Inc., Mott's U.S.A. and Mott's, Inc., falsely advertised Mott's 100% Apple Juice Products containing apple juice concentrate and violated applicable laws. Plaintiffs charge that defendants failed to disclose that certain of Mott's 100% Apple Juice Products containing apple juice concentrate also contained sweeteners from non-apple sources. Mott's vigorously denies any and all liability for these claimed allegations. Still, the parties have decided to settle these claims, and the following Settlement Class has been conditionally certified for the purpose of the proposed settlement: All persons in the United States who purchased Mott's 100% Apple Juice Products containing apple juice concentrate during the period from March 11, 1990 to October 1, 1997, excluding the Defendants, any entity in which any Defendant has a controlling interest, the present and former officers, directors and affiliates of Defendants, and the legal representatives, heirs, predecessors, successors or assigns of any such person. Under the proposed settlement, which is awaiting Court approval, Mott's shall distribute throughout the United States, at its sole expense, coupons for future purchases of Mott's products until a total value of $1,100,000.00 has been redeemed. In addition, as part of this proposed settlement, Mott's has agreed to pay Plaintiffs' attorneys' fees and expenses as ordered by the Court in an amount not to exceed $375,000. Mott's will pay all costs of publishing this notice of the proposed settlement on the Internet for 65 days and one time in the national weekend edition of USA Today. More information about the settlement can be obtained from a notice at http://www.motts.com/settlement.htmon the web. NETWORK ASSOCIATES Wolf Haldenstein Files Suit in California ------------------------------------------------------------ On April 12, Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit in the United States District Court for the Northern District of California on behalf of investors who bought Network Associates, Inc.(Nasdaq: NETA) stock between January 20, 1998 and April 6, 1999. The lawsuit charges Network Associates and one of its top officers with violations of the securities laws and regulations of the United States. The complaint alleges that defendants issued a series of false and misleading statements concerning the Company's financial condition for fiscal years 1997 and 1998. Specifically, the complaint alleges that the Company knowingly or recklessly overstated the Company's earnings by failing to conform to generally accepted accounting practices ("GAAP") with respect to its in-process research and development expenses. Upon the announcement that the Company would restate downward its in- process research and development write-offs for fiscal 1997 and 1998 by $13 million and $169 million respectively, the Company's stock price plunged as much as 27% in heavy trading. For more information, contact Michael Miske, Gregory Nespole, Esq., Fred Taylor Isquith, Esq., or Shane T. Rowley, Esq., by telephone at 800-575-0735 or write classmember@whafh.com or whafh@aol.com via email. NETWORK ASSOCIATES: Kaplan Kilsheimer Files Suit in California -------------------------------------------------------------- Kaplan, Kilsheimer & Fox LLP filed a class action suit against NETWORK ASSOCIATES, INC. (Nasdaq: NETA) and certain individuals associated with the Company in the United States District Court for the Northern District of California. The suit is brought on behalf of all who purchased Network Associates common stock between January 20, 1998 and April 6, 1999. The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing numerous false statements about Network Associates, its financial results and its business prospects which artificially inflated earnings. The Complaint further alleges that the price of Network Associates stock was also artificially inflated as a result of defendants' conduct which included, downplaying the significance of a letter from the Securities and Exchange Commission questioning the Company's accounting practices. In addition, the Complaint alleges that the individual defendants and other Network Associates executives reaped millions of dollars in proceeds from stock sales while in possession of material adverse and non-public information. To learn more, call Frederic S. Fox, Esq., Janine Azriliant, Esq., or Donald R. Hall, Esq., at 800-290-1952 or 212-687-1980, or write to lawkkf@aol.com via email. NETWORK ASSOCIATES: Wechsler Harwood Files Suit in California ------------------------------------------------------------- Wechsler Harwood Halebian & Feffer LLP, filed a class action lawsuit on April 12, 1999, in the United States District Court for the Northern District of California on behalf of all persons who purchased the common stock issued by Network Associates, Inc. (Nasdaq: NETA) from January 20, 1998 through April 6, 1999. The complaint charges Network Associates and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that the defendants issued numerous false statements about Network Associates, its financial results and its business prospects, including that the Company was experiencing strong pricing trends, its business was healthy, its outlook had never been better and, as a result, it would earn EPS of $2.12 in 1999, respectively. These false statements caused Network Associates stock to trade at artificially inflated levels of as high as $67 per share in December 1998 and kept it trading at over $30 per share, enabling several executive officers of Network Associates to sell over 852,500 shares of Network Associates stock at artificially inflated prices ranging from $34.33 to $50.88, for almost $33 million. It was only after these stock sales occurred, however, that the defendants revealed that Network Associates' accounting procedures may be improper. On January 6, 1999, Network Associates revealed that it had received a letter from the Securities and Exchange Commission questioning the Company's accounting practices in the Company's SEC filings made during 1998. Upon this announcement, Network Associates stock price fell from $59-15/16 to $58-3/16 per share on enormous volume of 14.9 million shares. The defendants admitted after the close of the market on April 6, 1999 that, in connection with the SEC's investigation, Network Associates had determined that: its in- process research and development expenditures were overstated by $45 million in 1997; its amortization expenses were materially understated in 1997; its in-process research and development expenditures were overstated by $169 million in 1998; its amortization expenses were materially understated in 1998; and its amortization expense for 1Q99 would increase to $58 million from planned expense of $22 million. For additional details, contact Robert I. Harwood, Esq., Mathew M. Houston, Esq., or Jeffrey B. Silverstein, Esq. by email at mhouston@whhf.com or jsilv@whhf.com or call 877-935-7400. NETWORK ASSOCIATES: Savett Frutkin Files Suit in California ----------------------------------------------------------- Savett Frutkin Podell & Ryan, P.C. filed a class action lawsuit in the United States District Court for the Northern District of California on behalf of all purchasers of Networks Associates Inc. (NASDAQ: NETA) common stock during the period January 20, 1998 through April 6, 1999, including those persons who received shares of Networks Associates in exchange for the American Depository Receipts ("ADR's") of Doctor Solomon's Group PLC (NASDAQ: SOLLY) (EASDAQ: SOLL), in connection with Networks Associates' acquisition of Doctor Solomon's on August 13, 1998. The Complaint charges Networks Associates and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that the defendants issued numerous false statements about Networks Associates, its financial results and its business prospects, including that the Company was experiencing strong pricing trends, its business was healthy, its outlook had never been better and, as a result, it would earn EPS of $2.12 in 1999. These false statements caused Networks Associates stock to trade at artificially inflated levels of as high as $67 per share in December 1998 and kept it trading at over $30 per share, enabling several executive officers of Networks Associates to sell over 852,500 shares of Networks Associates stock at artificially inflated prices ranging from $34.33 to $50.88, for almost $33 million. It was only after these stock sales occurred that the defendants revealed that Networks Associates' accounting procedures may be improper. On January 6, 1999, Networks Associates revealed that it had received a letter from the Securities and Exchange Commission questioning the Company's accounting practices in the Company's SEC filings made during 1998. In stark contrast to the defendants' statements during the Class Period, the defendants admitted after the close of the market on April 6, 1999 that, in connection with the SEC's investigation, Networks Associates had determined that: its in-process research and development expenditures were overstated by $169 million in 1998; its amortization expenses were materially understated in 1998; and its amortization expense for 1Q99 would increase to $58 million from planned expense of $22 million. To learn more, call Barbara A. Podell, Esquire at 800-993-3233 or write sfprpc@op.net via email. R.J. REYNOLDS: Tobacco Co. Glad Cigarettes Don't Kill Classes ------------------------------------------------------------- The R.J. Reynolds Tobacco Co. announced "another positive legal development for the tobacco industry," in that a lawsuit filed against the industry alleging that the industry tried to deceive and addict smokers to cigarettes was denied class certification. In denying class certification for the case (Judith E. Chamberlain, et al., v. The American Tobacco Company, Inc., et al.), Judge Patricia A. Gaughan (U.S. District Court, Northern District of Ohio, Eastern Division) wrote that "the plaintiffs' claims in this case are permeated with individual issues of reliance, causation and damages." Judge Gaughan also noted: "Because there are so many individual issues, it is this Court's view that trying this case as a class action would require an overwhelming number of 'mini-trials' on the numerous individual issues involved." Daniel W. Donahue, senior vice president and deputy general counsel for Reynolds Tobacco, applauded the ruling, saying, "Courts continue to recognize that claims by individuals who used a similar product at different times, for different reasons and with different results simply cannot be certified as a class." Donahue noted: "Since the landmark opinion decertifying the Castano class several years ago, no federal court has certified a smoking and health case as a class action. We believe that the minority of opinions from state courts certifying them will be overturned on appeal." To learn more, call Seth Moskowitz at 336-741-7698. SECURE COMPUTING: Cohen Milstein Files Complaint in California -------------------------------------------------------------- The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. on April 12, 1999 filed a lawsuit in the United States District Court for the Northern District of California on behalf of purchasers of the common stock of Secure Computing Corp. (Nasdaq: SCUR) between November 10, 1998 and March 31, 1999. The complaint charges Secure Computing and certain officers and directors of the Company with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that defendants issued materially false and misleading statements concerning Secure Computing's business operations and earnings growth and its ability to continue to achieve profitable growth. By issuing these allegedly false and misleading statements, defendants artificially inflated Secure Computing's stock price from $14 1/8 on November 9, 1998 to a high of $28 in January 1999, allowing Secure Computing's top insiders to sell 366,001 shares of their Secure Computing stock worth more than $6 million, before the true facts about Secure Computing's troubled operations, large losses and failed sales strategy were revealed and Secure Computing's stock collapsed to as low as $5 9/16 per share. To learn more, call Steven J. Toll or Emma Larson at 888-240- 1238 or 206-521-0080, or at stoll@cmht.com or elarson@cmht.com via email. STAFFMARK INC.: Stull Stull Files Complaint in Arkansas ------------------------------------------------------- Stull, Stull & Brody filed a securities class action lawsuit in the United States District Court for the Western District of Arkansas against StaffMark Inc. (NASDAQ: STAF) and certain officers and directors on behalf of all persons who acquired securities of StaffMark at artificially inflated prices between July 6, 1997, and March 2, 1999. The complaint alleges that defendants violated the federal securities laws (Sections 10(b) and 20(a) of the Securities Exchange Act of 1934) by misrepresenting or failing to disclose material information about StaffMark's financial condition and operating performance. As a result of defendants' false and misleading statements and omissions, the price of StaffMark's securities was artificially inflated, such that persons who purchased or otherwise acquired StaffMark's securities were damaged by overpaying for their securities. For additional details, call Tzivia Brody, Esq. at 1-800-337- 4983, or write to SSBNY@aol.com via email. SUNBEAM: Kirby Mcinerney Files Complaint in Florida --------------------------------------------------- On April 13, 1999, Kirby McInerney & Squire, LLP filed a class action lawsuit in the United States District Court for the Southern District of Florida. The lawsuit was filed on behalf of persons who purchased zero coupon convertible debentures after the initial offering, between March 20, 1998 and June 30, 1998, inclusive, except for securities acquired in the offering. The complaint asserts that Sunbeam made material omissions and misrepresentations that had the effect of inflating the market price of the debentures. Offered at about $37.24, their trading price toward the end of the class period was less than $23.00. The complaint names as defendants the issuer, its auditor Arthur Andersen, and two former Sunbeam principals, Messrs. Dunlap and Kersh. The plaintiff is an institution, which acquired in excess of $150 million, face amount, of the debentures during the class period, and was damaged thereby. To learn more, call Randall K. Berger, Esq. or Ms. Barrett Godsey at 212-317-2300 or 888-529-4787, or write kms@kmslaw.com via email. Y2K LITIGATION: Firm Thinks Lucent Needs to Fix Telephone Bugs -------------------------------------------------------------- The West Virginia publication the Sunday Gazette-Mail reported on a Charleston law firm contemplating a class action against Lucent Technologies, formerly AT&T. According to the story, the firm is trying to find others whose phone systems may falter at the end of the year. Depending on response to a current newspaper ad, a class action suit could be in the works. According to the report, at the heart of the matter is the firm's purchase in 1995 of a $42,000 telephone system. Jim Peterson, a lawyer with the firm, told the Sunday Gazette-Mail that he's heard it will cost $15,000 more to make all aspects of the system Y2K compatible. Unless the firm lays out more money, some functions of the system may not work when the calendar rolls to 2000, he said. Peterson said he doubts his firm - Hill, Peterson, Carper, Bee & Deitzler - is alone in the dilemma. So he's running a newspaper ad to solicit calls from other companies that may find themselves in the same boat. The Sunday Gazette-Mail reported that the ad is aimed at customers of Lucent who may have been "snookered." "Did Lucent recently tell you that your phone system is not Y2K compatible?," the ad asks. "Worse yet, did Lucent tell you that you must pay to fix the system they sold you? If so, you may have legal rights (after all, when you bought it, they said it would work)." Peterson told the Sunday Gazette-Mail that potential problems with the phone system came to his firm's attention when Lucent sent a letter saying two of the firm's features may not be Y2K compatible. "We searched high and low to get the type system we needed and eventually settled on the system manufactured at that time by AT&T. It's called the Merlin System. "There are various features that come with that phone. "We purchased call accounting and voice messaging, two of the more frequently purchased add-ons to a phone system." At the time, he said his firm was assured that the system would operate without a hitch well past the year 2000. "Lo and behold, in February of this year we received a letter from Lucent Technologies explaining that two of the features of our phone were not Y2K compatible. The cost to upgrade the voice messaging system and call accounting that we had would require new software and new hardware totaling approximately $15,000." Peterson told the Sunday Gazette-Mail that it isn't fair for the company to try to extract more money for a system that's paid for and was supposed to work. So he's thinking of a class action suit if other firms are having the same problem. "We've had numerous calls from banks, attorneys' offices and car dealerships," he said. "They received the same letters." When the system was sold, the company should have anticipated turn- of-the-century problems, he said. "Clearly, in the 1990s any computer person knew that a computer-driven package was going to have a problem unless software or computer chips were upgraded... . They had a duty to explain that, come the year 2000, they were going to have a problem. At a minimum, they had a duty to inform people of that." Lynn Newman, a spokeswoman for Lucent Technologies, told the Sunday Gazette-Mail that cases of Y2K incompatibility make up only about 5 percent of the firm's systems. "The most important thing is that more than 95 percent of the products business communication systems are using are currently compliant. For the vast majority of our customers, the year 2000 isn't an issue." Newman reportedly said if products made available on or after Sept. 30, 1996, aren't in compliance, they will be adjusted at no cost to the customer. When asked about systems sold before that date, she told the Sunday Gazette-Mail, "What we've been doing is contacting each of our customers who may have a Y2K issue and talking with them about upgrading or adjusting. Some may stay with what they have. Others may choose to upgrade. It's really going to vary... . Each customer among that small minority is going to be different. We've found some customers who, when we tell them how the Y2K issue may affect their system, say, 'That's fine. We'll stay with what we have.' It's on an individual case basis. That's how we're approaching it." ZONAGEN INC.: Consolidated Texas Securities Litigation Dismissed ---------------------------------------------------------------- Zonagen Inc. (Nasdaq: ZONA) (Pacific: ZNG) announced that the U.S. District Court, Southern District of Texas has dismissed with prejudice the class action lawsuits filed against the Company which had been consolidated on May 29, 1998. The lawsuits alleged that the Company and certain of its directors and officers violated the federal securities laws by making false and misleading statements about the patents and patent applications relating to Vasomax(R) and ImmuMax, and about the Company's clinical trials of Vasomax(R). The Court ruled that the lawsuits failed to state a claim under the federal securities laws. Zonagen Inc. develops pharmaceutical products for the reproductive system, treating sexual dysfunction, urology, contraception and infertility. For more details, call Jean Anne Mire at 281-719-3491. ********* 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. 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