/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990524.MBX C L A S S A C T I O N R E P O R T E R Monday, May 24, 1999, Vol. 1, No. 77 Headlines ACE CASH: Consumers Complain About Payday Loans in Three States ADAM'S MARK: Reunion Accommodations Prompt Alumni Complaints AMERICAN GENERAL: $167 Mil. Punitives for Misleading Dish Buyers CORRECTIONS CORPORATION: Settles Claims After Six Inmates Die DIAL CORP.: EEOC Charges Pattern & Practice of Sexual Harassment FORE SYSTEMS: Finkelstein & Krinsk File Pennsylvania Complaint FORE SYSTEMS: Yates Firm Files Complaint in Pennsylvania FULTON COUNTY: Agrees to More Funds for More Public Defenders GEORGIA GULF: Many Settle After "Unforeseen Chemical Reaction" GIBSON GREETINGS: Awaiting Approval to End Securities Litigation INSIGHT HEALTH: Buyout Prompts Stockholders' Suit in Delaware MAXIM GROUP: Abbey Gardy Files Complaint in Georgia MEMC ELECTRONIC: Settles Charges of Polluting Air, Soil & Water MTI TECHNOLOGY: Settles Consolidated 1998 Suits for $900,000 O'SULLIVAN INDUSTRIES: Shareholders Complain Merger is Unfair PAULSON CAPITAL: Expects Dismissal from SF Securities Suit SCHERING PLOUGH: Updates Antitrust and Consumers Cases SMITH & WESSON: Victims of Violence Seek Justice in Chicago TOBACCO LITIGATION: Jury Begin Work on Florida Smokers' Case WASTE MANAGEMENT: Parties Dismiss Louisiana Landfill Lawsuit ********* ACE CASH: Consumers Complain About Payday Loans in Three States --------------------------------------------------------------- ACE CASH EXPRESS INC has recently been served with three class- action lawsuits regarding its service commonly referred to in the check-cashing industry as a "payday loan." That service consists of providing a customer cash in exchange for that customer's check (in the amount of that cash plus a service fee) with an agreement to defer the presentment or deposit of that check until the customer's next payday, usually a period of two to four weeks. During the quarter ended March 31, 1999, the average amount of cash provided to a customer in such a transaction was approximately $200, and the fee to the Company was approximately $30. The first lawsuit, Bryan Meegan v. Ace Cash Express, Inc., was filed in the United States District Court for the Southern District of California on December 15, 1998, but was served on the Company only on February 5, 1999. The plaintiff, for himself and other customers similarly situated, alleges violations of the California statute that governs deferred-deposit transactions and, therefore, violations of various California consumer-protection statutes regarding usury and unfair and deceptive business practices. However, the plaintiff was not a customer of the Company, but was a customer of one of the Company's franchisees (not named in the lawsuit). It is therefore unclear whether the allegations concern the Company's deferred-deposit business at its own locations in California in addition to purported responsibility of the Company for its franchisee's deferred-deposit business in California. The complaint seeks an injunction against the alleged illegal activities and actual and punitive damages from the Company. The second lawsuit, Mike Kenney et al. v. Ace Cash Express, Inc., was filed in the State Circuit Court of Pulaski County, Arkansas on February 9, 1999. The plaintiff, for himself and other customers similarly situated, alleges that the Company's deferred-presentment transactions in Arkansas violate the usury laws of Arkansas. The complaint seeks the standard penalty for a usury-law violation in Arkansas: an amount equal to twice the amount paid by customers of deferred-presentment transactions during the past three years. The third lawsuit, Gary M. Kane and Wendy Betts v. Ace Cash Express, Inc. et al., was filed in the United States District Court for the Middle District of Florida on April 19, 1999. The complaint was filed not only against the Company, but also against Check Express, Inc., its wholly owned subsidiary, and most of the directors and executive officers of the Company and Check Express, Inc. The plaintiffs, for themselves and other customers similarly situated, allege violations of the federal Truth in Lending Act and Regulation Z and of Florida consumer- protection statutes regarding consumer lending, deceptive and unfair trade practices, and usury. The plaintiffs seek an injunction against the alleged illegal activities and actual and punitive damages of various kinds, based on various theories. The Company believes that the lawsuits are without merit and denies all allegations. The Company intends to vigorously defend the lawsuits. The Company understands that others in California, Arkansas, and Florida have also been sued regarding their "payday loan" service, on substantially similar bases as are stated in the complaints against the Company, by one or more plaintiffs represented by the same counsel as are representing the plaintiffs in the lawsuits against the Company. ADAM'S MARK: Reunion Accommodations Prompt Alumni Complaints ------------------------------------------------------------ Five visitors to Black College Reunion in Daytona Beach sued the Adam's Mark Hotel on Thursday, saying they were overcharged, made to wear bright-orange wristbands and forced to carry their own luggage, all because of their race. According to the Orlando Sentinel, the five, all professionals in their 20s, said oppressive security at the hotel during this year's gathering in April was more in line with a prison stay than a vacation. "I chose the Adam's Mark because it was supposed to be the best in Daytona," one of the plaintiffs, Napoleon Berrian, told the Orlando Sentinel. "I've never been arrested, never been in jail. Instead of orange jumpsuits, they gave us these [orange wristbands), and it felt like staying in the county jail for the weekend." The attorneys who filed the suit Thursday at U.S. District Court in Orlando said they would seek to have the case certified as a class action. No amount for damages was specified. One of the attorneys, John Relman of the Washington Lawyers' Committee for Civil Rights and Urban Affairs, compared the case with a class- action suit against the Denny's restaurant chain in which he recovered a $17.7 million settlement for the plaintiffs. "This case is of national importance," Relman said. "It's another wake-up call to white Americans who think race discrimination doesn't happen anymore. The truth is, unless we bring these cases and get injunctive relief, it isn't going to stop." Fred S. Kummer, founder and CEO of HBE Corp. the hotel chain's St. Louis-based parent company, issued a written statement saying the race of its guests had nothing to do with its practices during Black College Reunion. The company has 22 hotels across the country, including one in Orlando. "While this lawsuit will certainly be addressed by HBE Corp. in the courts, we feel an obligation to the fine management and staff at our Daytona Beach hotel ... to clarify our record regarding these irresponsible claims," Kummer's statement read. Daytona Beach hotels frequently take special measures in dealing with the crowds generated by events such as spring break, Bike Week and Black College Reunion. Bikers have accused hotels of price-gouging; spring breakers have complained about extra security, locked balcony doors and the identification wristbands designed to police the number of visitors per room. But lawyers accused the Adam's Mark of taking matters to an extreme, setting out to make things so unpleasant that black visitors would not come back. Berrian and the other four plaintiffs - Dante Gilliam, 28, St. Petersburg, Jamie Morrison, 26, Waterbury, Conn., Mark Simmonds, 26, West Palm Beach, and Latoya Straughn, 25, Ocala - told similar stories. Among the allegations in the 29-page complaint are: Black guests were issued bright-orange wristbands, which they were told they had to wear all weekend to enter the hotel. Uniformed security guards repeatedly checked guests for the wristbands, which white guests weren't made to wear. The statement from Kummer said the Adam's Mark often requires guests to wear wristbands during large, heavily trafficked events. Rooms appeared to be "stripped down," with pictures missing from walls. Maid and valet services were not available. The company's statement said nothing about "stripped down" rooms but said maid and valet services, while "severely challenged" by the number of BCR visitors, weren't denied to anyone. It said although some BCR guests might have had to carry their own luggage, it had nothing to do with race but was because of the large number of guests. Guests were told they would be charged an additional $50 for anyone who visited the room during the weekend, even if the visitor stayed for only a few minutes. The Adam's Mark statement did not address this allegation. Visitors were made to pay the full price of their rooms in advance, in some case by check or money order. The hotel chain's statement said the pre-payment requirement is standard practice during all special events, including Bike Week and Speed Weeks. Room rates were higher than for other special events. The least-expensive single rooms during Black College Reunion cost $250 a night; during Biketoberfest in October, the rate for the same room is $189. The statement from Adam's Mark said room rates were actually higher during Speed Weeks in February, when they rented for as much as $340 for a single night. The Orlando Sentinel explained that the Black College Reunion began 15 years ago as a small gathering of students and alumni from Bethune-Cookman College and Florida A&M, but has grown into a major event that attracts as many as 100,000 young blacks to Daytona Beach. Beachside residents complain about traffic and lawlessness such as a shooting last year that left an Orlando man dead and four police officers wounded. In response, city officials this year designed a traffic plan that would have limited beachside access to local residents and registered hotel guests with special passes when the area became jammed with cars. The Florida National Association for the Advancement of Colored People labeled the plan discriminatory and filed for an emergency injunction to stop it. U.S. District Judge Patricia Fawsett ruled in the NAACP's favor, saying portions of the traffic plan violated visitors' constitutional rights to assemble, enjoy equal protection under the law and travel freely between states. Attorneys Charles Burr and Sam Smith, whose Tampa firm filed that suit on behalf of the NAACP, are among the attorneys on this case as well. Though the case was initially assigned to U.S. District Judge Anne Conway, Burr said he would move to have it reassigned to Fawsett because of the similarity of the issues involved. (THE ORLANDO SENTINEL; May 21, 1999) AMERICAN GENERAL: $167 Mil. Punitives for Misleading Dish Buyers ---------------------------------------------------------------- A jury ordered American General Financial Center (AGFC) to pay $167 million in punitive damages to 29 plaintiffs who had accused the company of misleading them about the credit agreement for financing satellite dish purchases. The jury also ordered AGFC to pay $500,000 in compensatory damages. Satellite Bcstg. & Communications Assn. (SBCA) wouldn't comment on specifics of case, but said it was "concerned" about decision. A spokeswoman questioned the timing of suit and predicted that the large judgment would be reduced. The class action suit was filed on behalf of 29 consumers who had obtained financing for their satellite dishes from AGFC in early 1990s. The plaintiffs allegedly did not know that they were entering into a credit card agreement, and accused the retailer and finance company of making misleading statements about the transaction. Each of plaintiffs borrowed about $2,500 and had repaid an average of $600 before being notified by company that he or she owed no additional money. This meant AGFC actually took loss on balance owed, an AGFC spokesman claimed. AGFC said it was disappointed in outcome of trial and plans to appeal. "The damage awards in this case are outrageous and contrary to sound constitutional protections established by the Mississippi Supreme Court and the United States Supreme Court." In a similar case, a jury in Alabama recently awarded $581 million, mostly in punitive damages, against Whirlpool Financial National Bank and Gulf Coast Electronics on charges of overcharging a couple $1,200 for 2 dishes. AGFC is a subsidiary of American General Finance Inc. and no longer is in the satellite dish financing business. Cases for small amounts involved in satellite dish financing complaints usually would go to Small Claims Court, but because large punitive awards are getting so much publicity, lawyers are placing ads and gathering plaintiffs, SBCA spokeswoman said. Financing dishes no longer is issue because their prices have dropped dramatically, but SBCA still warns retailer members to be very careful when executing credit agreements, she said. (Communications Daily; May 21, 1999) CORRECTIONS CORPORATION: Settles Claims After Six Inmates Die ------------------------------------------------------------- The Atlanta Journal and Constitution reports that Corrections Corporation of America and Washington agreed to pay 1,000 inmates $1.65 million to settle a class-action lawsuit filed after six inmates from Washington died while in the medical unit of a CCA prison in Ohio to which they had been sent. Three other inmates and a guard were stabbed at the facility and others were beaten. CCA is the largest private prison company in the world. Based in Nashville, it runs 80 institutions in the United States and abroad. Two of those prisons, which hold state inmates, are in South Georgia. The company also is building three more prisons in South Georgia, although the state hasn't agreed to house inmates in those. (The Atlanta Journal and Constitution; May 21, 1999) DIAL CORP.: EEOC Charges Pattern & Practice of Sexual Harassment ---------------------------------------------------------------- Beverly Allen had worked as a machine operator at the Dial Corp. soap plant in suburban Montgomery for some 30 years when she started complaining about sexual harassment on the job. The company's response: a few hostile comments and no assistance, according to U.S. Equal Employment Opportunity Commission investigators. On Thursday, Allen's complaints formed the core of a class-action lawsuit that the EEOC brought against Dial, alleging "a pattern and practice of sexual harassment." The company declined to comment. The Dial suit is much smaller in scope than the massive action the EEOC settled last year involving Mitsubishi Motor Manufacturing of America Inc.'s Normal, Ill., plant, but its bare outlines appear similar. Since at least July 1988, the consumer-products manufacturer subjected Allen and other female employees to "a hostile and abusive work environment," and also failed "to take prompt remedial action intended to eliminate the harassment," according to the complaint. About a half-dozen plant employees have stepped forward to air complaints so far, according to Noelle Brennan, the EEOC trial attorney on the case. Dial's alleged practices deprived Allen and female co-workers "of equal-employment opportunities and otherwise adversely (affected) their status because of their sex," the lawsuit said. It seeks an injunction ordering Dial to forbid sexual harassment, and asks for back pay and other compensation for any harassment victims. It also seeks an order forcing the company to provide employees and managers with training about harassment in the workplace. Allen, who Brennan said left her job at the plant last year, couldn't be reached by the Chicago Tribune for comment. The plant is a fixture in Montgomery, near Aurora. It has about 300 employees, at least one-third of them women, Brennan said. Scottsdale, Ariz.-based Dial is best known for its Dial line of soaps. The $1.5 billion company also makes Purex laundry detergents, Renuzit air fresheners and Armour Star canned meats. (Chicago Tribune; May 21, 1999) FORE SYSTEMS: Finkelstein & Krinsk File Pennsylvania Complaint -------------------------------------------------------------- Finkelstein & Krinsk filed a class action lawsuit accusing Fore Systems (Nasdaq:FORE) of granting millions of dollars in stock options to its key executives while acquisition negotiations were underway with General Electric Company of England (GEC), which isn't related to General Electric Co. of the U.S. In fact, the complaint charges that Fore Systems Inc. a Warrendale, Pennsylvania based maker of backbone equipment for data network and General Electric Company are liable for extraordinary payments to Fore System's top officers to "grease the skids" in conjunction with GEC's recently announced tender offer for the acquisition of Fore system. On April 30, 1999 GEC made a tender offer for $35 to all shareholders of Fore Systems. Yet the action taken by Fore Systems during the negotiations to grant stock options for the several key Fore executive officers which kicked in at between $13.44 and $20.56 in effect establishes a "privileged class" of shareholders. Moreover according to the complaint that "privileged class" in effect the directors and executives of Fore Systems, violated their fiduciary responsibility to all other shareholder by cutting a separate $23 million lucrative stock option deal for themselves. The stock options transactions were backdated to avoid shareholder scrutiny and ire in learning that they were authorized after the sale of Fore Systems was imminent. Finkelstein & Krinsk filed the complaint on behalf of all public shareholders that own Fore System shares and have since the time of the announcement of GEC's acquisition via a $35.00 Tender Offer. The complaint charges that Fore Systems, its executive management and GEC violated the securities laws including the Exchange Act and Rules 14d- 10 and 10b-13, in failing to abide by the "all holder, best price" rule and contravening shareholder anti discrimination requirements. The complaint also alleges that the named defendants also breached fiduciary duties owed the Fore Systems shareholders. GEC, which has represented to the financial press its comfort with the situation, could be liable for the additional per share benefit given to the executive defendants (on top of the $35 per share tender offer), an amount adding in excess of a billion dollars to GEC's purchase price. "The beauty of the securities laws are their adaptability to the broad array of cheating," stated Jeffrey Krinsk. "In this instance the Fore Systems and its executives and those at GEC thought they had 'committed the perfect crime' -- shareholders would not notice the payments to the executive defendants because the money was disguised as normal stock options, Fore Systems would not object since it benefited the Company's executive hierarchy, and GEC was not alarmed because these payments were the payola that greased its acquisition of Fore Systems." To learn more, contact Jeffrey R. Krinsk at 877-493-5366 or at fk.@class-action-Law.com via email, or call Alfred G. Yates Jr., Esq. at 412-391-5164 or write yateslaw@aol.com via email. FORE SYSTEMS: Yates Firm Files Complaint in Pennsylvania -------------------------------------------------------- The Law Office of Attorney Alfred G. Yates Jr. filed a Class Action in the United States District Court of the Western District of Pennsylvania on behalf of all FORE Systems, Inc. (Nasdaq: FORE) shareholders subject to the Tender Offer negotiated between FORE Systems, Inc. and GEC, P.L.C. of England (GEC). The complaint charges that FORE Systems Inc., a Warrendale, Pennsylvania-based maker of backbone equipment for data network and GEC are liable for extraordinary payments to FORE Systems top officers to "grease the skids" in conjunction with GEC's recently announced Tender Offer for the acquisition of FORE Systems. On April 30, 1999 GEC made a tender offer for $35 to all shareholders of FORE Systems. However, the complaint alleges that the action taken by FORE Systems during the negotiations to grant stock options for several key FORE Systems executive officers which kicked in at between $13.44 and $20.56 in effect establishes a "privileged class" of shareholders. According to the complaint, that "privileged class", the directors and executives of FORE Systems, violated their fiduciary responsibility to all other shareholders by cutting a separate $23 million lucrative stock option deal for themselves. The complaint charges that FORE Systems, its executive management and GEC violated Federal Securities laws including the Exchange Act and Rules 14d-10 and 10b-13, in failing to abide by the "all holder, best price" rule and contravening shareholder anti discrimination requirements. The complaint also alleges that the named defendants breached fiduciary duties owed the FORE Systems shareholders. GEC could be liable to the class for the additional per share benefit given to the executive defendants of FORE Systems in an amount in excess of $1 billion on top of the $35 per share tender offer. For more information, contact Alfred G. Yates, Jr, Esq. at 800- 391-5164 or 412-391-5164, or via e-mail at yateslaw@aol.com via email. FULTON COUNTY: Agrees to More Funds for More Public Defenders ------------------------------------------------------------- Agreeing to fund 20 more public defenders, Fulton County commissioners voted Wednesday to settle a federal suit by poor inmates claiming to be denied access to lawyers. The additions, to be made over the next three years, will bring the total lawyers defending indigent defendants in Fulton to about 85. That's virtually the same number of prosecutor positions in the Fulton District Attorney's Office. Increasing lawyers for the indigent was a key concession sought by the plaintiffs, a class defined as all non-homicide felony defendants not released on bond. The settlement also requires Fulton County to "make good-faith efforts" to ensure that the Fulton County Public Defender's Office and the Fulton County Conflict Defender's Office lower their per-attorney caseloads to 175 per year by 2002. The Conflict Defender's Office takes cases when a public defender's client is a co-defendant with another indigent whose interests conflict. On average, attorneys in the Public Defender's Office handled slightly more than 200 cases per year, according to data from 1998. The American Bar Association states that criminal- defense lawyers should not handle more than 150 cases per year. The agreement also requires Fulton County to pay $175,000 for plaintiff's attorneys' fees, costs and damages for the ex-inmate who brought the case. The case began in 1994 as a pro se filing by Sam Stinson, an indigent arrested and eventually convicted on a drug charge. Once U.S. District Court Chief Judge J. Ernest Tidwell appointed counsel to help him, Stinson's case achieved class action status and, in 1997, survived Fulton's motion for summary judgment. Claiming civil rights violations, Stinson alleges that he waited three months after his arrest before he was contacted by the Public Defender's Office, and that his situation is not uncommon among jailed indigents. Stinson v. Fulton County Board of Commissioners, No. 1:94-cv-240 (filed Jan. 28, 1994). A public defender appears at the bond hearing for an inmate, but the suit alleges that after that appearance, prisoners have virtually no contact with lawyers during the months they spend waiting to be indicted. Under Fulton's current system, an indictment triggers assignment of the case to a Superior Court judge and consequently to public defenders assigned to that particular courtroom. In a proposed settlement obtained by the Daily Report last year, Fulton County agreed to assign judges to cases before indictment. That would have sped the time a lawyer would be assigned to a defendant's case and made it more likely that the same lawyer would represent a defendant from a bond hearing through trial or a plea agreement (Daily Report, Aug. 14, 1998). But that provision was missing from the settlement approved by the commission Wednesday, which does not address when judges will be assigned to cases. Plaintiffs' counsel W. Bruce Maloy said Wednesday that that element came out of the agreement because it would have required action from a nonparty to the case -- Fulton Superior Court. Maloy says he asked judges to go along, but they declined. The agreement provides "the maximum relief we could get from the parties," says Maloy, a principal in Maloy & Jenkins. The agreement states that Fulton's government "shall make good-faith efforts" to ensure that a Pre-Trial Services officer interviews each incoming nonhomicide felony arrestee within two days of booking. If the defendant has not retained a private attorney, the Pre-Trial Services officer will immediately assign the case to either the Public Defender's Office or the Conflict Defender's Office. "The assigned office shall promptly assign an attorney to handle that defendant's case and shall thereafter immediately notify the defendant of this assignment," the agreement reads. If the defendant is not released on bond, a legal assistant supervised by an attorney from either the Public Defender's Office or the Conflict Defender's Office will meet with the defendant within two days of being appointed to the case. The inmates, represented by Maloy and Robert E. Toone of the Southern Center for Human Rights, had sought to require the county to provide budget parity between the District Attorney's Office and the public defenders. The settlement agreed to Wednesday does not address budgets, except to require the county to submit twice-yearly reports on the state of indigent defense, including the budget of the Public Defender's and Conflict Defender's offices. An important element of the reporting requirement, Maloy notes, is the county's commitment to track inmates who have been in jail without indictment. As for budget parity, Maloy says that would never happen, anyway, because the District Attorney's Office handles all criminal cases, whereas public defenders represent only poor defendants. In 1998, the District Attorney's Office had a budget of $10.7 million. The Public Defender's Office had a budget of $5.1 million, and the Conflict Defender's Office had a budget of $1.2 million. The Public Defender's Office budget had nearly quadrupled since 1990, when an outside consultant branded the county's indigent defense system among the worst in the country. Fulton County Attorney Overtis Hicks Brantley, who was attending the commission meeting Wednesday afternoon, declined to discuss the case. Judge Tidwell must approve the settlement and rule on whether to hold commission members in contempt for failing to show up at a settlement conference last month. Tidwell had ordered all seven members to the conference, but only Chairman Mike Kenn showed up with Brantley, who said later she thought the judge required only a single representative from the commission at the meeting. The contempt hearing was scheduled for Tuesday but was postponed due to the settlement vote. (Fulton County Daily Report; May 20, 1999) GEORGIA GULF: Many Settle After "Unforeseen Chemical Reaction" -------------------------------------------------------------- Georgia Gulf Corp. is a party to numerous individual and several class-action lawsuits filed against Georgia Gulf, among other parties, arising out of an incident that occurred in September 1996 in which workers were exposed to a chemical substance on Georgia Gulf's premises in Plaquemine, Louisiana. The substance was later identified to be a form of mustard agent, a chemical which is not manufactured as part of Georgia Gulf's ordinary operations, but instead occurred as a result of an unforeseen chemical reaction. Georgia Gulf presently believes there are approximately 2,000 plaintiffs, of which approximately 650 are workers claiming to have been on-site at the time of the incident. All of the actions claim one or more forms of compensable damages, including past and future wages, past and future physical and emotional pain and suffering, and medical monitoring. The lawsuits were originally filed in Louisiana State Court in Iberville Parish. In September 1998, the plaintiffs filed amended petitions that added the additional allegations that Georgia Gulf had engaged in intentional conduct against the plaintiffs. These additional allegations raised a coverage issue under Georgia Gulf's general liability insurance policies. In December 1998, as required by the terms of the insurance policies, the insurers demanded arbitration to determine whether coverage is required for the alleged intentional conduct in addition to the coverage applicable to the other allegations of the case. The date for the arbitration has not yet been established. As a result of the arbitration relating to the insurance issue, as permitted by federal statute, the insurers removed the cases to United States District Court in December 1998. By order entered March 2, 1999, the federal court denied the plaintiff's motion to remand the cases back to state court and retained federal jurisdiction. Settlements have been reached with a majority of the original workers, including those claimants believed to be the most severely injured, and the settled cases have been or will be dismissed. Additionally, settlements have been reached or are being negotiated with other parties named as defendants whereby such parties have made, or are being requested to make, contributions to the recoveries made by the plaintiffs. Negotiations for the resolution of the remaining claims are continuing. Notwithstanding the foregoing, Georgia Gulf is asserting and pursuing defenses to the claims. Based on the present status of the proceedings, Georgia Gulf believes the liability ultimately imposed will not have a material effect on the financial position or on results of operations of Georgia Gulf. GIBSON GREETINGS: Awaiting Approval to End Securities Litigation ---------------------------------------------------------------- In July 1994, immediately following GIBSON GREETINGS INC.'s announcement of an inventory misstatement at Cleo, which resulted in an overstatement of the Company's previously reported 1993 consolidated net income, five purported class actions were commenced by certain stockholders. These suits were consolidated and a Consolidated Amended Class Action Complaint against the Company, its then Chairman, President and Chief Executive Officer, its then Chief Financial Officer and the former President and Chief Executive Officer of Cleo was filed in October 1994, in the United States District Court for the Southern District of Ohio (In Re Gibson Securities Litigation). The Complaint alleged violations of the federal securities laws and sought unspecified damages for an asserted public disclosure of false information regarding the Company's earnings. In August 1996, the Court certified the case as a class action. The Court subsequently concluded that the certified class representative could represent only those class members who purchased Gibson stock after April 19, 1994 and before July 1, 1994. On June 15, 1998, the Court entered judgment for the Company and each individual defendant on all remaining claims asserted by the plaintiff class. Plaintiff's appeal of the judgment to the Sixth Circuit Court of Appeals was dismissed as untimely due to remaining claims and counterclaims between the Company and its former auditor in connection with a Third Party Complaint which the Company had filed against the auditor. In December 1998, the Company and its former auditor reached a settlement of all claims between them. Plaintiff re-filed its appeal of the judgment for defendant. Subsequently, the Company and the plaintiff agreed to a settlement which will be presented to the District Court for approval at a hearing expected to take place in May 1999. INSIGHT HEALTH: Buyout Prompts Stockholders' Suit in Delaware ------------------------------------------------------------- On May 19, 1999 a lawsuit was filed by two individuals claiming to be stockholders of InSight Health Services Corp., which seeks class action status, in Delaware chancery court in connection with the proposal of The Carlyle Group and the Halifax Group, announced May 17, 1999, to buyout the publicly held portion of InSight Health Services Corp. (Nasdaq:IHSC) common stock. The suit, names as defendants the Company, The Carlyle Group, the Halifax Group, five of the Company's eight directors, and the Company's chief operating officer. The complaint alleges, among other things, a breach of fiduciary duties and nondisclosure of material information in connection with the buyout proposal and seeks to have the proposal enjoined or, if it is consummated, to have it rescinded and to recover unspecified damages, fees and expenses. As announced by the Company on May 17, 1999, a special committee has been appointed by the Company's board of directors to evaluate the buyout proposal and consider other options to maximize stockholder value; however, no agreements have been reached to date with respect to the buyout proposal. The Company believes that the lawsuit is totally without merit and intends to defend itself vigorously. InSight, headquartered in Newport Beach, provides diagnostic imaging and information, treatment and related management services. It serves managed care entities, hospitals and other contractual customers in 29 US states, including five major US markets: California, the Southwest (including a major presence in Texas), the Midwest, the Northeast and the Southeast. MAXIM GROUP: Abbey Gardy Files Complaint in Georgia --------------------------------------------------- The Law Firm Of Abbey, Gardy & Squitieri, LLP filed a Class Action in the United States District Court for the Northern District of Georgia, on behalf of all purchasers of The Maxim Group Inc. (NYSE:MXG) common stock between August 31, 1998 and May 19, 1999. The Complaint charges The Maxim Group and certain of its officers and directors with violations of the federal securities laws. Among other things, plaintiff claims that defendants issued a series of materially false and misleading statements regarding The Maxim Group's financial results for fiscal 1999 and for certain quarters therein. On May 19, 1999, The Maxim Group announced that it would "record certain adjustments" to previously reported results due to its improper recognition of revenue in prior quarters. As a result of these adjustments, The Maxim Group is revising downward its reported results of operations for the second, third and fourth quarter of fiscal 1999 and for the fiscal year ended January 31, 1999. For more information, contact Mark C. Gardy, Esq., Karin E. Fisch, Esq., or James S. Notis, Esq. at 800-889-3701 or 212-889- 3700 or write kfisch@a-g-s.com via email. MEMC ELECTRONIC: Settles Charges of Polluting Air, Soil & Water --------------------------------------------------------------- MEMC ELECTRONIC MATERIALS INC was a named defendant in two class action lawsuits filed against companies operating industrial facilities along I-10 and along the Houston Ship Channel in Harris County, Texas. The lawsuits alleged that the defendants had discharged various pollutants into the air, soil, ground and surface waters. The Company has agreed to a settlement of these lawsuits and has been dismissed without prejudice as a defendant in such lawsuits. The settlement is conditioned upon the Company receiving signed releases from substantially all of the plaintiffs in these lawsuits. MTI TECHNOLOGY: Settles Consolidated 1998 Suits for $900,000 ------------------------------------------------------------ MTI Technology Corp., an Anaheim maker of data storage products, agreed to pay $900,000 to settle a class-action lawsuit. On May 17, 1999 the United States District Court for the Central District of California entered an order preliminarily approving the settlement and release of all claims against MTI Technology Corp. (Nasdaq: MTIC) and certain officers in the consolidated amended class action complaint entitled "In re: MTI Technology Corp. Securities Litigation," filed Feb. 2, 1999. This action is a consolidation of two prior complaints against the Company, "Wei Xin, et al. v. MTI Technology Corp., et al.," filed Aug. 26, 1998, and "Kenneth Bernard Flynn, et al. v. MTI Technology Corp., et al.," filed Oct. 30, 1998. The agreement between the Company and plaintiffs provides for a total settlement amount of $900,000. The Company's unreimbursed portion of the aggregate settlement is approximately $100,000. The settlement is subject to final approval by the Court. According to a story in the Los Angeles Times, shareholders had accused MTI of misrepresenting the negative impact of European sales on first-quarter earnings and failing to notify investors about delays in one of its product lines. Before announcing the negative news, three MTI senior officers allegedly sold all their shares for a profit of $2 million. MTI is a provider of high-performance, cross-platform data storage management solutions. MTI integrates distributed data management software, a hierarchy of modular storage systems and on-site services to meet the mass storage needs of its customers. Headquartered in Anaheim, Calif., the company offers services and support from more than 40 offices in the U.S. and Europe. O'SULLIVAN INDUSTRIES: Shareholders Complain Merger is Unfair ------------------------------------------------------------- Stockholder suits have been filed against O'Sullivan Industries Holdings, Inc. (NYSE: OSU), the tenth largest U.S. furniture manufacturer, as well as the directors of O'Sullivan and Bruckmann, Rosser, Sherrill & Co., L.P. ("BRS") in connection with the recently announced merger agreement with OSI Acquisition, Inc., an affiliate of BRS. The lawsuits, which purport to be class actions on behalf of O'Sullivan stockholders, allege that the consideration to be paid to O'Sullivan stockholders in the merger is inadequate and unfair and that the directors of O'Sullivan have breached their fiduciary duties in approving the transaction. The actions seek preliminary and permanent injunctive relief, as well as damages. O'Sullivan and BRS believe that the suits are without merit and intend to defend them vigorously. O'Sullivan is a leading designer and manufacturer of furniture. O'Sullivan products are sold primarily through office superstores, mass merchandisers, catalog showrooms, department stores, home improvement centers and other retailers. BRS is a private equity investment firm in New York that makes control investments in leveraged buyouts and recapitalizations. For more information, contact Terry L. Crump, Executive Vice President & CFO, 417-682-8379, or Phillip J. Pacey, Treasurer, 417-682-8312. PAULSON CAPITAL: Expects Dismissal from SF Securities Suit ---------------------------------------------------------- PAULSON CAPITAL CORP is a defendant in Holly Millar and Bertram Ostrau v. Pearce Systems International, Inc., et al., filed in San Francisco Superior Court, State of California, in March 1996. An asserted class action, plaintiffs allege violations of the California securities law, deceit, negligent misrepresentation and unfair business practices relating to alleged misstatements in the prospectus used in connection with a February 1994, $5 million public offering in which PIC acted as the managing underwriter. Plaintiffs seek rescission of the offering as well as actual damages, interest, attorney fees and punitive damages. No class has been certified. No date for a trial has been set. Pursuant to a tolling agreement with the plaintiff, the Company (but not PIC) expects to be dismissed without prejudice from the lawsuit. PIC and plaintiffs reached a settlement in principle in August 1998. The settlement is subject to court approval. The total payment by PIC under the settlement would depend upon the number of purchasers in the public offering who file valid claims. PIC believes the maximum total payment by PIC under the settlement would be approximately $920,000, but the actual payment could be less, depending upon the number of valid claims filed. A disagreement among the parties has arisen during the drafting of the settlement agreement about terms that would not affect PIC's maximum potential settlement payment. At this time, it is unclear what effect this disagreement will have on the settlement. If the case does not settle, the Company and PIC believe they have meritorious defenses and intend to defend this matter vigorously. SCHERING PLOUGH: Updates Antitrust and Consumers Cases ------------------------------------------------------ SCHERING PLOUGH CORP. is a defendant in more than 160 antitrust actions commenced (starting in 1993) in state and federal courts by independent retail pharmacies, chain retail pharmacies and consumers. The plaintiffs allege price discrimination and/or conspiracy between the Company and other defendants to restrain trade by jointly refusing to sell prescription drugs at discounted prices to the plaintiffs. One of the federal cases is a class action on behalf of approximately two-thirds of all retail pharmacies in the United States and alleges a price-fixing conspiracy. The Company agreed to settle the federal class action for a total of $22, which has been paid in full. The settlement provides, among other things, that the Company shall not refuse to grant discounts on brand- name prescription drugs to a retailer based solely on its status as a retailer and that, to the extent a retailer can demonstrate its ability to affect market share of a Company brand-name prescription drug in the same manner as a managed care organization with which the retailer competes, it will be entitled to negotiate similar incentives subject to the rights, obligations, exemptions and defenses of the Robinson-Patman Act and other laws and regulations. The United States District Court in Illinois approved the settlement of the federal class action on June 21, 1996. In June 1997, the Seventh Circuit Court of Appeals dismissed all appeals from that settlement, and it is not subject to further review. The defendants that did not settle the class action proceeded to trial in September 1998. The trial ended in November 1998 with a directed verdict in the defendants' favor. Three of the state antitrust cases have been certified as class actions. Two are class actions on behalf of certain retail pharmacies in California and Wisconsin, and the other is a class action in the District of Columbia, on behalf of consumers of prescription medicine. In addition, an action has been brought in Alabama purportedly on behalf of consumers in Alabama and several other states. Plaintiffs are seeking to maintain the action as a class action. The Company has settled the retailer class action in Wisconsin and the alleged class action in Minnesota. The settlements of the state antitrust cases in Wisconsin and Minnesota have been approved by the respective courts. The settlement amounts were not significant. In August 1998, a class action was brought in Tennessee purportedly on behalf of consumers in Tennessee and several other states. The court has conditionally certified a class of consumers, but has stayed the case pending the resolution of an earlier filed Tennessee case, which the Company has settled in principle. In April 1999, a state consumer case was filed in state court in North Dakota. The Company has also recently settled the state consumer cases in all of the states except Alabama, Tennessee and North Dakota. Court approval of those settlements has been obtained. The settlement amounts were not material to the Company. Plaintiffs in these antitrust actions generally seek treble damages in an unspecified amount and an injunction against the allegedly unlawful conduct. During the first quarter of 1999, the Company agreed to settle the consumer class action in California for approximately $1.625 million in cash and $8.34 million in free products donated to certain California public health clinics. Court approval has been obtained in all of the state consumer cases where settlements have been reached. SMITH & WESSON: Victims of Violence Seek Justice in Chicago ----------------------------------------------------------- >From Chicago, UPI reports that a father of slain Chicago police officer Michael Ceriale has filed a class-action lawsuit against gunmaker Smith and Wesson, a Riverdale, Illinois gun shop and various other handgun manufacturers. Ceriale was shot in the line of duty last year. The lawsuit was filed on behalf of people killed or injured by handgun violence. According to the United Press International story, Chuck's Gun Shop and Pistol Range sold a .357 magnum handgun used to kill officer Ceriale last August. TOBACCO LITIGATION: Jury Begin Work on Florida Smokers' Case ------------------------------------------------------------ After seven months, the nation's first statewide smokers' class- action trial is almost ready to go to a Miami-Dade Circuit Court jury for a verdict. Tobacco industry defendants rested their case, concluding with Wednesday's testimony of James J. Morgan, former president of Philip Morris U.S.A. Morgan said cigarette companies do not target children to become smokers. Susan and Stanley Rosenblatt are suing Morris, R.J. Reynolds Tobacco Co. and five more industry giants on behalf of sick smokers seeking billions of dollars in damages. (Sun-Sentinel (Fort Lauderdale, FL) May 21, 1999) WASTE MANAGEMENT: Parties Dismiss Louisiana Landfill Lawsuit ------------------------------------------------------------ The Advocate (Baton Rouge, LA) reports that U.S. District Judge Ralph Tyson dismissed a class-action lawsuit targeting Waste Management Inc. in connection with operation of the company's Woodside Landfill. Tyson said he took the action as a result of a joint motion by the plaintiffs and the defendants, which included the company and David Mason, the landfill manager. The lawsuit was dismissed without prejudice, which means the plaintiffs may file another lawsuit if they choose. In fact, Mason said Wednesday he would not be surprised to see additional lawsuits aimed at "profiting from the people of Livingston Parish and our company. "Mason described the dismissed lawsuit as "frivolous" and "riddled with falsehoods." He added, "The lawsuit against Woodside contained unsubstantiated and false allegations concerning the landfill." The lawsuit filed by Randy and Marilyn Wallace asserted Waste Management allowed "leakage of waste into the groundwater." Attorney Gerald L. Walter Jr. said he informed the plaintiffs' attorneys in an April 29 letter that information available from the Louisiana Department of Environmental Quality would show no leakage has occurred from the landfill. "There is absolutely no evidentiary support for these factual allegations," Walter said in the letter. Vincent J. Desalvo, Jack Harris and Robert Liptak, the attorneys who filed the lawsuit, could not be reached by the Advocate for comment. A number of residents have complained about the landfill in recent weeks. Last week, the Livingston Parish Council unanimously approved a resolution opposing a new 400-acre landfill adjacent to the 100-acre Woodside Landfill. The company operates Woodside for the parish and accepts both municipal trash and industrial waste at the site. Waste Management pays the parish a 5 percent royalty on the gross income from the waste. (Advocate Baton Rouge LA; 05/20/99) ********* 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. 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