/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990528.MBX C L A S S A C T I O N R E P O R T E R Friday, May 28, 1999, Vol. 1, No. 81 Headlines ALYDAAR SOFTWARE: Cohen Milstein Files Suit in North Carolina AMERICA ONLINE: Volunteers Balk They're Not Making Minimum Wage CELLSTAR CORPORATION: Milberg Weiss Files Complaint in Florida COCA-COLA: Management Spam Says Keep Files & Diversify Staff DECOSTER EGG: Unpaid Overtime Isn't Chickenfeed to Farm Workers FLORIDA: ACLU Challenges State Ban on Gays and Lesbians Adopting FORE SYSTEMS: Schiffrin & Barroway File Suit in Pennsylvania GLS CAPITAL: Court Rules that County may Assign Tax Liens GUN MANUFACTURERS: Jury Erred Finding Liability But Not Damages INFORMIX CORP.: Settlement Official, Lawyers Take Their Shares INTERNEURON PHARMACEUTICALS: Awaiting Decision in Redux Case IRIDIUM WORLD: Shalov Stone Files Securities Complaint NUCLEAR TESTS: Exposed New Zealand Veterans Seek Recognition PERRIGO COMPANY: Insurance Reimburses $8 Million Legal Expenses PRISON REALTY: Berman DeValerio Files Complaint in Tennessee PRISONER RIGHTS: Class Suit Delays But Doesn't Prevent Hangings XL CAPITAL: Shareholders Complain About Mid Ocean Sale in NY ********* ALYDAAR SOFTWARE: Cohen Milstein Files Suit in North Carolina ------------------------------------------------------------- The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. filed a lawsuit in the United States District Court for the Western District of North Carolina on behalf of persons who purchased the Alydaar Software Corp. (Nasdaq:ALYD) common stock during the period between Nov. 14, 1997, and April 1, 1999. The Complaint charges Alydaar and certain of its officers and directors with violations of the federal securities laws. The complaint alleges, among other things, that during the Class Period, defendants falsely reported Alydaar's financial results and for the first, second, third and fourth quarters of 1998 and 1998 fiscal year ended Dec. 31, 1998, causing Alydaar's common stock to trade at artificially inflated prices. Following defendants' disclosure that Alydaar would be required to restate its financial results, the company's common stock closed at $3 9/16 per share on April 5, 1999, a drop of over 81% from a high of $19.375 per share. Alydaar's common stock price has not recovered, and currently trades for less than $4 per share. To learn more, call Andrew N. Friedman or Robert Smits at 888- 240-0775 or 202-408-4600. AMERICA ONLINE: Volunteers Balk They're Not Making Minimum Wage --------------------------------------------------------------- The Associated Press reports that two former "volunteers" for America Online Inc. who helped advise the online giant's millions of customers filed a lawsuit Tuesday alleging that AOL violated labor laws by failing to pay them minimum wage. Kelly Hallissey and Brian A. Williams filed the lawsuit in U.S. District Court in Manhattan, seeking to obtain class-action status so that as many as 10,000 AOL workers that AOL considered volunteers can benefit from any outcome. AP says the lawsuit alleged that the volunteers were entitled to hourly wages and overtime wages to be determined as the case proceeds. Hallissey and Williams are among the thousands of volunteers who lead chat rooms, report violations of Internet rules, and answer questions from puzzled users. In the early days of the Internet, before companies went public and grew to be worth billions of dollars, scholars of all kinds frequently contributed their services to further the fledgling communication device. AOL spokeswoman Ann Brackbill recently defended the use of volunteers, saying, "This whole volunteerism community and the participants are what makes the Internet." (Associated Press) CELLSTAR CORPORATION: Milberg Weiss Files Complaint in Florida -------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach filed a class action lawsuit in the United States District Court for the Southern District of Florida on behalf of all persons who purchased the common stock of CellStar Corporation (Nasdaq: CLST) during the period March 19, 1998 to September 21, 1998. The complaint charges CellStar, and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as well as Rule 10b-5. The complaint alleges that defendants issued a series of materially false and misleading statements concerning the Company's financial condition and results of operations. Because of the issuance of a series of false and misleading statements the price of CellStar common stock was artificially inflated. To learn more, call Steven G. Schulman or Samuel Rudman at 800- 320-5081 or write endfraud@mwbhlny.com via email. COCA-COLA: Management Spam Says Keep Files & Diversify Staff ------------------------------------------------------------ The Atlanta Journal and Constitution reports that Coca-Cola Co. has told all U.S. employees not to destroy any relevant information concerning the racial discrimination suit filed against the company last month. "Please suspend normal record destruction practices for all documents or computer files ... on subjects which are or may be at issue in the lawsuit," said an email sent this week to the company's nearly 10,000 U.S. employees. Company spokesman Robert Baskin said the notice from Coca-Cola's information access department is "normal operating procedure for safeguarding documentation for all lawsuits." In fact, the memo also refers to five unrelated suits filed against the company and outlines the specific documents that need to be saved in each case. In one suit, for example, Pepsico Inc. accuses Coca-Cola of antitrust violations. For the racial discrimination suit, filed in Atlanta federal court, the memo lists 14 types of documents that should be retained, including those dealing with "any compensation, performance evaluation, promotion or termination of any employee." One former and three current employees have alleged in the suit that Coca-Cola has a companywide practice of discriminating against African-Americans in pay, promotions, performance evaluations and terminations. The plaintiffs are seeking class-action status so they can include another 1,500 black, salaried U.S. employees in the suit. The email also tells employees to hold on to all documents related to the " marketing, advertising and promotion of company products to African-American consumers." The discrimination suit alleges that while Coca-Cola has "carefully cultivated African- Americans as consumers of its product by public pronouncement, strategic alliances and specific marketing campaigns, it has failed to place the same importance on its African-American employees." The plaintiffs' attorney, Cyrus Mehri, had no comment Wednesday on Coca-Cola's document retention memo. Coca-Cola Co. also announced that it will step up efforts to diversify its staff at all levels, and appointed its senior African-American executive to help monitor those efforts. In an email memo to all domestic employees, Chairman and Chief Executive M. Douglas Ivester said the company supports a diverse or racially mixed work force as "an asset that provides leverage for better business results and greater learning and growth opportunities for all of us." Ivester appointed Carl Ware, 55, senior vice president in charge of the Africa Group, to co-chair a newly created Diversity Advisory Council, along with Jack L. Stahl, 46, senior vice president of the North America Group. Even though Ivester has denied in previous messages to employees that the company discriminates, he said he was stepping up his surveillance "to assure that we are able to achieve our different, better and special standard and to maximize the benefits of diversity in our work force." In addition, Ivester said, he plans to hold periodic meetings in the months ahead with small groups of employees to "increase my own efforts to open the lines of communications with all constituencies." Wednesday's email and the idea of small group meetings, however, may soon be the subject of a court challenge in the case. Plaintiffs' attorney Cyrus Mehri said Wednesday he believes "there is an obvious risk of coercion in this email and in future meetings with small groups of employees the email talks about." Mehri would not specifically comment on whether he would be filing a motion to stop the alleged coercion, which he believes targets those potential plaintiffs. Ivester's email memo also does not contain two disclaimer sentences that an Atlanta federal judge recently ordered the company to include when it sends emails to employees about its views on the case. According to The Atlanta Journal and Constitution, the sentences are: "The foregoing represents Coca- Cola's opinion of this lawsuit. It is unlawful for Coca-Cola to retaliate against employees who choose to participate in this case." But Coca-Cola spokesman Robert Baskin said the company did not include those sentences because Ivester's memo dealt with diversity at the company, not the lawsuit. Ivester's statements came hours after Ware acknowledged in an interview with The Atlanta Journal-Constitution that four years ago he and a panel of African-American Coca-Cola executives recommended ways to improve promotions and job opportunities for blacks at the company. The recommendations came at the request of Ivester, who was then president and chief operating officer. The panel included Ware; Juan D. Johnson, now vice president and director of learning and knowledge management; Ingrid Saunders Jones, vice president for external affairs; and Thomas A. Peters, assistant vice president and international treasury services manager. "We came together for a day and a half," Ware recalled, "to talk to one another, share thoughts and to disclose how each of us rose to senior rank in the company." The report given to Ivester consisted of suggestions for ways to help young African-American executives move along to responsible assignments. "We were interested in ways for African-Americans to move more freely outside of such jobs as human resources and external affairs, giving them a chance to work in profit-and- loss departments," Ware said. The pending suit alleges that African-American employees tend to be restrained by glass ceilings that limit pay, and glass walls that prevent them from moving as freely into operating jobs as other employees. In a phrase repeated later in the day on Wednesday, Ware said that his panel's report in 1995 was an attempt to create a "gold standard" for management diversity, accentuating efforts to include more African-Americans in all aspects of the company. "We need to treat diversity management as part and parcel of our effort to achieve business advantages," Ware said. Ivester repeated that same point in his afternoon memo. Among the strategies the company would follow, according to the Ware recommendations of 1995, would be a strong mentoring program to connect promising black executives with senior managers, as executive assistants, "so they could work in direct and close personal contact with our top leaders." These relationships would serve as a way to teach leadership, and keep good employees in the eye of the talent scouts at the senior level. Ivester eventually became a mentor to Juan Johnson, now a vice president. Quinton Martin, who is now manager of national accounts with bottlers, served as assistant to Stahl. Other promising young black executives also were paired with senior managers. "We are not where we want to be, because we have set a high standard," Ware told The Atlanta Journal and Constitution, "but I think this company is working hard to improve." While not responding to Ware's comments specifically, Mehri, the plaintiffs' attorney, said Wednesday that the company should have acted sooner. "Four years ago, top African-American officials at the company identified the problem of segregation at the highest ranks of the company," Mehri said. " We welcome the establishment of the diversity council. However, it should have been established four years ago, and it will not be fully effective without input from the plaintiffs and the other salaried, black employees." Regarding the pending lawsuit, Ware said, "I don't know the four people in the lawsuit, but I believe that we will see that allegations about the Coca-Cola Co. are not true." (The Atlanta Journal and Constitution; May 27, 1999) DECOSTER EGG: Unpaid Overtime Isn't Chickenfeed to Farm Workers --------------------------------------------------------------- Checks are in the mail to more than half the 1,200 workers of the former DeCoster Egg Farm of Turner, Maine, who filed claims for overtime pay, according to a United Press International story. The checks range from $500 to $40,000 with many averaging $4,000 to $5, 000. Half the recipients are in Maine with the rest scattered as far away as Texas and Mexico. Some live in Europe and a few are in prison. These sums amount to stunning windfalls for poor farm workers who labored from 1991 through 1997 at scarcely more than $5 an hour on the egg farm of Austin "Jack" DeCoster. UPI wrote that the DeCoster farm, once the world's largest producer of brown eggs, wracked up a history of numerous and repeated health and labor violations over a 20-year period. Former Labor Secretary Robert Reich once labeled the conditions "as dangerous and oppressive as any sweatshop we've seen." New England supermarkets refused to sell the eggs because of those deplorable conditions . At one point DeCoster was cited for raw sewage backing up into the company trailers housing the workers. According to the UPI report, some 1,275 workers joined in a class action suit filed by Portland attorney Donald Fontaine. Under a court-approved settlement, Fontaine is prevented from disclosing the total amount being paid. But he told UPI, "There's many about $15,000." The final checks are to be mailed by mid-July. Some relatives are expected to partake of the bonanza. Fontaine said, "Even members of DeCoster's family have filed claims." (United Press International 05/27/99) FLORIDA: ACLU Challenges State Ban on Gays and Lesbians Adopting ---------------------------------------------------------------- To Doug Houghton, the little boy he has raised since he was 3 years old is his son. To the boy, Houghton is the only dad he's ever known. But the state of Florida would never sanction their relationship by allowing Houghton to adopt the boy, now 7, because Houghton is gay. The Sun-Sentinel reports that the American Civil Liberties Union of Florida took up Houghton's fight and that of other gays and lesbians in the state by filing a class-action lawsuit challenging the state law that bans homosexuals from adopting. "If successful, this lawsuit will remove an outdated law that is based on little more than ignorance and prejudice," said Howard Simon, executive director of the ACLU of Florida. Florida is the only state that expressly bars homosexuals from adopting, although it does allow them to be foster parents. The ACLU was joined in the lawsuit by Children First Project, a Broward County children's advocacy group, which says that parentless children are kept in limbo while people willing to adopt them are systematically excluded from applying to be parents. "We feel that's far better to have these children in loving homes than meandering through a crisis-ridden foster care system," Christina Zawisza, attorney for Children First told the Sun-Sentinel. The group is representing the two children in the lawsuit, identified as John Doe and John Roe, who is Houghton's child. The ACLU is representing the gay and lesbian plaintiffs in the suit, which was filed in U.S. District Court in Key West. During a news conference to announce the lawsuit, Houghton, a clinical nurse at Jackson Memorial Hospital, expressed his hopes to adopt "John Roe," a sickly boy he met as a patient in his ward. The two connected and the boy's father, overwhelmed by the child's medical problems, eventually asked Houghton if he would take care of the boy. Houghton, 36, became his legal guardian. "I was thrilled," Houghton said. "It was always my dream to have a child. And what I want is to be able to legally solidify this relationship and adopt him. Like a good parent, I would die for my son." The 25-page complaint charges that the state law ignores the best interests of children by precluding an entire class of "qualified adults, rather than making adoption decisions on a case by case basis," the lawsuit says. In Florida, there more than 2,000 children in foster care who are awaiting adoption. In Broward County, there are 210; in Miami-Dade and Monroe counties, there are 495. Palm Beach County has more than 100 children waiting for a permanent home. Plaintiff Angela Gilmore, 36, of Hollywood, a lesbian and law professor at Nova Southeastern University, thinks the ban is unconstitutional. Gilmore wants to adopt an African-American child. "I want to adopt, absolutely," said Gilmore, who is in a committed relationship. "This law is systematic discrimination. You learn to expect it from ignorant people, but not from the state." She dismissed those who say a child reared by homosexuals will grow up to be one. "I don't believe that. (Children) will become what they already are," she said. Wayne Smith, 43, a plaintiff from Key West who is also in a long-term relationship, wants to adopt a child, but can't. He also can't keep a promise to his sister, who wants him to adopt her daughter in the event that anything happens to her. "It's like a silent scream. You know you can be a good parent, but the law says you can't do it," said Smith, an attorney. Michael Adams, associate director of the national ACLU's Lesbian and Gay Rights Project, said the Florida law is based on "myths and stereotypes." It was passed by the Legislature in 1977, just two days after Miami-Dade's first anti-gay discrimination law was repealed in a campaign led by singer Anita Bryant. "Not only does this law blatantly discriminate against homosexuals, but it robs needy children of the opportunity to live in stable families," Adams said. It's not the first time the state law has been challenged. In 1997, June Amer, a Weston woman who was denied adoption because she is a lesbian, sued the state in Broward Circuit Court. The judge ruled against her, saying it was up to the Florida Legislature to change the law. The lawsuit names Florida Attorney General Bob Butterworth and three Department of Children & Families officials: Secretary Kathleen Kearney, Broward District Administrator Robert Pappas, and Miami-Dade and Monroe District Administrator Sara Herald. George Was, spokesman for Butterworth's office, said they were aware of the lawsuit but had not seen it. "We will respond at an appropriate time," he told the Sun-Sentinel. Six states are considering bans on gays and lesbians as candidates for foster parents or adoption. They are Arkansas, Idaho, Indiana, Oklahoma, Texas and Utah. Many other states have moved to safeguard the interests of children with gay or lesbian parents. At least 21 states have granted dual-parent adoptions to lesbians and gay couples, ensuring that their children can enjoy the benefits of having two legal parents, especially if one of the parents dies or becomes incapacitated. (Sun-Sentinel May 27, 1999) FORE SYSTEMS: Schiffrin & Barroway File Suit in Pennsylvania ------------------------------------------------------------ The law firm of Schiffrin & Barroway, LLP filed a class action lawsuit in the United States District Court for 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. The complaint charges FORE Systems, its executive management and GEC with failing to abide by the "all holder, best price" rule and contravening shareholder anti- discrimination requirements. To learn more, contact Andrew L. Barroway, Esq. at 888-299-7706 or 610-667-7706, or at info@scbclasslaw.com via email. GLS CAPITAL: Court Rules that County may Assign Tax Liens --------------------------------------------------------- The Pennsylvania Law Weekly reports that the Commonwealth Court has ruled en banc that a county has every right to assign its tax liens to a third party under the Municipal Claims and Tax Liens Act. The decision stems from a class action lawsuit in Allegheny County where those involved said the county did not have the right to sell 23,800 tax liens to GLS Capital Inc., which could then enforce them against the party owners. The appellant argued that the language of the act does not allow for a county to assign tax claims to a third party. But the court ruled that the language of the section in question included the assigning of tax liens as well as municipal claims. "Appellant asserts, in essence, that Section 33 does not mean what it says," Judge Bonnie Brigance Leadbetter wrote for the majority in Maierhoffer v. GLS Capital Inc. PICS Case No. 99- 0937 (Pa. Commw. May 14, 1999) Leadbetter, J.; Friedman & Pelligrini, JJ. dissenting; Kelley, J., dissenting (26 pages). "She argues that 'any claim' necessarily refers only to municipal claims, and not to tax claims, because tax claims cannot be assigned to a 'third party,'" Leadbetter wrote. "We cannot accept appellant's strained reading of the act. Statutes are presumed to employ words in their popular and plain everyday sense." Judges Rochelle S. Friedman and James R. Kelley filed separate dissenting opinions, both addressing the third party issue, with Kelley saying the majority's ruling is in fact unconstitutional. "The majority concluded that by using the term 'any claim,' Section 33 allows a municipality to assign both its tax and municipal claims, and the assignee thereby steps into the shoes of the municipality and may enforce the claim as that entity could. I strongly disagree with this notion," Kelley wrote. "[T]he exercise of this awesome legislative power is circumscribed. It may only be exercised by a legislative body and, generally speaking, may not be constitutionally delegated by that body." (Pennsylvania Law Weekly; May 24, 1999) GUN MANUFACTURERS: Jury Erred Finding Liability But Not Damages --------------------------------------------------------------- The Associated Press reports that a Brooklyn federal judge set aside part of a jury's decision in a landmark lawsuit against the gun industry. The plaintiffs' lead attorneys, Elisa Barnes and Denise Dunleavy, have said they are using the Brooklyn case as a basis for a class-action suit against the gun industry on behalf of gunshot victims nationwide. In a written ruling, U.S. District Court Judge Jack Weinstein said he was dismissing the cases against gun makers in the shootings of six victims because the jury despite finding liability failed to award the victims any damages. AP reports that he ruled an award of $500,000 to a seventh plaintiff would stand. Following a month-long civil trial in February, the jury found several major handgun manufacturers liable for shootings because of irresponsible marketing. But only three defendants American Arms, Inc., Beretta USA, Inc., Taurus International Manufacturing, Inc. were ordered to pay $500,000 to a man who had survived being shot in the head with an illegal handgun. The mixed verdict left both sides claiming victory. (AP Online; 05/26/99) INFORMIX CORP.: Settlement Official, Lawyers Take Their Shares -------------------------------------------------------------- Informix(R) Corporation (Nasdaq:IFMX), signed a memorandum of understanding with respect to the settlement of pending private securities and related litigation against Informix, certain of its current and former officers and directors, and Ernst & Young LLP, Informix' former independent accountants, subject to court approval. With the exception of two very small cases, the settlement will resolve all litigation arising out of the restatement of certain of Informix' financial statements that was publicly announced in November, 1997. If the settlement is approved, Informix will pay approximately $3.2 million in cash. An additional amount of approximately $13.8 million of insurance proceeds will be contributed on behalf of certain of the Company's current and former officers and directors. Finally, the Company will contribute a minimum of 9 million shares of Informix common stock worth $91 million. Ernst & Young will pay $34 million in cash. The total amount of the settlement will be $142 million. Given that the settlement is funded largely through insurance and stock, the Company believes that the settlement terms are very favorable. The Company's decision to settle was driven solely by the Company's desire to remove the uncertainty, expense and distraction of continuing litigation. "We are pleased that we have reached this settlement. It is a well-structured solution that allows Informix to move forward unhindered. We can now devote all of our effort to building the new Informix," said Bob Finocchio, Informix chairman and chief executive officer. Informix Corporation, based in Menlo Park, provides innovative database products, ranging from small workgroups to very large parallel processing applications. The legal paper, The Recorder, reports that the case is one of the biggest and most egregious stock drop cases to hit Silicon Valley. U.S. District Court Judge Charles Breyer must still approve the settlement, a process that is expected to take several months. If Breyer does approve the settlement, the 58 plaintiffs firms, led by Milberg Weiss Bershad Hynes & Lerach, intend to take about 65 percent of their fees in stock, the same percentage their clients will receive. The settlement also does away with a parallel class action filed in San Mateo Superior Court. While Mark Solomon in the San Diego office of Milberg Weiss told The Recorder that he's unsure how much the attorneys will ask for, plaintiffs firms typically receive about 25 percent of the settlement. That works out to about $22.75 million in stock and $12.5 million in cash. Attorneys on both sides of the case told The Recorder that including new stock to settle such security cases is a tactic used before, and that taking stock for fees is becoming less of a rarity. But the amount put on the table in the Informix case breaks new ground. Attorneys involved say the reason for the large stock payout is because the company faced such huge liability -- one attorney close to the case estimated as much as $1 billion -- that a straight cash deal would have killed the corporation. Company officials stunned the market in November 1997 when they announced Informix would restate its financial reports for the previous 3-1/2 years, admitting that they overstated net income by $248 million during that time. The restatement, according to Ernst & Young, was the result of "acts of intentional wrongdoing by Informix management." In the wake of the news, the company's stock plummeted to $5.25 a share from a pre-announcement high of $26. Meanwhile, before the announcement, eight company executives sold nearly all of their stock -- valued at $37.5 million -- at an average price of $23.50. "The company was faced with a very substantial restatement, which current management inherited," said partner Steven Schatz of Palo Alto's Wilson Sonsini Goodrich & Rosati, who represented Informix. "The structure of the settlement allows the company to remove a substantial cloud from over its head and move forward unimpeded." The company was smacked with 25 separate suits in the days after it announced its restatement and several plaintiffs firms fought with each other to be named to the lucrative status of lead plaintiffs counsel in In re Informix Corp. Securities Litigation, 97-1289. Under the Private Securities Litigation Reform Act of 1995, judges appoint lead plaintiffs counsel based on whose clients have the most at stake. A three-firm consortium of Milberg Weiss, San Diego's Barrack, Rodos & Bacine and New York's Kaplan, Kilsheimer & Fox -- with a combined 979 investors who lost $14.6 million -- won lead counsel status. They beat out San Francisco's Gold Bennett & Cera and Philadelphia's Berger & Montague, who combined had 274 investors with a total of $5.7 million in losses. Then Lieff, Cabraser, Heimann & Bernstein made a belated run for the reins with a separate suit they filed on behalf of investors in a company that Informix bought with the inflated stock. In the end, Lieff, Cabraser managed to carve out a "subclass" for itself and its clients and now say they are entitled to 10 percent of the proceeds. Which attorneys get what is far from worked out. And with 58 plaintiffs firms clamoring for a piece of the pie, nasty fights appear to be inevitable. The doling out of attorneys fees is "going to be complicated," said Paul Bennett of Gold Bennett, who filed the first suit in the matter. "That's all I can say." (The Recorder; May 27, 1999) INTERNEURON PHARMACEUTICALS: Awaiting Decision in Redux Case ------------------------------------------------------------ Subsequent to the September 15, 1997 market withdrawal of the weight loss medication Redux, INTERNEURON PHARMACEUTICALS INC was named, together with other pharmaceutical companies, as a defendant in approximately 1,049 product liability legal actions, many of which purport to be class actions, in federal and state courts involving the use of Redux and other weight loss drugs. On December 10, 1997, the federal Judicial Panel on Multidistrict Litigation issued an Order allowing for the transfer or potential transfer of the federal actions to the Eastern District of Pennsylvania for coordinated pretrial proceedings. On September 25, 1998, the U.S. District Court for the Eastern District of Pennsylvania (the "Court") preliminarily approved an Agreement of Compromise and Settlement (the "Settlement Agreement") between the Company and the Plaintiffs' Management Committee ("PMC") relating to the proposed settlement of all product liability litigation and claims against the Company relating to Redux. As part of the Settlement Agreement, the Company and the PMC entered into a royalty agreement (the "Royalty Agreement") relating to a portion of the payments proposed to be made to the settlement fund. On November 3, 1998, the Court issued a stay halting all Redux product liability litigation against the Company, pending and future, in state courts, following the issuance of a similar stay halting Redux product liability litigation against the Company with federal courts on September 3, 1998. These stays will remain effective until further order of the Court. The limited fund class action established by the Settlement Agreement includes all persons in the United States who used Redux, and certain other persons such as their family members, who would be bound by the terms of the settlement. Membership in the class is mandatory for all persons included within the class definition. Under the terms of the proposed settlement, class members asserting claims against Interneuron will be required to seek compensation only from the settlement fund, and their lawsuits against Interneuron will be dismissed. By agreeing to the proposed settlement, Interneuron does not admit liability to any plaintiffs or claimants. The Settlement Agreement requires Interneuron to deposit a total of approximately $15,000,000 in three installments into a settlement fund. The first installment of $2,000,000 was deposited into the settlement fund in September 1998. A second installment of $3,000,000 is to be made after the Settlement Agreement is approved by the Court, which would depend upon the ruling in the Fairness Hearing, which was conducted between February 25, 1999 and March 5, 1999 (see below). These installments, less certain expenses, will be returned to Interneuron if the settlement does not become final. A third installment of $10,000,000, plus interest, is to be made after the settlement becomes final. In addition, the Settlement Agreement provides for Interneuron to cause all remaining and available insurance proceeds related to Redux to be deposited into the settlement fund. Interneuron also agreed to make certain royalty payments to the settlement fund pursuant to the Royalty Agreement which is part of the Settlement Agreement, in the total amount of $55,000,000, over a seven year period commencing when the settlement becomes final. Royalties will be paid at the rate of 7% of gross sales of Interneuron products sold by Interneuron, 15% of cash dividends received by Interneuron from its subsidiaries related to product sales, and 15% of license revenues (including license fees, royalties or milestone payments) received by Interneuron from a sublicensee related to product sales. All Interneuron products will be subject to this royalty during the applicable term. If, at the end of that seven year period, the amount of royalty payments made by Interneuron is less than $55,000,000, the settlement fund will receive shares of Interneuron stock in an amount equal to the unpaid balance divided by $ 7.49 per share, subject to adjustment under certain circumstances such as stock dividends or distributions. Interneuron could be required to issue up to 7,343,124 shares of Common Stock if it makes no royalty payments. The Settlement Agreement will not become final until approved by the Court and the time for filing appeals of the Court's judgment approving the Settlement Agreement has elapsed without any appeals being filed or all appeals from the Court's judgment approving the Settlement Agreement have been exhausted and no further appeal may be taken. In this case, in order to approve the settlement, the Court must make a determination that the proposed settlement is fair and reasonable and meets each of the prerequisites for a class action generally, and for a "limited fund" class action in particular, all as required by the Federal Rules of Civil Procedure. Pursuant to these rules, notice of the proposed settlement was provided to potential class members in November 1998. Between February 25, 1999 and March 5, 1999, the Court conducted a Fairness Hearing to determine whether the case is properly certifiable as a limited fund class action and, if so, whether the terms of the Settlement Agreement are fair and reasonable. At the Fairness Hearing, the Court heard testimony from various witnesses, received documentary evidence, and heard oral arguments from the proponents and opponents of the settlement. The Court has not yet rendered a decision. The Company may withdraw from the Settlement Agreement, or the Settlement Agreement may otherwise terminate, under any of the following conditions: (i) final approval of the Settlement Agreement is not entered by the Court; (ii) class certification and/or approval of the Settlement Agreement is overturned on appeal for any reason; (iii) pending and future litigation against the Company or any other party released by the Settlement Agreement ("Released Parties") is not permanently enjoined on the final approval date; (iv) the class action and all pending multi-district lawsuits against the Released Parties are not dismissed with prejudice on the final approval date; (v) an order is not entered by the Court permanently barring contribution and indemnity claims by other defendants in the diet drug litigation; or (vi) Interneuron is unable to compel tender of its insurance proceeds. On November 20, 1998, December 30, 1998 and February 5, 1999, the Company's three product liability insurers filed actions against Les Laboratoires Servier ("Servier") and the Company in the Court, pursuant to the federal interpleader statute. The insurers allege that both Servier and the Company have asserted claims against commercial excess insurance policies issued by the insurers to Interneuron with limits of $20,000,000, $5,000,000 in excess of $20,000,000, and $15,000,000 in excess of $25,000,000, respectively, a portion of which has been used in the Company's defense of the litigation. The insurers have deposited the available proceeds up to the limits of their policies into the registry of the Court. There can be no assurance that the Court will approve the settlement. Even if the settlement is approved by the Court, opponents of the settlement may appeal the Court's opinion to the United States Court of Appeals for the Third Circuit. In addition, there is a case pending before the United States Supreme Court (Ortiz v. Fibreboard Corporation et al) ("Ortiz"), that may influence the Court's decision or the outcome of any appeal that might be taken. Oral argument in the Ortiz case was heard on December 8, 1998 and the Supreme Court is likely to render its opinion by June 1999, which is the end of the current Supreme Court term. Although factually distinguishable in many respects from the Company's proposed settlement, Ortiz involves an appeal from a mandatory, putative "limited fund" class action settlement. There can be no assurance that the Supreme Court's rulings in Ortiz will not significantly influence the approval process for, or potentially result in the overturning of, the Settlement Agreement. The Company will record initial charges to operations for the estimated fair value of the Company's obligations under the Settlement Agreement, exclusive of insurance proceeds, at such time as the Company can determine that it is probable that the conditions to final settlement have been or will be met. This is expected to be subsequent to the Court's decision regarding approval of the Settlement Agreement and the Supreme Court ruling in Ortiz. The amount of the liability to be recognized in connection with these charges is likely to be significant and to materially adversely affect the Company's net worth. Additionally, if the Company records such charges prior to the final settlement date, then, on the date the Settlement Agreement becomes final, the Company will determine if there was any increase in the fair value of the equity conversion feature of the Royalty Agreement and record any such increase as an additional charge to operations. From the date the Company records the initial charge and related liability for the settlement and through the term of the Royalty Agreement, the Company may record additional charges to accrete the liability attributable to the royalty feature of the Royalty Agreement up to the amount of royalties the Company expects to pay pursuant to the Royalty Agreement over the time the Company expects to make such royalty payments. The Company has also been named as a defendant in several lawsuits filed by alleged purchasers of the Company's Common Stock, purporting to be class actions, claiming violation of the federal securities laws. It is not possible for the Company to determine its costs related to its defense in these or potential future legal actions, monetary or other damages which may result from such legal actions, or the effect on the future operations of the Company. IRIDIUM WORLD: Shalov Stone Files Securities Complaint ------------------------------------------------------ The law firm of Shalov Stone & Bonner filed a class action lawsuit on behalf of all persons who purchased the common stock of Iridium World Communications, Inc. (Nasdaq: IRID), in connection with Iridium's January 1999 Secondary Offering, as well as those persons who purchased Iridium common stock in the open market between January 21, 1999 through May 13, 1999 and who trace their shares back to the Offering. On January 21, 1999, Iridium filed its Final Prospectus and Registration Statement for the sale of 7,500,000 shares of Class A common stock in the Secondary Offering. The complaint alleges that the Final Prospectus and Registration Statement contained materially false and misleading statements and omitted to disclose material facts concerning, among other things: (i) the market for the Company's satellite system; (ii) the state of the Company's distribution network; and (iii) the Company's financial condition and future business prospects. For more information, contact Lee S. Shalov at 212-686-8004 (ext. 13) or at lshalov@aol.com via email. NUCLEAR TESTS: Exposed New Zealand Veterans Seek Recognition ------------------------------------------------------------ From "down-under," the Southland Times reports that the Government has refused to help pay for a class action by veterans on New Zealand frigates involved in Britain's nuclear bomb tests at Christmas Island in the Indian Ocean in 1957-58. MAURICE HAYMAN of Riverton, a radio operator aboard the Pukaki, recalls arriving at the island, after the tests had begun. "Our sick berth attendant spent long periods on the ship's broadcast, warning of the perils of VD. After our calls to Samoa and Fiji, I thought he would be giving us some information on the perils of Operation Grapple itself, but it seemed no special precautions were required while operating in the area, except at the time of an actual bomb burst." It was Pukaki's second trip to the thermo nuclear bomb test area at Christmas Island. "We would let go high altitude balloons with radio transmitters, to monitor the high level winds before each hydrogen "H" bomb burst. We anchored and got cracking with the fishing lines. Nuclear radiation or not, they sure tasted good." "We continued our weather duties, letting the regular balloon go aloft, as we approached the first of the drops to take place on August 22. Our first drop was an atomic bomb, which was used as a trigger for setting off the H bombs. They were in the kiloton range and troops on the island considered them very small beer. The A bomb was not dropped from the aircraft but suspended from a balloon over the land. I was on duty in the Radio Room as the detonation approached. Everything was shut down, which sent the temperature up inside the ship. Everyone not required below was up on deck, changing from the shorts and sandals to long pants and shirts. Anti Flash gun crew gear was worn on the arms and over the head and shoulders. The detonation lost me reception, for a while, of the morse broadcast from New Zealand. Those on deck reported the usual heat, flash, and shock wave, together with the spectacular sight of the fireball. The view is always a good one because the clouds are dissipated by the enormous heat." "It wasn't clear at the time why everyone not required for duty had to sit up on deck close to the explosion. The correct procedure for the fleet in event of a nuclear attack was to spread out far and wide, close the ship down, and start up outside water sprinklers." A British Defence report dated May 20, 1953, on the nuclear weapons trials answered this question. It read: "The object of the exercise is to discover the detailed effects of various types of explosion on equipment, stores and men with and without various types of protection." Maurice Hayman's booklet, Those Useless Wings, details his experiences on Operation Grapple. While he has seen friends sicken and die from illnesses linked to the exposure faced at Christmas Island, Maurice Hayman and his family have no health complaints and are not seeking compensation. His concerns that the assignment should be formally recognized as overseas service, and for widows to have pension entitlements, have been satisfied. People should remember, he says, that those tests developed the weaponry for nuclear submarines which kept the peace for more than 25 years. (Southland Times NZ; 05/22/99) PERRIGO COMPANY: Insurance Reimburses $8 Million Legal Expenses --------------------------------------------------------------- Under the provisions of its liability insurance coverage, Perrigo Company (Nasdaq: PRGO) will receive an $8 million reimbursement for legal expenses and costs associated with the recently dismissed class action lawsuit and the related derivative lawsuit. As a result, the Company will recognize in fiscal 1999's fourth quarter a one-time pre-tax gain of $8 million or approximately $5 million and $0.07 per basic share after tax. The one-time gain will be accounted for as an offset to unusual litigation expenses. The U.S. District Court has approved the final dismissal of the shareholder derivative lawsuit and an order in favor of Perrigo was entered by the Honorable Gordon J. Quist, U.S. District Judge for the Western District of Michigan on May 24, 1999, dismissing the derivative lawsuit. This dismissal follows the dismissal of a related shareholder class action lawsuit in late March 1999. "We have spent nearly four years aggressively defending our position that these lawsuits were without merit. The Court has agreed and vindicated us," stated Michael Jandernoa, Perrigo's Chairman and Chief Executive Officer. "I am pleased that we will be able to focus on our goal of profitably growing the Perrigo Company without this distraction." Perrigo Company is the nation's largest manufacturer of over- the-counter (non-prescription) pharmaceutical and nutritional products for the store brand market. Store brand products are sold by national and regional supermarket, drugstore and mass merchandise chains under their own labels and compete with nationally advertised brands. The Company's products include over-the-counter pharmaceuticals, such as analgesics, cough and cold remedies, antacids, laxatives, suppositories and feminine hygiene products and nutritional products, such as vitamins, nutritional supplements and nutritional drinks. PRISON REALTY: Berman DeValerio Files Complaint in Tennessee ------------------------------------------------------------ Prison Realty Trust, Inc. (NYSE: PZN) was sued by shareholders in a lawsuit filed by Berman, DeValerio & Pease LLP in the United States District Court for the Middle District of Tennessee on May 26, 1999. "The action charges that Prison Realty concealed from investors at the time of the merger that it would have to pay Corrections Corporation of America substantial additional fees regarding the management and development of prisons so that the merger would be approved" said Jeffrey C. Block, one of the partners at Berman, DeValerio & Pease LLP which is representing the plaintiff. The lawsuit, which seeks class action status, is brought for violations of sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The class consists of (1) all investors whose shares were converted into Prison Realty Trust common stock in the December 31, 1998 merger between Prison Realty and Corrections Corporation of America (NYSE: CCA) and (2) on behalf of purchasers of Prison Realty's common stock during the period October 16, 1998 through May 14, 1999. On May 14, 1999 Prison Realty revealed in its form 10-Q, filed with the SEC, that it would retroactively increase the fees it paid to Corrections Corporation of America to operate and develop new prisons. The increase in fees will cost Prison Realty approximately an additional $80 million, as charged in the lawsuit. Prison Realty's common stock price plummeted in reaction to this news falling from its closing price of $19 3/4 per share before the filing of the 10-Q to close at $13 3/8 on May 18, 1999, after the information was fully disclosed to the market. For more information, contact Michael M. Sullivan, Esq., Jennifer L. Finger, Esq., or Jeffrey C. Block, Esq. at 800-516- 9926. PRISONER RIGHTS: Class Suit Delays But Doesn't Prevent Hangings --------------------------------------------------------------- From Port of Spain, Trinidad, the Caribbean news agency Cana reports that Law Lords at the Privy Council on Wednesday 26th May removed the stay of execution on nine condemned murderers in Trinidad and Tobago when it dismissed arguments by lawyers representing them. "The state can now proceed with hangings," Peter Pursglove, legal adviser to the attorney-general told Cana. The nine men were scheduled to be hanged in groups of three last week. Earlier the Privy Council, the country's highest court, had granted a stay of execution to nine men until they heard arguments. Lawyers for the men went to the Privy Council after they were turned down by the local High Court and Appeal Court when they sought a stay of execution for Dole Chadee and eight men said to be members of his gang. The other convicted killers facing the hangman are Joey Ramiah, Ramkhelawan Singh, Clive Thomas, Robin Gopaul, Russel Sankerali, Joel Ramsingh, Stephen Eversley and Bhagwandeen Singh. They were found guilty of killing Deo Baboolal, his wife Rookmin, their daughter Monica and their son Hamilton in the early hours of a January morning in 1994. Lawyers for the condemned men argued for a stay of execution until the outcome of a motion filed three weeks ago by a lawyer on behalf of another death row prisoner which is challenging the death penalty. The constitutional motion brought by convicted killer Anthony Briggs seeks to have hanging abolished on grounds that it is unconstitutional, cruel and unusual. Briggs, who was sentenced to death for the murder of a taxi driver, is pursuing a class action - which means that the motion applies to all prisoners on death row. The appeal court, however, ruled that the lawyers arguments were "plainly hopeless, frivolous and bound to fail" . Lawyers said the men have also filed a second petition to the Inter-American Commission on Human Rights (IACHR) and should be allowed to have it determined. Trinidad and Tobago has withdrawn membership from the IACHR which became effective on Wednesday. The nine convicted killers lost their appeal against the death sentence more than two weeks ago when the Privy Council turned down their appeal to have their constitutional motion heard in the local court. Death warrants were read to the men last November at the death row cells and they were scheduled to be hanged in groups of three on three consecutive days. Hanging did not take place when they filed a constitutional motion complaining about a number of issues, including poor prison conditions, as reasons why they should not be hanged. (British Broadcasting Corporation; BBC Summary of World Broadcasts, May 28, 1999) XL CAPITAL: Shareholders Complain About Mid Ocean Sale in NY ------------------------------------------------------------ XL CAPITAL LTD, Mid Ocean and the directors of Mid Ocean have been named as defendants in a purported class action lawsuit filed in connection with the Arrangements in the Supreme Court, County of New York, State of New York. Harbor Finance Partners v. Newhouse, et al., C.A. No. 1998/601266. The Shareholder Action alleges that the defendants breached their fiduciary duties to the Mid Ocean shareholders by failing to exercise independent business judgment (due to their alleged conflict of interest) and by agreeing to sell Mid Ocean at an unfair and inadequate price. The Shareholder Action is brought on behalf of a purported class of persons consisting of Mid Ocean shareholders other than the defendants. As relief, the Shareholder Action seeks, among other things, an order enjoining consummation of the Arrangements, or, in the event the Arrangements are consummated, rescission of the Arrangements, and an award of compensatory damages in an unspecified amount, as well as costs, including fees for plaintiff's counsel and experts' fees and expenses. On January 25, 1999, the Supreme Court granted the defendants' motion to dismiss the Shareholder Action on the grounds that the Shareholder Action (i) failed to state a claim upon which relief may be granted under Cayman Islands law and (ii) was not brought in an appropriate forum (forum non conveniens). The Supreme Court's decision is subject to appeal. ********* 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. Kent L. Mannis, Project Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *