/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990602.MBX C L A S S A C T I O N R E P O R T E R Wednesday, June 2, 1999, Vol. 1, No. 84 Headlines 3COM CORP.: Chitwood & Harley Files Complaint in California AMERICAN BANKERS: Denies Wrongdoing, Will Contribute $15 Million ASCEND COMMUNICATIONS: Intends Vigorous Defense of CA Litigation CANDIES, INC.: Cohen Milstein Files Complaint in New York COLUMBUS TN: Lease Holders Claim Old, Historic & Cheap Rights EUROPA CRUISES: Awaiting Decision on Gamblers' Class Claims GUILFORD MILLS: Files Motion to Dismiss Consolidated Suit HOLOCAUST SURVIVORS: Victim's Insurance Trial Begins Feb. 2000 INTELOS: "Lifetime" ISP Customers Claim Fraud in West Virginia IRIDIUM WORLD: Kaplan Kilsheimer Files Securities Complaint NATIVE AMERICANS: Judge Upholds Chippewa Treaty with King George OLSTEN CORP.: Securities Complaint Breeds Derivative Lawsuit PICTURETEL CORP.: Discovery Continues in Consolidated Suit RANDALLS FOOD: MSP Participants Class Partially Certified STUCCO LITIGATION: Trial Set on Home Owners' Water Damage Claims TORONTO TRANSIT: Lawyer's Press Release Wasn't Contempt of Court ********* 3COM CORP.: Chitwood & Harley Files Complaint in California ----------------------------------------------------------- Chitwood & Harley filed a securities class action in the United States District Court for the Northern District of California on behalf of purchasers of 3Com Corp. (Nasdaq:COMS) common stock for the period between September 22, 1998 and March 2, 1999. The complaint alleges that 3Com and certain of its officers and directors violated the Securities Exchange Act of 1934. The complaint alleges that beginning in September 1998, defendants made false and misleading statements regarding 3Com's business prospects and financial health. More specifically, the complaint alleges that during 3Com's 1st and 2ndQ F99, 3Com's insiders used $130.4 million of 3Com's cash to repurchase 4.3 million 3Com shares on the open market in order to help manipulate and artificially inflate the stock so that 3Com insiders would be able to sell their own shares at much higher and more profitable prices. Due to these false and misleading statements 3Com's stock soared from as low as $23 1/8 on September 1, 1998 to as high as $51 1/8 on December 23, 1998. Moreover, the complaint alleges that from November 1998 through January 1999, 3Com's top insiders sold 4.2 million shares of their own 3Com stock at artificially inflated prices as high as $48.69 per share, reaping proceeds of roughly $189 million in unlawful insider sales. In early February 1999, 3Com's stock fell sharply, falling from $47 1/4 to $30 9/16 upon rumors that Intel Corp. was gaining NIC market share from 3Com, and two 3Com distributors announced disappointing results. However, when 3Com assured analysts that its business model remained intact, and that it was on track to achieve 3rdQ F99 and 4thQ F99 EPS consistent with its prior guidance, 3Com's stock stabilized and then recovered to as high as $35 9/16. However, on March 2, 1999, 3Com revealed that, due to weak sales of Systems Products, and particularly weak sales of Client Access Products, 3Com's 3rdQ F99 EPS, and its results going forward, would be substantially worse than earlier forecasted. 3Com's stock plummeted from $30 11/16 on March 1, 1999 to as low as $22 3/4 on March 3, 1999. To learn more, contact Corey D. Holzer, Esq. at 888-873-3999 or at mail@classlaw.com via email. AMERICAN BANKERS: Denies Wrongdoing, Will Contribute $15 Million ---------------------------------------------------------------- Certain subsidiaries of AMERICAN BANKERS INSURANCE GROUP INC, are presently parties to a number of individual consumer and class action lawsuits pending in Alabama involving premium, rate, marketing, sales practices, disclosure, and policy coverage issues. While a number of similar suits have been filed in other jurisdictions, the insurance and finance industries have been targeted in Alabama by plaintiffs' lawyers who enjoy a favorable judicial climate. The Company typically has been named as a co-defendant with one or several retailer or finance companies who have sold the Company's product to a consumer. Other insurers are also joined as co-defendants in some of the suits. Although the Alabama lawsuits and similar suits pending in Mississippi and other jurisdictions generally involve relatively small amounts of actual or compensatory damages, they typically assert claims requesting substantial punitive awards or purport to represent a large class of policyholders. On November 12, 1998, the Company and three of its clients entered into a settlement of all claims in class action litigation consolidated by the Panel on Multi-District Litigation in the United States District Court for the Middle District of Alabama, contingent upon approval of the fairness of the settlement by the District Court and other conditions. This series of class actions involved the largest collective class exposure to the Company. Under the terms of the settlement, without admitting any liability, the Company will contribute approximately $15 million in distributions to the classes and subclasses, and has agreed to be bound by an injunction limiting the percentage of authorized non-file insurance premium to be charged consumer finance and retailer accounts during 6 year and 18 month periods, respectively. The Company has accrued additional expenses associated with implementing the settlement. While none of the Company's remaining cases are necessarily significant in terms of financial risk to the Company, the judicial climate in certain jurisdictions is such that the outcome of these cases is extremely unpredictable. Moreover, class action lawsuits to which the Company is a party do not lend themselves to potential damage calculation. There are still a number of cases pending, and it is expected that more suits alleging essentially the same causes of action are likely to continue to be filed during 1999. The Company denies any wrongdoing in any of these suits and believes that it has not engaged in any conduct that would warrant an award of punitive damages or that the class allegations have merit. The Company has been advised by legal counsel that it has meritorious defenses to all claims being asserted against it. ASCEND COMMUNICATIONS: Intends Vigorous Defense of CA Litigation ---------------------------------------------------------------- ASCEND COMMUNICATIONS INC and various of its current and former officers and directors are parties to a number of consolidated lawsuits pending in the United Stated District Courts for the Central District of California, which purport to be class actions filed on behalf of all persons who purchased or acquired the Company's stock (excluding the defendants and parties related to them) for the period November 5, 1996 to September 30, 1997. In addition, the Company and one if its officers were recently named as defendants in a securities action filed in the Superior Court of Alameda County, California. The Alameda County action purports to be brought in behalf of all purchasers of the Company's stock between July 15, 1997 and September 29, 1997 (excluding the defendants). The lawsuits allege that the defendants violated the federal or state securities laws by engaging in a scheme to artificially inflate and maintain the Company's stock price by disseminating materially false and misleading information concerning its business and earnings and the development, efficiency, introduction and deployment of its digital modems based on 56K-bps technology. These actions are in the early stages of proceedings and the Company is currently investigating the allegations. Based on its current information, the Company believes the suits to be without merit and intends to defend itself and its officers and directors vigorously. CANDIES, INC.: Cohen Milstein Files Complaint in New York --------------------------------------------------------- The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. on June 1, 1999, filed a lawsuit in the United States District Court for the Southern District of New York, on behalf of those persons who purchased or acquired Candies, Inc. (Nasdaq:CAND) common stock during the period between May 28, 1997, and May 12, 1999. The Complaint alleges that defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing a series of materially false and misleading statements regarding Candies financial results for fiscal 1998 and for the first three quarters of fiscal 1999. On May 12, 1999, the company announced that its previously reported results for fiscal 1998 and the first three quarters of fiscal 1999 might have to be restated due to the material overstatement of revenue and earnings and that the financial statements could no longer be relied upon. To learn more, call Andrew N. Friedman or Robert Smits at 888- 240-0775 or 202-408-4600 or write to afriedman@cmht.com or rsmits@cmht.com via email. COLUMBUS TN: Lease Holders Claim Old, Historic & Cheap Rights ------------------------------------------------------------- No one would expect to pay Manhattan rental rates for real estate in this quaint, antebellum town. But $11.62 a year for prime land on Main Street seems like a steal to some state officials. Nevertheless, nearly 1,400 lease-holders here, citizens who make up the cultural and financial heart of this Old South community, are clinging to leases drafted 178 years ago that state officials contend cheat the owner of the land - the public schools - out of millions of dollars. "Right now, the entire square mile in downtown Columbus produces about $2,500 (in rent), total," says Secretary of State Eric Clark, perhaps the least popular person in town these days. "It should be producing a minimum of a half million (dollars) a year." Columbus is among the state's oldest and most picturesque cities. Magnolias shade lush gardens, and front-yard signs announce the names of grand homes built by earlier generations. The city was spared much of the fighting of the Civil War. But today, Columbus feels like a city under siege as the community's most influential residents continue to vigorously fend off a decade of efforts to raise rents to reflect today's real estate market. Moreover, the land within the square mile owned by the schools is home to banks, law offices, businesses, the local media, churches and restaurants. The area also includes many of the city's finest homes. And these powerful leaders are entrenched. While leaseholders in other cities and counties renegotiated their rental agreements, the establishment here has put up half a million dollars to fund a class-action lawsuit now pending in federal court. Local dissent is undetectable. So fervent the fight, the school board that once pursued higher lease rates says it is now satisfied with the paltry rents. It is, though, contemplating budget cuts. The City Council and Board of Supervisors declared a vested public interest in the fight, recently donating $25,000 each in public tax dollars to the private lawsuit - despite a 1996 attorney general's opinion questioning their authority to do so. And the city is suffering a public relations black eye. "I think the perception around the state is that greed is driving Columbus's resistance to changes in the . . . leases. I don't think that's the case at all," says Birney Imes III, whose family newspaper, The Commercial Dispatch, pays the $11.62 rate. Rather, he believes, most lease-holders worry that a 200 percent increase in rates would rock the town. "Start playing around with these leases and you will see an eventual erosion of the tax base and lessening of interest in downtown development," he says. "I don't think that's in the best interest of the schools or the town." Like so much of Columbus, today's fight is intimately linked to the past. In the 18th and 19th Centuries, the federal government granted land to new states with the provision that a square mile in each township - the 16th of 36 one-square-mile sections - be used for the benefit of public education. (Many north Mississippi counties do not have 16th-Section land. Instead, they receive a payment from the state to compensate for the lands sold off when Mississippi acquired the Chickasaw Nation's territory). To help settle this wilderness outpost, known then as Possum Town and cut off from the rest of Mississippi by Choctaw territory, the Mississippi Legislature in 1821 authorized the leasing of 16th- Section land for a school. The proceeds were dedicated to Franklin Academy, the state's oldest public school, which today still serves as an elementary school. The "renewable forever" clause added by lawmakers nine years later, say lease-holders, was to provide stability and encourage long-term development. Over the decades, the antiquated lease rates and outright abuse of the public trust lands around the state eventually inspired a change in the political momentum. The Legislature in 1978 passed a reform act. And in the 1980s, then-Secretary of State Dick Molpus began demanding school districts everywhere revise lease agreements. Most counties and leaseholders complied, especially after a state Supreme Court decision in 1989 declared that the pennies-per-acre rates were tantamount to donating public property to private individuals. The 16th-Section leases around Mississippi that once produced $5 million for public schools now bring in $50 million a year. Columbus, though, fought back. And it claims to be unique. "To understand why it's fair, you have to look back to the early 1800s and think about what land cost," says Randolph Lipscomb, a gentlemanly lawyer whose great-grandfather penned the history of the community and whose Queen Anne- style boyhood home on the corner of the Courthouse Square today serves as his law office. "The going price for land in the Indian territories when they opened for settlement in 1822 was $1.25 an acre." Lipscomb, who pays $1.45 a year for the land beneath his law office, says some Delta planters were allowed to simply purchase 16th-Section land at such paltry rates and face no such "attack." Lease-holders argue they support the public schools, paying the fifth-highest property tax rates in the state on the leased property. (Lease-holders in other counties where rents have been renegotiated also pay property taxes as if they owned the land, state officials note.) And, Lipscomb complains the ongoing battle has made it difficult to sell property, get title insurance or competitive interest rates on mortgages. To raise rents, Lipscomb and others fear, would put elderly homeowners out on the streets and shake downtown. He says it would also put at risk of civil liability a real estate industry that for decades guaranteed clear title on the properties. Columbus feels so threatened that Lipscomb recently accused Clark of intending to "destroy" Columbus. And when Imes's newspaper, which in years past has run front-page stories written by lease-holders, did not print a response from Clark, Clark blasted back in a letter to the editor, calling Lipscomb's remarks "outrageously false and irresponsible." Indeed, while most citizens rarely give the Secretary of State much thought, the office ignites passionate indignation here. Imes says his newspaper's decision to endorse 1995 Democratic gubernatorial candidate Molpus over Kirk Fordice, for reasons other than the 16th-Section dispute, was unpopular among readers. "In every other city, leases have been resolved to the benefit of the schoolchildren and to the lease-holders . . . it has been a win- win situation," says Molpus. "There has been more demonization by some of the leadership of Columbus of the Secretary of State than legitimate efforts to find common ground to solve this problem." Both Clark and Molpus dismiss the notion Columbus would be harmed. Rather, they argue, clearing confusion over the validity of the leases would open the door to more development. They point to other cities around the state that have flourished since lease rates were renegotiated, ranging from Brandon - a small town east of Jackson that once collected less than $50,000 a year on downtown leases and today takes in $6 million - to the Gulf Coast, where a mall is being built on 16th-Section land. The property, they contend, is rich with development after the validity of the leases was resolved. Moreover, argues Clark, the taxpayers outside of the 16th Section in Columbus are subsidizing those within it with higher property tax rates. In fact, debate rages here over whether the high property tax rates discourage development. But Columbus lease-holders are encouraged these days. In a ruling last year ordering a trial court to hear the case, a three-judge panel of the U.S. Fifth Circuit Court of Appeals noted that the state Supreme Court in 1898 appeared to have approved the validity of the leases. The case is scheduled for trial next year and will center on technical questions over the validity of the leases. Lipscomb, though, has filed a motion seeking a final court judgment. The case is about the past, he says, joking that a trial would require a seance. And the issue, he stresses, is the value of a contract, no matter how seemingly politically incorrect. "What if the Chickasaws said, 'Our chiefs were drunk and the treaty (ceding much of Northeast Mississippi) is no good. You bribed our chiefs,'" says Lipscomb, noting the treaty actually itemized payments to chiefs. "You can't ascribe late 20th-Century concepts and values to early 19th-Century actions in the wilderness. History (and these lease agreements) has to be taken in perspective with the times." EUROPA CRUISES: Awaiting Decision on Gamblers' Class Claims ----------------------------------------------------------- On or about November 29, 1994, William Poulos filed a class action lawsuit on behalf of himself and all others similarly situated against approximately thirty-three defendants, including Europa Cruises of Florida 1, Inc. and Europa Cruises of Florida 2, Inc. in the United States District Court, Middle District of Florida, Orlando Division (Case No. 94-1259-CIV-ORL- 22). Europa Cruises of Florida 1, Inc. and Europa Cruises of Florida 2, Inc. were served with the Complaint on or about March 15, 1995. The suit was filed against the owners, operators and distributors of cruise ship casinos which utilized casino video poker machines and electronic slot machines. The Plaintiff alleges violation of the Federal Civil RICO statute, common law fraud and deceit, unjust enrichment and negligent misrepresentation. The plaintiff had filed a similar action against most major, land-based casino operators in the United States. The earlier action, which did not name the Company or any of its subsidiaries as defendants, was transferred from the U.S. District Court in Orlando, Florida to the U.S. District Court in Las Vegas, Nevada. The plaintiff contends in both actions that the defendant owners and operators of casinos, including cruise ship casinos, along with the distributors and manufacturers of video poker machines and electronic slot machines have engaged in a course of fraudulent and misleading conduct intended to induce people to play their machines based on a false understanding that the machines operate in a truly random fashion. The plaintiff alleges that these machines actually follow fixed, preordained sequences that are not random, but rather are both predictable and subject to manipulation by defendants and others. The plaintiff seeks damages in excess of $1 billion dollars against all defendants. Management believes there is no support for plaintiff's factual claims and the Company intends to vigorously defend this lawsuit. On September 13, 1995, the United States District Court for the Middle District of Florida, Orlando Division, transferred the case pending in that Court against Europa Cruises of Florida 1, Inc. and Europa Cruises of Florida 2, Inc. and other defendants to the United States District Court for the District of Nevada, Southern Division. Accordingly, the case against Europa and the other defendants in the cruise ship industry will be litigated and perhaps tried together with those cases now pending against the land-based casino operators and the manufacturers, assemblers and distributors of gaming equipment previously sued in federal court in Nevada. Management believes the Nevada forum provides a more favorable forum in which to litigate the issues raised in the Complaint. The Company is sharing the cost of litigation in this matter with other defendants. On November 3, 1997, the Court heard various motions in the case, including a Motion to Dismiss filed by the cruise ship defendants. The motion was denied. On March 18, 1998, the Plaintiffs filed a Motion for Class Certification. The motion is pending. GUILFORD MILLS: Files Motion to Dismiss Consolidated Suit --------------------------------------------------------- Several purported class action lawsuits have been filed on behalf of purchasers of GUILFORD MILLS INC common stock against the Company and certain of its officers and directors. These lawsuits were consolidated by order of the Court on January 8, 1999. A Consolidated and Amended Class Action Complaint was filed on February 8, 1999. The Consolidated Complaint purports to allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, in connection with the Company's public disclosure of accounting irregularities at the Hofmann Laces unit in fiscal year 1998. Specifically, the Consolidated Complaint alleges that, during the alleged class period (January 20, 1998 through October 26, 1998), defendants materially misrepresented the Company's financial condition and overstated the Company's reported earnings. No specific amount of damages is sought in the Consolidated Complaint. On April 9, 1999, defendants filed a motion to dismiss the Consolidated Complaint. On May 7, 1999, plaintiffs filed their opposition to the motion to dismiss. Defendants have until May 27, 1999 to file a reply. The Company intends to vigorously defend the lawsuits. HOLOCAUST SURVIVORS: Victim's Insurance Trial Begins Feb. 2000 -------------------------------------------------------------- The Fresno Bee reports that a date has been set for the first trial in the United States involving insurance companies accused of failing to pay claims to Holocaust survivors and their families. Los Angeles Superior Court Judge Florence-Marie Cooper on Friday rejected arguments by insurance company lawyers who argued that California courts didn't have the jurisdiction to hear the case. Cooper set Feb. 9, 2000, for the trial of Adolf Stern vs. Assicurazioni Generali. Stern, 82, and six other family members, some of whom live in Los Angeles, are seeking $135 million, claiming that Generali -- a large Italian-based insurer -- has acted in bad faith in failing to honor claims that family members lodged several times since the end of World War II on a policy purchased in 1929 by family patriarch, Moshe "Mor" Stern. Moshe Stern was killed in the gas chamber at Auschwitz, along with his wife and three of their seven children. Adolf Stern, who lives in Florida, is a surviving son of Moshe Stern. The judge's ruling was made on 55th anniversary of the day the Stern family was sent to Auschwitz. "This is a real benchmark day for Holocaust survivors" because now some of them may get a trial within their lifetimes, said Claremont lawyer William M. Shernoff, who represents the Sterns and plaintiffs in three other cases against Generali. Other Holocaust-related suits have been filed in several U.S. cities and in Europe, including massive class-action cases against Generali and a dozen other insurers in New York and Newark, N.J., but there have been no rulings on whether those cases can go forward. Generali and other insurers have argued that the cases should be heard in the European country where the policy was purchased. In January, Cooper ruled that California courts have jurisdiction under the Holocaust Victims Insurance Act, which extends until 2010 the statute of limitations for filing Holocaust-era insurance lawsuits. A state appeals court upheld Cooper's ruling and Generali has asked the California Supreme Court to review the case. The state's highest court has until June 15 to decide on a review. Defense lawyer Peter Simshauer said Generali and four other European-based insurers are members of an international commission attempting to settle global Holocaust claims. The company also has approached California Insurance Commissioner Chuck Quackenbush, who has been an advocate for Holocaust survivors, about settling the case, he said. (Fresno Bee; 05/30/99) INTELOS: "Lifetime" ISP Customers Claim Fraud in West Virginia -------------------------------------------------------------- The Charleston Daily Mail reports that a pair of lawyers is hoping to represent customers of an Internet company who may have lost lifetime service contracts when the company they originally contracted with was bought by another company. The class-action suit was filed Friday in Kanawha County Circuit Court on behalf of all customers who bought lifetime packages from West Virginia Internet before it was absorbed by Intelos, a Virginia-based Internet firm. The suit was filed by lawyers William DePaulo and Mary Anne Maul on behalf of Charles Allen of Charleston and other, unnamed customers. Maul had estimated there could be more than 1,000 potential clients from the ranks of West Virginia Internet, and perhaps thousands more who bought such contracts from Intelos' most recent West Virginia acquisition, New Wave Internet. "This could be very big. There might have been quite a lot of people who have been affected." But Intelos president David Lowe said Friday that its records show fewer than 100 of West Virginia Internet's nearly 1,200 customers bought lifetime plans. Later Friday, Maul told the Charleston Daily Mail, "We had heard that there could be more than 1,000 affected parties, but they (Intelos) would have better access to that information than I do." Lowe also said New Wave Internet, which became part of the company only this week, had no lifetime service plans. "Their numbers, well, they're just absurd," Lowe said. Lowe said the lifetime service customers were a subject addressed when Intelos bought West Virginia Internet from its previous owner, Timothy Davis. "That was part of the purchase agreement. The seller (Davis) took the responsibility of dealing with those customers," Lowe said. Maul agreed that Davis should be held responsible - he also is named in the suit. She maintains, though, that Intelos should have to repay the lifetime customers and pay damages to punish it for what she calls "fraud." (Charleston Daily Mail; 05/29/99) IRIDIUM WORLD: Kaplan Kilsheimer Files Securities Complaint ----------------------------------------------------------- On May 28, 1999, Kaplan, Kilsheimer & Fox LLP filed a Class Action lawsuit against Iridium World Communications, Ltd. (NASDAQ: IRID), certain of its officers and directors, and its principal investor. The suit is brought on behalf of all persons or entities who purchased or otherwise acquired the common stock of Iridium between September 9, 1998 and March 29, 1999. The complaint alleges that defendants issued a series of false and misleading statements, and failed to disclose material information, about the Company's ability to fully deploy its global mobile wireless communications system known as the Iridium System. The Company's false and misleading statements and omissions caused Iridium's common stock to trade at artificially inflated prices during the Class Period. Certain insiders and directors sold approximately 49,000 shares of Iridium stock to the unsuspecting investing public and over $1.3 million in proceeds was realized as a result of these sales. To learn more, contact Jonathan K. Levine, Esq. Christine M. Comas, Esq. or Adrienne L. Valencia, Esq. at 800-290-1952 or 212-687-1980, or write lawkkf@aol.com via email. NATIVE AMERICANS: Judge Upholds Chippewa Treaty with King George ---------------------------------------------------------------- In upholding a Chippewa class-action land claim to a four- square-mile chunk of urban Sarnia, Justice Archie Campbell of the Ontario Superior Court made it clear that the decision does not imperil other land-claims areas in Canada, according to a report in The Lawyers Weekly. The defendants had raised an in terrorem argument to the effect that if the Chippewa won in Sarnia, then the entire city of Ottawa together with 8.5 million acres surrounding it, all of British Columbia west of the Rockies (including Vancouver), all of Nova Scotia and New Brunswick and large parts of Quebec might also have to be conveyed to Native people. Justice Campbell dismissed this alarmist notion, saying that the Chippewa case "is driven entirely by its own narrow facts and it does not raise the defendants' spectre of an 'acre-by-acre battle' right across the country." The narrow facts of the case, said Justice Campbell, were that the Chippewa never lawfully surrendered the Sarnia land. They surrendered 2,000,000 surrounding acres, but under 1827's Treaty 29 with King George IV they specifically reserved the Sarnia land for the Chippewa "and their posterity at all times hereafter, for their own exclusive use and enjoyment." In spite of that, Chippewa "wheeler dealer" Joshua Wawanosh and two other chiefs privately sold the reserved land to speculator Malcolm Cameron in 1839. Justice Campbell declared that sale null and void. However, he disallowed the Chippewa action against the present property owners, including 2,100 homeowners, 175 industries, businesses, schools, churches and others, because they were "good faith purchasers for value without notice." He said it would be "unconscionable" to let an action proceed against them. Instead, the Chippewa may continue their action against the Crown for damages. The quantum of damages that might eventually flow remains an open question, given Justice Campbell's finding that the Chippewa are "strangers to this land and have no communal memory or oral history of wrongful dispossession," and that "without speculating on what might be argued or decided in the ongoing damage action, it is uncontradicted that they received for the land substantial if not full payment in trust at a price thought by some at the time to be fair and by their expert witness to- day to be reasonable. There is no evidence of fraud." Counsel for the Attorney General of Canada Charlotte Bell said she is pleased that the present landowners are now out of the lawsuit. Counsel for the Chippewa, Earl Cherniak of Toronto's Lerner & Associates, said his clients are appealing the ruling and making a bid for actual possession of the Sarnia land. (THE LAWYERS WEEKLY; June 4, 1999) OLSTEN CORP.: Securities Complaint Breeds Derivative Lawsuit ------------------------------------------------------------ On September 8, 1998, a Consolidated Amended Class Action Complaint was filed by the plaintiffs in four purported class action lawsuits (Weichman, Goldman, Waldman and Cannold) pending against Olsten and certain of its officers and directors. The Amended Complaint asserts claims under Sections 10(b) (including Rule 10b-5), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. On October 19, 1998, the Company and the individual defendants served a motion seeking an Order dismissing the Amended Complaint; that motion was fully briefed on December 23, 1998. While the Company is unable at this time to assess the probable outcome of the Class Action or the materiality of the risk of loss in connection therewith (given the preliminary stage of the Class Action and the fact that the Amended Complaint does not allege damages with any specificity), the Company believes that it acted responsibly with respect to its shareholders and has vigorously defended the Class Action. On or about May 11, 1999, a Complaint was served in a derivative lawsuit, captioned Robert Rubin, et al. v. John M. May, et al., No. 17135-NC (Delaware Chancery Court), which was filed against the following current and former directors of the Company: John M. May, Raymond S. Troubh, Jo[sh] S. Weston, Victor F. Ganzi, Stuart R. Levine, Frank N. Liguori, Miriam Olsten, Stuart Olsten and Richard J. Sharoff. The Complaint, which names Olsten as a nominal defendant, alleges a claim for breach of fiduciary duties arising out of the Class Action referenced above and certain Healthcare Investigations. Plaintiffs seek a judgment (1) requiring the defendants to account to the Company for unspecified alleged damages resulting from the defendants' alleged conduct; (2) directing the defendants to establish and maintain effective compliance programs; and (3) awarding plaintiffs the costs and expenses of the lawsuit, including reasonable attorneys' fees. PICTURETEL CORP.: Discovery Continues in Consolidated Suit ---------------------------------------------------------- Since September 23, 1997, seven class action shareholders' complaints have been filed against the Company, Norman E. Gaut, Director and former Chairman of the Board and Chief Executive Officer, and Les Strauss, the former Vice President and Chief Financial Officer, in the United States District Court for the District of Massachusetts. The plaintiffs filed a consolidated complaint on February 11, 1998. The original complaints were filed following the Company's announcement on September 19, 1997 that it would restate its financial results for the first quarter of the fiscal year ending December 31, 1997 and the last two quarters of the fiscal year ending December 31, 1996 and were amended when the Company announced on November 13, 1997 that it would also restate the second quarter of the fiscal year ending December 31, 1997. The consolidated complaint alleges that PictureTel and Messrs. Gaut and Strauss violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, during the period from October 17, 1996 through November 13, 1997, through the alleged preparation and dissemination of materially false and misleading financial statements which artificially inflated the price of PictureTel Common Stock. The consolidated complaint seeks to recover an unspecified amount of damages, including attorneys' and experts' fees and expenses. On April 7, 1998, the Company filed a motion to dismiss the complaint. On October 28, 1998, the motion to dismiss Norman E. Gaut was granted and the motion to dismiss PictureTel and Les Strauss was denied. Limited discovery has occurred, and the Company expresses no opinion as to the likely outcome. RANDALLS FOOD: MSP Participants Class Partially Certified --------------------------------------------------------- Following the acquisition by RANDALLS FOOD MARKETS INC of Cullum Companies, Inc. in August 1992, the Company terminated the Cullum's Management Security Plan for Cullum Companies, Inc. ("the MSP"). In respect of such termination, the Company paid MSP participants the greater of (i) the amount of such participant's deferral or (ii) the net present value of the participant's accrued benefit, based upon the participant's current salary, age and years of service. Thirty-five of the former MSP participants have instituted a claim against the Company on behalf of all persons who were participants in the MSP on its date of termination (which is alleged by plaintiffs to be approximately 250 persons). On May 7, 1997, the plaintiffs filed an amended complaint for the Court to recognize their action as a class action, to recover additional amounts under the MSP, for a declaration of rights under an employee pension benefit plan and for breach of fiduciary duty. The plaintiffs assert that the yearly plan agreement executed by each participant in the MSP was a contract for a specified retirement and death benefit set forth in such plan agreements and that such benefits were vested and nonforfeitable. A pre-trial order in the MSP litigation, which was submitted to the Court on October 22, 1997, states that an expert for the plaintiffs, assuming class certification, may testify that the damages allegedly sustained by the plaintiff class may range from approximately $18.0 million to $37.2 million and, assuming that a court were to award additional damages based on a rate of return achieved by an equity index over the relevant period, that such damages may range from approximately $37.4 million to $70.6 million. On June 16, 1998, the Court certified the case as a class action for the limited issue of determining if the MSP was an exempt "top hat plan" (a plan which is unfunded and maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees). The Court defined the class as all persons who, on the date of the termination of the MSP, were participants in the MSP and were employed by Randall's Food Markets, Inc. The trial of the limited class action issue was conducted before the Court, sitting without a jury, on October 26, 1998. Upon order of the Court, both parties submitted post-trial briefs on November 6, 1998. On February 18, 1999, the Court ruled on the limited class action issue finding that the MSP was not an exempt top hat plan. In addition, the Court requested on the same date a joint statement from the parties concerning future scheduling. The parties submitted the requested joint statement, but the Court has not yet issued any scheduling orders. On March 4, 1999, the Company filed a motion requesting that the Court amend its order to allow an interim appeal and confirm that the Company did not stipulate that it bore the burden of proof at the trial. On March 26, 1999, the Court denied the motion for an interim appeal and confirmed that the Company bore the burden of proof at the trial. When the Court certified the limited class issue, it stated that once that issue was resolved, it would make an evaluation as to whether any other issues should be dealt with in a class action context. On April 8, 1999, the Plaintiffs filed a new Motion for Class Certification, seeking class action treatment on all remaining issues. In addition, on April 8, 1999, the plaintiffs filed a new damages model in which they appear to seek total damages of approximately $65.1 million with prejudgement interest of approximately $28.0 million. Also, the plaintiffs have provided to the Company an additional schedule indicating that damages allegedly sustained may range from $65.1 million to $72.4 million, and assuming reinvestment, such damages may approximate $200 million. The Company filed its brief in opposition to the Motion on April 28, 1999 and will oppose the request by the Plaintiffs for class certification of further issues. Based upon current facts, the Company is unable to estimate any meaningful range of possible loss that could result from an unfavorable outcome of the MSP litigation. STUCCO LITIGATION: Trial Set on Home Owners' Water Damage Claims ---------------------------------------------------------------- From North Carolina, The News and Observer reports that a lawsuit against the manufacturers of synthetic stucco can proceed as a statewide class-action case and will go to trial in the fall, a Superior Court judge will rule this week. Ben F. Tennille of Greensboro, a special Superior Court judge who handles complex business cases, notified opposing attorneys Thursday that he would order a series of trials against six manufacturers to begin Oct. 4. Tennille also said he would move the trials from New Hanover County to Johnston County at the request of the manufacturers. The problem with synthetic stucco surfaced three years in New Hanover County, where a county building inspector has led a campaign drawing national attention to the issue. Hundreds of stuccoed homes there might have suffered water damage. Many homes in Cary have also had problems. Statewide, there are more than 15,000 houses that have been treated with the synthetic stucco, also known as EIFS. Most of them have not reported a drainage problem. Gary K. Shipman of Wilmington, a lead attorney for the plaintiffs, filed the lawsuit in January 1996 on behalf of homeowners in North Carolina whose houses are clad with synthetic stucco. The suit alleges that the material is defective because it doesn't provide a way for water to drain. When water gets behind the stucco, the walls rot. Thousands of homeowners across the state might have that problem, and hundreds of lawsuits have already piled up in state courts. The N.C. Attorney General's Office calls it possibly the worst consumer problem the state has ever faced. Manufacturers blame the contractors who applied the synthetic stucco and deny their product is inherently defective. In November, a manufacturer settled a lawsuit that was already in progress for an undisclosed amount. Shortly after that, a Greensboro jury awarded a couple $187,000 in their suit against a builder. Senergy, one of the manufacturers that had been named in the state class-action lawsuit, settled last year by creating a $20 million fund to pay claims from homeowners across the country. Six manufacturers remain in the lawsuit, and unless they settle there will be six separate trials, with the company that has the largest market share going first. The manufacturers are Dryvit Systems, Sto Corp., Parex, United States Gypsum, Continental Stucco, and Bonsal and Thomas Waterproof Coatings. Each trial will be split into two phases. In the first phase, a jury will decide whether the material is defective and whether the manufacturers failed to warn consumers of its defects. If the jury returns verdicts against the manufacturers in the first phase, it will then determine the amount of damages the companies will have to pay. Manufacturers tried to prevent the case from proceeding as a class-action lawsuit, and unsuccessfully argued that third parties such as builders and contractors should also be brought into the case. (The News and Observer; June 1, 1999) TORONTO TRANSIT: Lawyer's Press Release Wasn't Contempt of Court ---------------------------------------------------------------- The Lawyers Weekly reports that a superior court judge has rejected contentions that a Toronto law firm representing plaintiffs in a class action over a subway fire was in contempt of court when it issued a press release stating that the class action had been certified for $30 million, that the Toronto Transit Commission had been held liable and the only remaining question was how much individual plaintiffs would receive. Although it acknowledged that lawyers are entitled to speak to the media, the TTC objected to the press release, on grounds it constituted a "notice of certification" pursuant to ss. 17-20 of the Class Proceedings Act (the purpose of which is to give class members complete information about their legal rights). Such notices require court approval, which had not been given. The release might encourage exaggerated or fabricated claims, said the TTC, particularly because it inaccurately stated that "all the passengers will be entitled to receive compensation," whereas in truth only passengers who can prove damages will be entitled. In their application to Superior Court Justice Robert Sharpe, TTC lawyers also expressed concern that the mention of $30 million might cause inflated expectations and make individual claims hard to settle. They were also concerned that new claimants might be attracted. In rejecting the TTC's position, Justice Sharpe ruled that the press release did not constitute a notice of certification under the Act, nor was it a formal document. It "merely provided the media with information." In so ruling, Justice Sharpe distinguished Mangan v. Inco, (1998), 38 O.R. (3d) 703 (Gen. Div.) where class counsel (the same firm as in the present case) sent "claim kits" to potential class members. The kits violated the notice provisions of the Act because they left out important elements of a court-approved notice, such as coupons by which potential class members could opt out. In the present case, the press release bore "no relation to the 'claim kit' distributed in the Mangan case," he ruled. "The press release is not a formal document, nor does it resemble one. It is impossible to imagine that anyone could read it as constituting legal notice of certification, of the choices available, or the steps to be taken to implement those choices. ... Nor was there any risk that the press release would undermine or evade the requirements of the court-approved notice." The plaintiffs, passengers aboard a Bloor-Danforth subway train, allege they suffered smoke inhalation and property damage from burning rubber in a nearby subway tunnel. Class counsel in the present case is Toronto firm McGowan & Associates. The TTC is represented by Toronto's Dutton, Brock. (THE LAWYERS WEEKLY; June 4, 1999) ********* 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 * * *