/raid1/www/Hosts/bankrupt/CAR_Public/990617.MBX
C L A S S A C T I O N R E P O R T E R
Thursday, June 17, 1999, Vol. 1, No. 95
Headlines
AHT CORPORATION: Fingers Attorneys Over Litigation Manipulating Yahoo! Posts
CANDIE'S, INC.: Special Investigative Committee Formed; New CFO Appointed
CELLSTAR CORP.: Still Stull Files Complaint in Florida
CENDANT CORPORATION: Commences Dutch Auction to Repurchase 50M Shares
CEPHALON, INC.: Agrees to Pay $17 Mil. To Settle Shareholder Suits
COOK COUNTY: ACLU Sues to Correct Juvenile Detention Conditions
INDIAN TRUST: Plaintiffs Rest in BIA/Treasury Dept. Breach-of-Trust Case
MARQUETTE TEACHERS: Union Charges Board of Education with Unfair Practices
MTI TECHNOLOGY: Securities Cases Preliminarily Settled for $900,000
NEW YORK: New Jersey Files Commuter Tax Suit
PRISON REALTY: Kantrowitz Goldhamer Files Complaint in New York
PRUDENTIAL: Challenge to HMO's Guidelines On Giving Medical Care Survives
SABRATEK CORPORATION: Decries Merits of Amended Shareholder Complaint
SEARS ROEBUCK: Fraud Suit Seeks to Recapture Fees For Tires Never Balanced
SELECT COMFORT: Kaplan Kilsheimer Files Complaint in Minnesota
TAINTED BLOOD: 10,000 Canadians in Line for $1.2 Billion Settlement
TOBACCO LITIGATION: Wisc. Judge Allows Conspiracy Claim to Proceed
Y2K LITIGATION: Senate Okays Bill to Limit Y2K Suits; Veto Likely
*********
AHT CORPORATION: Fingers Attorneys Over Litigation Manipulating Yahoo! Posts
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AHT Corporation (Nasdaq: AHTC) announced yesterday it has received evidence
as to the identities of individuals responsible for several hundred abusive
and often sexually vulgar postings on the Yahoo! Message Board regarding
the Company, its officers, directors, and stockholders. Information
subpoenaed from Yahoo! appears to indicate that Ed Bukstel and David
Bukstel, Esq., posing under numerous aliases, have been waging an ongoing
campaign of misinformation in what appears to be an attempt on their part to
influence the outcome of two court cases in their favor by suppressing the
price of AHT's stock.
Ed Bukstel and David Bukstel, Esq., are the Chairman and Secretary,
respectively, of a shell corporation named Bukstel and Halfpenny,
Incorporated (B&H). The subpoenaed Yahoo! records appear to indicate that
in over 300 postings on the Yahoo! Message Board, both Ed Bukstel and his
brother, David Bukstel, a licensed attorney, have engaged, under the guise
of being concerned stockholders, in a systematic pattern of unethical and
fraudulent postings. These records show that one of the tactics employed by
the Bukstel brothers has been to post messages under one or more aliases and
to respond to such postings using one or more different aliases. The Bukstel
brothers are involved in two previously disclosed court actions against AHT:
one, as the sole plaintiffs in a rescission action which seeks the reversal
of AHT's 1997 acquisition of B&H's assets and, the other, as putative
members of a proposed class action in connection with the Company's stock
price decline in 1998.
The Company has brought these postings to the attention of the Judge
presiding over the rescission action.
"Clearly, what we have uncovered is a manipulative, abusive and unethical
use of the Internet medium. This is a high-tech method of utilizing low-rent
tactics," said Eddy Friedfeld, Senior Vice President and General Counsel of
AHT Corporation. "These virulent postings tend to depress the price of
AHT's stock and to create an environment to dupe and mislead our
stockholders. Some of the Yahoo! postings have engendered fear among certain
employees and their families. No company or its employees and their families
should be subjected to this type of abuse. We plan to take all steps
legally available to us to stop those who resort to posting misinformation
and threats on the Internet while hiding behind false identities."
Jon Edelson, MD, Chairman, CEO and President of AHT Corporation, stressed,
"These individuals are acting contrary to the best interests of our
Company and our stockholders. We will not tolerate such actions from these
or any other individuals. We are working hard to build a healthcare e-
commerce business and do not intend to let individuals who propagate false
information about our Company stand in the way of creating value for our
customers and our stockholders." AHT Corporation participates in the growing
healthcare e-commerce market. The Company provides information technology
enabling the electronic management of laboratory and prescription
transactions. AHT's goal is to be a leading provider of Internet-based
clinical e-commerce among physicians and healthcare organizations. For more
information, please visit AHT's website at http://www.ahtech.com.(Effective
February 1, 1999, Advanced Health Corporation changed the name under which
it is conducting business to AHT Corporation and changed its Nasdaq stock
symbol from ADVH to AHTC.)
CANDIE'S, INC.: Special Investigative Committee Formed; New CFO Appointed
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Candie's, Inc. (Nasdaq/NMS:CANDE) disclosed that a Special Committee of its
Board of Directors has been appointed to investigate certain issues that
have prevented completion of the audit of the Company's financial statements
for the fiscal year ended January 31, 1999, and preparation of financial
statements for subsequent periods. The Special Committee has retained an
independent accounting firm and law firm to assist in its investigation. The
Company is diligently working to provide the Special Committee and its
experts with the information they request as part of the Company's goal of
having its fiscal year 1999 audit completed as soon as possible.
The Company also announced that the Company's Controller, Frank Marcinowski,
has assumed the Chief Financial Officer's responsibilities on an interim
basis until a successor to David Golden is appointed. The Company also
noted that its inability to complete its fiscal year 1999 audit has
prevented it from filing its Form 10-K for fiscal 1999 and Form 10-Q for the
quarter ended April 30, 1999, which is part of the maintenance requirement
for continued listing of its common stock on the Nasdaq Stock Market. The
Company intends to ask Nasdaq for a temporary exception to this maintenance
requirement.
In addition, The Company announced that during the past several weeks,
several class action complaints have been filed in the United States
District Court for the Southern District of New York against the Company and
certain of its current executive officers and directors and a former
executive officer. The complaints, which the Company anticipates will be
consolidated, allege, among other things, that the defendants misrepresented
or omitted to state material facts concerning the Company's business and
financial condition.
Commenting on these issues, Neil Cole, the Company's Chief Executive
Officer, stated "the Company has a strong balance sheet and sufficient
capital to fund its operations for the foreseeable future. Our banks are
very supportive and continue to provide our working capital requirements. We
look forward to resolving the issues being investigated by the Special
Committee as expeditiously as possible. Of course, the Company intends to
defend vigorously all class action lawsuits."
Neil Cole commented further, "We are very excited about the fall season, in
which we will launch CANDIE'S fragrance supported by a $ 20 million
advertising campaign funded by our licensee, Liz Claiborne, Inc., and
CANDIE'S jeanswear through our joint venture with Azteca Production
International, Inc. We are also very enthusiastic about the growth of the
BONGO brand, which we believe has been enhanced by our fall 1998 acquisition
of Michael Caruso & Co., Inc., owner of BONGO branded jeanswear and
apparel," Neil Cole concluded.
CELLSTAR CORP.: Still Stull Files Complaint in Florida
------------------------------------------------------
On June 14, 1999, in the United States District Court for the Southern
District of Florida on behalf of all persons who purchased the common stock
of CellStar Corp. (NASDAQ: CLST) between March 19, 1998, and Sept. 21, 1998,
Stull, Stull & Brody filed a class action securities complaint.
The complaint alleges that certain officers and directors of the company
violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
by, among other things, misrepresenting and/or omitting material information
concerning the company's results of operations and the purported success of
the company's entry into the pre-paid Cellular business primarily through an
investment in Topp Telcom, Inc.
In particular, the complaint alleges that during the relevant time period
CellStar was making a material and substantial amount of sales to Topp for
which it was not being paid nor did CellStar seek payment or expect to be
paid. Ultimately, CellStar was forced by its auditors to change its
accounting for its investment in Topp and its sales to Topp -- treating its
receivables as an "investment" and changing from coast accounting to equity
accounting -- and to recognize 100 percent of Topp's losses, thereby causing
CellStar to report a significant loss in the third quarter of 1998.
Following the announcement of the adverse facts described above the price of
CellStar common stock dropped to $ 5.00 per share, a more than 72 percent
reduction from its Class Period high of $ 17.875.
Contact Tzivia Brody, Esq. at Stull, Stull & Brody by calling toll-free 1-
800-337-4983, or by e-mail at SSBNY@aol.com, or by fax at 212/490-2022, or
by writing to Stull, Stull & Brody, 6 East 45th Street, New York, NY 10017.
CENDANT CORPORATION: Commences Dutch Auction to Repurchase 50M Shares
---------------------------------------------------------------------
Cendant Corporation (NYSE: CD) yesterday announced that its Board of
Directors has authorized a "Dutch Auction" self-tender offer for 50 million
shares of its common stock or approximately 7.0% of its shares outstanding
through its wholly owned subsidiary, Cendant Stock Corporation. The offer
will commence on June 16, 1999 and will expire at midnight, New York City
time, on July 15, 1999, unless the offer is extended.
Under the terms of the offer, the company will invite shareholders to tender
shares at prices between $19.75 and $22.50 per share. Based upon the number
of shares tendered and the prices specified by the tendering shareholders,
the company will determine the single per share price within that price
range that will allow the company to purchase 50 million shares or such
lesser number of shares as are properly tendered. The company will not
prorate shares tendered by any shareholder owning beneficially fewer than
100 shares in the aggregate as of June 15, 1999, who continues to
beneficially own fewer than 100 shares at the expiration of the offer and
who tenders all such shares in the offer.
The company expects to fund the offer with proceeds from the divestiture of
Cendant's fleet segment which is expected to close on or about June 30,
1999. Completion of the tender is conditioned upon the closing of the fleet
segment transaction. Cendant's common stock price closed at $19.75 on the
New York Stock Exchange on June 15, 1999, the last full trading day on the
NYSE prior to the announcement of the offer.
Cendant Chairman, President and CEO, Henry R. Silverman stated: "This action
by our board is a strong vote of confidence in Cendant's long-term
performance and strategic growth plan. The repurchase of our shares is
clearly the best investment available to our company at this time and is
consistent with our long-term goal of increasing shareholder value while
maintaining a debt to total capitalization ratio of about 40 percent."
Banc of America Securities LLC will act as dealer manager and Chase Mellon
Shareholder Services LLC. will act as information agent and depositary for
the offer. Any questions or requests for assistance or for additional
copies of the Offer to Purchase, the Letter of Transmittal or the Notice of
Guaranteed Delivery related to the offer, may be directed to the information
agent at 1-800-684-8823 or the dealer manager at 1-212-847-5355.
Shareholders may also contact their broker, dealer, commercial bank or trust
company for assistance concerning the offer.
CEPHALON, INC.: Agrees to Pay $17 Mil. To Settle Shareholder Suits
------------------------------------------------------------------
Cephalon Inc. has agreed to pay $17 million to settle a spate of class-
action shareholder suits filed in 1996 that said top corporate officers hid
the truth about the prospects of an experimental drug to treat Lou Gehrig's
disease.Senior U.S. District Judge Clifford Scott Green last week granted
preliminary approval of the settlement, clearing the way for notices of
it to be published in the Wall Street Journal and mailed to potential class
members.Under the settlement, Cephalon's insurers will pay $ 7.5 million and
the remaining $ 9.5 million will come from sales of Cephalon stock. The
settlement required Cephalon to give the plaintiffs' attorneys enough stock
to raise the full $ 9.5 million.The plaintiffs' lawyers who worked on the
case for the past three years will be entitled to petition for a fee of up
to $ 5.1 million, or 30 percent of the fund, according to court papers. The
co-lead plaintiffs' counsel are Sherrie R. Savett and Carole A. Broderick of
Berger & Montague; Mark C. Rifkin of Rifkin & Associates; and Marian P.
Rosner of Wolf Popper Ross Wolf & Jones in New York.Cephalon was represented
by John G. Harkins, Eleanor Morris Illoway and David G. Creagan of Harkins
Cunningham.
If the settlement wins Judge Green's approval at a fairness hearing on July
29, it will mark the end of three years of court battles the West Chester-
based biopharmaceutical company has fought over its development of
Myotrophin, an experimental drug, it had touted as a possible treatment for
Lou Gehrig's disease or "amyotrophic lateral sclerosis,'' a fatal,
degenerative disorder of the central nervous system. (The Legal
Intelligencer 16-Jun-1999)
COOK COUNTY: ACLU Sues to Correct Juvenile Detention Conditions
---------------------------------------------------------------
The ACLU of Illinois yesterday sued Cook County on behalf of children at the
Cook County Juvenile Temporary Detention Center (JTDC). The lawsuit, filed
in U.S. District Court, would compel Cook County to remedy the systematic
and long standing mistreatment of young persons held at JTDC, and make the
facility safe and sanitary. The lawsuit results from the dreadful and
barbarous conditions at JTDC, which holds children charged with delinquency
or those facing criminal counts in adult court. The complaint also names
Jesse Doyle, Superintendent of the JTDC, as defendant.
The JTDC was the target of scathing criticism in a 1998 report prepared by a
panel of experts from the prestigious John Howard Association. That
report showed the JTDC was plagued by overcrowding and understaffing.
Population at JTDC often exceeds 600 - and rises, at times, to 800 -- in a
complex designed to hold fewer than 500. This overcrowding, combined with
understaffing, a lack of professionalism by some staff members and neglect
by the administration creates a frightening and dangerous environment for
children at JTDC.
Yesterday's lawsuit charges that the County has not implemented an
effective strategy to address the serious deficiencies at the facility
highlighted by a series of reports, studies and exposes over the past
decade. Moreover, the suit charges that children held at the facility --
many as young as thirteen (13) -- are in jeopardy of serious illness and
left unprotected from violence because of the unendurable conditions and
gross mismanagement of JTDC.
The lawsuit comes at a critical moment. The U.S. House of Representatives
is preparing this week to debate new legislation affecting the juvenile
justice system, legislation which may result in increased populations in
juvenile corrections facilities. The ACLU opposes this legislation, in
part, because of the condition of juvenile facilities such as JTDC, which
fail to meet the minimal standards for a youth corrections facility.
"The conditions at JTDC are absolutely heartbreaking," said Benjamin S. Wolf
of the Illinois ACLU after filing the suit. "At JTDC, one sees forgotten
children, denied adequate services, left unprotected from violent attacks by
other youths, physically and verbally abused by cruel guards, locked in
their rooms for days often for violating petty rules, and forced to live in
overcrowded conditions complete with rats and cockroaches. No one can be
expected to live in these conditions. However, to subject children to these
circumstances is brutal and dehumanizing. They have not yet been tried, but
they already are being harshly punished."
Jean Maclean Snyder, an attorney at the MacArthur Justice Center at
the University of Chicago Law School , co-counsel in the suit added: "It is
simply unacceptable that the administration of Cook County and JTDC has
failed to make basic, human services available to these children. JTDC
administrators have promised for years to correct these problems. Little
has changed. These children, many of whom are being held for non-violent
offenses, continue to be forced to tolerate the most unsanitary, overcrowded
and perilous conditions."
Specifically, the suit delineates the following conditions:
* Overcrowding -- The facility, designed for less than 500 children,
regularly houses between 600 and 800. Children are forced to sleep in
temporary quarters, mixing children of different ages, violent offenders
with non-violent children. Because of overcrowding, the staff is not able
to provide adequate oversight of the children, a circumstance that too often
results in violent attacks on children.
* Lack of Adequate Food -- Children at JTDC complain of inadequate
food and report that the staff sometimes take what food is available for
themselves.
* Lack of Educational Services -- Many children receive little or no
education at JTDC. This is especially acute in times of overcrowding when
children are sent to an "overflow" school that provides almost no education.
Additionally, few special services are provided to children with special
education needs.
* Lack of Medical Services -- Children at JTDC receive little medical
attention. Medical record-keeping is poor, with records often in disarray.
Youngsters do not receive prescribed medications. Children often are denied
access to a doctor or a nurse when they complain of health problems.
Untrained personnel often attempt to make medical decisions without
consulting appropriate professionals.
* Room Confinement -- Children are routinely subjected to punishment
in the form of "room confinement" in which they are locked in their rooms
alone for up to five days, and denied access to education classes and
exercise. The length of such punishment bears little correlation to the
alleged infraction, and there is no adequate appeals process for this
punishment.
* Understaffing -- JTDC is seriously understaffed. The John Howard
report recommends adding more than 125 additional personnel for the complex.
The union representing most of the JTDC employees also complains about
serious understaffing at the facility. Mr. Doyle, JTDC Superintendent, has
been cited in press reports saying the facility is adequately staffed.
* Poor Management -- Staff at JTDC is poorly managed and badly
trained. The John Howard team found that the staff at JTDC believe that up
to 30% of the staff should not be retained.
* Violence -- Children report that the facility is rife with violence,
threats of violence and physical intimidation. Some staff abuse children
and are not disciplined. Youth-on-youth violence is regularly reported, at
times resulting in serious injury to children.
* Unsanitary Conditions - Physical conditions at JTDC are squalid.
Children complain of the presence of rodents, cockroaches and other pests
throughout the facility. One named plaintiff reports finding a mouse in his
bed.
The suit on behalf of four named plaintiffs seeks certification as a
class representing all children held at JTDC.
For additional information, contact Edwin C. Yohnka, at the ACLU of
Illinois at 312-201-9740, ext. 305, fax, 312-201-9760, or pager, 312 851-
2832
INDIAN TRUST: Plaintiffs Rest in BIA/Treasury Dept. Breach-of-Trust Case
------------------------------------------------------------------------
The plaintiffs in a class action lawsuit alleging that the federal
government has made such a mess of the $ 2.5 billion Indian trust fund
program that the court should take control said yesterday they will rest
their case today, several weeks earlier than they had planned, because
victory is a "a slam dunk."
After hearing testimony from only five of the 30 witnesses they had intended
to call to the stand, lawyers for the Native American Rights Fund said they
will rest their case this morning after making some procedural motions. They
said there is no need for additional evidence because the government has, in
effect, admitted a breach of trust after mismanaging the trust accounts.
"The government's stipulations and what our witnesses have testified [have]
already established our case," said Keith Harper, attorney for the rights
fund. "The documentary evidence is so overwhelming that it is unnecessary
to bring in a whole slew of witnesses to say the same thing."
U.S. District Judge Royce C. Lamberth began hearing testimony on Thursday
contending that decades of mismanagement by the Interior Department, the
Bureau of Indian Affairs and the Treasury Department has deprived Indians of
billions of dollars that had accumulated in individual trust fund accounts
created to compensate them for use of their land and to pass along royalties
from the sale of oil, natural gas, timber and other natural resources.
There are about 350,000 accounts held by individual Indians and 1,500 tribal
accounts amounting to $ 2.5 billion, with more than $ 350 million going
through the trusts each year. Independent audits have shown that Interior
has been unable to document $ 2.4 billion in transactions over a 20-year
period, and both sides agree that the record-keeping has been a shambles for
at least 75 years.
While it has not been ascertained that the money is missing, documents
cannot be found to show where much of it came from or where it went.
Officials concede that the documents are scattered in disarray in file
cabinets in dozens of BIA offices around the country in a system that
Assistant Secretary for Indian Affairs Kevin Gover has called "a logistical
nightmare." However, they say the problems long preceded this administration
and were ignored by Congress.
Harper said a major turning point in the trial came last week when Gover and
Interior Secretary Bruce Babbitt agreed to six stipulations, including
admissions that Interior does not adequately control receipts and
disbursements in all Indian trust accounts, does not provide all account
holders with periodic statements of their accounts' performance, does not
have written policies and procedures for all trust fund management and
accounting functions, and does not provide adequate staffing, supervision
and training for all aspects of trust fund management.
"Their policy has been to deny, deny, deny," Harper said. "Now, they are
admitting there is a breach of trust, but they're saying, 'Please don't have
judicial oversight.' "
Rex Hackler, BIA director of communications, said the trust program has been
"broken" for over a century and that this is the first time the bureau has
the funds to fix it. He denied that the outcome of the trial is a foregone
conclusion. "We think the plan we're on is going to get it fixed, and that's
what you're going to hear from us during the rest of the trial," he said.
Earlier this year, Lamberth held Babbitt, Gover and Treasury Secretary
Robert E. Rubin in contempt of court for failing to turn over records to the
Indians' lawyers. The judge was so critical of the government lawyers
working on the case that a new set of attorneys has taken over.
Harper said that even without the testimony of the other plaintiffs'
witnesses, the introduction of 10 General Accounting Office reports
detailing trust fund mismanagement proved their case. One GAO report in May
said Interior was spending $ 60 million on a new computer system to
reconcile the accounts without even knowing if it will work.
Harper said the BIA does not have enough reliable trust account information
to put into the new computer system to straighten out the bookkeeping. "It
will be garbage in, garbage out," Harper said, adding that allowing the
government to try to fix the system now "will not make it any different."
He said the only answer for the court now is to appoint a special master or
receiver to oversee the reform of the trust program.
Interior Department official Kevin Gover calls the fund's files "a
logistical nightmare." (The Washington Post 16-Jun-1999)
MARQUETTE TEACHERS: Union Charges Board of Education with Unfair Practices
--------------------------------------------------------------------------
The Marquette teachers union plans to file a complaint against the local
school board, contending the district did not consult the union on the
issue of moving teachers after closing Parkview Elementary School, according
to a report appearing in The Detroit News. The Marquette Area Education
Association's executive board intends to file an unfair labor practice
charge and a class-action grievance against the school board. Although the
district disagrees, the union contends that the district must get its
written permission when such changes are made, MAEA President Stuart Skauge
said.
MTI TECHNOLOGY: Securities Cases Preliminarily Settled for $900,000
-------------------------------------------------------------------
On June 1, 1999, Weiss & Yourman announced the settlement of a class action
lawsuit filed in the United States District Court, Central District of
California on behalf of all purchasers of MTI common stock during the period
May 21, 1998 through and including June 9, 1998. The lawsuit, entitled "In
re: MTI Technology Corp. Securities Litigation" under Master File No. CV 98-
6975 JSL (RCx), has been certified as a class action for purposes of the
Settlement only, and the Settlement for $ 900,000 has been preliminarily
approved by the Court. A hearing will be held before the Honorable J.
Spencer Letts in Courtroom No. 4 (or such other courtroom as may be posted)
at the United States Courthouse, 312 No. Spring Street, 2nd Floor, Los
Angeles, California 90012 at 9:00 a.m. on July 22, 1999 to determine whether
the proposed Settlement is fair, reasonable and adequate and to consider the
application of Plaintiffs' Counsel for an award of attorneys' fees and
reimbursement of costs and expenses.
David Berdon & Co. LLP, has been designated to handle claim processing.
Plaintiffs' Counsel is Peter A. Pease, Esq., Berman, DeValerio & Pease LLP,
One Liberty Square, Boston, MA 02109; Kevin J. Yourman, Esq., Jordan L.
Lurie, Esq., Weiss & Yourman, 10940 Wilshire Blvd., 24th Floor, Los Angeles,
CA 90024.
NEW YORK: New Jersey Files Commuter Tax Suit
--------------------------------------------
Vowing to garner equal justice for some 240,000 Garden State commuters, New
Jersey Governor Christie Whitman announced yesterday that the state has
filed a class action challenging the constitutionality of a New York law
that repeals a commuter tax only for suburban New Yorkers.
The suit, filed in Manhattan Supreme Court by Acting Attorney General Paul
Zoubek, argues that the limited repeal is a violation of interstate commerce
and travel and of equal protection and due process. It names Charles Quinn,
a Morristown, N.J. resident who is a senior attorney at Fish & Neave, as a
plaintiff.
New Jersey's lawsuit is not the first to be filed in connection with the new
law, nor is it likely to be the last. Two lawyers at Thelen Reid & Priest,
Thomas J. Igoe Jr. of Darien, Conn. and Richard P. Swanson of Ridgewood,
N.J., filed a class action on Friday in Manhattan Supreme Court accusing New
York of discriminating against out-of-state commuters.
Officials from Connecticut and Pennsylvania also are expected to file legal
challenges. And Jersey City Mayor Bret Schundler, Bergen County Freeholder
chairman Anthony Cassano and Essex County Executive Jim Treffinger announced
that they plan to file a lawsuit in federal court. (New York Law Journal
02-Jun-1999)
PRISON REALTY: Kantrowitz Goldhamer Files Complaint in New York
---------------------------------------------------------------
Kantrowitz, Goldhamer & Graifman, P.C., commenced a class action suit
against Prison Realty Trust, Inc. (NYSE: PZN) in the United States
District Court for the Eastern District of New York on behalf of
two Plaintiffs and a proposed class of persons who exchanged shares of
CORRECTIONS CORPORATION OF AMERICA and/or CAA PRISON REALTY TRUST
for common stock of PRISON REALTY TRUST, INC. in the merger
which took place on or about December 31, 1998.
The suit alleges claims against PRISON REALTY and certain of its officers
and directors based upon the payments of substantial fees by PRISON REALTY
to affiliated companies and individuals which were undisclosed in (or at
variance with) the merger documents, including the proxy and prospectus.
Because of these material misrepresentations in the merger documents, the
claims asserted by plaintiffs on behalf of themselves and the Class are
brought pursuant to Sections 11 and 12(2) of the Securities Act of 1933, and
Section 10(b) of The Securities Exchange Act of 1934. Upon revelation of
the retroactive management fees paid by PRISON REALTY, on May 14, 1999, the
stock price of PRISON REALTY shares plummeted from a closing price of $
21.125 on May 13, 1999 to $ 13.375 on May 18, 1999.
For more information on the suit, see the "Investor Hotline" at
http://WWW.KGGLAW.COM/hotl.htmlon the Firm's Web site.
Contact Gary S. Graifman at Kantrowitz, Goldhamer & Graifman, P.C. toll-free
at 800/660-7843 or via internet e-mail at KGLAW1@aol.com or by writing,
Kantrowitz, Goldhamer & Graifman, P.C., 747 Chestnut Ridge Road, Chestnut
Ridge, New York 10977, for additional information.
PRUDENTIAL: Challenge to HMO's Guidelines On Giving Medical Care Survives
-------------------------------------------------------------------------
A Manhattan judge has given the go-ahead to a class action alleging that a
leading health maintenance organization committed fraud and breach of
contract by letting personnel other than doctors decide what length of
hospital stay will be covered.
In denying the Prudential Insurance Company's bid to have the case dismissed
in its entirety, Supreme Court Justice Herman Cahn said the suit can proceed
even though the plaintiffs had failed to exhaust their remedies under the
insurance contract. Justice Cahn also rejected Prudential's argument that
the suit was rendered moot because of recent changes in New York's Public
Health Law, which set up tighter standards for "medical necessity"
determinations. The judge, however, refused to declare certain sections of
Prudential's insurance contracts void on public policy grounds.
The suit was brought by Musette Baras and Nancy T. Vogel, on behalf of
themselves and all other subscribers to health care plans offered through
Prudential or its subsidiary, Prudential Health Care Plan of New York Inc.
(PruCare).
In 1997, the women sued Prudential and PruCare in Manhattan Supreme Court
alleging that the carriers' handling of the "medical necessity"
determinations amounted to breach of contract, fraud, breach of fidiuciary
duty and interference with contract. Specifically, they contended that
Prudential, through its subscriber contracts and its promotional materials,
had represented that its "medical necessity" decisions were to be made by
trained doctors in the relevant specialty based on prevailing medical
opinion in the field.
While Justice Cahn agreed with Prudential that the claims of breach of
fiduciary duty and interference with contract must be dismissed, he found
that the contract and fraud claims were viable. Although conceding that
Prudential's plan provided for a grievance procedure for denied claims, the
judge said that the class claims did not fall within the scope of that
process. The plaintiffs, he noted, base their cause of action on
allegations that procedures employed by Prudential in making the medical
necessity decsions were "not as promised." Such claims, he added, would not
be barred by subsequent legislation concerning claims review procedures. As
for the fraud claims, the judge found that it was too early in discovery
to rule on the possibility that Prudential may have "misrepresented the
terms and conditions of the benefits offered."
Stanley M. Grossman, D. Brian Hufford and Robert J. Axelrod, of Pomerantz,
Haudek, Block & Gossman represented the class. Peter L. Altieri, Claudia M.
Cohen and Jeremy I. Bohrer, of Epstein Becker & Green represented
Prudential. (New York Law Journal 2-Jun-1999)
SABRATEK CORPORATION: Decries Merits of Amended Shareholder Complaint
---------------------------------------------------------------------
Sabratek Corporation (Nasdaq: SBTK) yesterday announced that an amended
complaint has been filed in the United States District Court for the
Northern District of Illinois against Sabratek and certain officers and
directors. The complaint is an amendment to the complaint that was
originally filed on January 27, 1999 as a purported class action on behalf
of all persons who purchased Sabratek common stock between January 13, 1998
and November 24, 1998. Sabratek intends to vigorously defend against these
charges and believes the amended complaint is without merit.
Sabratek Corporation's family of companies and alliances provide a Virtual
Hospital Room(TM) -- a seamless system that is designed to surround the
patient at any point of care with the technology required to clinically
manage the patient's condition.
The Sabratek Division develops, produces and markets technologically
advanced, easy-to-use, smart, interactive medical devices that work
seamlessly together to allow health care providers to lower health care
costs, expand access, and maintain quality across the continuum of care. The
ROCAP Division manufactures ready-to-use saline flush syringes that reduce
error and waste while saving time and money for enhanced safety, compliance
and patient care. GDS develops and manufactures advanced point-of-care blood
diagnostics for multiple tests with a single device capable of fast, simple,
accurate and economical results anywhere on the continuum of care. MOON
Communications is the health care industry's first Internet-based,
vertically integrated communications portal, which will enable real-time
monitoring and reporting of a patient's clinical information from any site,
including the patient's home. HEALTHMAGIC is a developer of innovative
healthcare information management tools, which feature intranet/internet
technology. These tools enable health care providers to realize significant
operational and clinical management efficiencies as well as providing
patients and their families the ability to monitor and manage their own
health. The CMS subsidiary offers managed care and provider services to
health care payors -- including utilization review, provider credentialing
and network development -- that enable delivery systems to be managed more
efficiency and with higher quality. The LifeWatch division utilizes smart
devices to monitor patients transtelephonically in alternate site settings.
LifeWatch offers these services to healthcare providers and is the market
leader in arrhythmia monitoring.
SEARS ROEBUCK: Fraud Suit Seeks to Recapture Fees For Tires Never Balanced
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Sears, Roebuck & Co. collected up to $400 million for tire balancing
services it never performed, then paid millions to keep it quiet, according
to a class-action lawsuit filed Tuesday in Madison County Circuit Court,
also claims managers destroyed the tire-balancing machines with
sledgehammers to cover up the fraud.
Up to 30 million people could be included in the suit if a judge certifies
it as a class action about the number of tires Sears sold from 1989-1994 to
customers who also purchased its AccuBalance service, the lawsuit estimates.
The suit says balancing machines were supposed to be used to shave off a
tiny layer of rubber to make sure the tires were round.
Sears workers typically charged $12.50 to process each tire but often
skipped the procedure, which was impossible for the buyer to detect, the
suit claims.
It also claims Sears management knew that most of the balancing services
never were performed, but pressured employees to sell the services anyway.
Stephen Katz, the lawyer who filed the suit, said his allegations match
those in an unrelated Florida claim, which he said was stalled in federal
court.
A federal appeals court last fall reinstated the $100 million class-action
Florida lawsuit, which had been dismissed on grounds the claims were covered
by a nationwide settlement reached in California in 1992.
The appeals court said the language of the notice didn't sufficiently notify
the Florida plaintiff that claims like his were being litigated.
The settlement was reached after a California state agency reported in 1992
that Sears Tire and Auto Centers routinely overcharged customers for
repairs, recommended unnecessary repairs and charged for work that was never
done.
Sears spokeswoman Jan Drummond yesterday morning said the retailer had no
immediate comment on the lawsuit. The company is based in the Chicago suburb
of Hoffman Estates.
The lawsuit accuses Sears of paying almost $30 million in ''hush money'' to
buy the silence of the machine's manufacturer, Assix International Inc., of
Tampa, Fla., after that company's workers reported significant discrepancies
between the services Sears sold and the work recorded by mechanical counters
on the machines.
Assix leased about 1,300 machines to Sears for $300 per month each, plus a
royalty of 15 cents on every tire shaved, according to court documents.
Sears paid Assix based on cash register receipts and not the counters, the
suit said.
The lawsuit alleges that Sears, based in the Chicago suburb of Hoffman
Estates, distributed a ''secret video tape'' telling workers to destroy the
machines and the counters with sledgehammers, then sell the remains for
scrap. It claims Sears also acquired all Assix paperwork regarding its
AccuBalance machines as part of ''massive cover-up efforts.'' (Associated
Press 16-Jun-1999)
SELECT COMFORT: Kaplan Kilsheimer Files Complaint in Minnesota
--------------------------------------------------------------
Kaplan, Kilsheimer & Fox LLP has filed a Class Action lawsuit against SELECT
COMFORT CORPORATION (Nasdaq: AIRB) and certain of its officers and directors
in the United States District Court of Minnesota. The suit is brought on
behalf of all persons or entities who purchased or otherwise acquired the
common stock of Select between January 25, 1999 and June 7, 1999, inclusive.
The complaint charges Select and certain officers and directors with
violations of the securities laws and regulations of the United States.
The complaint alleges, among other things, that during the Class Period,
defendants falsely reported Select's financial condition, operation,
and liquidity causing Select's common stock to trade at artificially
inflated prices.
Contact Frederic S. Fox, Esq., Brigid Kavanaugh, Esq., Donald R. Hall, Esq.
at Kaplan, Kilsheimer & Fox LLP (800-290-1952 or info@kkf-law.com or fax:
212-687-7714) for further information.
TAINTED BLOOD: 10,000 Canadians in Line for $1.2 Billion Settlement
-------------------------------------------------------------------
Lawyers announced a $ 1.2-billion compensation deal Tuesday for 10,000
Canadians who contracted hepatitis C through tainted blood. The package
will see claimants infected between 1986 and 1990 awarded anywhere from $
10,000 to $ 225,000, depending on how sick they are, and includes
compensation for loss of income, funeral expenses, and for dependents.
But no amount of money will satisfy Calgarian Rick Nykoluk, who said his
life has been "hell" since he was infected more than 10 years ago. "It's
not a bit of good for me -- you can't go out and buy a pill that will cure
you," said Nykoluk, who contracted the disease from blood transfusions
during an operation for two brain aneurysms in 1988. "It's been hell, it's
been honestly hell," Nykoluk said of the fatigue, headaches and abdominal
pain that have plagued him since -- and stand to get worse with time. "If I
walk at a good pace for a block, I'm finished," he said.
The settlement -- which was agreed to by the federal government as well as
provinces and territories -- ends class-action lawsuits launched in B.C.,
Ontario and Quebec.
"In some cases, the compensation might actually exceed what the individual
would get at trial," said Calgary lawyer Clint Docken, who represents 200
claimants in Alberta. Compensation will be indexed to inflation and
claimants will have the option of seeking more money in the future if their
illness gets worse, said Docken.
The package goes before the courts in August, and claimants should receive
compensation a few weeks later. (The Calgary Sun 16-Jun-1999)
TOBACCO LITIGATION: Wisc. Judge Allows Conspiracy Claim to Proceed
------------------------------------------------------------------
U.S. District Judge Barbara A. Crabb in Madison, WI, has gutted a product
liability action brought by three smokers and their spouses against tobacco
companies, dismissing all claims from their consolidated action except for
one alleging a conspiracy among the companies to manipulate the nicotine
content of cigarettes and to conceal the manipulation. Insolia et al. v.
Philip Morris Inc. et al., No. 97-C-0347-C (SD WI, May 19, 1999); see
Tobacco Industry LR, April 23, 1999, P. 13.
With a 32-page opinion, the judge granted summary judgment for tobacco
company defendants on the smokers' claims of strict liability, negligent
manufacture and negligent marketing. She said that these claims all hinge
on proof that cigarettes are unreasonably dangerous and defective and that
the smokers "had failed to come forward with sufficient proof to create a
genuine dispute of fact on this issue."
She awarded summary judgment for the tobacco companies on the smokers'
claims that the companies conspired to suppress research, intentionally
misrepresented the health hazards of smoking and fraudulently concealed the
health hazards. These claims must be dismissed because the smokers offered
no proof that they relied on any statements made by tobacco companies nor
any proof that any information allegedly concealed by the companies played a
material role in their decisions to continue smoking, she said.
The companies are entitled to summary judgment on the smokers'
failure-to-warn claims, the judge continued, because they "cannot establish
that a causal connection exists between their decisions to continue smoking
and defendants' alleged failure to disclose information about the risks
associated with smoking when there is no evidence that any type of warning
would have made a difference."
Finally, the judge ruled that the tobacco companies are entitled to summary
judgment on the smokers' claims that the companies had intentionally exposed
them to a hazardous substance. No such cause of action exists in Wisconsin,
the judge said.
She ordered the tobacco company defendants to inform her by June 3 whether
they intend to seek summary judgment on the smokers' remaining claim of
conspiracy to manipulate the nicotine content of cigarettes and to conceal
the manipulation.
The plaintiffs in the suit are Vincent and Karen Insolia, Billy and Phyllis
Mays, Maureen and Lee Lovejoy, and Charles Caldwell, representative of the
estate of Charles Caldwell Sr.
They assert tort claims for lung cancers allegedly caused by cigarette
smoking against eight defendants: Philip Morris Inc.; R.J. Reynolds Tobacco
Co.; Brown & Williamson Tobacco Corp.; B.A.T. Industries plc.; Lorillard
Tobacco Co.; Liggett Group Inc.; The Council for Tobacco Research-U.S.A.
Inc.; and The Tobacco Institute Inc.
As originally filed, the suit asked the court to certify a nationwide class
of people who began smoking before 1964, have smoked at least one pack of
cigarettes per day for 20 years and have been diagnosed with lung cancer.
Judge Crabb denied the class certification motion last December. She ruled
that the proposed class proposed would be unmanageable because any attempt
to try the class members' claims would "degenerate into an interminable
series of mini-trials that would bear little if any resemblance to a class-
action lawsuit" (see Tobacco Industry LR, Dec. 28, 1998, P. 8).
The judge noted that individual issues raised in the lawsuit overwhelm the
single issue common to members of the class. "Individual issues such as
medical causation, reliance and comparative negligence predominate over the
lone question common to the entire class: whether defendants conspired to
misrepresent the addictive nature and adverse health effects associated with
tobacco use," she wrote.
The judge also emphasized the lack of commonality among the plaintiffs.
"Aside from general causation, issues such as reliance, addiction and
contributory negligence all depend to some extent on facts specific to
individual plaintiffs, not the entire class," she noted.
Last month, Judge Crabb handed the plaintiffs another setback when she
granted a tobacco company motion to sever the claims of three couples; she
ruled that their claims are not sufficiently similar to warrant joining them
in a single proceeding for trial.
The plaintiffs are represented by James A. Olson with Lawton & Cates, S.C.,
of Madison, WI, and by Kenneth B. McClain and Gregory Leyh with Humphrey,
Farrington & McClain of Independence, MO. (Tobacco Industry Litigation
Reporter 28-May-1999)
Y2K LITIGATION: Senate Okays Bill to Limit Y2K Suits; Veto Likely
-----------------------------------------------------------------
Supporters of legislation to curb Y2K-related lawsuits, encouraged by a
strong Senate vote, say the U.S. economy is at stake and that the White
House should reconsider its veto threat.
"I hope that the president would not veto" the bill, said Sen. Diane
Feinstein, D-Calif., who joined 11 other Democrats and 50 Republicans
Tuesday in the 62-37 vote to pass the bill. "I can't tell you the depth of
passion that the high tech industry feels about this bill."
The legislation, passed in a different version by the House and now heading
for a House-Senate conference, has been avidly backed by the high tech and
business community, which say it can help prevent billions of dollars in
lawsuits arising from computers that could produce a variety of problems by
misreading the year 2000 as 1900.
But the administration, backed by consumer groups and trial lawyers, has
threatened a veto, saying the bill undercuts legal rights to seek damages
and would discourage companies from fixing computers.
Tuesday's vote was five short of the two-thirds needed to override a
presidential veto, but Sen. John McCain, R-Ariz, the chief sponsor, said he
would work to prevent that veto.
"We are now at the moment of truth in this struggle between those who would
restrain the engine of our economic growth and those who would protect it,"
he said.
"All the momentum has shifted in our direction. The president is going to
have to cooperate," said National Association of Manufacturers president
Jerry Jasinowski.
"It's a simple choice. It's time for the White House to do the right
thing," said U.S. Chamber of Commerce president and CEO Thomas J. Donohue.
But it won't be simple for the White House to choose between the arguments
of the high tech industry, which has been a strong financial supporter of
both President Clinton and Vice President Al Gore, and the trial lawyers and
consumer groups, also political allies, who strongly oppose the legislation.
Joan Claybrook, president of the advocacy group Public Citizen, said the
bill was a "disincentive for the industry to behave." She said the bill
might "boomerang" on senators who supported it if the new millennium dawns
with major disruptions because businesses unconcerned about getting sued
don't fix computers.
Supporters insisted that won't happen and that wrongdoers will still be held
liable. The bill does provide a 90-day cooling off period to allow
businesses to fix computers before they can be sued and encourages
mediation.
It discourages the practice of looking for deep-pocketed companies to sue by
stating that in most cases a company would be held liable for only that
portion of damages it causes, limits class action lawsuits and sets punitive
damage caps for small companies.
"Without the Y2K act, we run the risk of starting a gold rush for
prospecting lawyers in search of Y2K gold," said Sen. Christopher Dodd,
D-Conn., who worked with Sen. Ron Wyden, D-Ore., to make the legislation
more consumer-friendly and acceptable to the administration.
The final product, while still unacceptable to the White House, was
generally more moderate than a version passed by the House last month in a
more partisan vote.
Rep. Tom Davis, R-Va., a chief sponsor of that bill, said they were ready to
start negotiations immediately with the Senate and said the strong Senate
vote would be a factor in coming up with a compromise. But he added that
"we're not going to let the trial lawyers right the bill."
The House bill offers punitive damage caps to all defendants who make a good
faith effort to correct problems, extends proportionate liability to more
defendants and includes a loser-pay provision. (Associated Press 16-Jun-
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
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Group, Inc., Washington, DC. Peter A. Chapman, Editor. Kent L.
Mannis, Project Editor.
Copyright 1999. All rights reserved. ISSN 1525-2272.
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