/raid1/www/Hosts/bankrupt/CAR_Public/991022.MBX
C L A S S A C T I O N R E P O R T E R
Friday, October 22, 1999, Vol. 1, No. 183
Headlines
ABBOTT LAB: Stull, Stull Files Securities Suit In Illinois
ABERCROMBIE & FITCH: Spector & Roseman File Securities Suit In Ohio
AMPLIDYNE INC: Keller Rohrback Tells Of Nov. 15 Deadline For Documents
AUTO INSURANCE: Plaintiffs In Illinois Ask State Farm To Pay Billions
BOISE CASCADE: Will Defend Suits In Multi States Over Defective Siding
CELLSTAR CORP: Will Contest Consolidated Securities Suit In Florida
CENDANT CORP: Law Firms Announce Pendency of Class Action In New Jersey
COCA-COLA: Israeli Ct Oks Class Re Company's Pledge On Awarding Prizes
COUNSEL CORP: Issues Shareholder Letter On Bergen Brunswig Lawsuit
DAIMLERCHRYSLER: Chicago Ct Dismisses Suit Re Noise From Jeep Cherokees
DUPONT: 9th Cir. Says Release Does Not Bar Fraud Claims By Hawaiian Man
EVERGREEN AMERICA: Settles For Improper Billing On Truckers At NY & NJ
FORD MOTOR: CA Jury Faces Complex Trial Over Faulty Ignition Module
HMO: Two Legal Groups Are On The Verge Of Filing Suits In California
IVAX CORP: 11th Cir Reasons On Press Releases, Dismisses Securities Suit
MATTEL INC.: Stull, Stull Files Securities Suit In California
MATTEL INC: Steven E. Cauley Files Securities Suit To Set Aside Merger
MATTEL INC: The Pomerantz Firm Files Securities Suit In California
MERCHANT'S LEGAL: Illinois Court Certifies Three Classes Of Debtors
ODYSSEY PICTURES: 9th Cir Oks Dismissal Of CA Securities Suit
PAYDAY LENDER: Edelman, Combs Sues All-State Pay Day Advance In Chicago
STUCCO MANUFACTURERS: Parex Inc. Settles; List Of Cos. In Suit Reduced
TIG HOLDINGS: NY Ct Oks Withholding Of Reserve Study In Securities Suit
TOBACCO LITIGATION: Industry Fears Fla. Ct Decision Could Cost $300 Bil
UNUMProvident CORP: Schiffrin & Barroway File Securities Suit In Maine
WESTAR GROUP: Pattison Decries Merit Of Suit Over Restructuring
* Task Force Hopes To Stem Inmate Litigation
*********
ABBOTT LAB: Stull, Stull Files Securities Suit In Illinois
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The following announcement is made by the law firm of Stull, Stull &
Brody:
Notice is hereby given that a class action lawsuit was filed on October
20, 1999, in the United States District Court for the Northern District
of Illinois on behalf of all persons who purchased the securities of
Abbott Laboratories (NYSE:ABT) from March 17, 1999 through and including
September 29, 1999.
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 fact that Abbott was seriously out of
compliance with government quality assurance regulations at its North
Chicago, Illinois, Diagnostic Products Division plant which manufactures
most of the medical diagnostic equipment sold by Abbott. This adverse
state of affairs, which threatened a segment of Abbott's business which
accounts for over 20% of Abbott's annual revenues, was concealed from
the market until September 29, 1999, when Abbott, for the first time,
publicly disclosed the existence of a March 17, 1999 letter from the FDA
to Abbott detailing violations found by FDA inspectors during the
inspection that was conducted from September to November of 1998. When
the market learned of the true state of affairs at Abbott, the company's
stock price plunged and plaintiff and others similarly situated were
substantially harmed.
Plaintiff is represented by, among others, the law firm of Stull, Stull
& Brody. If you are a member of the class described above, you may, not
later than sixty days from October 20, 1999, move the Court to serve as
lead plaintiff of the class, if you so choose. In order to serve as lead
plaintiff, however, you must meet certain legal requirements.
If you wish to discuss this action or have any questions concerning this
notice or your rights or interests with respect to these matters, please
contact Tzivia Brody, Esq. at Stull, Stull & Brody by calling toll-free
1-800-337-4983, or by email 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. TICKERS: NYSE:ABT
ABERCROMBIE & FITCH: Spector & Roseman File Securities Suit In Ohio
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Oct. 21, 1999--Spector & Roseman announced that a class action lawsuit
has been filed in the United States District Court for the District of
Ohio on behalf of all persons and entities who purchased the common
stock of Abercrombie & Fitch Co. (NYSE: ANF) between October 8, 1999 and
October 13, 1999, inclusive.
The Complaint alleges that A&F and certain of its officers and directors
violated the federal securities laws. According to the Complaint, by
October 7, 1999, A&F knew that, while it would reach earnings estimates
for the third quarter of 1999, the Company was experiencing slowing in
same-store growth, which was an important indicator of present and
future growth in revenues and earnings, and that the Company's
same-store sales would not reach 15%-17% estimates, but would instead be
only 12%. Although the defendants knew that the disclosure of this
information would have an adverse affect on A&F's stock price, rather
than timely disclose this material information, as required by the
federal securities laws, on or about October 7, 1999, A&F selectively
disclosed this information to an analyst at Lazard Freres ("Lazard").
As a result of this selective disclosure, Lazard's top clients were able
to unload significant holdings in A&F's stock prior to the subsequent
public disclosure of A&F's true financial condition on October 13, As a
direct result of defendants' affirmative decision to selectively
disclose material information to a limited group, and not to the
investing public, the price of A&F stock was artificially inflated, and
traded as high as $ 38.9375 per share on October 8, 1999.
Ultimately, on October 13, 1999, when A&F finally publicly disclosed the
same-store sales growth of only 12%, A&F stock dropped to $ 26.3125 per
share. Plaintiffs seek to recover damages on behalf of all purchasers of
A&F common stock during the Class Period.
The plaintiffs are represented by the law firm of Spector and Roseman,
P.C., among others. If you are a member of the Class described above,
you may, no later than 60 days from October 20, 1999, move the Court to
serve as lead plaintiff of the Class, if you so choose. In order to
serve as lead plaintiff, however, you must meet certain legal
requirements. If you wish to discuss this action or have any questions
concerning this notice or your rights or interests, please contact
plaintiff's counsel Robert M. Roseman toll-free at 1-888-844-5862 or via
E-mail at classaction@spectorandroseman.com
AMPLIDYNE INC: Keller Rohrback Tells Of Nov. 15 Deadline For Documents
----------------------------------------------------------------------
The following was released by Keller Rohrback L.L.P.:
Pursuant to federal law, investors who purchased Amplidyne, Inc. common
stock (Nasdaq:AMPD) between September 9, 1999 and September 14, 1999,
inclusive, are required to act no later than November 15, 1999 to
actively participate in the class action lawsuit as a lead plaintiff in
the securities suit filed against Amplidyne, Inc. In order for us to
file necessary papers with the court, we must receive all related
documents in our office prior to the stated deadline. Keller Rohrback
L.L.P. represents individual shareholders in a class action suit against
Amplidyne and certain officers and directors.
Shareholders assert that defendants violated Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Rule 10-b(5) established
thereunder, by rendering false and misleading statements and/or
omissions concerning the present and future financial condition and
business prospects of the Company, as well as the financial benefits
that would flow to Amplidyne and its shareholders.
Shareholders should immediately return information packets, including
certification forms, received from Keller Rohrback's Shareholder
Department, in addition to trade confirmation documents (fax:
206/623-3384). Shareholder certification forms must be signed and dated.
If you wish to discuss this announcement, have information relevant to
the case, wish to learn about your rights to seek to serve as a lead
plaintiff, or have any questions on how to join as a class
representative in any securities class action, you may contact Keller
Rohrback L.L.P. (Lynn L. Sarko or Elizabeth Leland, Esq.) toll free at
800/776-6044, or via email at investor@kellerrohrback.com. Those who
inquire by e-mail are asked to provide their mailing address and
telephone number. TICKERS: NASDAQ:AMPD; OTC:TMRTE
AUTO INSURANCE: Plaintiffs In Illinois Ask State Farm To Pay Billions
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An Illinois jury ruled that State Farm Mutual Insurance Company breached
its contract by installing inferior replacement parts in its insureds'
automobiles and failing to advise policyholders, thereby violating the
Illinois Consumer Fraud Act.
The court awarded $ 456.1 million in compensatory damages to the 4.7
million plaintiffs in the class action. The plaintiffs are also seeking
$ 3 billion to $ 4 billion in punitive damages.
A 12-person Williamson County Circuit Court jury unanimously awarded $
243.7 million in "Specification/Direct" compensatory damages, based on
the cost difference between original equipment manufacturer (OEM) and
non-OEM parts, and another $ 212.4 million for "Installation" damages,
based on the associated costs to have the cheaper parts removed and
replaced.
The jury was dismissed following its decision. The judge in the case,
John Speroni, will make the decision on punitive damages, which was not
determined as this story went to press.
The plaintiffs are also asking the judge to force State Farm to offer a
mandatory consent form to insureds before replacing parts in damaged
automobiles with non-OEM parts, according to Patricia Littleton, a
plaintiff attorney in Marion, Ill.
"The $ 3-to-$ 4 billion is because the $ 456 million awarded so far is
not going to get State Farm's attention," Ms. Littleton said.
The ruling could lead to much higher premiums, according to Bloomington,
Ill.-based State Farm, which will appeal the ruling.
But Ms. Littleton was skeptical about the threat to consumers. "They
want to scare the public, but in testimony they said using OEM parts
would cost around $ 8 to $ 12 per policyholder. Who wouldn't pay the
extra $ 12 for OEM parts?" said Ms. Littleton. "First State Farm said it
was impossible to trace what the premium difference would be and then
they say it would be around $ 12 and now they try and scare the public."
Ms. Littleton added that she doubts State Farm could justify much of a
premium hike.
Non-OEM parts are as good as OEM parts in many cases, according to Jack
North, senior vice president of State Farm Mutual Automobile Insurance
Company. "We are disappointed in the verdict," he said. "Even the
plaintiffs' own witnesses said some of these parts are good as can be --
or even better than -- the originals. We believe only good parts have
gone on State Farm-insured vehicles."
Ms. Littleton again disputed the insurance company's claim and said
non-OEM parts can be unsafe.
"On a test of a Ford Taurus bumper, where they simulated a
five-mile-per-hour crash, the OEM bumper suffered no more than a nick,"
according to Ms. Littleton. "When they put on an imitation bumper, the
crash damaged the bumper and went right into the header panel and
damaged the air condenser. And State Farm wants to say there is no
difference? State Farm is lying."
At least one claims expert agreed with Ms. Littleton, adding that it is
nearly impossible to assure the safety and quality of many non-OEM
parts. "The problem is if you order non-OEM parts from a company and it
turns out to be quality parts, the next time you order something from
them it might not be the same," said Larry Johnson, vice president of
claims at Middlesex Mutual Assurance Company, based in Middletown, Conn.
"The way most companies make parts is inconsistent. Where the non-OEM
company gets parts to make their parts is also inconsistent."
Mr. Johnson added that many alternative market parts are not made of
galvanized steel, thus rust can form in as little as three years instead
of the approximately 20 years it might take to find rust on an OEM part.
"It is written in the policy that we will only use OEM parts for first-
and third-party cases," Mr. Johnson said, adding that State Farm's
position on OEM parts needs to be clearer to its policyholders.
Using competitive alternative parts can save money for policyholders and
insurers, according to the Washington-based American Insurance
Association. The AIA said that a 1996 Ford Taurus radiator costs $ 366,
while a non-OEM radiator costs $ 210; the hood of a 1996 Chevrolet
Camaro costs $ 591, while the non-OEM version is $ 284; a 1997 Dodge
Intrepid OEM front bumper cover costs $ 510, while the competitive
alternative is $ 241. Indeed, State Farm saved its policyholders almost
$ 234 million in 1997 by specifying the use of alternative parts,
according to Mr. North.
"Consumers have benefited from allowing competition among companies
offering OEM and non-OEM parts. The question has to be asked, will
there be competition in auto body parts or not?" said AIA Assistant
General Counsel David Snyder. "Parts do not have to be identical," he
said. "Every effort is made through the certification process to assure
the safety and quality of non-OEM parts. Some insurance companies might
argue that they are equivalent." Mr. Snyder also said that if
competition is stopped, prices on OEM parts will skyrocket.
"Competition is a good thing. Our entire market system is based on
competition," said Ms. Littleton. "We're not saying no to competition.
All we are saying is State Farm should stop lying about their parts.
Competition as an excuse for lying is not allowed. They broke a promise
when they said it was of equal quality. They can use all the good-guy
defenses they want. They lied."
The Illinois Department of Insurance did not receive complaints on State
Farm's use of non-OEM parts, according to AIA's director of public
affairs, Dierdre Manna. "How can it be said that policyholders are so up
in arms over this when no one has complained?" she said.
But Ms. Littleton said State Farm repaired automobiles surreptitiously
with non-OEM parts, so a high percentage of policyholders did not know
their cars were repaired with them. "At the trail, they pulled 1,300
files from 1996 to show that there was a very low complaint rate. We
hired a group to call the policyholders involved and 66 percent of them
did not know that non-OEM parts were being used," Ms. Littleton said.
"And of the 66 percent that did not know, quite a few were upset."
The use of OEM parts varies from one insurer to another, according to
Ms. Manna. While some insurance companies offer endorsements to insure
the use of OEM parts, other insurers will use alternative market
solutions on older cars only, when OEM parts are no longer available.
"And some insurance companies offer the insured a choice, while others
don't," she noted.
Mr. Snyder also questioned whether the Illinois court overstepped its
boundaries by ruling on a class-action case in Illinois that affects
policyholders in 47 other states.
"This ruling did not step on the toes of any regulatory body in any
state. In no state would it be legal to lie to policyholders and all
policies and issues come through Bloomington. That's why the case was
held here," Ms. Littleton said.
The case against State Farm is another illustration of the need for
sweeping reform of the nation's class-action mechanism, according to the
Alliance of American Insurers in Downers Grove, Ill. "There have been an
explosion of class-action filings recently, and the legal landscape of
class-action activity has shifted dramatically to the state courts,"
said Ann Spragens, general counsel and senior vice president of the
Alliance. (National Underwriter, Property & Casualty/Risk & Benefits
Management Edition 10-11-1999)
BOISE CASCADE: Will Defend Suits In Multi States Over Defective Siding
----------------------------------------------------------------------
A number of lawsuits have been filed against Boise Cascade Corp. arising
out of its former manufacture and sale of hardboard siding products.
These lawsuits allege that siding manufactured by the company was
inherently defective when used as exterior cladding for buildings. Five
of these lawsuits seek certification as class actions. These actions
claim that the requested class of litigants consists of owners of
structures bearing hardboard siding manufactured by the company. Four of
these five cases seek certification of statewide classes of plaintiffs
(Illinois, Oregon, and Texas), while the fifth case seeks certification
of a nationwide class of mobile home owners. To date, no court has
granted class certification. The lawsuits seek to declare the company
financially responsible for the repair and replacement of the siding, to
make restitution to the class members, and to award each class member
compensatory and enhanced damages. The company discontinued
manufacturing the hardboard siding product that is the subject of these
lawsuits in 1984. We believe there are valid factual and legal defenses
to these cases and will resist the certification of any class and
vigorously defend all claims alleged by the plaintiffs.
CELLSTAR CORP: Will Contest Consolidated Securities Suit In Florida
-------------------------------------------------------------------
During the period from May 1999 through July 1999, seven purported class
action lawsuits were filed in the United States District Court for the
Southern District of Florida, styled as follows: (1) Elfie Echavarri v.
CellStar Corporation, Alan H. Goldfield, Richard M. Gozia, and Mark Q.
Huggins; (2) Mark Krug v. CellStar Corporation, Alan H. Goldfield,
Richard M. Gozia and Mark Q. Huggins; (3) Jewell Wright v. CellStar
Corporation, Alan H. Goldfield, Richard M. Gozia and Mark Q. Huggins;
(4) Theodore Weiss v. CellStar Corporation, Alan H. Goldfield, Richard
M. Gozia and Mark Q. Huggins: (5) Tony LaBella v. CellStar Corporation,
Alan H. Goldfield, Richard M. Gozia and Mark Q. Huggins; (6) Thomas F.
Petrone v. CellStar Corporation, Alan H. Goldfield, Richard M. Gozia and
Mark Q. Huggins; and (7) Adele Brody v. CellStar Corporation, Alan H.
Goldfield, Richard M. Gozia and Mark Q. Huggins.
Each of the above lawsuits seeks certification as a class action to
represent those persons who purchased the publicly traded securities of
the Company during the period from March 19, 1998 to September 21, 1998.
Each of these lawsuits alleges that the Company issued a series of
materially false and misleading statements concerning the Company's
results of operations and the Company's investment in Topp, resulting in
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, as amended, and Rule 10(b)(5) promulgated thereunder. The Court
entered an order on September 26, 1999 consolidating the above lawsuits
and appointing lead plaintiffs and lead plaintiffs' counsel. The lead
plaintiffs have expressed their intention to file a consolidated
complaint. The Company believes that it has complied with all reporting
requirements with respect to its result of operations and investment in
Topp and that it has meritorious defenses to these allegations and
intends to vigorously defend the consolidated action.
CENDANT CORP: Law Firms Announce Pendency of Class Action In New Jersey
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The following was released by Barrack, Rodos & Bacine and Bernstein
Litowitz Berger & Grossmann LLP: IN THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF NEW JERSEY
In re: CENDANT CORPORATION LITIGATION Master File No. 98-1664 (WHW) This
document relates to: All Actions Except the Prides Action (No. 98-2819)
SUMMARY NOTICE OF PENDENCY OF CLASS ACTION TO: ALL PERSONS AND ENTITIES
WHO PURCHASED OR OTHERWISE ACQUIRED PUBLICLY TRADED SECURITIES (OTHER
THAN PRIDES) OF EITHER (i) CENDANT CORPORATION OR (ii) CUC
INTERNATIONAL, INC., DURING THE PERIOD BEGINNING MAY 31, 1995 THROUGH
AND INCLUDING AUGUST 28, 1998, AND WHO WERE INJURED THEREBY
This is to notify you that pursuant to Rule 23 of the Federal Rules of
Civil Procedure and an Order dated January 27, 1999, this Court has
certified the above-captioned action (the "Action") to proceed as a
class action on behalf of the following Class: all persons and entities
who purchased or otherwise acquired publicly traded securities (other
than PRIDES) of either Cendant Corporation ("Cendant") or CUC
International, Inc. ("CUC") during the period beginning May 31, 1995,
through and including August 28, 1998 and who were injured thereby,
including all persons or entities who exchanged shares of HFS
Incorporated ("HFS") common stock for shares of CUC stock in connection
with the merger of CUC and HFS. The Action alleges violations of the
Securities Act of 1933 and of the Securities Exchange Act of 1934 by the
following defendants:
Cendant. The following former officers of CUC, and later of Cendant:
Walter Forbes, Chairman of Cendant's Board of Directors and a member of
Cendant's Executive Committee; E. Kirk Shelton, Vice Chairman and a
director of Cendant; Christopher K. McLeod, Vice Chairman and a director
of Cendant; Cosmo Corigliano, Senior Vice President and Chief Financial
Officer of CUC and later Chief Financial Officer of Cendant Membership
Services, Inc. ("CMS"); and Anne M. Pember, Senior Vice President and
Controller of CUC and CMS. The following former directors of CUC: Burton
C. Perfit; T. Barnes Donnelley; Stephen A. Greyser; Kenneth A. Williams;
Bartlett Burnap; Robert P. Rittereiser; and Stanley M. Rumbough, Jr. The
following former officers of HFS and later of Cendant: Henry R.
Silverman, President, Chief Executive Officer and a director of Cendant;
John Snodgrass, Vice Chairman and a director of Cendant; Michael P.
Monaco, Vice Chairman, Chief Financial Officer and a director of
Cendant; James E. Buckman, Senior Executive Vice President, General
Counsel and a director of Cendant; and Scott E. Forbes, Senior Vice
President-Finance of Cendant. The following former directors of HFS:
Steven P. Holmes; Robert D. Kunisch; Leonard S. Coleman; Christel
DeHaan; Martin L. Edelman; Brian Mulroney; Robert E. Nederlander; Robert
W. Pittman; E. John Rosenwald, Jr.; Leonard Schutzman; and Robert F.
Smith. Ernst & Young LLP, the former independent auditor of CUC and CMS,
which performed audits and reviews of the financial statements of CUC
and CMS.
Excluded from the Class are: (i) defendants; (ii) members of the family
of each individual defendant; (iii) any entity in which any defendant
has a controlling interest; (iv) officers and directors of Cendant and
its subsidiaries and affiliates; and (v) the legal representatives,
heirs, successors or assigns of any such excluded party. The Court has
appointed plaintiffs California Public Employees' Retirement System; the
New York State Common Retirement Fund; and several of New York City's
employee pension funds as Lead Plaintiffs and certified them as class
representatives in the Action.
IF YOU PURCHASED OR ACQUIRED THE PUBLICLY TRADED SECURITIES (EXCEPT
PRIDES) OF CENDANT OR CUC AS DESCRIBED ABOVE, AND YOU DO NOT REQUEST
EXCLUSION FROM THE CLASS, YOUR RIGHTS WILL BE AFFECTED BY THIS
LITIGATION. If you have not yet received the full printed Notice of
Pendency of Class Action (the "Notice"), you may obtain a copy by
identifying yourself as a member of the Class and by writing to: Cendant
Corporation Securities Class Action Litigation, c/o Heffler, Radetich &
Saitta L.L.P., P.O. Box 510, Philadelphia, PA 19105-0510. If you wish to
be excluded from the Class, you must, in accordance with the
instructions contained in the Notice, submit a written request for
exclusion, postmarked on or before December 27, 1999, addressed to
Cendant Corporation Securities Class Action Litigation at the address
indicated above. All other inquiries regarding this Action may be made
in writing, addressed to Lead Counsel:
Leonard Barrack, Esquire Max W. Berger, Esquire Gerald J. Rodos, Esquire
Daniel L. Berger, Esquire Jeffrey W. Golan, Esquire Jeffrey N. Leibell,
Esquire Barrack, Rodos & Bacine Bernstein Litowitz Berger & 3300 Two
Commerce Square & Grossmann LLP 2001 Market Street 1285 Avenue of the
Americas Philadelphia, PA 19103 New York, NY 10019
PLEASE DO NOT CALL OR WRITE THE COURT OR THE OFFICE OF THE CLERK OF THE
COURT FOR INFORMATION OR ADVICE.
Dated: October 20, 1999 Clerk of the Court
United States District Court
District of New Jersey
SOURCE Barrack, Rodos & Bacine; Bernstein Litowitz Berger & Grossmann
LLP CONTACT: Cendant Corporation Securities Class Action Litigation, c
COCA-COLA: Israeli Ct Oks Class Re Company's Pledge On Awarding Prizes
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An Israeli court has given go-ahead to a class-action suit against the
Coca Cola company for failing to honor its pledge to award prizes to
people collecting award-bearing bottle caps, a local daily said
Thursday.
The Tel Aviv district court ruled Wednesday that in a contest in 1997,
the world-leading soft drink company failed to inform consumers in a
timely manner of all the conditions to win a free trip to the United
States, Haaretz said. Therefore, the class-action suit, which was filed
by the Israeli Consumer Council and several individual consumers in
1998, could continue, according to the rule.
In the contest two years ago, the Coca Cola company promised to award "a
trip to the u.s. with two friends" to anyone who managed to collect the
necessary combination of letters for the Hebrew word "tiul" (meaning
"trip") from pop-tops and bottle caps of its beverage containers. The
plaintiffs complained that after they succeeded in finding all the four
letters, the company refused to award them the trip and said an
additional symbol was needed. They argue that the new condition was not
mentioned in the company's advertisements for the contest until it was
nearing its end, when they had already fulfilled the other contest
conditions.
The court ruled that the company's notification was provided too late to
benefit those consumers who had invested their money, time and effort
collecting the beverage tops in accordance with the contest rules. It
also decided that, as there were to be a maximum of 25 prize winners,
the class-action suit would be transferred to the magistrate's court,
which has the authority to discuss financial claims up to one million
shekels (nearly 250,000 U.S. dollars). (Xinhua General News Service
10-21-1999)
COUNSEL CORP: Issues Shareholder Letter On Bergen Brunswig Lawsuit
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Counsel Corporation (TSE: CXS / Nasdaq: CXSN) said that it is mailing a
letter to its shareholders commenting on the lawsuit filed against it
last week by Bergen Brunswig Corporation in connection with Bergen
Brunswig's January 1999 acquisition of Counsel's Stadtlander Drug Co.
subsidiary. In the letter, which was signed by Counsel Corporation
Chairman and Chief Executive Officer Allan Silber and President Morris
Perlis, the Company, among other things, reiterated that the Bergen
Brunswig lawsuit is completely without merit, and said that the Company
and its senior management stand behind their conduct at every step of
the due diligence process leading up to the Stadtlander transaction. The
letter also states that the Company fully intends to pursue all
available legal remedies to compensate the Company and its shareholders
"for the extreme and unwarranted damage Counsel Corporation has and will
continue to suffer as a result of Bergen Brunswig's egregiously false
and malicious statements and actions."
The full text of the letter follows:
October 21, 1999
Dear Counsel Corporation Shareholder:
Last January, Counsel Corporation and Bergen Brunswig Corporation
completed a transaction under which Bergen Brunswig acquired Stadtlander
Drug Co., a subsidiary of Counsel, in a cash-and-stock transaction
valued at approximately US$ 400 million, including the assumption of
approximately US$ 100 million of debt. Over the several months preceding
the transaction's completion, your Company, its management team, and its
outside accountants and financial and legal advisors went to
extraordinary lengths to ensure that our counterparts at Bergen
Brunswig-including their management, auditors, investment bankers and
other experts-had unrestricted and unlimited access to every fact and
figure about Stadtlander, its operations, and its historical and current
financial condition and performance, as well as to any managers,
employees and advisors they wished to talk to. We did this because a
determination of the actual operational and financial condition of
Stadtlander was necessary to determine the value to be assigned to
Stadtlander at closing. We also did so because, as this was both our and
Bergen Brunswig's largest transaction to date, we wanted both parties to
have a high degree of comfort about the condition and value of what they
were buying, and we were selling. And we did so because we were
confident that the more Bergen Brunswig knew about Stadtlander, the more
it would recognize what a truly outstanding enterprise it was acquiring.
Last May, four months after the transaction was successfully
completed-and after Bergen Brunswig and its own outside auditors,
Deloitte & Touche, had reviewed and found no fault with the two audits
of Stadtlander (at September 30 and December 31, 1998) specified under
the purchase agreement-Bergen Brunswig notified us that it was seeking
an accounting adjustment as provided by the agreement which, in effect,
was an attempt to renegotiate the entire deal. After a detailed review
of the matter with our own auditors from Arthur Andersen, we concluded
that the adjustment Bergen Brunswig was seeking was unwarranted and
unreasonable. Over the next two months, we met repeatedly with Bergen
Brunswig and tried to negotiate a resolution of the matter. By mid-June,
we had determined conclusively that, with regard to the accounting
issues Bergen Brunswig had raised, we were right and they were simply
wrong. And, when Bergen Brunswig would not abandon its position, we
decided that, pursuant to the terms of the agreement, we would seek to
resolve our differences by means of binding arbitration. Two weeks ago,
an arbitration firm was selected that both sides said they found
acceptable. Then last Friday, without prior notice and despite the fact
that we and Bergen Brunswig had recently agreed on an arbitration firm
as part of the ongoing arbitration process, we learned from a wire
service report that Bergen Brunswig had filed suit against us in
California state court. We subsequently obtained a copy of the suit, and
we have since had an initial opportunity to review it. While we will be
responding in detail to the allegations it contains in due course, we
can say this much right now:
First, we are absolutely convinced that the Bergen Brunswig lawsuit is
completely without merit.
Second, Counsel Corporation and its senior management team stand by our
conduct at every step of the due diligence process, from before the
signing of the definitive agreement to and through completion of the
transaction.
Third, we find the suggestion by Bergen Brunswig that we have not acted
in a completely ethical and responsible manner with regard to the
Stadtlander transaction profoundly offensive.
Fourth, the allegation of Bergen Brunswig that we, in effect, attempted
to pull the wool over its eyes in the Stadtlander transaction is
patently absurd. Counsel Corporation did not cash out under the terms of
the Stadtlander transaction. As part of the consideration for our
interest in Stadtlander and our stake in PharMerica, which Bergen
Brunswig later also acquired, we received a total of 7.8 million shares
of Bergen Brunswig stock-as a result of which we are now one of Bergen
Brunswig's largest shareholders. Moreover, since completion of the
Stadtlander transaction, we have not sold a single share of that stock.
Had it been our intention to sell Bergen Brunswig damaged goods, why
would we have agreed to take, and continued to hold, Bergen Brunswig
stock?
We are now preparing a detailed response to the Bergen Brunswig lawsuit,
which we will file with the appropriate judicial authorities in due
course. We are frankly at a loss to understand what has motivated Bergen
Brunswig to pursue this course. We continue to hope that, whatever
factors specific to Bergen Brunswig may have led it to proceed against
us in this manner, Bergen Brunswig's Board, management and advisors will
reconsider the appropriateness of their course of conduct. We fully
intend to pursue all available legal remedies to compensate your Company
and you, its owners, for the extreme and unwarranted damage Counsel
Corporation has and will continue to suffer as a result of Bergen
Brunswig's egregiously false and malicious statements and actions. We
will continue to keep you fully informed of developments in this matter.
We will continue to act in good faith, serving the best interests of our
shareholders, business partners and employees, as we always have and
always will. On behalf of Counsel Corporation and its management team,
we want to thank you for your continued confidence, interest and
support.
Sincerely,
Allan Silber Morris Perlis Chairman and Chief Executive Officer
President
DAIMLERCHRYSLER: Chicago Ct Dismisses Suit Re Noise From Jeep Cherokees
-----------------------------------------------------------------------
A Chicago judge on October 20 dismissed a class action lawsuit against
DaimlerChrysler, the German-American carmaker, seeking $ 500m damages on
behalf of 1.2m owners of Jeep Cherokees made in the early 1990s. The
suit alleged that noise levels from the vehicles' 4.0-litre engines were
excessive and that they were poorly engineered.
The car and truck maker had maintained the vehicles were not defective
and the lawsuit was frivolous.
The company did replace some six-cylinder engines in late-1993 and
early-1994 models, although it stressed then that the move was prompted
not by safety or durability issues, but by the question of customer
satisfaction. (Financial Times (London) 10-21-1999)
DUPONT: 9th Cir. Says Release Does Not Bar Fraud Claims By Hawaiian Man
-----------------------------------------------------------------------
Citing its recent decision in what it called an "indistinguishable"
case, the Ninth Circuit U.S. Court of Appeals has ruled 2-1 that an
Hawaiian nurseryman can proceed with his claims that fraudulent behavior
by E.I. du Pont de Nemours and Co. (DuPont) led him to prematurely
settle his suit alleging that the company's Benlate 50 DF ruined his
nursery stock. Fuku-Bonsai Inc. v. E.I du Pont de Nemours and Co. et
al., No. 98-15429 (9th Cir., Aug. 11, 1999); see Toxic Chemicals LR,
July 6, 1999, P. 3.
The $2.5 million release David Fukomoto signed in 1994 when bailing out
of a Hawaiian circuit court class action by several Aloha State
ornamental plant growers, said the federal appeals court, cannot be read
to bar his present suit.
In reaching the decision, the Ninth Circuit referred to its Feb. 2
ruling in Matsuura v. Alston & Bird, a virtually identical suit by a
fellow Hawaiian botanical grower who said DuPont fraudulently induced
him to settle his crop damage action for less that its fair amount by
concealing evidence that its fungicide was chemically tainted (see Toxic
Chemicals LR, Feb. 16, 1999, P. 3).
In allowing the plaintiff in Matsuura to proceed, the Ninth Circuit
cited a 1932 Delaware Chancery Court opinion which held that parties
claiming to have been fraudulently induced to enter a contract may
choose between rescinding it or to affirm it and file suit. It rejected
DuPont's claim that the complainant's sole remedy was to rescind the
pact and return any settlement proceeds.
The Ninth Circuit said that its decision was made easy in the instant
case, not only by the identical nature of Fukomoto's claims as compared
to those in Matsuura, but also by a directly applicable Delaware
Chancery Court ruling issued in March.
The Delaware court's decision in In re U.S. Robotics Corp. Shareholders
Litigation (March 15, 1999) freed the federal panel from the task of
projecting how a Delaware court would rule on the issue, said the
appeals court in an opinion by Judge Betty B. Fletcher.
The Ninth Circuit said that in discussing the insubstantial fraud
allegations set forth in U.S. Robotics, the Delaware Chancery Court
provided a piece of unsolicited commentary about the claims of the
Matsuura plaintiffs:
The plaintiffs supported their fraudulent inducement claim with evidence
which had previously convinced two federal district courts that the
defendants had misrepresented the nature of certain material evidence
and had concealed other evidence plaintiffs sought. The conclusive
nature of the evidence in Matsuura is far different than the sketchy,
implausible, and insubstantial fraud allegations that movants advance in
this case.
The Ninth Circuit majority held that plaintiffs' claim for fraudulent
inducement is not barred by the release language in the product
liability settlement agreement. "DuPont's fraudulent actions and lack of
good faith negotiations undermined plaintiffs' ability to bargain freely
for a fair settlement," it said.
The appeals court reiterated its observation in Matsuura that Delaware's
policy of favoring the voluntary settlement of legal disputes is
advanced by allowing the plaintiff, here Fukomoto and his business
Fuku-Bonsai Inc., "a remedy for its victimization in settlement
negotiations."
In dissent, Circuit Judge Robert Boochever said the panel should delay
issuing a ruling on the question of Delaware law until the state's
supreme court renders a decision in a case in which it has accepted
certification on this exact issue, E.I. du Pont de Nemours and Co. v.
Florida Evergreen Foliage, No. 98-2242-CIVGOLD. The Delaware court's
decision there, he observed, will render the Ninth Circuit's Matsuura
ruling no longer binding on the interpretation of Delaware law. Making
Fuku-Bonsai wait for a definitive ruling from the Delaware Supreme Court
would not impose a hardship on the firm, since it has retained the $2.5
million settlement it received from DuPont.
Fuku-Bonsai is represented by Stephen T. Cox, Peter N. Molligan, David
W. Moyer, and John C. Hentschel of Molligan, Cox & Moyer in San
Francisco and by Carl H. Osaki and Ross N. Gushi of Bays, Deaver, Hiatt,
Lung & Rose in Honolulu.
DuPont is represented by A. Stephens Clay IV of Kilpatrick and Cody in
Atlanta and by John R. Lacy, Lisa W. Munger, and Bruce L. Lamon of
Goodsill Anderson Quinn & Stifel in Honolulu. (Toxic Chemicals
Litigation Reporter 9-6-1999)
EVERGREEN AMERICA: Settles For Improper Billing On Truckers At NY & NJ
----------------------------------------------------------------------
Evergreen America Corp. has agreed to settle a class-action lawsuit
alleging that it billed trucking firms millions of dollars for equipment
repairs that were never done.
The case arose from a chronic problem in the intermodal business -
disputes over what is normal wear and tear on ship lines' container
chassis and what is over-the-road damage for which truckers are liable.
A similar lawsuit is pending by truckers against Yang Ming Marine
Transport Corp., its U.S. agent, Solar International Shipping Agency
Inc., and a third- party billing agency, Newport Systems Inc.
The Evergreen case involved truckers at the Port of New York and New
Jersey, where Evergreen is the second-largest carrier. The American
Trucking Associations has reported similar complaints by members at
several East Coast ports. Evergreen America, a subsidiary of
Taiwan-based Evergreen Marine, did not admit any wrongdoing. However,
the company agreed to pay an undisclosed sum that will be divided
proportionally by up to 600 trucking firms that Evergreen billed for
equipment repairs between 1993 and 1998.
The settlement still requires formal approval from Hudson County
Superior Court in Jersey City, N.J.
Procedure Is Determined
Terms of the settlement were outlined in a letter sent to the trucking
companies. The letter outlines a procedure that will enable truckers to
file complaints about future billing disputes.
Evergreen agreed to implement a dispute resolution system that will
follow criteria used by Maher Terminals Inc. to allocate repair charges
for chassis in the pool it operates for several carriers. Most of the
Evergreen-owned equipment handled by truckers at New York-New Jersey is
interchanged at Maher Terminals in Port Elizabeth, N.J.
Addressing A Grievance
Weitzman & Weitzman, the Maplewood, N.J., law firm that filed the
truckers' lawsuit on behalf of Golden Carriers Inc. of Hillside, N.J.,
is expected to seek formal approval of the agreement in two weeks.
""A trucker will have the opportunity to meet face to face with a
representative of Evergreen to resolve a dispute and will not be "shut
out' while disputing the invoice,'' said a letter from Weitzman &
Weitzman to the truckers.
The suit, filed Dec. 11, claimed Evergreen had threatened to bar
truckers from its terminal if they failed to quickly pay any challenged
invoices. The letter said that under the settlement agreement, disputes
between Evergreen and its truckers may be sent to binding arbitration.
The suit charged that Evergreen violated its motor carrier equipment
interchange agreement by billing for repairs that weren't made and
failing to guard against overbilling.
An East Coast Concern
While truckers say improper billing is a major concern along the East
Coast, West Coast truckers are spared that problem because terminals
rely on an special fund that reimburses terminals for equipment repairs.
Each West Coast terminal might add a fee of $5 per container, for
example, to cover the cost of routine repairs.
Disputes over roadworthiness of chassis, however, have been an issue for
truckers nationally. The Federal Highway Administration opened the
so-called " "roadability'' issue of truckers' equipment to public
comments earlier this year after the American Trucking Associations
pushed for the review. (Journal of Commerce 10-20-1999)
FORD MOTOR: CA Jury Faces Complex Trial Over Faulty Ignition Module
-------------------------------------------------------------------
One juror had a large gash across his forehead. Another wore dark
glasses and a Band-Aid over her right cheek. As plaintiffs' attorneys
began their closing statements Tuesday in the largest class action
against Ford Motor Co., it appeared the jury had been left battered and
bruised after being bombarded for five months by dense and technical
testimony.
But now the 12 jurors (and the one alternate hanging on) are facing a
16-page verdict form that could prove as challenging as some of the
testimony they've heard since May.
In the coming days, the jury will have to answer seven seemingly simple
questions about whether Ford violated state law when it installed a
faulty ignition module that caused its cars to stall and then tried to
hide the problem from the public. But they will have to apply the
questions to more than 200 vehicle models manufactured between 1983 and
1995 -- bringing the total number of questions to more than 1,000.
Plaintiffs' attorneys maintain the questions are simple to resolve
because Ford installed the Thick Film Ignition part, known as a TFI
module, in all the cars included in the class.
"The TFI module failure caused cars to stall and caused people to be put
at risk," said Paul Nelson, plaintiffs' attorney and partner with
Hancock Rothert & Bunshoft, who delivered the closing statements. "The
premise of our case is that Ford Motor concealed a defect."
Tuesday's statements were the beginning of the end of an unusually
complex trial. The court was down to just one alternate by the time the
defense took the stage. The jury endured more than 200 hours of
videotaped deposition from the plaintiffs' attorneys, including
complicated technical explanations about mechanical and electrical
engineering.
Ford had intended to put about a dozen witnesses on the stand but in the
end decided to keep its presentation short by bringing in only five
witnesses. The company spent more than $9 million on one of three expert
witnesses.
Judge Michael Ballachey opened Tuesday with reference to a little bottle
of anti-stress aromatherapy spritz he's been keeping on his bench before
diving into a half-hour review of jury instructions. He encouraged the
jury not to consider the number of witnesses presented so much as the
strength of their testimonies. He also reminded them that the plaintiffs
carried the burden of proof and have to show fraud or malice was
committed in order for punitive damages to be awarded.
The Alameda County case is the first of six identical suits pending in
courts in Alabama, Illinois, Maryland, Tennessee and Washington. The
suits claim as many as 20 million cars should have been recalled across
the country.
In California alone, more than 3 million people could be deemed part of
the class action by the jury. The lead plaintiff named in Howard v. Ford
Motor Co., 763785-2, is the uncle of a lead plaintiffs' attorney in the
case. The jury could award $250 per person to repair the vehicle, and
the judge could up that to a $1,000 per person statutory minimum defined
in the California Consumers Legal Remedies Act if the jury finds Ford
misrepresented characteristics of its cars or sold substandard vehicles.
"Five months. I didn't think it would take this long. You didn't think
it would take this long," said Nelson in his closing statements. "The
evidence was sometimes awkward and tiresome. It was not easy to watch
that screen hour after hour. Sometimes it was too long. But the evidence
got out there."
Ford attorneys said their closing statements will reiterate that their
vehicles are safe and that the company did not commit fraud or hide
information from public agencies and consumers.
Donald Lough, in-house counsel and spokesman for Ford, still maintains
that the lawsuit should never have been certified as a class action
because the jury will have to consider hundreds of different products.
Ford attorneys asked the court of appeal to decertify the suit but the
court refused to hear arguments on the eve of the trial. "This is not a
class action. In a class action, you're supposed to judge all the
plaintiffs as one group. This is the antithesis of a class action,"
Lough said. "Our vehicles are all safe and what these plaintiffs'
lawyers want to ask the jury to do makes no sense whatsoever." (The
Recorder 10-20-1999)
HMO: Two Legal Groups Are On The Verge Of Filing Suits In California
--------------------------------------------------------------------
Two different legal groups are on the verge of filing class-action
lawsuits against HMOs in California, setting up state courts here to
become the latest battleground between lawyers and health insurers.
Prominent San Francisco attorney Fred Furth confirmed that he will file
state and federal class-action suits "maybe next week" against
unspecified HMOs in California. "California hasn't had any of these
class actions yet," said attorney Suzanne Ethpison, whose San Diego firm
of Casey Gerry Reed Schenk plans to file its own HMO lawsuits "very
soon."
The California actions are patterned after suits filed in other state
and federal courts in recent weeks by several legal groups dominated by
law firms that earned huge fees from tobacco litigation.
Valerie Kockelman, a widow in Palo Alto who has been engaged in a long
struggle to sue her HMO for negligence in her husband's suicide in 1993.
Furth and Ethpison have both asked her to become members of their
class-action suits. "I know lawyers get an unconscionable amount of
money but I think they do a real service," Kockelman said, adding that
she is angry enough to join a class-action because "maybe they'll win
and somebody will notice."
Furth is affiliated with the Scruggs law firm in Mississippi, a
successful tobacco law firm which filed a class-action against Aetna
Inc. earlier this month. Ethpison is part of another group of ex-tobacco
lawyers led by New Orleans attorney Russ Herman.
The current spate of class-action suits that have been filed against
HMOs in other states were made possible by a groundbreaking U.S. Supreme
Court decision in January. In that decision, the high court held that
insurance companies could be sued for fraud under the Racketeer
Influenced and Corrupt Organizations Act, if the evidence showed that
they misled policy holders.
Furth, the San Francisco attorney, said his planned lawsuit is based on
the same legal theory.
However, Harvey Rosenfield, head of Consumers for Quality Care, a Santa
Monica group that supports lawsuits against HMOs, questioned the timing
of the lawsuits because they make it seem as if Congress does not need
to change the law for individuals to sue their health insurers.
In fact, Congress is still debating whether individuals can recover
damages when they sue HMOs. California recently changed state law to
favor such HMO suits, but those changes don't take effect until 2001.
Rosenfield said the current round of class-action suits against HMOs
would not provide consumers the same protection proposed in the
legislation now before Congress. Moreover he is afraid the class-action
suits will give HMOs ammunition to claim they are already vulnerable.
"It's too easy to turn this into a propaganda victory for the industry."
HMO lobbyist Karen Ignagni, president of the American Association of
Health Plans in Washington, D.C., agrees. "The entire debate in Congress
has proceeded from the misconception that health plans couldn't be
sued," Ignagni said, adding "members of Congress are getting a chance to
see that the fundamental premise is wrong."
Mark Robinson Jr., president of the Consumer Attorneys of California,
said that while individuals technically have the right to sue, that
right is extremely limited. Under current federal law, Robinson noted,
an individual can only sue an HMO for the actual cost of some denied
treatment. Plaintiffs can't collect damages for pain and suffering.
"Without the possibility of damages, you can't get a lawyer to take the
case on a contingency fee," he said. Robinson said he favors the
recently passed California state law and the proposed changes in the
federal law that would allow individual plaintiffs to collect damages in
lawsuits against HMOs. (The San Francisco Chronicle 10-21-1999)
IVAX CORP: 11th Cir Reasons On Press Release, Dismisses Securities Suit
-----------------------------------------------------------------------
The Eleventh Circuit ruled that, even if a company's press release
contains both factual and forward-looking statements, it will not be
liable under the 1995 Private Securities Litigation Reform Act, for
projections ultimately proved false, provided they contain meaningfully
cautionary statements.
A class of investors, who claimed that two press releases of a generic
drug company contained fraudulent projections, sued the company,
alleging securities fraud. Although the press releases contained
disclaimers, the investors claimed that the defendant's
misrepresentations were not entitled to safe harbor, because the
releases concerned present fact rather than future performance.
The district court disagreed, finding that the statements were all
forward-looking and were accompanied by the requisite cautionary
language.
The Eleventh Circuit affirmed, and, because it agreed that all the
statements were forward-looking, it never addressed the issue of the
pleading requirements for scienter, which are presently at the center of
great debate. The court stated that where a forward-looking statement
"is accompanied by 'meaningful cautionary language,' the defendants'
state of mind is irrelevant." While the statements referred to in the
complaint contained both factual and forward-looking declarations, the
court found that the releases must be viewed as a whole, and whether as
a whole they mislead anyone reading them. The court ruled that, in this
light, the statements were, in fact, forward-looking. The court reasoned
that "were we to banish from the safe harbor lists that contain both
factual and forward-looking factors, we would inhibit corporate officers
from fully explaining their outlooks. Indeed, liability-conscious
officers would be relegated to citing only the factors that could
individually be called forward-looking. This would hamper the
communication that Congress sought to foster." Harris v. Ivax Corp., No.
98-4818 (July 27). (The Corporate Counsellor, September 1999)
MATTEL INC.: Stull, Stull Files Securities Suit In California
-------------------------------------------------------------
The following was announced by Stull, Stull & Brody:
A class action lawsuit against Mattel, Inc. (NYSE: MAT) and certain
individuals associated with the Company was commenced in the United
States District Court for the District of Central California on behalf
of purchasers of Mattel shares. If you purchased Mattel shares between
October 22, 1998 and October 1, 1999, or if you owned shares of The
Learning Company, Inc. (NYSE: TLC) which were exchanged for Mattel
shares as a result of the merger of the two companies, please read this
notice.
The complaint charges Mattel and certain of its executive officers with
violations of The Complaint charges that defendants violated Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10-b(5).
The action arises from damages incurred by the Class as a result of a
scheme and common course of conduct by defendants which operated as a
fraud and deceit on the Class during the Class Period. The complaint
alleges that defendants issued a series of materially false and
misleading statements regarding the Company's financial condition and
results of operations. These false and misleading statements caused the
price of Mattel's stock to be artificially inflated.
Plaintiff is represented by the law firm of Stull, Stull & Brody. If you
are a member of the class described above, you may, no later than
December 6, 1999, move the Court to serve as lead plaintiff, if you so
choose. In order to serve as lead plaintiff, however, you must meet
certain legal requirements.
If you wish to discuss this action or have any questions concerning this
notice, please contact plaintiff's counsel Patrice L. Bishop at
888-388-4605 or via e-mail at info@secfraud.com or visit the firm's web
site at http://www.secfraud.comTICKERS: NYSE:MAT
MATTEL INC: Steven E. Cauley Files Securities Suit To Set Aside Merger
----------------------------------------------------------------------
The Law Offices of Steven E. Cauley announced that it filed a class
action lawsuit against Mattel, Inc. (NYSE: MAT), Jill E. Barad, and
other responsible individuals within the company on behalf of persons
who held Mattel, Inc. securities as of March 15, 1999.
The complaint alleges that Mattel violated Section 14(a) of the
Securities Exchange Act of 1934 when on March 26, 1999, Mattel and The
Learning Company, Inc. ("TLC") issued a Joint Proxy Statement/Prospectus
("Proxy/Prospectus") as part of a Registration Statement containing the
details of a merger between Mattel and TLC. The lawsuit charges that the
Proxy/Prospectus was materially false and misleading because it
incorporated TLC's historical financial results which had been prepared
in violation of Generally Accepted Accounting Principles ("GAAP") and
did not disclose this violation. This failure to disclose prevented the
shareholders from making a fully informed decision regarding the
proposed merger. Unaware of the materially false and misleading
statements and omissions in the Proxy/Prospectus, shareholders of Mattel
and TLC approved the merger. The Complaint seeks to set aside the
wrongfully consummated merger between Mattel and TLC, rescind the common
stock issued and provide monetary relief to the Class Members who
suffered damages.
If you wish to serve as one of the lead plaintiffs in this lawsuit you
must file the appropriate motion with the court. To ensure your motion
is received in time, you may call the Law Offices of Steven E. Cauley,
which has successfully handled numerous lawsuits such as this one,
including the Medpartners securities litigation, where they recovered
$25 million for their clients in just over one year. If you have any
questions regarding this lawsuit, how you may be able to recover for the
losses you have incurred or your rights in the selection of an attorney
please E-mail or call one of the attorneys listed below: Steven E.
Cauley Scott E. Poynter Gina M. Cothern 2200 N. Rodney Parham, Ste. 218
Little Rock, AR 72212 E-mail: CauleyPA@aol.com 1-888-551-9944 - toll
free
MATTEL INC: The Pomerantz Firm Files Securities Suit In California
------------------------------------------------------------------
Pomerantz Haudek Block Grossman & Gross LLP has filed a class action
suit against Mattel, Inc. (NYSE: MAT) and certain high ranking officers
of Mattel and The Learning Company ("TLC"). The case was filed in the
United States District Court for the Central District of California on
behalf of all those who purchased the common stock of Mattel during the
period between February 2, 1999 and October 1, 1999, inclusive.
The Complaint charges that defendants issued materially false and
misleading financial statements, as well as false and misleading
statements about Mattel's merger with TLC and the Company's operations
and business prospects during the Class Period in violation of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934. The Complaint
alleges that Mattel misled investors in order to get approval of its
merger with TLC. Mattel misled investors with respect to the financial
condition of TLC and its business prospects. In particular, Mattel
allegedly concealed that TLC's purported results had been artificially
inflated by the recognition of improper revenues for product sales which
were subject to significant contingencies. Moreover, TLC failed to
establish appropriate reserves for these contingencies and for bad debt.
Mattel finally disclosed to the public on October 4, 1999 the Company's
true financial condition and actual impact of the TLC acquisition.
Mattel revealed that the new TLC division had incurred a $50-100 million
loss for the third quarter 1999 due to significant amounts of product
returns and the writeoff of bad debt. As a result of these revelations,
Mattel's stock plummeted 38% to 11 7/8 on October 4, 1999. During the
Class Period, two top officers of TLC pocketed several millions of
dollars in severance payments after the merger closed.
If you purchased Mattel Inc. common stock during the Class Period, you
have until December 6, 1999 to ask the Court to appoint you as one of
the lead plaintiffs for the Class. In order to serve as lead plaintiff,
you must meet certain legal requirements. If you wish to discuss this
action or have any questions, please contact Andrew G. Tolan, Esq. of
the Pomerantz firm at 888-476-6529 (or 888-4-POMLAW), toll free, or at
agtolan@pomlaw.com by e-mail. Those who inquire by e-mail are encouraged
to include their mailing address and telephone number.
MERCHANT'S LEGAL: Illinois Court Certifies Three Classes Of Debtors
-------------------------------------------------------------------
A debt collector who mailed standard collection letters to consumers to
collect money owed to a clothing store must defend three separate class
actions filed under the Fair Debt Collection Practices Act.
Davis-Holden, et al. v. Merchant's Legal Services P.A., et al., No. 98 C
6091 (N.D. Ill. 8/25/99).
Lisa Davis-Holden and Marie Barrientos sued Merchant's Legal Services,
Samuel Aurilio and NPC Check Services Inc. under the FDCPA after they
received three separate form collection letters which sought to collect
money owed to a retail clothing store. The plaintiffs settled with
Aurilio and Merchant's and then moved the U.S. District Court for the
Northern District of Illinois to certify three classes of consumer
debtors.
Davis-Holden, the proposed representative for the first two classes,
alleged that the first dunning letter contained a misleading notice that
suggested only Colorado debtors had the right to direct the collector to
cease communications. She claimed the second letter's insistence that
the debtor immediately contact her attorney and respond to the notice
contradicted and overshadowed the FDCPA's validation provision.
Barrientos, who represented the third class, alleged the form notice she
received from NPC threatened prosecution, threatened to supply
information concerning her worthless check to the police and threatened
a criminal investigation.
The District Court concluded that each class commonly alleged the
similar instruments violated their rights and that NPC could not avail
itself of the bona fide error defense. It also disagreed that NPC's
possible set-off rights defeated Fed. R. Civ. P. 23 (b)'s predominance
requirement and that plaintiffs' counsel could not adequately represent
the class.
Writing for the court, Judge Kennelly opined that the plaintiff's met
all the requirements for Fed. R. Civ. P. 23 and granted the motion for
class certification. (Consumer Financial Services Law Report 10-5-1999)
ODYSSEY PICTURES: 9th Cir Oks Dismissal Of CA Securities Suit
-------------------------------------------------------------
In March, 1996, a class action complaint was filed against the Company
entitled Dennis Blewitt v. Norman Muller, Jerry Minsky, Dorian
Industries, Inc. and Communications and Entertainment Corp. The
complaint seeks damages in connection with the Company's treatment in
its financial statements of the disposition of its subsidiary, Double
Helix Films, Inc. in June, 1991. The complaint seeks unspecified damages
on behalf of all persons who purchased shares of the Company's common
stock from and after June, 1992.
A second action, alleging substantially similar grounds, was filed in
December 1996 in Federal Court in the United States District Court for
the Southern District of California under the caption heading "Diane
Pfannebecker v. Norman Muller, Communications and Entertainment Corp.,
Jay Behling, Jeffrey S. Konvitz, Tom Smith, Jerry Silva, David Mortman,
Price Waterhouse & Co., Todman & Co., and Tenato Tomacruz." Following
the filing of the second action, the first action was dismissed by
stipulation in May 1997. The Company filed a motion to dismiss the
complaint in the second action and after a hearing on the motion in
July, 1997, the Court dismissed the federal securities law claims as
being time-barred by the applicable statute of limitations, and
dismissed the state securities law claims for lack of subject matter
jurisdiction. The lower court's dismissal of this action was upheld on
appeal by the Ninth Circuit.
Messrs. Muller, Smith and Mortman, former directors of the Company, have
asserted claims for indemnification against the Company. The Company has
advised the claimants that it will not provide such indemnification
based upon their wrongful actions and failure to comply with various
obligations to the Company. The case was refiled in California state
court in August 1998 and the Company has retained counsel to represent
itself. The Court has granted motions to dismiss two of the complaints
filed by the Plaintiff who has also filed a third complaint. Counsel
expects a further motion to dismiss to be granted by the court.
PAYDAY LENDER: Edelman, Combs Sues All-State Pay Day Advance In Chicago
-----------------------------------------------------------------------
The Chicago law firm of Edelman, Combs & Latturner has filed a class
action lawsuit against a Tampa, Florida "payday loan" firm, All-State
Pay Day Advance, that made loans to Illinois residents at more than 700%
interest by fax, phone and wire transfers.
The lawsuit alleges violation of the federal Truth in Lending Act, the
Illinois Consumer Fraud Act, and the Illinois Interest Act, and that the
transactions are unconscionable. The case was filed in federal district
court in Chicago, Henry v. Roth, 99 C 6817.
"Payday loans" are short term, very high interest rate loans. The loans
are typically two weeks in duration and carry annual percentage rates of
100% to over 1800%. The lender generally obtains a post-dated check as a
means of repayment. The loans are typically "rolled over" on multiple
occasions.
"Payday loans" are generally made to consumers facing financial
emergencies. Once a consumer obtains a "payday loan," he or she will
often be unable to pay it off except from the proceeds of additional
"payday loans." Often, the "payday loans" force the borrowers into
unnecessary bankruptcies.
Contact: Daniel A. Edelman of Edelman, Combs & Latturner, 312-739-4200,
or fax, 312-419-0379. After November 12, 1999, address will be:
Edelman, Combs & Latturner, 120 S. LaSalle Street, 18th floor, Chicago,
Illinois 60603. The main telephone and fax numbers will remain the same.
STUCCO MANUFACTURERS: Parex Inc. Settles; List Of Cos. In Suit Reduced
----------------------------------------------------------------------
The list of stucco manufacturers in a statewide class-action lawsuit was
cut further with the announcement that a third defendant settled out of
court and a fourth is in negotiations.
Parex Inc., a manufacturer of synthetic stucco blamed for rot in
buildings across the state, has made a deal similar to one announced
Sept. 28 involving Dryvit Systems Inc., lawyers said.
Parex reached its tentative settlement in early September, but it was
kept quiet because a trial with Dryvit was pending, the lawyers said.
Dryvit settled before its Oct. 4 trial.
Sto Corp. became next in line for a trial, but that has been postponed
indefinitely while lawyers for the homeowners and Sto "conclude
settlement discussions," a statement from the lawyers said.
With the agreements by Senergy Inc., Dryvit and Parex, Sto is the last
of four manufacturers in the lawsuit that plaintiffs' lawyers consider
the biggest distributors in North Carolina. Three other smaller
companies have not settled either.
Senergy Inc. reached a nationwide settlement with the same lawyers for $
20 million last year.
Lawyers hope the Dryvit and Parex settlements will be finalized early
next year. They could amount to millions of dollars, depending on how
many affected property owners make claims.
Both Parex and Dryvit have agreed to pay $ 6 per square foot of their
product on homes that have elevated water levels beneath the surface.
Neither company admitted liability in their agreements. "The company and
its insurance carriers decided that it was in Parex's best interests if
the litigation could be stopped through a reasonable settlement," said
Steven W. Ouzts, a lawyer for Parex.
A single house with 3,000 square feet of stucco cladding, a common
amount in these cases, would cost Dryvit or Parex $ 18,000. If 1,000
people with houses that size made claims against each company, the two
settlements would be worth $ 36 million.
The plaintiffs have estimated 20,000 homes have been damaged in North
Carolina, a number the defendants have said is too high.
The lawsuit, which was filed in New Hanover County Superior Court in
1996, followed the discovery the previous year that water had gotten
behind synthetic stucco facades, then couldn't evaporate. The material
is supposed to provide a watertight seal around a house, but trapped
water causes buildings to rot.
The Wilmington area was hit hard because synthetic stucco was popular
during a building boom and coastal conditions made damage more likely.
Payments to qualified homeowners will be made directly to them under
both deals. Gary Shipman, a leading attorney for the homeowners, said
Friday that separate agreements with lawyers for the plaintiffs give
them up to $ 6 million and $ 1.75 million from Dryvit and Parex,
respectively.
Superior Court Judge Ben F. Tennille, a special judge who hears complex
business cases, will decide whether the plaintiffs' lawyers will get the
maximum or less than that. He has disappointed the lawyers in the past.
The plaintiffs' attorneys asked for a $ 6 million slice of the Senergy
settlement but he awarded a maximum of $ 2.2 million this July. Mr.
Shipman said the recent settlements are very different from the Senergy
deal. "We certainly are hopeful that Judge Tennille will reward us for
our efforts," he said.
Several factors have led to the back-to-back settlements and the
possibility of another, lawyers in the case said. One is that when a
defendant makes a deal, it can add some leverage for plaintiffs in the
other cases. "We hope that it will encourage resolution of the entire
dispute," Trey Thurman, a lawyer for homeowners, said of the recent
settlements. "From a business standpoint, each of these manufacturers
made a sound business decision given that they are all very large
players, if you will, in this industry," Mr. Shipman said. "It only made
good business sense to get this problem behind them."
But more important to the so-called "domino effect" was the approach of
a trial date, he said. Civil lawyers, as well as criminal attorneys,
generally believe that setting a trial date encourages settlements or
guilty pleas because the prospect of facing a jury becomes a reality.
Rob Fields, a lawyer for Sto, said settlement negotiations have been
easier to approach since Judge Tennille decided in May that each
defendant would be tried separately instead of together.
Trial order was determined by market share in the state, beginning with
the company holding the most. Dryvit was estimated to hold as much as 45
percent of the business. Parex and Sto vied for the next spot, with each
holding 10 to 15 percent of the market, Mr. Shipman said.
Mr. Fields said that when all the defendants were facing a single trial
together, the complexity of the situation hindered talks. "Once the
cases got separated it became easier for everyone to focus on the
specific situations of each of the manufacturers, which helped the
settlement process for all of the manufacturers," Mr. Fields said.
(Morning Star (Wilmington, NC) 10-9-1999)
TIG HOLDINGS: NY Ct Oks Withholding Of Reserve Study In Securities Suit
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RUSKIN v. TIG HOLDINGS, INC., U.S. District Court: S.D.N.Y.
Defendants moved to dismiss a first amended action complaint on the
basis of insufficiency of particularity in pleading fraud and failure to
state a claim on which relief could be granted. Plaintiff alleged that
the company in which it purchased common stock engaged in deceptive and
misleading conduct. Specifically, it charged, the company withheld
certain information of which it was fully apprised, concerning increased
loss potential of some accounts. In granting the defendants' motion, the
court said the defendants were under no legal obligation to report the
results of the reserve study before those findings were final. The court
also explained, as a policy concern, imposing a duty upon a company to
publicize moment-to-moment accounts of its studies would lead to
incorrect expectations as to the final results.
Judge Stanton
RUSKIN v. TIG HOLDINGS, INC. QDS:02761644 - Defendants move under Fed.
R. Civ. P. 9(b) and 12(b)(6) to dismiss the First Amended Class Action
Complaint ("Complaint") for insufficient particularity in pleading
fraud, and for failure to state a claim on which relief can be granted.
In their complaint, the plaintiffs make the following allegations:
Plaintiffs purchased common stock of TIG Holdings, Inc. between October
21, 1997 and January 30, 1998. TIG, whose ancestor was Transamerica
Insurance Group, is primarily engaged in property and casualty insurance
and reinsurance through subsidiaries, including its wholly owned TIG
Reinsurance Company ("TIG Re"). Defendant Rotenstreich was TIG's chief
executive officer and chairman of its board of directors. Defendant
Clark was TIG Re's chief executive officer and board chairman, and a
director of TIG.
TIG Re's operations accounted for 36 percent of the total net premiums
written by TIG, and TIG Re's business was concentrated on a small number
of clients, five of which represented 34 percent of TIG Re's net
premiums written in 1997. TIG Re maintained an audit staff responsible
for performing reinsurance reviews at those clients' offices, in
addition to its own actuarial department. TIG maintains reserves for
unpaid losses and loss adjustment expenses ("LAE") based on individual
case estimates and statistical projections of reported losses and
estimates of incurred but unreported losses.
In its May 15, 1997 Form 10-Q, TIG stated that, "the estimation of TIG
Re's loss and LAE reserves and therefore net loss and LAE incurred is
subject to significant uncertainty due to TIG Re's relatively short
operating history and rapid premium growth." It also explained:
Since mid-1996, TIG Re's paid and reported losses have been higher than
anticipated... In the fourth quarter of 1996, the Company hired a new
chief underwriting officer who immediately commenced a company wide
review of underwriting, pricing, and reserving practices. This
evaluation is expected to be completed in the second quarter of 1997 in
conjunction with routine semi-annual loss and LAE reserve reviews for
both reinsurance and primary lines.
In its Form 10-Q's for the second and third quarters of 1997, filed on
August 14 and November 14, 1997, respectively, TIG omitted the above
cautionary statement about the significant uncertainty of its reserve
estimates, and stated that, "during second quarter 1997 TIG completed a
study of company-wide loss reserves based on year-end 1996 data. The
study indicated that the Company's reserve position net of available
reinsurance coverage continues to be adequate."
On October 21, 1997, TIG issued a press release announcing net income at
the end of the third quarter higher than the previous year, and
exceeding the estimates of analysts, but TIG did not disclose that
(Complaint PP 36, 37):
Prior to the close of the third quarter on September 30, 1997, the
Company learned of significant problems relating to increased loss
potential at five of TIG Re's largest accounts. This initial
information, learned 3 weeks before the October 21, 1997 Press Release,
prompted the Company to begin an extraordinary review of loss reserves
based on the knowledge that certain of TIG Re's largest accounts needed
to be restructured or nonrenewed.
This extraordinary review was not the typical semi-annual review of
reserve adequacy. Rather, the review was designed to assess the
magnitude of the problems at TIG Re. Thus, once the Company decided to
undertake the extraordinary review, the question was not whether TIG was
underreserved, but rather to what extent were TIG's reserves inadequate.
Nondisclosure of the inadequacy of its reserves was deceptive and misled
the market, in view of the statements in TIG's third quarter 10-Q (filed
November 14) repeating that, "while there can be no assurance that the
reserves at any given date are adequate to meet TIG's obligations, the
amounts reported on the balance sheet are management's best estimate of
that amount." The third quarter 10-Q also stated that:
During second quarter 1997, TIG completed a study of Company-wide loss
reserves based on year-end 1996 data. The study indicated that the
Company's reserve position net of available reinsurance coverage
continues to be adequate. TIG will continue to monitor its reserve
position and periodically conduct thorough loss reserve reviews...
management believes that adequate provision has been made for TIG's loss
and LAE reserves.
The review announced on October 21, 1997 was, in fact, extraordinary.
TIG at no point revealed that it had been prompted by communications to
TIG Re from five of its largest clients, from which TIG Re determined
the need to restructure or nonrenew those accounts. As the Complaint
summarizes (P 54):
In the end, the Third Quarter 10-Q continued to falsely state that the
knowingly flawed reserves were management's "best estimate"; eliminated
certain warnings relating to the uncertainty of reserves at TIG Re;
touted the results of the second quarter review which were no longer
applicable to TIG's current operations; and failed to alert investors
that the Company was aware of significant problems at five of TIG Re's
largest accounts, including TIG Re's largest client.
The extraordinary review was completed by the end of December 1997.
On January 30, 1998 the defendants announced that TIG Re was increasing
its gross loss reserves by $ 220,000,000, amounting to a $ 145,000,000
charge against TIG's earnings, after relying on stop-loss reinsurance
contracts of $ 75,000,000, which would limit TIG's investment income in
future. That addition to reserves eliminated all net income for the
quarter and produced a quarterly loss; it eliminated over 89 percent of
the company's earnings for the first nine months of 1997, and
represented a 40 percent increase to TIG's reserves. The analysts
down-graded the stock, which dropped nearly 18 percent in a single
trading day, on high volume, reducing its trading range to the mid-$
20's, from its prior daily average price of $ 33.16 during the October
21, 1997 - January 30, 1998 class period.
During the class period some TIG insiders sold their own shares, in
unusual amounts, and under their employment contracts with TIG some
executives' compensation was enhanced by TIG's higher stock prices.
All this, plaintiffs assert, amounts to actionable fraud under Section
10(b) of the Securities Exchange Act of 1934, 15 U.S.C. @ 78j(b), and
under SEC Rule 10b-5, 17 CFR @ 240.10-b, supplemented by the Private
Securities Litigation Reform Act of 1995 ("PSLRA"), Pub. L. No. 104-67,
109 Stat. 737. In addition, plaintiffs claim that defendants
Rotenstreich and Clark are liable for fraud as controlling persons under
Section 20(a) of the Securities Exchange Act, 15 U.S.C. @ 78t(a).
Defendants' Position
Defendants identify the key assertions in the Complaint (See PP 36, 37
and 54 above) as resting on the claim that:
TIG Re was also aware of its inadequate loss reserves by virtue of the
fact that the problems stemmed from five of its largest accounts, to
whom [sic.] TIG Re was in close contact and for whom TIG Re's audit
staff performed reinsurance reviews at those clients' offices. Complaint
P 75.
Despite this conclusory allegation, defendants contend, nowhere does the
complaint show when TIG Re became aware of the inadequacy of the loss
reserves, or when it learned of the dimensions of the inadequacy, or
what TIG Re was told by the managers of those accounts, or how long (if
at all) before January 30, 1998 TIG Re knew of the actual size of the
required adjustments to its loss reserves. Thus, they argue, the
complaint sets forth no basis for concluding that defendants'
statements, when made, were known to be false. They seek dismissal of
the complaint for 1) failure to plead fraud with particularity, 2)
failure adequately to allege scienter, 3) failure to allege that
defendants' statements fall outside the PSLRA's safe harbor provision,
and 5) failure properly to allege controlling persons liability.
Discussion
Two deficiencies pervade the complaint. First, defendants had no duty to
report the results of the reserve study before those results were final.
See, In re Carter-Wallace, Inc. Sec. Litig., 97-7345, 1998 WL 388333 at
*4 (2d Cir. July 13, 1998) (duty to report impairment to drug's
commercial viability did not arise until "statistically significant"
number of deaths attributed to that drug); Acito v. IMCERA Group, Inc.,
47 F.3d 47, 52 (2d Cir. 1995) (no duty to report inspection results
until regulatory action taken). There is generally no duty to publicize
a moment-to-moment account of a company's investigations; indeed, such
intermediate appraisals risk creating expectations not justified by the
ultimate results. See, Panter v. Marshall Field & Co., 646 F.2d 271, 292
(7th Cir. 1981) ("... projections, estimates, and other information must
be reasonably certain before management may release them to the
public").
Second, not only were defendants under no such legal duty, but the
complaint never alleges when and how, if at all, before January 30,
1998, the defendants in fact learned of the reserves' inadequacy, and
its magnitude - without which allegations there remains no sufficient
basis for the claim their statements, or omissions, were false when
made.
Failure to Plead Fraud With Particularity
As the Court of Appeals has stated:
... securities fraud allegations under @ 10(b) and Rule 10b-5 are
subject to the pleading requirements of [Fed. R. Civ. P.] 9(b), and a
complaint making such allegations must '(1) specify the statements that
the plaintiff contends were fraudulent, (2) identify the speaker, (3)
state where and when the statements were made, and (4) explain why the
statements were fraudulent. Shields v. Citytrust Bancorp, 25 F.3d 1124,
1127-28 (2d Cir. 1994) (citations omitted).
Since the complaint does not identify the accounts posing problems, nor
the problems themselves, nor to whom and when they became known, nor
when defendants recognized the need to increase the reserves, it does
not "explain why the statements were fraudulent" (item (4) above), and
must be dismissed for failure to plead fraud with the particularity
required in Rule 9(b).
Scienter
The Private Securities Litigation Reform Act of 1995 ("PSLRA")
heightened the requirements for pleading scienter, n1 requiring the 1
plaintiff to "state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of mind." 15
U.S.C. @ 78u-4(b)(2).
n1 "Scienter" is defined as an "... intent to deceive, manipulate, or
defraud." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 96 S.Ct. 1375,
1381 (1976).
This can be done in two ways. "As a pleading requirement, a plaintiff
must either (a) allege facts to show that 'defendants had both motive
and opportunity to commit fraud' or (b) allege facts that 'constitute
strong circumstantial evidence of conscious misbehavior or
recklessness.'" Press v. Chemical Investment Services, Corp., 166 F.3d
529, 538 (2d Cir. 1999), quoting Shields. The allegations against
Rotenstreich and Clark are considered separately.
Rotenstreich
Motive and Opportunity
As the CEO of TIG, Rotenstreich had the opportunity to supervise and
control the dissemination of public information about TIG.
Rotenstreich's motive to commit fraud, according to the complaint, is
that his compensation was "based largely on a business plan established
by the Company early in the year that includes financial targets for
that year that are directly related to the earnings per share of TIG
common stock." Complaint P 78 (emphasis original).
However, a pay incentive by itself does not suffice to plead the
necessary motive:
Plaintiffs' allegation that defendants were motivated to defraud the
public because an inflated stock price would increase their compensation
is without merit. If scienter could be pleaded on that basis alone,
virtually every company in the United States that experiences a downturn
in stock price could be forced to defend securities fraud actions.
'Incentive compensation can hardly be the basis on which an allegation
of fraud is predicated.' Acito, 47 F.3d at 54 (2d Cir. 1995), quoting
Ferber v. Travelers Corp., 785 F. Supp. 1101, 1107 (D. Conn. 1991).
There is no other allegation of motive as to Rotenstreich.
Strong Circumstantial Evidence
Demonstrating Conscious Misbehavior or Recklessness
Plaintiffs might plead scienter by alleging"... facts that constitute
strong circumstantial evidence of conscious misbehavior or
recklessness." Wellcare Management Group Sec. Liting., 964 F. Supp. 632,
639 (N.D.N.Y. 1997). The conduct must go beyond "mere garden variety
breach of duty," and be conduct which is "'highly undreasonable.'" Id.
As discussed above, the complaint lacks any showing of when Rotenstreich
became aware of the inadequacy and magnitude of the loss reserves, and
therefore any basis for concluding that his statements, when made, were
known to be false.
Thus it dooes not adequately allege scienter with respect to
Rotenstreich.
Clark
Motive and Opportunity
Scienter is adequately pleaded against Clark by the allegation that he
was motivated to inflate the price of TIG's stock during the period in
which he sold a large number of shares (Complaint P 80, 84). Unlike
incentive compensation, unusual stock sales can provide sufficient
motive to adequately plead scienter. In re Burlington Coat Factory Sec.
Litig., 114 F.3d 1410, 1424 (3d Cir. 1997) ( plaintiffs must "... allege
that the trades were made at times and in quantities that were
suspicious enough to support the necessary strong inference of
scienter"). Clark's sale of a large quantity of stock (20,735 shares
according to P 80 of the complaint) in the months when the review was
proceeding sufficiently alleges motive to survive a motion to dismiss,
because to require more in pleading of motive... would make virtually
impossible a plaintiff's ability to plead scienter in a financial
transaction involving a corporation, institution, bank or the like that
did not involve specifically greedy comments from an authorized
corporate individual. Press, 166 F.3d at 538 (citations omitted).
However, for its failure to plead fraud in the first place, the
complaint is dismissed against Clark.
Safe Harbor
Since the PSLRA provides a safe harbor, under which no 10b-5 liability
may arise, for statements made without actual knowledge that the
statement is false or misleading, 15 U.S.C. @ 78u-5(c), and the
complaint makes no sufficient allegation that defendants had actual
knowledge of the falsity of their statements at the time the statements
were made, their statements fall within the safe harbor provision of the
PSLRA.
Controlling Person
In order properly to plead that someone is a "controlling person" within
the meaning of Section 20(a) of the Securities Exchange Act, the pleader
must allege an underlying primary violation. See Mishkin v. Ageloff, 97
Civ. 2690 (LAP), 1998 WL 651065 at *25 (S.D.N.Y. Sept. 23, 1998). Here,
since no underlying primary violation has been sufficiently pleaded, the
claim for controlling person liability is dismissed.
Conclusion
Defendants' motions to dismiss plaintiffs' First Amended Class Action
Complaint are granted. Plaintiffs have leave to replead within thirty
days of the date of this order. (New York Law Journal 9-30-1999)
TOBACCO LITIGATION: Industry Fears Fla. Ct Decision Could Cost $300 Bil
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The 3rd District Court of Appeal in Florida said on Wednesday the jury
in a class-action case involving 500,000 sick Florida smokers can award
punitive damages in a single lump sum instead of one smoker at a time.
Tobacco industry lawyer Dan Webb warned the court that damages from the
case could exceed $300 billion, which "would destroy any industry."
"The stakes suddenly have become humongous," said Northeastern
University law professor Richard Daynard, head of an anti-tobacco
clearinghouse. Daynard said a big award could bankrupt some tobacco
companies because they would have to post a bond greater than the award
itself while they appeal.
Lawyers for both sides cannot discuss the case under a gag order imposed
by the judge. (Chicago Tribune 10-21-1999)
The Daily Telegraph (London) of October 21 says that damages, to be
assessed in the next stage of the litigation in November, are expected
to be more than $ 100 billion.
UNUMProvident CORP: Schiffrin & Barroway File Securities Suit In Maine
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The following statement was issued by the law firm of Schiffrin &
Barroway, LLP:
Notice is hereby given that a class action lawsuit was filed in the
United States District Court for the District of Maine on behalf of all
purchasers of the common stock of UnumProvident Corp., Inc. (NYSE: UNM)
from February 4, 1998 through August 2, 1999, inclusive.
The complaint charges UnumProvident and certain of its officers and
directors with issuing false and misleading financial statements that
understated reserves for disability insurance claims and merger costs.
If you are a member of the class described above, you may, not later
than November 30, 1999, move the Court to serve as lead plaintiff of the
class, if you so choose. In order to serve as lead plaintiff, however,
you must meet certain legal requirements.
Plaintiff is represented by the law firm of Schiffrin & Barroway, LLP.
If you wish to discuss this action or have any questions concerning this
notice or your rights or interests with respect to these matters, please
contact Schiffrin & Barroway, LLP (Andrew L. Barroway, Esq.) toll free
at 888/299-7706 or 610/667-7706, or via e-mail at info@sbclasslaw.com
TICKERS: NYSE:UNM
WESTAR GROUP: Pattison Decries Merit Of Suit Over Restructuring
---------------------------------------------------------------
The allegations against businessman Jim Pattison and his associates in a
proposed class action suit over the restructuring of Westar Group Ltd.
are false, according to a statement of defence filed by Mr. Pattison.
'The common scheme and conspiracy which is alleged to connect these
discrete transactions is fictitious,' the statement said. 'These
defendants say the entire claim is devoid of merit.'
A suit claiming $500-million in damages was launched last spring by
Samos Investments Inc., the private company of former Victoria mayor
Peter Pollen. Lawyers for Samos have been soliciting other former
shareholders to join in the suit through a Web site.
The defendants, in addition to Mr. Pattison, include Canadian Imperial
Bank of Commerce, which joined with him in salvaging and then
restructuring insolvent Westar between 1994 and 1997.
In its statement of defence, CIBC describes the suit as an 'abuse of the
court's process,' because the final acts in the restructuring were
approved by a judge of the B.C. Supreme Court in June, 1997. All of the
defendants argue that the suit cannot go ahead unless that approval is
overturned first.
Westar was known initially as British Columbia Resources Investment
Corp., a government-sponsored holding company that went public in 1979
in a $550-million offering, lubricated by gifting five free shares to
every B.C. resident.
Westar was in trouble by 1987, owing $360-million to five Canadian
banks. It was unable to pay any of that debt when it matured in 1992.
After its coal-mining subsidiary went bankrupt in the summer of 1992,
Westar spent the next 18 months trying to restructure its debt, but
failed because of disagreements among the bankers.
Mr. Pattison became a director of Westar in 1992. After the
restructuring talks failed, he and CIBC teamed up to buy the Westar debt
from the other lenders for 50 cents on the dollar.
Mr. Pollen contends that the discount should have been 'negotiated for
the benefit' of Westar and its shareholders. After the debt was
purchased at a discount, it was restructured in a move that ultimately
converted some of it into common shares, substantially diluting the
existing shareholders, but leaving Mr. Pattison owning 46% of the
company. His firm also acquired much of a rights offering.
In 1995 Westar's shares were consolidated, with one new share exchanged
for 125 old shares. Mr. Pattison's defence said this move, which purged
the shareholder list of about 50,000 small shareholders, was done to
reduce administrative costs. Mr. Pollen argues that shareholders were
disenfranchised.
Westar's balance sheet was cleaned up further in 1996 by converting the
remaining debt to preferred shares -- and subsequently into non-voting
common shares, many of them owned by the Pattison group.
On the heels of that, Westar's remaining asset, its bulk terminal near
Vancouver, was sold to an income trust, netting Westar $663-million. Mr.
Pattison then took Westar private in 1997.
Mr. Pollen alleges that Mr. Pattison acquired Westar's assets 'without
paying fair value' by 'not telling the shareholders the full truth.' Mr.
Pattison said that every step in the restructuring was laid out in
circulars to the shareholders, who approved each major move at
subsequent meetings.
'These defendants did not act in a manner which was oppressive or
unfairly prejudicial to the shareholders of Westar or any group of
them,' he said. (National Post (formerly The Financial Post) 10-5-1999)
* Task Force Hopes To Stem Inmate Litigation
--------------------------------------------
>From the ridiculous to the deadly earnest, inmates' lawsuits are costing
taxpayers a pretty penny and a task force of judges and lawyers is
hoping to stem the tide. Nationwide, 54,715 noncriminal prisoner
complaints landed in federal court last year, covering everything from
lack of soap to abuse by guards. In western Pennsylvania alone, 644
inmate complaints accounted for the lion's share of a total 3,036
federal civil actions received in 1998."There's been a lot of publicity
around the nation with police brutality and cases that have occurred at
the hands of police," said Phyllis Jin, a Fayette County attorney who
has handled inmate complaints. "I think inmates are very aware of it,
and some are looking for it: a cross word or putting handcuffs on too
tight."
The task force is made up of judges and attorneys in the 3rd U.S.
Circuit Court of Appeals, which covers Pennsylvania, New Jersey,
Delaware and the Virgin Islands. The idea is to help represent prisoners
with legitimate complaints. Pennsylvania taxpayers shell out about $ 3
million annually to defend the state against prisoner claims, said state
Attorney General Mike Fisher. Some appear silly like one recent
prisoner's claim against 15 corrections officials complaining, among
other things, that his state-issued underwear was too tight. Others levy
serious claims, such as a class-action lawsuit filed in 1994 by 25
inmates who said they were beaten by guards at the Allegheny County
Jail. The county agreed to pay $ 350,000 to settle individual claims.
Jin is among the lawyers who have agreed to handle prisoner cases for
free, although the Allegheny County Bar Association is providing
insurance and will pay for legal costs associated with depositions,
expert testimony and other matters. U.S. District Judge Donald Ziegler
said lawyers will be appointed only in cases determined by a magistrate
judge to have merit. (Pennsylvania Law Weekly 10-11-1999)
*********
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. Theresa Cheuk and Peter A. Chapman, editors.
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 * * *