/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000104.MBX C L A S S A C T I O N R E P O R T E R Tuesday, January 4, 2000, Vol. 1, No. 2 Headlines ABLE TELCOM: Abbey, Gardy Files Securities Suit in Georgia ARIZONA STATE: Parents’ Suit Re IDEA to Go Without Joinder of Districts CARIBINER INT’L: Intends to Vigorously Defend Securities Suits in N.Y. CELESTIAL SEASONINGS: Settles Stockholders’ Suit in Colorado DELOITTE & TOUCHE: 5th Cir Sends Retaliation Case to Jury DIASENSOR COM: Faces Securities Lawsuits Filed in Penn. in 1996 DIGITAL ORIGIN: Faces Shareholder Suit in CA Re Splash Common Stock FRUIT OF: Co. Sued over Hazardous Wastes Files for Bankruptcy GENERAL ELECTRIC: Not to Incur Debtor Comptech's Liability As Employer INMATES LITIGATION: Clinton Opposes Appeal of H.I.V. Ruling in Alabama MACY’S: CA Ct Rules for Remedy & Compliance Plan in ADA Suit MEXICO MONEY: Fd Ct Refuses to Lift Stay of Cases Pending RICO Action MONOGRAM CREDIT: Suit Challenges State Bank Status & Export of Rates NAVIGANT CONSULTING: Finkelstein & Krinsk Files Securities Suit in Il. PROTECTION ONE: Press Releases Say Securities Suits Have Been Filed SAFETY COMPONENTS: Finkelstein & Krinsk Files Securities Suit in N.J. US 1: Faces Investigations under CERCLA Re Hazardous Waste Disposal Y2K: The Good, the Bad, the Ugly As the World Reboots Into 21st Century ********* ABLE TELCOM: Abbey, Gardy Files Securities Suit in Georgia ---------------------------------------------------------- The following statement was issued January 3 by the law firm of Abbey, Gardy & Squitieri, LLP: A Class Action has been filed in the United States District Court for the Northern District of Georgia, Atlanta Division, 1 99-CV-3308, on behalf of all persons who purchased Able Telcom ("Able") (Nasdaq: ABTE) or the (Company") common stock from February 24, 1999 through and including December 1, 1999 (the "Class Period"). The Complaint charges Able and certain of its officers with violating the federal securities laws. The plaintiff claims that defendants misrepresented and concealed material facts concerning the Company's operations, misled investors about the reserves established in connection with Able's July 1998 acquisition of MFS Network Technologies and overstated the Company 's income in its 1999 quarterly financial results. Contact: Nicholas H. Gilbo, Esq., Abbey, Gardy & Squitieri, LLP, 212 East 39th Street, New York, New York 10016, TELEPHONE: 800-889-3701 or 212-889-3700, FAX: 212-684-5191, E-MAIL: ngilbo@a-g-s.com ARIZONA STATE: Parents’ Suit Re IDEA to Go Without Joinder of Districts ----------------------------------------------------------------------- A class action against state entities arising from their alleged failure to implement an IDEA-compliant complaint resolution procedure can proceed without joinder of individual districts, a district court ruled. Dunajski by Dunajski v. Keegan, 31 IDELR 76 (D. Ariz. 1999). The parents, representing a class of all school-aged students with known or suspected disabilities and their parents, guardians and/or representatives, alleged that the state of Arizona, through its department of education, failed to implement an adequate complaint resolution procedure in compliance with the IDEA. They charged that while the DOE's complaint resolution procedure facially satisfied the state and federal requirements, the system as implemented failed to meet those requirements and assure FAPE. More specifically, they alleged that complainants were not allowed the opportunity to submit additional information before the DOE reached a final conclusion, failed to ensure identified violations were corrected in a timely manner and failed to award compensatory education to students against whom violations were found to exist. The DOE contended that the four individual school districts where the named plaintiffs attended school were parties who should be joined under Fed.R.Civ.P. 19(a) or, alternatively, that the parents should be made to join the school districts as defendants. The DOE argued that under the rule, complete relief could not be granted in the absence of the individual districts, since any order directing them to force districts to comply with the law would require an additional order requiring compliance by the districts themselves. The parents asserted the litigation challenged the DOE's supervisory authority over the LEAs, regardless of any school district responsibility. Because the named defendants bore ultimate responsibility for assuring compliance with IDEA requirements, the district court ruled the districts did not have to be joined in order to accord complete relief among the existing parties. The court further found any interests held by the districts would not be impaired or impeded by case adjudication in their absence. The court rejected the DOE's argument that its responsibilities under the IDEA were so intertwined with district responsibilities that the court would be unable to provide a meaningful remedy. Any relief granted would not alter the existing duties of the various districts. The court did not reach the parents' alternate argument that joinder was not proper because class actions are generally exempt from the requirements of Rule 19(a). (The Special Educator December 21, 1999) CARIBINER INT’L: Intends to Vigorously Defend Securities Suits in N.Y. -----------------------------------------------------------------------On March 25, 1999, a purported shareholder class action was filed in the United States District Court for the Southern District of New York (the "Southern District") against the Company and certain of its current and former officers and one of its directors. On May 7, 1999, a purported shareholder class action substantially identical to the March 25th action was filed in the Southern District against the Company and the same individuals named in the March 25th action. Both lawsuits allege, among other things, that defendants misrepresented the Company's ability to integrate various companies it was acquiring and alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and various rules promulgated thereunder. The lawsuits seek unspecified money damages, plus costs and expenses, including attorneys' fees and expert fees. The Company believes it has meritorious defenses to this action and intends to defend the lawsuit vigorously. In November, 1999, the court issued an order consolidating the lawsuits into a single action and appointing lead plaintiffs and by the plaintiffs lead counsel. It is anticipated that an amended consolidated complaint will be filed in early 2000. CELESTIAL SEASONINGS: Settles Stockholders’ Suit in Colorado ------------------------------------------------------------ On May 5, 1995, a purported stockholder of the Company filed a lawsuit, Schwartz v. Celestial Seasonings, Inc. et al., in the United States District Court for the District of Colorado (Civil Action Number: 95-K-1045), in connection with disclosures by the Company concerning the Company's license agreement with Perrier Group of America, Inc. which was terminated on January 1, 1995. In addition to the Company, the complaint names as defendants certain of the Company's present and former directors and officers, PaineWebber, Inc., Shearson/Lehman Brothers, Inc., and Vestar/Celestial Investment Limited Partnership. The complaint, which was pled as a class action on behalf of persons who acquired the Company's common stock from July 12, 1993 through May 18, 1994, sought money damages from the Company and the other defendants for the class in the amount of their loss on their investment in the Company's common stock, punitive damages, costs and expenses of the action, and such other relief as the court may order. On November 6, 1995, the federal district court granted a motion by the Company and the other defendants to dismiss the case. On September 5, 1997, however, the court of appeals reversed the decision of the district court and returned the case to the district court for further proceedings. The case has been certified as a class action. On November 4, 1999, the Company reached a settlement with the plaintiff. As a result, the Company took a charge to earnings of $1.2 million during the fourth quarter of 1999. The settlement is subject to completion of a definitive settlement stipulation to be filed in the district court, court approval of the settlement and finalization of court proceedings. The Company anticipates that the settlement will be finalized in the spring of 2000. DELOITTE & TOUCHE: 5th Cir Sends Retaliation Case to Jury --------------------------------------------------------- Some employee complaints are obviously frivolous; others are well meaning but no more meritorious. But a complaint's apparent merit or lack thereof should not affect whether or how quickly the response should be. There are cases in which an employee who failed to prove discrimination was still able to prove that he or she was retaliated against because the employer failed to promptly and/or effectively respond to a discrimination complaint, whether legitimate or not. Facts Johnnie Shackelford, an African-American female, worked as a tax processor for Deloitte & Touche LLP (D&T) from July 1, 1991, until her termination on October 13, 1995. She was responsible for preparing income tax returns, attaching filing instructions, ensuring that clients received necessary documentation, and filing income tax returns on a backup basis. Her immediate supervisor was Caroline Korioth, the administrative supervisor and secretary to one of D&T's tax partners. Korioth reported to Robert Chapman, the partner who headed the company's tax department. In May 1995, a class action lawsuit alleging company-wide race discrimination was filed in federal court against D&T. Shackelford was the only potential class member in the tax department. In accordance with a court order, the company's human resources director, Culver Wilson, read her a statement about discrimination and asked whether she had ever experienced discrimination while working for D&T. Shackelford told Wilson that she had experienced mistreatment by Korioth. She then asked for a meeting with Chapman and Wilson to discuss the alleged mistreatment. The following day, Shackelford received two negative performance evaluations. Chapman's evaluation indicated that she was "below requirements" in her ability to work with others and in her demeanor and flexibility. Korioth's evaluation indicated that she was "below requirements" in resolving interpersonal disputes, discussing and meeting deadlines, and handling stress. Although both evaluations were dated July 18, 1995, Shackelford did not receive them until August 25, the day after Wilson read her the statement about the class action discrimination lawsuit. On that day, Korioth also attached an addendum to Shackelford's performance evaluation stating that her performance had improved since July. Until then, her performance evaluations had been primarily positive; she had received the "Employee of the Month Award" in April 1995. According to Shackelford, Korioth's criticism of her ability to resolve interpersonal disputes arose from her complaint to Korioth about a Caucasian co-worker, Lisa Stevens. Korioth had also received a complaint from Stevens about Shackelford, but Stevens' ability to resolve interpersonal disputes was not criticized on her performance evaluation. On September 15, Shackelford once again requested a meeting with Wilson and Chapman to discuss her relationship with Korioth. Wilson replied that he would be out of the office for 10 days, but that she could wait for his return or meet with Korioth alone. According to Wilson, he didn't hear anything further from Shackelford about the meeting. Apparently, Wilson also failed to follow up with Shackelford upon his return. On October 6, Shackelford was listed as a potential witness in the class action lawsuit. The following week, she removed several income tax returns from the in/out box. D&T's practice was to leave surplus returns in the box so that other staff could work on them, and Shackelford was aware of this practice. Korioth reminded her that penalties would accrue if the returns were not completed and filed before the October 15 deadline. Shackelford stated that the returns were "90 percent done." In fact, the returns were timely completed and filed, but Korioth criticized her for not being a "team player." Korioth and Shackelford offered conflicting stories about whether Shackelford previously had difficulty meeting deadlines and whether she ever requested or refused assistance with the returns at issue in that regard. On October 12, Shackelford contacted Wilson again to arrange a meeting with him and Chapman. According to D&T, Korioth informed Wilson on October 13 about her exchange with Shackelford concerning the completion of surplus income tax returns, and the company decided to terminate Shackelford that same day. But Shackelford claimed that Korioth overheard her conversation with legal counsel for the class action lawsuit on October 13 before she was terminated. Shackelford sued D&T, alleging that it discriminated against her on the basis of her race in violation of Title VII of the Civil Rights Act of 1964 by, among other things, issuing unfair performance evaluations and firing her. She also alleged that the company retaliated against her in violation of Title VII by firing her because she complained of discrimination. The company claimed that she was terminated because of her inability to get along with co-workers and handle her workload. The federal district court granted D&T's request to dismiss her lawsuit. She then asked the U.S. Fifth Circuit Court of Appeals in New Orleans to review her case. Court's Decision The court of appeals found that Shackelford failed to offer sufficient evidence of race discrimination. But the court said her failure to show she was fired because of her race did not necessarily preclude her from showing she was fired for complaining of race discrimination. To establish a claim of retaliation under Title VII, she had to show that: * she engaged in activity protected by Title VII; * an adverse employment action occurred; and * there was a causal connection between her participation in the protected activity and the adverse employment action. D&T then had to show Shackelford was terminated for a legitimate, nondiscriminatory reason. To rebut that reason, Shackelford had to show it was false and that her termination was in retaliation for complaining of race discrimination, whether or not it actually occurred. D&T presented a legitimate, nondiscriminatory reason for firing Shackelford: her inability to get along with co-workers and manage her workload. But she argued that the close timing between her race discrimination complaint and her termination showed the company's retaliatory motive. She was fired on October 13, the same day Korioth allegedly overheard her talking on the phone with counsel for the class action lawsuit. Additionally, her termination occurred the day after she tried to arrange a meeting with Wilson and Chapman to discuss what she perceived as race discrimination. Her termination also occurred one week after she was identified as a potential witness in the class action lawsuit. Finally, after four years of favorable performance reviews, Shackelford received her first negative performance evaluation in August 1995, shortly after the class action lawsuit against D&T was filed. The court said that D&T needed to offer an explanation for the timing of Shackelford's termination because of the "tight temporal proximity" (i.e., timing) at issue in the case. Korioth explained that she contacted Chapman on October 13, the morning after observing Shackelford's poor performance (i.e., hoarding work) during the busy October season. Korioth also claimed that Shackelford had exhibited similar performance in September and that she counseled her about her poor work practice. According to Korioth, she recommended on October 13 that Shackelford be terminated after the October 15 deadline. Chapman explained his immediate reaction (i.e., firing her before the October 15 deadline) by stating that "if we were going to terminate somebody, we were going to do it now as opposed to later." Shackelford countered D&T's explanation by alleging that she requested assistance with the surplus returns on October 12, 1995, but did not receive that assistance in a timely fashion. According to Shackelford, it was then too late in the day for anyone to assist her and she had substantially completed the income tax returns. She also disputed that she had previously hoarded work, as the company alleged, and D&T apparently offered no evidence that she had been counseled on that issue. Shackelford contended that other employees warned her not to get involved in the class action lawsuit if she wanted to keep her job. Finally, she reminded the court that Stevens (the Caucasian co-worker) wasn't given a negative performance evaluation concerning interpersonal skills although she was involved in the same incident for which Shackelford was criticized. The court concluded that the "totality of this evidence" was sufficient to question the reason offered by D&T for her termination. The evidence offered by Shackelford, said the court, could support the inference that the company did not believe her performance was poor, but instead terminated her in retaliation for complaining of discrimination. The court noted that the suspicious timing of her termination in combination "with other significant evidence of pretext" was sufficient to reverse the district court's dismissal of her retaliation claim. Therefore, the court reinstated her retaliation claim and sent the case back to the district court for a trial in which she'll have the opportunity to convince a jury of her peers that her former employer retaliated against her for complaining about alleged discrimination. Johnnie Shackelford v. Deloitte & Touche, L.L.P., 190 F.3d 398 (5th Cir. 10/4/99). Bottom Line The problem for the employer in this case was not just the timing of the employee's termination (i.e., on the heels of her race discrimination complaint), but also the fact that it didn't have sufficient evidence to back up the legitimate, nondiscriminatory reason it offered for her termination. Had the employer been able to demonstrate that the employee was previously counseled for her poor performance and failed to improve, the court may not have found Shackelford's evidence (the timing of her discharge) sufficient to overcome the employer's reason for her termination. Moreover, the employee requested meetings with management to discuss the perceived discrimination on at least three occasions. Although she might not have had a legitimate complaint of discrimination, the employer offered no evidence that it promptly or effectively responded to her requests. This case emphasizes that procedures to promptly and effectively address employee complaints should be established and consistently followed (whether or not they are perceived valid) and any discrimination that has occurred should be remedied. The results of the investigation and the action, if any, to be taken to resolve employee complaints should be explained to the employee, even when there's no evidence to support a complaint or the investigation is inconclusive. Additionally, employees should be reassured that they will not be retaliated against for complaining of discrimination and that they should immediately report any such activity. Finally, all complaints of discrimination should be treated seriously and equally and in accordance with consistently applied policies and procedures. A written antidiscrimination policy serves no purpose if action is not taken promptly when a complaint is presented under the policy. (Louisiana Employment Law Letter December, 1999) DIASENSOR COM: Faces Securities Lawsuits Filed in Penn. in 1996 --------------------------------------------------------------- In April 1996, the Pennsylvania Securities Commission commenced a private investigation into Diasensor.com's sales of its common stock pursuant to its public offering in an effort to determine whether any sales were made improperly to Pennsylvania residents. The Company says it has been cooperating fully with the state and has provided all of the information requested. As of the date of its filing with the SEC, no determinations had been made, and no orders have been issued. In May 1996, the Company, along with BICO and BICO's individual directors, including David Purdy and Fred Cooper, who are also officers and directors of Diasensor.com, was served with a federal class action lawsuit based on alleged misrepresentations and violations of federal securities laws. The action is pending in federal district court for the Western District of Pennsylvania, and remains in the pre-trial pleadings stage with the consent of all parties. No determinations as to possible liability or exposure are possible at this time, although the Company does not believe that any violations of the securities laws have occurred. In April 1998, the Company was served with a subpoena requesting documents in connection with an investigation by the U.S. Attorneys' office for the Western District of Pennsylvania. The Company has submitted various scientific, financial and contractual documents in response to such requests. DIGITAL ORIGIN: Faces Shareholder Suit in CA Re Splash Common Stock ------------------------------------------------------------------- On January 13, 1999 and January 28, 1999, Digital Origin Inc. and one of its former directors, Charles Berger, were named as defendants in two shareholder class action lawsuits against Splash Technology Holdings, Inc. ("Splash"), various directors and executives of Splash and certain selling shareholders of Splash. The suits were filed in the United States District Court in Northern District of California and have been consolidated and captioned IN RE SPLASH TECHNOLOGY HOLDINGS INC. SECURITIES LITIGATION (Master File No. C99-0109 SBA). The law firm of Milberg Weiss Bershad Hynes & Lerach LLP has been designated lead counsel for the eight lead plaintiffs. The lawsuit alleges, among other things, that the defendants made or were responsible for material misstatements, and failed to disclose information concerning Splash's business, finances and future business prospects in order to artificially inflate the price of Splash common stock. The complaint does not identify any statements alleged to have been made by Charles Berger or the Company. The complaint further alleges that the Company engaged in a scheme to artificially inflate the price of Splash common stock to reap an artificially large return on the sale of the common stock in order to pay off its debt. The Company and the former director vigorously deny all allegations of wrongdoing and intend to aggressively defend themselves in these matters. Defendants’ initial motion to dismiss the action was granted with leave to amend and an amended complaint has been filed by plaintiffs. FRUIT OF: Co. Sued over Hazardous Wastes Files for Bankruptcy ------------------------------------------------------------- If you have an interest in the billion-dollar chapter 11 cases filed by Fruit of the Loom, Inc., and its thirty-some U.S. debtor-affiliates in Wilmington, Delaware, this past week, a free copy of the first issue of FRUIT OF THE LOOM BANKRUPTCY NEWS is available at no charge at http://www.bankrupt.com/fruit.txt GENERAL ELECTRIC: Not to Incur Debtor Comptech’s Liability As Employer ---------------------------------------------------------------------- Pearson v. Component Technology Corp., PICS Case No. 99-2375 (W.D. Pa. Dec. 16, 1999) Cohill, S.J. (38 pages) Although a secured creditor may incur liability as an employer under the WARN Act when its debtor fails to provide notice before closing a plant, a secured creditor does not incur such liability where the debtor did not function as the alter ego or instrumentality of the secured creditor or where the secured creditor did not exercise direct control over the debtor. Motion for summary judgment granted. Defendant Component Technology Corporation (Comp-tech) closed its plastics plant without giving its employees the notice required under the Worker Adjustment Retraining Notification Act (WARN Act). Plaintiffs, employees of bankrupt Comptech, brought a class action seeking to recover the back pay and benefits to which the WARN Act entitled them from Comptech's secured creditor, defendant General Electric Capital Corporation (GE). Plaintiffs argued that GE was liable as an "employer" under the act and moved for partial summary judgment on the issue of liability. Contending that it was not an "employer" under WARN, GE also moved for summary judgment. The district court granted GE's motion. Agreeing with decisions of the Eighth and Ninth Circuit courts, the court ruled that the WARN Act's obligations can attach to a secured creditor and that there is a point at which a secured creditor's actions can exhibit such a high degree of control over the debtor corporation that the creditor assumes the overall management of debtor's business. The court, however, rejected each theory that plaintiffs advanced to prove that GE exercised such control over Comptech. Relying on Board of Trustees of Trucking Employees v. Centra, 983 F.2d 495 (3d Cir. 1992), plaintiffs argued that GE was directly liable as a matter of law because it possessed an unconditional right to vote Comptech's stock as of the date on which GE gained a "bring along call" on the stock of Comptech's president and thus controlled the company. However, Trucking Employees merely held that an entity that holds stock options constructively owns the stock for ERISA purposes, the court noted. Therefore, Trucking Employees was not controlling law on the question of whether a lender that holds stock or stock options as security for its loans controls the borrower so as to incur liability as a WARN Act employer. The court also rejected other attempts to attach employer liability to GE. The court held that there was no evidence of a parent-subsidiary relationship between GE and Comptech, and the court found that plaintiffs had not proven that GE took total and actual control over Comptech so that Comptech functioned as GE's alter ego or instrumentality. The court found that each instance that plaintiffs cited was consistent with the control a lender is entitled to exercise to secure a multi-million dollar loan. Finally, the court rejected plaintiff's contentions that GE was directly liable as an employer under WARN because it effectively made the decision to close the plant by refusing to extend credit to Comptech, because it controlled Comptech as a business enterprise, and because it acted in ways that are inconsistent with the conduct of a secured lender. The court reitierated its previous conclusion that the restrictions found in GE's loan agreement with Comptech did not constitute evidence that GE controlled Comptech's business activities, but instead represented legitimate steps taken by a lender to secure its investment. (The Legal Intelligencer January 03, 2000) INMATES LITIGATION: Clinton Opposes Appeal of H.I.V. Ruling in Alabama ---------------------------------------------------------------------- The Clinton administration has urged the Supreme Court not to hear an appeal in a discrimination case brought on behalf of hundreds of H.I.V.-positive prisoners in the Alabama prison system, where all inmates with the virus that causes AIDS are barred from educational and recreational programs and even from religious services where they might mix with the general prison population. If the court takes the administration's advice, it will leave intact a sweeping ruling that bars these inmates from more than 70 programs available to other prisoners, including work-release programs that can shorten their incarceration. The justices will decide this month whether to hear the appeal in the closely watched, nearly 15-year-old case, which presents the question of how to assess whether a disability is a "significant risk" to others that cannot be eliminated by the "reasonable accommodation" ordinarily required under federal laws that prohibit discrimination on the basis of disability. A federal appeals court ruled last year that the categorical exclusion of the H.I.V.-infected inmates from prison programs did not violate the Rehabilitation Act of 1973, given the fatal nature of AIDS and the prospect that prisoners could transmit the virus to one another. The administration told the court that, although the appeals court might have ruled too broadly, its approach was generally correct and its decision should not be reviewed. The United States Court of Appeals for the 11th Circuit, in its 8-to-3 ruling last April, said, "When the adverse event is the contraction of a fatal disease, the risk of transmission can be significant even if the probability of transmission is low," adding, "death itself makes the risk significant." The Americans with Disabilities Act of 1990, enacted after the Alabama lawsuit was filed, incorporated the same "significant risk" defense against a discrimination charge. A coalition made up of public health organizations and AIDS specialists is supporting the appeal by the Alabama prisoners, arguing that the circuit court relied on "subjective fear and stigma" rather than the objective, scientific risk assessment that the Supreme Court insisted on in a 1998 ruling that was its first look at AIDS in the context of federal disability law. In that case, a suit by an H.I.V.-positive woman against a dentist who refused to treat her in his office, the court said the assessment of "significant risk" should be made in light of the views of public health authorities, based on "objective, scientific information." The brief for the coalition, filed by the Lambda Legal Defense and Education Fund, a gay advocacy group in New York, said the appeals courts had ignored the 1998 ruling by relying on a theoretical risk of transmission without regard to the particular circumstances. That approach, the brief said, "threatens to justify virtually any discrimination against persons with H.I.V. in employment, health care, education, and every other aspect of community life." Alabama, Mississippi and South Carolina automatically segregate H.I.V.-positive inmates. The federal prison system, like those of most states, evaluates inmates individually and decides, on the basis of their history and psychological profile, whether to exclude them from particular activities. The administration filed its brief in response to a request from the court for the federal government's views. The appeals court's ruling "may well be overbroad," Seth P. Waxman, the solicitor general, told the justices, adding that "the court should have carefully examined the circumstances and effect" of participation of inmates in the programs. The brief said such an examination might have shown that there was no danger in permitting H.I.V.-positive inmates to participate in such activities as religious services, data processing classes, and testing for high school equivalency diplomas. Nonetheless, the brief said, there was no need for the court to take the case because the appeals court's opinion, even if questionable in the particulars, was generally correct in deferring to Alabama prison officials the assessment of the risk presented by "the violence that is an inescapable part of prison life." The solicitor general said the case presented the question of "whether behavior that is concededly high-risk is likely to occur if H.I.V.-positive and non-H.I.V.-positive prisoners are integrated in a number of prison programs." The brief continued: "The answer to that question turns not on medical judgments about the risk inherent in certain behaviors, but on prison management judgments about the ability of prison authorities to control prisoners in various settings and programs." In defending its policy, Alabama points to a much lower rate of H.I.V. transmission in its prison population than in states that do not segregate infected inmates. The state told the court that over eight years, out of 30,000 inmates who did not have H.I.V. when they entered prison, only two became infected while in prison. Their decision on whether to take this case may depend on whether the justices see implications beyond the prison context and on the extent of their concern about whether their ruling in the 1998 dental patient case, Bragdon v. Abbott, had provided sufficient guidance to the lower courts. The current case is called Davis v. Hopper, No. 98-9663. For many years, it was known as the Onishea case, but the lead plaintiff in the class-action lawsuit, Lydia Onishea, is no longer in custody, and another inmate, Arion Davis, was substituted. The inmates, represented by the National Prison Project of the American Civil Liberties Union, have argued that decisions about exclusion or inclusion should be based on individualized assessments of the inmate and the program. (The New York Times January 3, 2000) MACY’S: CA Ct Rules for Remedy & Compliance Plan in ADA Suit ------------------------------------------------------------ certain types of employers must also be sensitive to the regulations in Title III of the ADA, which applies to "places of public accommodation." As shown below, retail and other employers whose services are available to the public must ensure not only that reasonable accommodation is afforded to applicants and employees, but also that the facilities are accessible to the public. The process is similar. For example, a retailer must review its current accessibility and assess how it can provide access through "alternative methods." Facts In the first ADA class action to target a retailer, a class of persons with mobility disabilities alleged that Macy's Union Square store in San Francisco contained numerous barriers, making it and its merchandise inaccessible to persons with disabilities. The claim, which was filed in the Northern District of California, alleged that Macy's failed to comply with Title III of the ADA and its Access Guidelines (ADAAG) with respect to merchandise sales counters, fitting rooms, restrooms, entrances, signage, public telephones, and main and secondary aisles. During the trial, Macy's admitted many of the ADA violations. The most contested issue concerned the width of aisles between merchandise display units and the placement of display units in the aisles. The disabled persons alleged that Macy's spacing and layout made it difficult or impossible for persons with disabilities to access merchandise. One of the disabled persons gave an in-court demonstration of how impossible it was to maneuver within Macy's aisles in a wheelchair. The judge apparently then asked, "Is this the point at which you leave Macy's and go over to Nordstrom's?" 'Readily Achievable' Standard As a "place of public accommodation," Macy's, like other large retailers, is subject to Title III of the ADA, which provides that "[n]o individual shall be discriminated against on the basis of disability" and defines discrimination as "failure to remove barriers . . . where such removal is readily achievable." "Readily achievable" means "as easily accomplishable and able to be carried out without much difficulty or expense," considering various factors, including the overall financial resources of the entity and/or any parent corporation and the effect on operations. Examples of readily achievable barrier removal include rearrangement of temporary or movable structures, such as furniture, equipment, or display racks. If barrier removal is not readily achievable, then retailers must provide access to merchandise through "alternate methods." 'Accessible Route' Standard The ADAAG requires retailers to provide an "accessible route" of at least 36 inches to self-service display units. Macy's conceded that the Union Square store provides only 24 to 30 inches of clear space between its merchandise display units. The store contended that its selling strategy is to place all inventory on the floor when it arrives and to leave it out until it sells. Due to the large volume of merchandise, the display units are placed close together to maximize sales. In addition, it admitted that it selects display units based on how they "look" to the customer rather than space efficiency. Hardship Defense None of Macy's attempted defenses were successful. Retailers have a "hardship" defense: If the retailer can demonstrate that removal of barriers causes significant loss of selling or serving space, then the removal is not "readily achievable." Macy's claimed that 15 to 25 percent of its display units would have to be removed just to provide a 30-inch clear space and that the reduction of merchandise displayed on the floor would have an equivalent effect on sales. The court handily rejected Macy's defense, finding the opinions of its in-house "lay witnesses" speculative and unreliable. It found that Macy's did not present any evidence that it had even attempted to rearrange display units, much less any expert opinion as to lost sales. Court's Decision Like the ADA regulations governing employment that require an employer to assess the functions of an employee's job and determine what accommodations might be provided, Title III requires a retailer to review its current accessibility and assess how removing barriers or providing access through alternate methods would affect its operations. The court found that Macy's had not made any effort to review access to its display areas nor to assess the feasibility of alternate methods that would improve access. The court noted with approval "alternate methods" used by Nordstrom, a competitor of Macy's, that provide better access without significant burden, such as more stock rooms, transferring merchandise to other stores, using clearance centers, and more careful planning. Additional customer service to retrieve inaccessible merchandise is another "alternate method" to barrier removal permitted by the regulations. Macy's claimed it provides customer service to the extent it fails to provide actual physical access. The court rejected that defense, finding that the store had no personnel designated to provide such customer service, no training program for sales clerks, and no procedures to ensure disabled shoppers actually received assistance. Having found Macy's liable for most of the ADA violations alleged, the court required it to remedy the violations and to work with the disabled persons to develop a compliance plan. In addition, the store must designate a person to review accessibility within displays on an ongoing basis to ensure customers with disabilities have effective access. The damages phase of the trial has yet to be scheduled. Bottom Line Two other class actions targeting 80 Macy's stores in California are pending. Disability advocates are hailing this decision as a major victory and vow that more lawsuits in other states will follow. Although this is a California case, the regulations at issue also govern Indiana retailers. Retail employers should note the deficiencies in Macy's practices that could have alleviated liability if properly cared for: failing to design and implement a training program for sales clerks about the needs of disabled customers and failing to designate personnel to study and assess accessibility issues on an ongoing basis. (Indiana Employment Law Letter December, 1999) MEXICO MONEY: Fd Ct Refuses to Lift Stay of Cases Pending RICO Action --------------------------------------------------------------------- The U.S. District Court for the Northern District of Illinois refused to lift a preliminary injunction to stay pending state and federal actions while the court considered a proposed class action settlement in a RICO case. The RICO action involved a class of approximately 5 million persons nationwide who had allegedly been defrauded by undisclosed fees for wire transfers of money. (In re Mexico Money Transfer Litigation, Nos. 98 C 2407, 98 C 2408 (N.D. Ill. 10/19/99).) In this class action, the plaintiffs alleged that MoneyGram Payment, Western Union Financial Services Inc. and other defendants violated RICO by illegally collecting undisclosed fees for wire transfers of money from the United States to Mexico. (Other allegations included breach of written contracts, misrepresentation, conversion, unjust enrichment and discrimination based on national origin.) After successful negotiations between the parties, the District Court granted preliminary approval to a proposed settlement and class certification. The court also temporarily enjoined parallel state and federal lawsuits, including seven class action lawsuits already pending in courts across the country. Plaintiffs in two pending California state court actions intervened and sought to lift the injunction staying their cases. (These cases had been dismissed without prejudice by federal courts for failure to adequately plead their federal claims. They could be amended and refiled, if the parties so desired.) A group of California elected officials, community leaders and other organizations filed amici briefs arguing that California courts were in a better position to protect California citizens from violations of California law. (Civil RICO Report December 23, 1999) MONOGRAM CREDIT: Suit Challenges State Bank Status & Export of Rates -------------------------------------------------------------------- A class action against a GE Capital subsidiary challenges the way the Federal Deposit Insurance Corp. defines a "state bank" and may jeopardize the ability of credit card banks to impose their rates and fees on customers outside their home states. The plaintiffs, led by consumer Patricia Heaton, are arguing that Monogram Credit Card Bank of Georgia violated state usury law by exporting its interest rates and late fees to customers in Louisiana. The suit alleges the GE Capital unit, which holds a state charter in Georgia, does not fit the definition of a state bank laid out in the Federal Deposit Insurance Act and is therefore not entitled to export its rates and fees across state lines. FDIC officials said they consider the lawsuit groundless. FDIC General Counsel William Kroener took issue with a judge's finding that Monogram is not a state bank in a recent speech to the Federal Bar Association, saying, "If it stands, there are likely to be class-action suits against a lot of credit card banks." The crux of the plaintiff's argument is the assertion that the FDIC made a mistake when it determined that Monogram, which services store credit cards for retailers, is a state bank and therefore eligible for deposit insurance. According to the Federal Deposit Insurance Act, a "state bank" must be "engaged in the business of receiving deposits." Monogram receives deposits from only two sources, both of which are units of its parent company. U.S. District Court Judge Carl J. Barbier found the plaintiffs' claim persuasive enough to remand the case in late November to a state court for a decision on the bank's status. "Because case law appears silent on this precise point, the court relies upon a reading of the plain language of the statute and concludes that, although Monogram receives 'deposits' from its parent company, it is not engaged in the ' business of receiving deposits' from its customers. Accordingly, under the plain language of the statute, Monogram is not a 'state bank,' " the judge wrote. According to an FDIC motion to intervene filed in U.S. District Court in New Orleans, the suit threatens the interests not only of Monogram but also of "hundreds of institutions." "A decision adverse to Monogram may literally open the floodgates of litigation and deluge the institutions regulated by the FDIC with a torrent of similarly frivolous suits," the agency wrote. In an interview, FDIC Deputy General Counsel Douglas Jones said the agency has examined the question of whether institutions with a small number of depositors can rightly be considered state banks under the law. "The conclusion has always been that limited deposits, whether they are from affiliates or employees, have been sufficient to qualify a bank as being in the business of receiving deposits," he said. Still, the FDIC is considering an amendment to its policies that would specifically allow banks with as little as one depositor to be considered "in the business of receiving deposits." The proposal was to have been considered by the agency's board on Dec. 14 but was withdrawn from the agenda at the last minute. FDIC officials refused to discuss the proposal, why it was withdrawn, or whether it would be presented at a future board meeting. Monogram's lawyers appealed the ruling to the Fifth U.S. Circuit Court of Appeals on Dec. 13. In a statement, a spokesman for the bank said, "GE Capital believes the decision is clearly wrong on the law, and the FDIC agrees with our position." Louis L. Plotkin of the New Orleans firm Gertler, Gertler, Vincent & Plotkin represented the plaintiff, Ms. Heaton. "We believe that the judge was correct in the ruling, and we believe the ruling will be vindicated on appeal," he said. The appeals court is not expected to act on the appeal for months. (The American Banker January 3, 2000) NAVIGANT CONSULTING: Finkelstein & Krinsk Files Securities Suit in Il. ---------------------------------------------------------------------- An announcement on December 31, 1999 says that Navigant Consulting, Inc. (NYSE: NCI) is accused in a class action lawsuit filed by Finkelstein & Krinsk of violating the federal securities laws by misrepresenting the Company's true business condition in order to inflate the price of the Company's stock. According to the Complaint, the Company and its controlling insiders issued a series of false and misleading statements to the market or omissions to disclose facts regarding, amongst other things, that the Company and certain of its insiders participate in a scheme to improperly obtain large loans from the Company and thereafter used these funds to purchase NCI stock, artificially inflate the value of the stock and, in at least one case, repaid such loans by using a large portion of NCI holdings. Additionally, the Complaint alleges that the Company misrepresented its financial results for the first three quarters of 1999 by using improper accounting methods to artificially inflate both the Company's earnings and growth rate. Defendants' statements and conduct were improper and caused the Company's stock to trade at artificially inflated levels during the Class Period (May 6, 1999 - November 23, 1999). When the truth about defendants' misrepresentations and omissions became known to investors, the price of NCI stock dropped dramatically from Class Period prices of over $53 per share to less than $10 per share. The Complaint particularizes plaintiff's allegations of how the Company's management violated the Securities Exchange Act of 1934, and specifies the Company's false statements and omitted material facts. The Complaint has been filed in United States District Court for the Northern District of Illinois and represents a class comprised of all individual and institutional investors for the pertinent time period. Contact: Jeffrey R. Krinsk at Finkelstein & Krinsk, the Koll Center, 501 West Broadway, Suite 1250, San Diego, CA 92101 by calling toll free 877-493-5366 or E-Mail - fk@class-action-law.com or fax 619-238-5425. PROTECTION ONE: Press Releases Say Securities Suits Have Been Filed ------------------------------------------------------------------- Public releases say that purported class action lawsuits have been filed against Protection One Inc. and certain of its officers and directors alleging violations of federal securities laws arising from the Company’s public announcement that it has decided to restate its financial statements for the year ended December 31, 1997 and each of the first three quarters of 1998. The Company says it has not been served with process and, therefore, cannot provide more details with respect to these or any other claims alleged in these actions. SAFETY COMPONENTS: Finkelstein & Krinsk Files Securities Suit in N.J. --------------------------------------------------------------------- Safety Components International, Inc. (NASDAQ:ABAG) is accused in a class action lawsuit filed by Finkelstein & Krinsk of violating the federal securities laws by misrepresenting the Company's true business condition in order to inflate the price of the Company's stock. According to the Complaint, the Company and its controlling insiders issued a series of false and misleading statements to the market or omissions to disclose facts regarding, amongst other things, the nature of the Company's operations and financial statements. Defendants' statements and conduct were improper and caused the Company's stock to trade at artificially inflated levels during the Class Period (August 14, 1997 - November 9, 1999). The Complaint has been filed in United States District Court for the District of New Jersey and represents a class comprised of all individual and institutional investors for the pertinent time period. Contact: Jeffrey R. Krinsk at Finkelstein & Krinsk, the Koll Center, 501 West Broadway, Suite 1250, San Diego, CA 92101 by calling toll free 877-493-5366 or E-Mail - fk@class-action-law.com or fax 619-238-5425. US 1: Faces Investigations under CERCLA Re Hazardous Waste Disposal ------------------------------------------------------------------- Certain present and former operating sites, or portions thereof, currently or previously owned and/or leased by current or former operating units of US 1 Industries Inc. are the subject of investigations, monitoring or remediation under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA" or "superfund"), the federal Resource Conservation and Recovery Act or comparable state statutes or agreements with third parties. These proceedings are in various stages ranging from initial investigations to active settlement negotiations to implementation of the clean-up or remediation of sites. A number of present and former operating units of the Company have been named as Potentially Responsible Parties ("PRPs") at 20 Superfund sites under CERCLA or comparable state statutes in a number of federal and state proceedings. In each of these matters the operating unit of the Company is working with the governmental agencies involved and other PRPs to address environmental claims in a responsible and appropriate manner. Under CERCLA and other similar statutes, any generator of hazardous waste sent to a hazardous waste disposal site is potentially responsible for the clean-up, remediation and response costs required for such site in the event the site is not properly closed by its owner or operator, irrespective of the amount of waste which the generator sent to the site. No information currently available reasonably suggests that projected expenditures associated with these proceedings, whether for any single site or for those in the aggregate, will have a material adverse effect on the Company's financial condition, results of operations or cash flows. Y2K: The Good, the Bad, the Ugly As the World Reboots Into 21st Century ----------------------------------------------------------------------- Power plants and warheads passed the Y2K test at midnight New Year's Eve. If the many complex computer systems that are turned on do the same, we can breathe a collective $ 100 billion sigh of relief. But the defeat of the Y2K computer bug would leave a vacuum to be filled by the good and bad consequences. The Good Millions of corporate dollars and many teams of techno-minds will be freed of tedious Y2K patchwork. Just as the end of World War II marked the real dawn of TV, the end of Y2K may be the historic starting line of computers and Web sites that dramatically change lives. An estimated 500,000 specialists who have been diligently fixing Y2K problems will be out of work. But at just the right time. There are 350,000 unfilled technology jobs, and surveys indicate that about 80% of Y2K workers will be retained by their employers. The other 100,000 should find jobs with little retraining. Y2K was the only thing standing in the way of the roaring U.S. economy, which is now three weeks from a record 107-month expansion. You can't even feel sorry for the lawyers. Most Y2K legal fees have already been collected from advising companies on how to make themselves lawsuit-proof, says Randy Lipsitz, who is author of articles on Y2K class-action lawsuits. He has already moved on to Web site and e-commerce law, where "there is a ton of work to do." Nike has joined GTE, Xerox and Unisys in suing property insurance companies for the millions of dollars spent making the day uneventful. The "sue and labor" clause that dates back to 17th century shipping is meant to encourage policyholders to minimize damage ahead of disasters. For example, if a ship breaks down in the path of a hurricane, the insurance company would reimburse the expense of having it towed out of harm's way. Lawyer Bob Carter of McKenna & Cuneo says the majority of the $ 70 billion spent by U.S. businesses is recoverable even if Y2K fears were overblown. Some of the Y2K worry may yet prove justified. "It's the applications deep in the bowels of the average company that will need the remedial work," says John Gantz, chief research officer for information technology company International Data. "Nowhere in the history of computer software maintenance has anybody touched such a large body of code and not induced errors," Y2K consultant Howard Rubin says. "Statistically, more stuff should have happened. Either it was miraculously clean code, or it breaks the entire tradition of software." "My biggest fear," Rubin says, "is that this will unravel as a thousand bee stings." More Bad Consequences Computers are marching toward other confusing dates. Feb. 29 is the first leap day in a turn-of-the-century year since 1600. 2000 will be the first year with 54 business weeks because its 366 days include Jan. 1 on a Saturday and Dec. 31 a Sunday. Such examples go on. Interest rates are headed up if Y2K glitches don't slow the economy. If paranoia is a staple of life, something must fill the void left by Y2K. The public is probably inoculated to other warnings of computer problems. But sunspots, dubbed Sky2K, will peak between now and April. Such flares can have as much energy as 40 billion Hiroshima-size atomic bombs and could cause more havoc to cellular phones and satellite TVs than Y2K. With no signs of a Cold War comeback, the next worldwide paranoia could be biotechnology and other fears of scientists gone mad, says Gerald Celente, editor of Trends Journal. But he's betting on terrorism. "That's an easy one to predict," and it had already risen to No. 1 in the last weeks of 1999 as Y2K fears waned, Celente says. "If they can't stop tons of drugs or millions of (illegal) immigrants from flooding over the border, how are they going to stop suitcase-size weapons of mass destruction?" Celente asks. It won't take much more fear of terrorism to have a dramatic impact on business, which might spend billions of dollars more protecting people and property. Good or bad, the Y2K void is certain to be filled by second-guessing. Resolved: The Year 2000 computer problem was heroically defeated by one of the great feats of government, management and technology. OR Resolved: If 10-year-old VCRs and $ 10 watches still work and countries from Myanmar to Moldova escape unscathed, a half-trillion dollars was squandered. Let the debate begin. On the bad side of Y2K's exit, 10 years from now, there may not be a definitive answer. On the good side, next Dec. 31 we can pretend. At midnight, we'll turn out the lights and worry about the next thing to go bump in the night. (USA Today January 3, 2000) ********* 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. 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