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/raid1/www/Hosts/bankrupt/CAR_Public/000211.MBX C L A S S A C T I O N R E P O R T E R Friday, February 11, 2000, Vol. 2, No. 30 Headlines AA 1420: Estate of Oklahoma Victim in June Crash Sues for Damages ACCESS HEALTH, HBO: DE Ct Remands Case Re Merger for Savings Clause AMERICAN INDUSTRIAL: Wins Securities Suit in TX over Merger with RELPs ANALYTICAL SURVEYS: Cohen, Milstein Files Securities Lawsuit in IN AOL: Colson Hicks Files Suit in Miami for Consumers of Software 5.0 BANK ONE: Elwood S. Simon Files Securities Lawsuit in IL BMC SOFTWARE: Savett Frutkin Files Securities Complaint in TX CHRISTIE'S, SOTHEBY'S: Morris and Morris Files Suit in NY Re Antitrust CITY COLLEGE: CA Case against Students Poses Debate on Website Links COCA-COLA: Papers on Workplace Racial Bias Show Blacks Share Experience COMMERCIAL FINANCIAL: Bondholders Sue Accountant Arthur Andersen in OK CSC CREDIT: Improper Release, Not Mere Risk, Constitutes FCRA Violation DAIMLERCHRYSLER: PA Judge Affirms $58.5 Mil Award in Vent-Burn Case H&R BLOCK: Sp Ct Cites Agency Role in Case over Loan in Tax Preparation H&R BLOCK: Liberty Tax Serivce Files Suit in VA over False Advertising HERBALIFE INT'L: Ct OKs Settlement of Shareholder Suits Re Tender HOLOCAUST VICTIMS: Swiss Bank Pact Draws Fire for Release of Insurers MARCOS: Philippine Rights Victims to Claim Assets If Payout Fails NCAA: PA Suit over Tests for Student Athletes May Go to Supreme Court ONYX ACCEPTANCE: Rabin & Peckel Files Securities Suit in California ROCKY MOUNTAIN: Contests Shareholder Suit in CO over Common Stock Bid STB SYSTEMS: Finkelstein & Krinsk Files Securities Lawsuit in TX SUNSTAR HEALTHCARE: Shepherd & Geller Files Securities Lawsuit in FL TD WATERHOUSE: Dennis J. Johnson Files Securities Lawsuit in NY TOBACCO LITIGATION: Consumers File 3 Suits in NY over Price Fixing ********* AA 1420: Estate of Oklahoma Victim in June Crash Sues for Damages ----------------------------------------------------------------- The estate of an Oklahoma resident killed in the June crash of American Airlines Flight 1420 filed a federal lawsuit on February 9 against the airline, joining about two dozen other plaintiffs. Jeffery Alan Stewart, 33, of Wister, Okla., died June 10 of multiple injuries. The jetliner landed in a thunderstorm June 1 and went off a runway at Little Rock National Airport, where it broke apart and caught fire. In all, 11 people died, including the pilot. The lawsuit, filed by attorney David E. Rapoport of Rosemont, Ill., seeks damages above those allowed by the Warsaw Convention, which prevents international passengers from seeking punitive damages. Other lawsuits have taken a similar tack. The Stewart lawsuit claims that the pilots should have aborted the landing and knowingly took the jet into a dangerous situation. "The defendant acted wantonly in causing the crash, or with such a conscious indifference to the consequences that malice should be inferred," the lawsuit states. It seeks compensatory damages plus punitive damages "to make an example of the defendant and to deter similar conduct by other airlines." Lawyers for the airline have said that the Warsaw Convention provision is well-established under U.S. law. It also says that since there was no malice, punitive damages should not be allowed for either domestic or international passengers. U.S. District Judge Henry Woods previously consolidated a number of the cases and, on Febraury 9, issued an order limiting disclosure of case information deemed confidential. Woods characterized the confidential material as "so proprietary or sensitive" that it should be protected from disclosure. Among other lawsuits filed after the crash, one was filed in Pulaski County Circuit Court in an attempt to work past the Warsaw treaty and allow for punitive damages. American's lawyers have said they would work to have that lawsuit moved to federal court in Arkansas's Eastern District and have it consolidated with the others. Stewart, who was an Air Force mechanic, was on his way to Little Rock Air Force Base at Jacksonville for jet-engine training for military mechanics. He was based at Kadena Air Base on Okinawa Island in Japan and was a member of the 353rd Maintenance Squadron, the Air Force said after the crash. In the consolidated cases, Woods set trial for international passengers for June 19 this year. He set trial for suits from domestic passengers for May 15, 2001. (The Associated Press, February 9, 2000)"the proxy materials clearly and unequivocally disclose all the interests at stake; the Limited Partners were not misled about the General Partners' interest in this transaction." Judge Prado also noted that "the evidence strongly suggests that the Limited partners ratified the roll-up transaction," and he invited AIP to re-urge a Motion for Sanctions. American Industrial Properties REIT is focused on the light industrial property sector, including office showroom, service center and flex properties, low-rise office and small bay distribution buildings. ACCESS HEALTH, HBO: DE Ct Remands Case Re Merger for Savings Clause ------------------------------------------------------------------- The U.S. District Court for the District of Delaware has remanded a securities fraud suit, alleging Access Health Inc. and HBO & Co. distributed false financial information during their merger, because the suit's equitable fraud claim falls under the "savings clause" of the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Derdiger v. Tallman et al., No. 99-670 (D DE, Dec. 9, 1999). In November 1998, Access sent a proxy statement to all its shareholders, informing them of a meeting to vote on a merger agreement between Access and HBO. The agreement provided that Access would merge into an HBO subsidiary, and Access shareholders would receive 1.45 shares of HBO for each Access share. The proxy statement contained financial information about each of the companies, as well as projected information for the combined company. The proxy statement also included the Access directors' recommendation for approval of the merger. On Dec. 10, 1998, the Access shareholders approved the merger. Once the companies completed the merger, Howard Derdiger filed a securities suit on behalf of himself and all other former Access shareholders in Delaware Chancery Court. Derdiger alleged the directors of Access and HBO misrepresented material facts in the proxy statements. Count I of the complaint claimed breach of duty against the directors and the second count claimed HBO knowingly aided and abetted the directors' breach of duty. Two months later, Derdiger amended the complaint to include a third count alleging that HBO committed equitable fraud by making false statements about its financial performance in the proxy statement. HBO removed the action to federal court. Derdiger then moved to remand the case back to the chancery court. Upon review of the matter, the district court noted that Congress enacted SLUSA to make federal court the exclusive venue for most securities class actions and to prevent plaintiffs from evading federal law protection from abusive litigation by filing their actions in state courts. SLUSA also contains a "savings clause," Sec. 78bb(f)(3), which allows certain securities class actions to proceed with state law claims. The district court found the savings clause required the suit to be remanded to the chancery court. Sec. 78bb(f)(3) allows a securities class action based on common law to remain in state court if it involves a recommendation or communication about the sale of securities. Such a communication must be "made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer" and concerns the holders voting their securities, addressing a tender offer, or exercising stockholders' rights. The district court reasoned that the equitable fraud claim involved a communication over the sale of securities on behalf of Access' affiliate HBO in connection to the vote on the merger agreement and therefore fell within the scope of the savings clause. The district court decided to remand the class action to the chancery court. (Corporate Officers and Directors Liability Litigation Reporter, January 10, 2000) AMERICAN INDUSTRIAL: Wins Securities Suit in TX over Merger with RELPs ---------------------------------------------------------------------- American Industrial Properties REIT (NYSE: IND) ("AIP") announced that it has prevailed in a securities class action lawsuit pending in San Antonio, Texas. The lawsuit arose from the January 1998 roll-up merger between AIP and four real estate limited partnerships (USAA "RELPs" I-IV). The plaintiffs alleged that AIP failed to pay adequate consideration for the RELP properties acquired in the merger and that the RELPs' general partners breached their fiduciary duties by agreeing to the terms of the merger. The plaintiffs also contended that the proxy materials issued by AIP and the general partners in connection with the merger were misleading. United States District Judge Edward C. Prado granted AIP's Motion for Summary Judgement. Judge Prado held that the plaintiffs failed to offer admissible evidence to show they had been damaged. He observed that ANALYTICAL SURVEYS: Cohen, Milstein Files Securities Lawsuit in IN ------------------------------------------------------------------ Cohen, Milstein, Hausfeld & Toll, P.L.L.C filed a class action lawsuit in the United States District Court for the Southern District of Indiana on behalf of all persons who purchased the common stock of Analytical Surveys, Inc. during the period of January 25, 1999 and January 27, 2000, inclusive. The Complaint charges Analytical and certain of its senior officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by, among other things, misrepresenting and/or omitting material information. On January 27, 2000, ANLT announced that even after adjusting its fiscal 1999 year end revenue and earnings on December 30, 1999, it might have to restate revenue and earnings for fiscal 1999 due to improper cost-of-completion projections for certain contracts. For further information concerning this lawsuit, please contact Andrew N. Friedman (afriedman@cmht.com ) or Robert Smits (rsmits@cmht.com) of Cohen, Milstein, Hausfeld & Toll, P.L.L.C., 1100 New York Avenue, N.W., Suite 500 West Tower, Washington, D.C. 20005 at 888/240-0775 or 202/408-4600 AOL: Colson Hicks Files Suit in Miami for Consumers of Software 5.0 ------------------------------------------------------------------- The Law Firm of Colson Hicks Eidson filed a class action suit on February 9 in Miami Federal Court against America Online, Inc. (AOL) for unfair business practices and antitrust violations. The suit was filed as a class action brought by Miami residents Juan and Elizabeth Cofino on behalf of an estimated 8 million AOL consumers who have already attempted to install Version 5.0. The suit alleges that subscribers to AOL who install Version 5.0 of AOL's Internet software experience problems after downloading the program. The suit further alleges that the installation of Version 5.0 deliberately interferes with the use of non-AOL communications programs and with connections to non-AOL Internet service providers (ISP), resulting in the calculated and intended prevention and destruction of competition in the ISP industry. Problems resulting from installing Version 5.0 include replacing or modifying critical windows files and communications setting, which makes it virtually impossible to connect to alternative ISPs. Once the program is installed, it makes it harder, if not impossible, to use another ISP. "We feel it is an attempt by AOL, the largest Internet service provider in the world, to monopolize the ISP industry through deceptive tactics," said Mike Eidson, partner at Colson Hicks Eidson, which handles cases in the burgeoning legal arena of emerging technologies. The complaint alleges anti-trust violations, common law state claims and a statutory unfair deceptive trade practice claim. At no time did AOL alert its customers that during the installation process, AOL Version 5.0 would unnecessarily `customize' the host system's communications configuration and settings such as to interfere with any non-AOL software and service the customers might have or have in the future. In addition to downloading Version 5.0, AOL has mailed CDs containing the program to millions of mailboxes across the country as part of AOL's massive bulk-mailing program. Potential customers or even unsuspecting children can cause extreme damage to both the target computer and its existing file. The named Plaintiffs, Mr. and Mrs. Cofino, have been AOL customers for a long time. Shortly after Version 5.0 was made available, they downloaded it from the Internet, primarily because AOL touted its additional features, such as the ease of attaching pictures to email. When they installed it, they were not warned that the software would make major changes to their Windows operating system. In the Cofino's case, the changes caused such havoc that they were unable to restore their system and lost very important personal and financial information. After losing such valuable data as tax returns, health care information and their children's poems and schoolwork, they had to resort to reconfiguring their entire operating system. "The problem is that users who have not yet experienced difficulties may do so when they connect to non-AOL service," added Eidson. "It is not yet clear the extent of the damage brought on by installing Version 5.0; the ultimate consequences of this evolving global dispute are unknown." Contact: The Law Firm of Colson Hicks Eidson, Miami Karen M. Guggenheim Director of Communications & Public Affairs 305/373-5400 x228 BANK ONE: Elwood S. Simon Files Securities Lawsuit in IL -------------------------------------------------------- Elwood S. Simon & Associates, P.C. filed a class action lawsuit in the United States District Court for the Northern District of Illinois, on behalf of all persons who had their shares of First Chicago NBD Corp. exchanged for shares of Bank One Corp. pursuant to the October 2, 1998 merger of First Chicago NBD Corp. and Bank One Corp. The complaint alleges that Bank One Corp. and several officers of the company violated Sections 11, 12 and 15 of the Securities Act of 1933 in connection with the October 2, 1998 merger. According to the complaint, material misrepresentations and omissions in the Registration Statement and Proxy/Prospectus for the merger caused the price of Bank One Corp. common stock to be artificially inflated at the time it was issued to former First Chicago NBD Corp. shareholders in exchange for their First Chicago NBD Corp. common stock. As a result, former First Chicago NBD Corp. shareholders received insufficient value when their First Chicago NBD Corp. common stock was exchanged for Bank One Corp. common stock pursuant to the merger. For matters regarding the above-mentioned lawsuit, please contact Elwood S. Simon, Esq. of Elwood S. Simon & Associates, P.C., telephone at 248/646-9730, fax at 248/248-2335 or e-mail at essassocpc@aol.com or Jan Bartelli, Esq. or Kevin Landau, Esq of Garwin of Bronzaft, Gerstein & Fisher, L.L.P., telephone at 1-888/398-5553 or fax at 212/764-6620 or at lawoffices@gbgf-law.com or gbgf@gbgf-law.com via e-mail. BMC SOFTWARE: Savett Frutkin Files Securities Complaint in TX ------------------------------------------------------------- Savett Frutkin Podell & Ryan, P.C filed a securities class action complaint in the United States District Court for the Southern District of Texas on behalf of a Class of persons who purchased the common stock of BMC Software, Inc. at artificially inflated prices during the period July 29, 1999 through January 4, 2000 and who were damaged thereby. The complaint charges defendants, BMCS and certain of its officers and directors, with violations of the Securities Exchange Act of 1934. The complaint alleges that defendants' false and misleading statements about (1) strong sales of BMCS' existing software products; (2) the successful integration of its acquisitions of Boole & Babbage and New Dimension Software earlier in 1999; (3) strong demand for its mainframe MIPS software, notwithstanding a slowdown in sales of IBM mainframe computers; and (4) the lack of customer deferrals of orders or purchases due to Y2K concerns, resulted in artificially inflated stock prices. Contact: Barbara A. Podell or Robert P. Frutkin of Savett Frutkin Podell & Ryan. P.C. at 215/923- 5400 or 800/993-3233 or via e-mail at sfprpc@op.net CHRISTIE'S, SOTHEBY'S: Morris and Morris Files Suit in NY Re Antitrust ---------------------------------------------------------------------- A class action lawsuit was filed by the law firm of Morris and Morris on February 9 in the U.S. District Court for the Southern District of New York, seeking to pursue remedies under the federal antitrust laws on behalf of a class consisting of all persons who either (a) purchased any items auctioned by Christie's International PLC or Sotheby's Inc. between Jan. 1, 1992 and the present, or (b) sold any items through Christie's or Sotheby's between March 1, 1995 and the present. The class action complaint alleges that Christie's and Sotheby's conspired to fix the commissions (or "premiums") they charged their respective clients, thereby eliminating competition between Christie's and Sotheby's and enabling each to charge higher commissions at the expense of its clients. Specifically, the complaint alleges that on or about Jan. 1, 1992, Christie's and Sotheby's secretly agreed to fix the premiums each charged buyers at identical, noncompetitive levels, and that on or about March 1, 1995, Christie's and Sotheby's further secretly agreed to fix the commissions each charged sellers at identical, noncomptitive levels. The complaint alleges that this conspiracy violated the federal antitrust laws, and seeks treble damages and injunctive relief on behalf of all members of the class as defined above. Plaintiff is represented by the law firm of Morris and Morris. Contact: James A. McShane, Esq. at Morris and Morris by calling toll free 1-800-296-0410, or by e-mail at morrisandmorris@compuserve.com or by fax at 302/426-0406, or by writing Morris and Morris at 1105 North Market Street, Suite 1600, Wilmington, DE 19801. CITY COLLEGE: CA Case against Students Poses Debate on Website Links -------------------------------------------------------------------- The courts are delving into yet another legal question that has arisen in the cyberspace age: If your Web site links to another site, are you liable for the content on that site? A San Francisco professor thinks so. He has sued both the creator of a Web site posting student reviews of his teaching and a student group linking to the site. As has been reported on the CAR, last October, Daniel Curzon Brown filed a class action on behalf of himself and other professors at San Francisco City College. The lawsuit, Curzon Brown v. San Francisco Community College District, 307335, filed in San Francisco Superior Court, seeks an injunction against the posting of defamatory comments on the Teacher Review Web site. The site, created and operated by a former City College student, consists of student critiques of City College professors. A trial date has been set for March 29. But Robert Meyers, a partner at Steinhart & Falconer who is representing Associated Students of City College -- the student group maintains its own Web site that links to Teacher Review -- says the issue of liability by linking is already addressed in current law. "Section 230 of the Communications Decency Act and basic defamation law prevents suing one Web site that links to another alleged to have committed defamation," says Meyers. Otherwise, he adds, any Web site could be sued for the content on any site it links to. James Chadwick, an associate in Gray Cary Ware & Freidenrich's Palo Alto office, agrees. "In defamation there is a republication rule that says the republisher is liable in the same way as the original publisher or speaker," says Chadwick. "Is simply providing a link to another site adequate to constitute republication? I think that's a stretch." And what about original publications on the Internet? Can those posting opinions be held liable for defamation? The American Civil Liberties Union, which is representing the creator of the Teacher Review site, contends that the material there is protected under the First Amendment. "If the legal theories underlying Curzon Brown's claims had any merit, no on-line forum for the exchange of views on any topic interesting enough to be controversial could survive the risk of suit by self-appointed guardians of 'correct' thinking like plaintiff," reads part of an ACLU brief prepared in response to the professor's suit. Curzon Brown, for his part, believes the Internet has provided a forum for people to libel others with impunity. "Anyone can send in a review lying about you for the world to read, and you can't respond," he says. "It's just like McCarthyism." The anonymous comments posted about Curzon Brown on the Teacher Review site are very harsh. According to his complaint, Curzon Brown has been called a "racist," "emotionally unbalanced" and "mentally ill." According to the complaint, he also has been accused on the Teacher Review site of "violent mood swings, irrational personal attacks on students, and insane progressions in thought." "You would be sued for libel if you published anything like this in a newspaper," Curzon Brown said. (The Recorder, February 8, 2000) COCA-COLA: Papers on Workplace Racial Bias Show Blacks Share Experience ----------------------------------------------------------------------- Few in number, black employees at Coca-Cola formed networking groups to share prejudical experiences as a way to ''retain their psychological health,'' according to documents released as part of a racial discrimination suit. Coke turned over about 300 pages of documents on February 9 to lawyers representing eight current and former black employees who have sued the beverage giant, claiming the company discriminated against blacks in pay, promotion and performance evaluations. ''It's really a window into how the top blacks of the company were dealing with racism,'' said Cyrus Mehri, a Washington lawyer representing the plaintiffs. Included in the documents 40 pages of which Coke faxed to reporters is a December 1995 report on diversity from Carl Ware, the former head of Coke's Africa Group, to M. Douglas Ivester, who was then Coke president and will soon retire as chairman and chief executive officer. In the fall of 1995, Ware led a discussion group of five black senior Coke officials who reviewed the company's efforts at diversifying its work force and the environment in which black employees worked. The group concluded that some black employees were seen as ''lacking the skills and intelligence to succeed in certain areas,'' and that group members credited their advancement to mentors and their ''ability to depersonalize prejudicial behavior.'' ''Even when African-Americans were few in number in the organization, an informal network of African-Americans was operating to provide sanity checks and a comparison of related experiences with the social realities of the organization,'' Ware wrote. ''This allowed many of them to retain their psychological health.'' Mehri called the report ''the litigation equivalent of the fall of the Berlin Wall.'' ''They have no more moral standing left,'' he said. Coke spokesman Ben Deutsch said plaintiff attorneys were reading too much into the documents, which U.S. District Judge Richard Story last month ordered Coke to produce. ''It doesn't say that the company was systematically engaging in practices that discriminate against African-Amercian associates,'' he said. Ivester, who plans to retire after Coke shareholders meet in April, is being replaced by Douglas Daft. Deutsch said that neither Ware nor Ivester was available to discuss the report. Daft, who was elected president in December, has made a series of swift management decisions in recent weeks, including persuading Ware to change his mind about leaving the company and announcing worldwide job cuts of 6,000 workers as the Atlanta-based company struggles to stem declining profits. Deutsch said the documents were made public because the company wanted ''to be sure the information is put in the proper context.'' He said many of Ware's recommendations had been implemented, including a formal minority recruitment and training program, a quarterly networking program for black employees and diversity training for all managers starting this year. In a statement, Coke's incoming president Jack Stahl said the company is committed to renewing its diversity efforts. ''While the company has taken some actions since that report was written, we are not where we want to be where diversity is concerned,'' Stahl said. ''We must and will make accelerated progress.'' The discrimination lawsuit seeks class action status, which would expand it to represent more than 2,000 black employees in the United States. Coca-Cola has denied the allegations of discrimination and is fighting the efforts to certify the lawsuit as a class action. In an order made public on February 8, Story said the parties must ''attempt in good faith to settle this case by participating in non-binding, confidential mediation,'' in which a neutral third party attempts to reach a settlement. James Voyles, a Marietta attorney representing the plaintiffs, said that the mediation is expected to start in two to three weeks. He declined to reveal who the mediator is. (AP Online, February 10, 2000) COMMERCIAL FINANCIAL: Bondholders Sue Accountant Arthur Andersen in OK ---------------------------------------------------------------------- A group of Commercial Financial Services Inc. bondholders have put a new spin on the ancient practice of killing the messenger for delivering bad news -- they are suing the accountant for not telling them the bad news. In three separate lawsuits filed in U.S. District Court in Tulsa on February 7, 174 bondholders sued Arthur Andersen LLP, the accounting firm for CFS during the period the debt collector sold about $ 1.7 billion in bonds. Chicago-based Andersen was reckless or at least inattentive when auditing CFS's annual financial statements for 1995-1997, the suits alleged. Investors relied on those audits when they bought CFS bonds, the lawsuits stated -- a move that resulted in millions of dollars in damages. Andersen was derelict in getting to know CFS, how it operated, its internal controls and whether it could hit its financial goals, the lawsuits alleged. Bondholders alleged that CFS failed to adhere to accounting principals in its financial statements and Andersen then failed to call the company's bluff. "Andersen either knew, or was deliberately reckless in not knowing, that the CFS financial statements did not comply with" generally accepted accounting principals, two lawsuits representing 169 bondholders alleged. "Contrary to its representations to plaintiffs, Andersen did not perform audits in accordance with generally accepted auditing standards." In addition, the bondholders alleged that Andersen repeatedly uncovered troubling information about CFS's bulk sales of accounts to other debt collectors, but chose to ignore its obligation to bring those abnormalities to bondholders' attention. "Andersen violated legal duties owed to plaintiffs," alleged the two lawsuits. "Under the Securities Act of 1934, the Oklahoma Securities Act, and the common law, Andersen must compensate plaintiffs for the hundreds of millions of dollars in damages plaintiffs have suffered as a result of Andersen's unlawful conduct." The five complainants in the third lawsuit sought at least enough to recover the $ 59 million they spent on bonds plus damages. CFS paid bond investors based on the company's ability to collect more than the industry average from overdue credit card accounts. CFS sold the bonds to finance additional purchases of bad credit card accounts from card issuers. Its financial statements provided the only concrete proof of how well CFS did its job as a debt collector. The statements CFS produced, and Andersen audited, provided a glowing view that was ultimately a financial mirage, according to the lawsuits. ". . . CFS failed to record a liability to reflect its true cost of collecting credit card receivables, which was more than CFS was being paid to service the credit card receivables," two bondholder groups alleged. "Had Andersen demanded that CFS record this liability, plaintiffs would have known the lie behind CFS's purported superior debt collection ability and would not have purchased" the bonds. Through it actions or inaction, bondholders alleged, Andersen "played a key role in perpetuating the scheme" to defraud bondholders. An anonymous letter to bond rating agencies in October 1998 exposed CFS's failing system, some bondholders alleged. The letter led to a suspension in ratings on CFS bonds. The suspension cut off CFS from selling more bonds. Less than eight months later the company was bankrupt. All three suits accused Andersen of negligent misrepresentation, common law fraud and violation of securities law. Each requested a jury trial. (TULSA World, February 9, 2000) CSC CREDIT: Improper Release, Not Mere Risk, Constitutes FCRA Violation ----------------------------------------------------------------------- Actionable harm under the Fair Credit Reporting Act is improper disclosure of a credit report, not the mere risk of improper disclosure when reporting agencies do not follow reasonable procedures. A reporting agency must first release a credit report for there to be a violation of the act. Washington, et al. v. CSC Credit Services Inc., et al., No. 98-31209 (5th Cir. 1/7/00). Bernita and Kevin Washington and other consumers brought a class action against CSC Credit Services Inc. and Equifax Inc. under the FCRA. They alleged the reporting agencies failed to maintain reasonable procedures, as required by Section 1681e(a) of the act, before providing their credit reports to insurance companies. The consumers requested statutory, compensatory, and punitive damages as well as declaratory and injunctive relief. The U.S. District Court for the Eastern District of Louisiana found that the class satisfied the prerequisites of Fed. R. Civ. P. 23(a) and certified the class under Rule 23(b)(2) and 23(b)(3). The court denied Equifax's motion for reconsideration. Furthermore, the District Court concluded that a consumer claiming a violation of the FCRA for failure to maintain proper procedures does not need to first show an improper disclosure. The reporting agencies appealed challenging the class certification. Specifically, they argued that the consumers did not meet the typicality and commonality requirements of Rule 23(a) nor the superiority and predominance requirements of Rule 23(b)(3). Finally, the reporting agencies claimed the District Court erred in certifying the class under Rule 23(b)(2) because the FCRA does not offer individuals injunctive relief. Reasonable Procedures On appeal, the 5th U.S. Circuit Court of Appeals explained the FCRA requires reporting agencies to maintain reasonable procedures to avoid furnishing consumer credit reports to insurance companies other than at a consumer's request or for underwriting purposes. It then addressed the issue presented: "whether a plaintiff can bring an action for failure to 'maintain [the] reasonable procedures' required by 1681e(a) without first showing that a report was disclosed" for other than the permitted purposes. Considering the purpose of Section 1681b - to limit the furnishing of credit reports - Judge Emilio M. Garza opined that the purpose of the act is not furthered unless a consumer suffers the harm the act was meant to prevent, improper disclosure. Thus, the court ruled, "actionable harm the FCRA envisions is improper disclosure, not the mere risk of improper disclosure that arises when 'reasonable procedures' are not followed and disclosures are made." The 5th Circuit vacated and reversed the District Court's class certification under Rule 23(b)(2). Injunctive Relief In certifying the class under Rule 23(b)(2), the District Court found that the consumers were entitled to injunctive relief under the FCRA. The 5th Circuit held otherwise. First, the court referred to the fact that the act contains civil liability provisions regarding damages and attorney's fees but does not mention injunctive relief. The 5th Circuit found this omission significant because "the Act elsewhere expressly grants the power to obtain injunctive relief to the [Federal Trade Commission]." The court perceived this affirmative grant of power to the Federal Trade Commission and a similar lack of remedy to individual litigants to be a strong indication that Congress only intended the FTC to have the power to obtain injunctive relief in FCRA actions. Because the "application of Rule 23(b)(2) would frustrate the FCRA's limitation of injunctive relief to the FTC" the 5th Circuit vacated the District Court's Rule 23(b)(3) certification as well. Regarding the credit reporting agencies' argument that the class's request for monetary damages predominated over its request for injunctive relief, the 5th Circuit looked to see if the monetary damages flowed directly from the declaratory relief. It ruled that they did not. Instead, the 5th Circuit found the monetary damages were the predominant form of relief requested by the class. The court remanded the case for further proceedings. (Consumer Financial Services Law Report, January 25, 2000) DAIMLERCHRYSLER: PA Judge Affirms $58.5 Mil Award in Vent-Burn Case ------------------------------------------------------------------- A state court judge in Philadelphia has denied post-trial motions and let stand a $58.5 million compensatory and punitive damages award to 80,000 owners of 1988, 1989,and 1990 Chrysler vehicles with air bag vents at the "three and nine o'clock" positions. The plaintiffs claimed that the positioning allows hot gas to escape on deflation, resulting in burns to the hands and arms. The award represents approximately $730 per class member. Crawley et al. v. DaimlerChrysler Corp., No. 4900 July Term 1990 (PA Ct. C.P., Philadelphia Cty., Jan. 11, 2000); see Automotive LR, March 3, 1999, P. 3. Judge Mark I. Bernstein of the Pennsylvania Court of Common Pleas for Philadelphia County issued a one-pageorder denying all post-trial motions but one: the plaintiffs' request for attorneys' fees. The amount of fees has not been determined. DaimlerChrysler will appeal. An attorney for the plaintiffs noted that while the possible burns were not life threatening, they could be disfiguring, a risk Chrysler ignored when choosing the air bag design. The suit charged that Chrysler issued a deceptive and inaccurate owner's manual with the vehicles, which warned only of "minor abrasions" and "skin-reddening." The automaker contended in its post-trial motions that the class was not properly certified, and that the court's handling of the suit violated the rules of civil procedure. Chrysler also said the evidence was insufficient to support the jury's defect finding that: (1) no fraud had taken place; (2) Chrysler had no duty to disclose air bag safety studies; (3) certain expert witnesses for the plaintiffs should not have been allowed to testify; and (4) an expert for the defense was improperly precluded from testifying. The large number of motions were designed to preserve the issues for appeal, and according to Chrysler counsel Terri Reiskin of Hogan & Hartson in Washington, DC, the automaker plans to challenge the "entirety" of Judge Bernstein's ruling. Chrysler was also represented by James Hourihan of Hogan & Hartson, Keith Heinold of Marshall Dennehey Warner Coleman & Goggin in Philadelphia, and Charles A. Newman of Bryan Cave in St. Louis. The plaintiffs were represented by Joseph C. Kohn and Martin J. D'Urso of Kohn Swift & Graf, and Isaac Green of Moody & Anderson. Both are located in Philadelphia. (Automotive Litigation Reporter, January 18, 2000) H&R BLOCK: Sp Ct Cites Agency Role in Case over Loan in Tax Preparation ----------------------------------------------------------------------- The fate of a case that could pit thousands of H & R Block customers against the national tax preparation company is now in the hands of the state Supreme Court. On February 1 the justices heard oral arguments in Basile v. H & R Block Inc. Last March, the Superior Court overturned a Philadelphia Common Pleas Court decision granting summary judgment to the defendant in the case, in which customers allege H & R Block failed to disclose that its "Rapid Refund" program is really a high-interest loan. St. Louis attorney Louise Ellingsworth argued the case on behalf of Block. Philadelphia attorney Steven E. Angstreich represented the taxpayers. H & R Block prepares income-tax returns for its customers. In addition to the preparation, Block can electronically file the tax returns with the IRS. Through this electronic filing, Block provides its customers with a service commonly called the "Rapid Refund" program. Block claims it will turn the return into cash through a "Refund Anticipation Loan." Anyone interested in the service must agree to the loan and sign a check. The lawsuit alleges that Block does not adequately inform its customers that the Rapid Refund service is in fact a loan, complete with interest. Mellon Bank, which is located in Delaware, was an initial defendant in the case. Mellon was eventually dismissed as a party to the suit. Philadelphia Common Pleas Court Administrative Judge John W. Herron threw out the class action on all claims but one breach of fiduciary duty. The case was then transferred to Judge Stephen E. Levin. Levin granted summary judgment to Block in February 1998, ruling that H & R Block had not entered a fiduciary relationship or acted as an agent for Block customers who sought tax-preparation services. He preserved any separate individual claims under the state consumer protection law. The Superior Court opinion, written by Judge Justin M. Johnson, disagreed with Levin's analysis, saying that Pennsylvania agency law does establish a possible agency relationship between Block and the class members. Since federal tax law makes each filer ultimately responsible, on pain of perjury, for the veracity of information on the return, each filer is vested as a matter of law "with the ultimate right of control over the compilation and filing of his or her return," Johnson reasoned. "Because plaintiffs engaged Block to file their returns subject to plaintiffs' right of control and because Block accepted the task accordingly, we conclude that all elements of an agency relationship have been established," Johnson wrote. Within the agency relationship, Johnson then concluded, there was a fiduciary duty flowing from Block's tax preparers and the filers. If the plaintiffs can show that Block personnel failed to disclose the true nature of the Rapid Refund service, they may be able to establish a breach of duty on a class-wide scale, Johnson suggested in remanding the case to the Philadelphia court for resolution of the issue. The Supreme Court granted allocatur to decide "whether the Superior Court erred as a matter of law in finding that an agency relationship ... could be established under the 'control over the result test' without any showing that the purported agent was acting for the benefit of, and with the ability to bind, the purported principal." Oral Argument Ellingsworth said the Superior Court abandoned the traditional test of agency in rendering its decision. During the argument the justices asked many questions to both sides. Justice Ralph J. Cappy asked Ellingsworth to show how there was no agency relationship between Block and its customers. "Where is there a lack of control over the loan?" Cappy asked. "Block is not a party to that transaction," Ellingsworth said. She said that Block was basically making a "contract for services" and was only referring customers to Mellon Bank, where a transaction took place between Mellon and the tax filer. "Does [Block's relationship] constitute the ability to act on behalf of someone?" Cappy asked. There is a difference between acting "on the request of" someone rather than "on behalf of" someone, Ellingsworth said. Justice Stephen A. Zappala asked about the paperwork between the taxpayer and Mellon, and Justice Thomas Saylor asked Ellingsworth if she thought the case was appropriate for summary judgment. Ellingsworth said it was. But Angstreich said that Block does indeed do the work for the taxpayer and is in effect the representative of the taxpayer. "Is someone being tricked here somewhere?" Justice Ronald D. Castille asked at one point. Castille said as a consumer himself, if he were to see that he's getting less money than the total refund, "unless I'm totally naive, I see someone's getting it." (The Legal Intelligencer, February 2, 2000) H&R BLOCK: Liberty Tax Serivce Files Suit in VA over False Advertising ---------------------------------------------------------------------- In a lawsuit filed January 30th in the U.S. District Court, Norfolk Division, Liberty Tax Service and several of its local franchisees filed a false advertising claim against H&R Block alleging the H&R Block advertisements mislead customers thereby giving H&R Block an unfair competitive advantage. In the suit Liberty Tax Service charges Block with falsely advertising their refund anticipation loan product, which in truth is a bank loan for the anticipated refund less fees. Liberty tax alleges that H&R Block is currently advertising in the Hampton Roads market that the customer receives the "refund amount" in just two days without disclosing it is a bank loan and that certain fees will be withheld. According to Charles N. Lovelace, a local franchisee of Liberty Tax Service, "I believe this is a clear attempt to create unfair competition in our home market. Liberty Tax Service is committed to customer service and we believe that H&R Block is hurting the customer, and thereby hurting the tax preparation industry overall." The suit also notes that IRS rules mandate that refund anticipation loans be clearly described as a loan and not a refund in all advertising materials. H&R Block paid stiff penalties for a similar alleged violation in 1996 of a New York City regulation against deception in the advertising of refund anticipation loans. HERBALIFE INT'L: Ct OKs Settlement of Shareholder Suits Re Tender ----------------------------------------------------------------- Herbalife International Inc. (Nasdaq:HERBA) (Nasdaq:HERBB) reported on February 10 that MH Millennium Acquisition Corp., an entity controlled and beneficially owned by Mark Hughes, the founder, chairman, president and chief executive officer of Herbalife, has extended the expiration of its previously announced tender offer to 5:00 p.m., New York City time, on Friday, March 10, 2000. Hughes indicated that he and his advisers continue to address the financing of the transaction. In addition, the company noted that under the terms of the agreement governing the transaction, Hughes has the right to further extend the tender offer. As of the close of business on Feb. 8, 2000, approximately 1,434,740 shares of Herbalife's Class A stock and 3,117,927 shares of Herbalife's Class B stock had been validly tendered and not withdrawn in response to the tender offer. On Sept. 13, 1999, Herbalife announced that its board of directors accepted a definitive offer from Mark Hughes to purchase all company shares not owned by Hughes for $17.00 per share in cash. Court Approves Final Settlement Offer Herbalife also reported on February that it has obtained final court approval of the proposed settlement of shareholder lawsuits challenging the proposed transactions. The final court order provides for a dismissal with prejudice of several lawsuits against the company, its directors and certain of its executive officers challenging the proposed transactions after its announcement in September 1999. Under the terms of the settlement agreement, members of the settlement class (which includes, generally, the company's public stockholders and the holders of the DECS securities issued by DECS Trust III) would become entitled to a supplemental cash payment in an amount equal to $.81 per share or DECS security. The supplemental payment would be in addition to the $17.00 per share in cash payable pursuant to the tender offer and the merger. The terms of the settlement, including the making of the supplemental payment, remain subject to a number of conditions, including completion of the buy-out transaction. There can be no assurance that these conditions will be satisfied; consequently, there can be no assurance that the supplemental payment will be made. Herbalife International Inc. markets nutritional, weight-management and personal care products in 46 countries worldwide. Herbalife products are available only through a network of independent distributors who purchase the products directly from the company. HOLOCAUST VICTIMS: Swiss Bank Pact Draws Fire for Release of Insurers --------------------------------------------------------------------- A coalition of Holocaust survivor groups from South Florida is objecting to a proposed $ 1.25 billion settlement of a class-action lawsuit against Swiss banks accused of harboring billions in assets that were stolen by the Nazis from European Jews before and during World War II. In court papers filed in U.S. District Court in Brooklyn, N.Y., the 15 groups, which have a total of 10,000 members, contend the deal is inadequate because it releases from the suit a number of Swiss insurance companies that operated in Nazi Germany during the war. The survivors don't want to see culpable parties get off the hook without paying what they owe, Miami lawyer Samuel Dubbin of Greenberg Traurig said in an interview. He represents both the coalition and Dr. Thomas Weiss, a Miami Beach ophthalmologist and a son of survivors who is pressing claims for family bank accounts in Switzerland as well as unpaid European insurance policies. Dubbin contends German and Swiss insurance companies should not be released from the suit because money they collected from Jews in Europe ended up in the Swiss banking system. Several Swiss insurers were used to cloak the assets of the major Nazi-based insurance companies, Allianz and Munich Re within Swiss companies, Dubbin wrote in a 36-page court filing. Swiss insurers profited directly and handsomely from the German insurance market during World War II. They also profited from gold looted by Nazis from Jews and other victims. Why should they be released in litigation over Swiss bank accounts? Richard Litten of Washington, D.C.s Wilmer Cutler & Pickering, who represents a group of defendant Swiss banks, did not respond to a telephone message by press time. The survivors and heirs have a right to know whether, and on what terms, any particular company will be released, forever, from all liabilities for Holocaust-era insurance policies or other ill-gotten gains, Dubbin adds in his court filing. This is especially true with respect to Swiss companies used as dummy entities to fence assets stolen from Jews during the Holocaust. A settlement in the bank case --brought in 1996 -- was agreed to in late January 1999. It is designed to resolve claims by thousands of survivors and heirs who have dormant bank accounts in Switzerland. Before the litigation, many of the banks either denied the accounts existed or refused to cooperate when survivors and their families sought access to their money. The litigation is only a part of a broader effort by survivors to reclaim assets stolen by the Nazis from European Jews, 6 million of whom were systematically murdered during the war. Federal courts granted survivors and heirs a forum to press their claims against European banks and other companies such as insurance firms because many conduct business in the United States. In the Swiss bank case, U.S. District Judge Edward Korman appointed New York attorney Judah Gribetz of Richards & ONeil as a special master to decide how the money is to be distributed. Last summer, the court started the process of notifying survivors and heirs about the settlement. From around the world, several hundred thousand people responded and filled out questionnaires to stake claims to bank accounts. Gribitz is expected to propose an allocation plan some time in March, according to Dubbin. The judge has not yet ruled on the fairness of the settlement or the coalitions objection. Greenberg Traurig said in an interview. He represents both the coalition and Dr. Thomas Weiss, a Miami Beach ophthalmologist and a son of survivors who is pressing claims for family bank accounts in Switzerland as well as unpaid European insurance policies. Dubbin contends German and Swiss insurance companies should not be released from the suit because money they collected from Jews in Europe ended up in the Swiss banking system. Several Swiss insurers were used to cloak the assets of the major Nazi-based insurance companies, Allianz and Munich Re within Swiss companies, Dubbin wrote in a 36-page court filing. Swiss insurers profited directly and handsomely from the German insurance market during World War II. They also profited from gold looted by Nazis from Jews and other victims. Why should they be released in litigation over Swiss bank accounts? Richard Litten of Washington, D.C.s Wilmer Cutler & Pickering, who represents a group of defendant Swiss banks, did not respond to a telephone message by press time. The survivors and heirs have a right to know whether, and on what terms, any particular company will be released, forever, from all liabilities for Holocaust-era insurance policies or other ill-gotten gains, Dubbin adds in his court filing. This is especially true with respect to Swiss companies used as dummy entities to fence assets stolen from Jews during the Holocaust. A settlement in the bank case --brought in 1996 -- was agreed to in late January 1999. It is designed to resolve claims by thousands of survivors and heirs who have dormant bank accounts in Switzerland. Before the litigation, many of the banks either denied the accounts existed or refused to cooperate when survivors and their families sought access to their money. The litigation is only a part of a broader effort by survivors to reclaim assets stolen by the Nazis from European Jews, 6 million of whom were systematically murdered during the war. Federal courts granted survivors and heirs a forum to press their claims against European banks and other companies such as insurance firms because many conduct business in the United States. In the Swiss bank case, U.S. District Judge Edward Korman appointed New York attorney Judah Gribetz of Richards & ONeil as a special master to decide how the money is to be distributed. Last summer, the court started the process of notifying survivors and heirs about the settlement. From around the world, several hundred thousand people responded and filled out questionnaires to stake claims to bank accounts. Gribetz is expected to propose an allocation plan some time in March, according to Dubbin. The judge has not yet ruled on the fairness of the settlement or the coalitions objection. (Broward Daily Business Review, February 3, 2000) MARCOS: Philippine Rights Victims to Claim Assets If Payout Fails ----------------------------------------------------------------- Rights abuse victims under the Ferdinand Marcos regime will lay claim to the assets of late Philippine dictator's estate to implement a two-billion-dollar judgement if a 150-million-dollar payout deal falls through, a lawyer for the group said on February 10, 2000. "If we have to terminate the settlement agreement, I think you will see us moving quickly and aggressively to go after any and every Marcos asset we can find in the United States and elsewhere," US lawyer Robert Swift told a news conference here. "This has been a long and troubling case and the human rights victims deserve to be compensated now, not some time in the future," he said. Swift, who represents 10,000 Filipino human rights victims, said the US district court of Hawaii has set a February 28 deadline for the Marcos family to produce the compensation money. Failure to do so would terminate an agreement reached last year, leaving Marcos' widow, Imelda, and son, Ferdinand Junior, in contempt of court and facing additional damages of about 171 million dollars, he said. "This is not an issue of sincerity on both parties, this is simply a question of transfer of money. If it does not happen, there is no deal," Swift said. Swift said the victims of torture, summary killings and forced disappearances and their relatives would then seek to implement a 1994 ruling by the Hawaii district court awarding them two billion dollars in damages for their suffering. The victims had won a class action suit lodged before the court. The court would also be asked to grant a pending motion to compel Imelda to testify under oath as to the true extent of the fabled Marcos wealth, which some experts estimate at 10 billion dollars, Swift said. Vice President Gloria Macapagal-Arroyo said the government would continue to go after the Marcos funds, but noted the rights victims also have the right to shift strategy. "As much as practical, we will continue to pursue it through the legal process," she told reporters. "For the human rights victims, it's their call." Senate minority floor leader Teofisto Guingona said deals involving the Marcos family should now be "pursued with more resoluteness at this stage." "The promises have to be made concrete," he said. Ferdinand Marcos and his cronies are believed to have amassed a fortune during his 20-year regime, which was ended by a 1986 popular revolt that sent him into exile in Hawaii where he died three years later. Not a cent has been recovered in 14 years of costly and often lengthy litigation. The only money so far identified is 540 million dollars held in Swiss accounts that has since been transfered to an escrow account in Manila and grown to 630 million dollars because of interest. The 150 million dollar payout deal was struck between the Marcos estate and the victims, and endorsed by the government of President Joseph Estrada, in a bid to end varying claims to the money. However, a special graft court ruled it illegal pending a ruling on who were the real owners of the funds. Swift said that ruling was "wrongly conceived" but conceded the only option now for the Marcos family was to pay "independently of the escrow account." Failure to put a closure on the Marcos wealth case goes "against the grain of history and the development of jurisprudence," Swift stressed, noting that even rights victims under the Holocaust "are finally achieving some compensation" for their sufferings. Among the assets that could be seized are a Picasso paintaing and some 1.5 million dollars in other assets, including real estate in the Philippines and the United States that have so far been identified. Swift and his Filipino co-counsel Rod Domingo, however, admitted the public "may never know the full extent" of the Marcos wealth. (Agence France Presse, February 10, 2000) NCAA: PA Suit over Tests for Student Athletes May Go to Supreme Court --------------------------------------------------------------------- The 3rd U.S. Circuit Court of Appeals in Philadelphia declined on February 9 to review whether the NCAA is subject to federal civil rights laws, but an attorney for the plaintiffs in the class-action lawsuit said her clients would ask the Supreme Court to review the matter. A federal judge had ruled that the NCAA's current criteria for the use of standardized test scores violated the 1964 Civil Rights Act, citing the rule's "disparate impact on black student-athletes." The judge also ruled that the NCAA received federal funds and, as a private organization, is subject to the civil rights laws. A three-judge panel reversed the lower court ruling in December in a split vote, making its decision on jurisdictional issues and determining the NCAA could use those criteria to determine who is eligible to compete, practice and receive athletic scholarships as college freshmen. February 9's ruling, in effect, puts the onus on the Supreme Court to decide whether to hear the case and, if it does, make a ruling with wide-ranging ramifications on collegiate sports. The Justice Department had filed a friend-of-the-court brief supporting the plaintiffs' argument. Adele Kimmel of Trail Lawyers for Public Justice said the plaintiffs would file within the 90-day period allowed for cases to be appealed to the Supreme Court. "We are very disappointed by [yesterday's] ruling and very surprised," she said. "We are optimistic that the Supreme Court will grant review because it cannot and should not be the law that the NCAA is immune from the civil rights laws and free to discriminate on the basis of race, sex or disability." Elsa Cole, the NCAA's general counsel, said in a statement that the use of the test scores has helped increase graduation rates for both white and black student-athletes. "We will continue to study the effects of the legislation as we have since the inception of initial-eligibility standards, but we also believe decisions about such standards should be made by higher education and not the courts," she said. (The Washington Post, February 10, 2000) ONYX ACCEPTANCE: Rabin & Peckel Files Securities Suit in California ------------------------------------------------------------------- A class action has been commenced in the United States District Court for the Central District of California, Orange County District, on behalf of purchasers of Onyx Acceptance Corp. (Nasdaq: ONYX) common stock during the period from April 28, 1997 through January 26, 1999, inclusive. The Complaint alleges that Onyx and certain of its officers and directors violated section 10(b) of the Securities Exchange Act of 1934 by issuing a series of false and misleading statements concerning, among other things, Onyx's reported financial results during the Class Period. In particular, it is alleged that the revenue, net income, and earnings per share reported in these financial statements were materially inflated by valuing certain assets of Onyx in a manner which violated GAAP and require restatement. The Complaint alleges that, as a result of these material false and misleading statements, Onyx=s stock price was artificially inflated throughout the Class Period. Plaintiff is represented by the law firm of Rabin & Peckel LLP. Contact: Joseph McBride, Rabin & Peckel LLP, 275 Madison Avenue, New York, NY 10016, by telephone at (800) 497-8076 or (212) 682-1818, by facsimile at (212) 682-1892, by e-mail at email@rabinlaw.com ROCKY MOUNTAIN: Contests Shareholder Suit in CO over Common Stock Bid --------------------------------------------------------------------- On May 26, 1999, certain shareholders filed a class action lawsuit (Case No. 99 CV 349) against the Company, its directors and certain former directors challenging certain actions that the plaintiffs allege were taken in response to the unsolicited tender offer for the Company's outstanding common stock commenced by Whitman's Candies, Inc. on May 10, 1999. The bidder withdrew the tender offer on June 7, 1999. The plaintiffs filed an amended complaint on June 30, 1999. The plaintiffs seek injunctive relief and unspecified compensatory damages together with prejudgment interest, costs, attorneys' fees and expert witness' fees. The action was filed in the District Court for the City and County of Denver. It has been moved to La Plata County, Colorado, the county in which the Company's principal offices are located. On July 20, 1999, the Company filed a motion to dismiss the case. On December 15, 1999, the court dismissed the case on the grounds that the plaintiffs' claims were derivative in nature, the plaintiffs failed to satisfy certain requirements for bringing a derivative action and the plaintiffs could not bring a direct action. The plaintiffs have until January 29, 2000 to appeal the order of dismissal. The Company believes the plaintiffs' claims are without merit and intends to vigorously defend any claims asserted by them if the dismissal is appealed. (Case: Harbor Finance Partners, Individually and On Behalf of All Others Similarly Situated, v. Franklin E. Crail, Gary S. Hauer, Gerald A. Kien, Lee Mortenson, Everett A. Sisson, Fred Trainor and Rocky Mountain Chocolate Factory, Inc., Case No. 99 CV 349.) STB SYSTEMS: Finkelstein & Krinsk Files Securities Lawsuit in TX ---------------------------------------------------------------- Finkelstein & Krinsk filed a class action lawsuit in the United States District Court for the Northern District of Texas on behalf of all persons who purchased or acquired a significant amount of STB Systems, Inc stock during August 25, 1997 to May 1,1999. The complaint charges that the company and its controlling insiders violated the Securities Exchange Act of 1934. Specifically, the complaint alleges that the company issued a series of false and misleading statements to the market regarding demand for the company's products, while failing to disclose that due to ongoing quality problems, two of STB's largest customers had informed the defendants that they would no longer accept or pay for defective STB products. The defendants took advantage of the inflated price of STB stock to sell approximately $66 million worth of STB stock at artificially inflated values. The complaint particularizes how the company's management violated the Securities Exchange Act of 1934, and specifies the company's false statements and omitted material facts. For any inquiries concerning this lawsuit, please 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 at fk@class-action-law.com or fax at 619-238-5425. SUNSTAR HEALTHCARE: Shepherd & Geller Files Securities Lawsuit in FL -------------------------------------------------------------------- The Law Firm of Shepherd & Geller, LLC filed a class action lawsuit in the United States District Court for the Middle District of Florida on behalf of all individuals and institutional investors that purchased the common stock of SunStar Healthcare, Inc. between November 13, 1998 and December 14, 1999, inclusive. The complaint charges that certain officers and directors of the company violated the federal securities laws by providing materially false and misleading information about the company's business, financial condition, earnings and future prospects. Specifically, the complaint alleges that the defendants caused the company to fail to take adequate reserves to pay foreseeable healthcare claims and, as a result, the company materially overstated its income and earnings per share at all times during the Class Period. As a result of these false and misleading statements the company's stock traded at artificially inflated prices during the class period. When the truth about the company was revealed, the price of the stock dropped significantly. For more details on the above-mentioned lawsuit, you may contact Jonathan M. Stein of Shepherd & Geller, LLC, Boca Raton at 561/750- 3000 or toll free at 1-888-262-3131 or via e-mail at jstein@classactioncounsel.com TD WATERHOUSE: Dennis J. Johnson Files Securities Lawsuit in NY --------------------------------------------------------------- The Law Office of Dennis J. Johnson and Shalov Stone & Bonner filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of investors who maintained Internet trading accounts at TD Waterhouse Investor Services, Inc. or its predecessor company, Waterhouse Securities, Inc., and who suffered losses when Waterhouse executed previously-canceled securities trades although Waterhouse had confirmed the cancellation of those trades. The plaintiff alleges that Waterhouse and its President, John H. Chapel violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The plaintiff further alleges that Waterhouse violated the federal securities laws by falsely representing to investors that they had successfully canceled securities trades and then executing those transactions. In addition, the plaintiff alleges that Waterhouse unlawfully paid itself commissions in connection with those unauthorized trades and related transactions executed by Waterhouse to liquidate the unauthorized trades or to generate funds to pay for those transactions. For more information concerning this lawsuit, please contact Dennis Johnson of the Law Office of Dennis J. Johnson (LODJJ@AOL.com) by telephone (802) 862-0030 or 1-888-459-7855 (toll free) at 1690 Williston Road, South Burlington, VT 05403; or James Bonner of Shalov Stone & Bonner (Jim@lawssb.com) by telephone 212-686-8004 at 276 Fifth Avenue, Suite 704, New York, NY 10001. TOBACCO LITIGATION: Consumers File 3 Suits in NY over Price Fixing ------------------------------------------------------------------ Consumers filed three lawsuits in New York and California on February 9 against the leading tobacco companies, contending the companies had conspired to fix the prices of cigarettes sold in those states since 1993. The lawsuits came a day after cigarette wholesalers filed a separate action in Washington, accusing tobacco companies of meeting in secret since at least the 1980's to fix prices throughout the world. Consumers' suits against the Philip Morris Companies, R. J. Reynolds Tobacco Holdings and others seek class-action status on behalf of all people who bought cigarettes in New York and California since Nov. 1, 1993. The complaints accuse the industry of participating in meetings "in which future price increases for cigarettes were discussed, agreed upon and implemented." A Philip Morris spokesman called the allegations "simply frivolous." Similarly, a Reynolds spokesman said the company did not believe there was any basis to the suits. Named as other defendants are British American Tobacco P.L.C.'s Brown & Williamson Tobacco unit; the Loews Corporation's Lorillard unit; and the Liggett Group, a unit of Brooke Group Ltd. (The New York Times, February 10, 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. Romeo John D. Piansay, Jr., editor, Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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