/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000214.MBX C L A S S A C T I O N R E P O R T E R Monday, February 14, 2000, Vol. 2, No. 31 Headlines ADAPTEC INC: Reports on Settlement for Derivative Securities Suit in CA AML COMMUNICATIONS: Reaches Agreement to Settle Securities Suits in CA CHOLESTECH CORP: Plans Vigorous Defense of Securities Lawsuit in CA DUNHILL STAFFING: Long Island Franchisee Sues over Direct Competition ELITE INFORMATION: Aust Solution 6 Extends Bid for FTC to Review Merger HOLOCAUST VICTIMS: EU Is Asked to Help in NY Suit over Land in Poland KENETECH CORP: Intends Vigorous Defense of Securities Suits in DE MASTEC INC: Resolves Shareholder Lawsuits Filed in DE in 1990 NETOPTIX CORP: Files Motion to Dismiss Shareholders' Complaint NOVELL INC: Intends to Vigorously Defend Federal Securities Lawsuit PAYDAY LENDER: Edelman, Combs Sues Indiana Lender Koach's Kash Station ST JOHN KNITS: ContestS CA Suit Alleging Fiduciary Breach Re Merger ST JOHN KNITS: Reaches Agreement to Settle Securities Fraud Suit in CA SUNNYVALE'S CYLINK: Judge Appoints Innelli & Molder As Lead Counsel TOBACCO LITIGATION: CA Consumers Sue for Damages from Price Fixing TOBACCO LITIGATION: MI Smokers Sue for Damages from Price Fixing TOBACCO LITIGATION: Philip Morris Loses appeal of 1998 Gag Order in FL TOBACCO LITIGATION: Women Claim Fraud in Marketing Of Light Cigarettes U S WEST: Agency Orders Refund Re Service Quality; Won't Sue for Fines VALENCE TECHNOLOGY: Announces Settlement Reached for Securities Lawsuit VALUE AMERICA: Schiffrin & Barroway Files Securities Lawsuit in VA VALUE AMERICA: Wolf Haldenstein Files Securities Lawsuit in VA * Bush Proposes Reforms: Curb Frivolous Suits; Large Ones in Fd Courts ********* ADAPTEC INC: Reports on Settlement for Derivative Securities Suit in CA ----------------------------------------------------------------------- As previously reported in the CAR, a class action lawsuit is pending in the United States District Court for the Northern District of California against the Company and certain of its officers and directors. The class action lawsuit alleges that the Company made false and misleading statements at various times during the period between April 1997 and January 1998 in violation of federal securities laws. The complaint does not set forth purported damages. The Company believes the class action lawsuit is without merit and intends to defend itself vigorously. The Company also discloses in its report to the SEC that a derivative action was filed in the Superior Court of the State of California against the Company and certain of its officers and directors, alleging that the individual defendants improperly profited from transactions in the Company's stock during the same time period referenced by the class action lawsuit. In July 1999, the Company entered into an agreement to settle the derivative action. Under the terms of the agreement, the Company will reimburse the fees and costs incurred by the plaintiff's attorney in an amount to be approved by the court up to a maximum amount of $600,000. The settlement is subject to approval by the court, and does not affect the class action lawsuit still pending. The potential liability is included in "Accrued liabilities" in the Condensed Consolidated Balance Sheet at September 30, 1999. AML COMMUNICATIONS: Reaches Agreement to Settle Securities Suits in CA ---------------------------------------------------------------------- Two purported class action lawsuits are pending in federal and state court against the Company and certain of its current and former officers and directors. While the federal action asserts claims under the federal securities laws and the state action asserts claims under California's securities laws, the complaints are substantially identical. The complaints allege that in order to profit from insider trading at artificially inflated prices during the purported class period of April 10, 1996 to March 25, 1997, the defendants engaged in a scheme to artificially inflate and maintain the Company's stock price by disseminating materially false and misleading information. Generally, plaintiffs allege that the Company failed to disclose adverse business trends, increasing competition and difficulties associated with the development of new products. In the federal action, Sussman v. AML Communications, Inc., et al., U.S.D.C. Case No. 98-2010 CAS (Ex) (C.D. Cal.), four lead plaintiffs and co-lead counsel were appointed on June 29, 1998 pursuant to The Private Securities Litigation Reform Act of 1995. On September 3, 1998, plaintiffs filed an amended complaint. The Company responded to the amended complaint by filing a motion to dismiss the case. A hearing on the motion to dismiss was held on February 8, 1999. The court took the motion under submission. On August 2, 1999, in light of the Ninth Circuit's decision in In re Silicon Graphics Sec. Litig., 183 F.3d 970 (9th Cir. 1999), the court ordered plaintiffs to show cause why their amended complaint should not be dismissed. On September 3, 1999, in response to plaintiffs' motion for a stay of any determination of the motion to dismiss until after a petition for rehearing in Silicon Graphics was decided, the court stayed the action against the Company for 90 days. On October 27, 1999, the Ninth Circuit denied the petition for rehearing in Silicon Graphics. All discovery is stayed unless and until it is determined that plaintiffs have stated an actionable claim. With respect to the state action, all proceedings have been stayed until the stay of discovery is lifted in the federal action. In November, 1999, the parties reached a settlement in principle which is intended to resolve fully both the federal and state actions. Counsel for the parties currently are in the process of preparing settlement documents, which shall be submitted to the federal court for preliminary approval of the settlement. CHOLESTECH CORP: Plans Vigorous Defense of Securities Lawsuit in CA ------------------------------------------------------------------- On February 5, 1999, a complaint entitled Ree v. Pinckert, et al., No. C99-0562 (MMC) was filed in the United States District Court for the Northern District of California. The Action is a putative class action and the complaint alleges that Cholestech and an officer, Mr. Pinckert, violated the federal securities laws by misleading investors during the time period of July 30, 1997 - June 26, 1998, concerning the Company's business and its future prospects. On June 24, 1999, plaintiffs filed an amended complaint, which expanded the putative class period to June 28, 1996, through June 26, 1998. The amended complaint's substantive allegations and purported causes of action remain based on allegations that the Company misled shareholders concerning the Company's business and its future prospects. The complaint does not specify alleged damages. The Company intends to defend the case vigorously. The action is in its preliminary stages and a trial date has not been set. DUNHILL STAFFING: Long Island Franchisee Sues over Direct Competition --------------------------------------------------------------------- Claiming a serious breach of its franchise agreement by directly competing for business, Dunhill Staffing Systems of Massapequa, Long Island, has filed a lawsuit against its Hauppauge, New York based corporate franchisor Dunhill Staffing Systems, Inc. that could result in millions of dollars in damages. The franchisor company is owned by Florida based Watsco, Inc. According to Dunhill of Long Island President Philip N. Missirlian, who has successfully operated a Dunhill franchise since 1987, the franchise agreement specifically precludes Dunhill corporate franchisor from competing with his temporary services business anywhere from Long Island. Missirlian believes there is strong evidence that Dunhill corporate has been violating the non-compete agreement for more than two years. "Over the past 12 years I've built my business from scratch into the top producer of Dunhill with more than 2,000 employees. Now Dunhill corporate is trying to take my business away from me out of sheer jealousy and greed," Missirlian said. "I realize it's a David versus Goliath situation, but I will do everything legally possible to win this battle and protect what I have built." According to Missirlian, things were going great between him and Dunhill corporate until he rejected an offer in 1995 to sell his franchise back. "When I refused to sell, another franchisee warned me to watch my back, but I never expected the turnaround in attitude and actions would be so severe." Through research, Missirlian indicated he has discovered a pattern where Dunhill corporate has used similar competition tactics against other successful franchisees. He added that discussions are taking place among other franchisees concerning a possible class action lawsuit against the franchisor. Missirlian alluded to one case where Dunhill corporate launched a new operation to compete with a 20-year franchisee owner who had fallen ill. It is known that the publicly traded Watsco has considered selling or spinning off Dunhill Staffing Systems, Inc. in a separate stock offering, which would likely precipitate a desire to boost revenue. According to Missirlian, one way to accomplish that would be to capture high revenue producing franchises and bring them back under the corporate umbrella or to take away business through direct competition. Since Watsco's purchase of Dunhill corporate in May 1988, the selling of franchises has ceased and the number of active franchises has decreased from 332 to 72. "Owning a franchise is touted as being part of the American Dream and Dunhill corporate has been one of the most aggressive in soliciting this type of ownership," Missirlian said. It's a sad state of affairs when a franchisee has to worry that its own franchisor may destroy it. What I want to know is why, on one hand, are they strongly seeking new investors, while on the other, they are trying to pull the rug out from under those that succeed by trying to force them to sell or trying to force them out of business by directly violating an agreement not to compete? Our franchise laws were made to protect small businessmen like me and I won't let them get away with it," Missirlian concluded. ELITE INFORMATION: Aust Solution 6 Extends Bid for FTC to Review Merger ----------------------------------------------------------------------- Accountancy software group Solution 6 advised it had extended its bid for US-based technology firm Elite Information Group Inc for a second time to give the US Federal trade Commission more time to review the merger, a report on AAP Newsfeed says. The $ 11.00 per share cash offer, which is being put forward by the group's subsidiary - EIG Acquisition Corp - will now expire at 5.00 pm New York City Time on Thursday, March 2, 2000, the company said. The company, which last month extended the offer to February 10 2000, said it has been extended again to allow the US Federal trade Commission (FTC) more time to complete its review of the proposed merger. The FTC review followed a move by United States legal firm Milberg Bershad Hynes and Lerach LLP to file a class action bid in a San Diego court in January this year. The law firm said that Elite directors, by entering into an agreement with Solution 6 were violating their fidiciary duties to Elite shareholders. The FTC then requested to review additional information and documents relating to the takeover offer. Solution 6 said that the expiration date would be extended further if necessary to provide the FTC time to complete the review. (AAP Newsfeed, February 11, 2000) HOLOCAUST VICTIMS: EU Is Asked to Help in NY Suit over Land in Poland --------------------------------------------------------------------- Holocaust survivors and European Parliament members called on Poland to settle a compensation suit of property seized by the Nazis during World War II, then taken over by the Communist government. ''Polish governments have come and gone, but nothing has happened,'' said Peter Koppenheim, a 69-year-old survivor of the Holocaust and a plaintiff in a lawsuit seeking compensation and the return of property that once belonged to Polish Jews. A $ 7 billion class action lawsuit, filed in June in New York, accuses the Polish government and treasury of illegally seizing and sometimes selling Jewish properties after the war. The suit, launched on behalf of 11 plaintiffs and about 300,000 claimants worldwide, says Polish archives contain proof that Holocaust survivors are the rightful owners of thousands of parcels of land in Warsaw, Krakow and other parts of the country. Polish Jews numbered 3.5 million in 1939 and 500,000 when the war ended. Holocaust survivors and their heirs met with European Parliament representatives to discuss their case and to ask for help in pressuring the Polish government to act quickly. ''Property rights are an issue of human rights, we must ensure that wrongs are righted,'' said Gary Titley, a British Labor member of the European Parliament. Titley said the Polish government knows it must resolve the issue before an agreement to let Poland join the 15-member European Union can be ratified. He said the European Parliament along with other EU institutions would continue to put pressure on Poland. Mel Urbach, a lawyer representing the survivors in the lawsuit, said the average age of the claimants is 83. ''Their lives are in a twilight, a year is a lifetime,'' he said, stressing the need for a quick resolution of the case. Koppenheim is originally from Breslau, then in Germany now the Polish city of Wroclaw. He was forced to flee with his family to Britain when the Nazis came. His grandfather died in the Jewish ghettos there. After the war, Breslau became part of Poland and all property belonging to his family was confiscated by the Communist government. Successive Polish governments since the fall of Communism have failed to pass legislation to compensate those whose property was taken. The Polish parliament is debating a draft ''re-privatization'' bill that would restrict compensation claims to Polish citizens who have been resident in the country for the past five years. Poland's government says it would scrap the residency qualification, which was added to its bill by a parliamentary committee. Koppenheim called the Polish position unacceptable. Every other Eastern European nation under Soviet rule ''has paid up or is doing so,'' he said. (AP Worldstream, February 9, 2000) KENETECH CORP: Intends Vigorous Defense of Securities Suits in DE ----------------------------------------------------------------- On February 2, 2000, plaintiffs Robert L. Kohls and Louise A. Kohls filed two actions in the Court of Chancery of the State of Delaware In and For New Castle County, against defendants KENETECH Corporation (the "Registrant"), Angus M. Duthie, Mark D. Lerdal, Gerald R. Alderson and Charles Christenson. Plaintiffs allege that they were beneficial owners of Preferred Redeemable Increased Dividend Equity Securities, 8-1/4% PRIDES, Convertible Preferred Stock, par value $0.01 per share (the "PRIDES") of the Registrant, that mandatorily converted, on May 14, 1998, into common stock, par value $0.0001 per share ("Common Stock"), of the Company. The first action is purportedly brought as a class action on behalf of the named plaintiffs and all other persons who owned the PRIDES as of May 13, 1998, and plaintiffs allege, among other things, that defendants breached the terms of the Registrant's Certificate of Designations, Preferences, Rights and Limitations under which the PRIDES were issued and breached their fiduciary duty to protect the interests of the holders of the PRIDES prior to the PRIDES mandatory conversion. Plaintiffs are seeking, among other things, certification of the action as a class action and a declaration that the holders of PRIDES are entitled to be paid a liquidation preference of up to $1,012.50 per share of PRIDES or, in the alternative, a judgment in the amount that would have otherwise been attributed to the PRIDES up to $1,012.50 per share. The second action is purportedly brought as a derivative action on behalf of the Company and plaintiffs generally allege that the purchase of the Company's Common Stock by defendant Mark D. Lerdal in December 1997 was a corporate opportunity and that such Common Stock should have been instead purchased by the Company. Plaintiffs are seeking, among other things, a declaration that the purchase of the Common Stock by defendant Lerdal constituted the taking of a corporate opportunity and is null and void and an order requiring Defendant Lerdal to transfer the Common Stock to the Company for the consideration he paid or, to the extent the Common Stock may not be transferred to the Company, damages for the fair value of the Common Stock. The Company intends to vigorously defend each of these actions. MASTEC INC: Resolves Shareholder Lawsuits Filed in DE in 1990 ------------------------------------------------------------- In its report to the Securities and Exchange Commission, the Company states that it entered into a stipulation of settlement in the fourth quarter of 1999 regarding two shareholder class action and derivative lawsuits first filed in 1990. The two Delaware state court lawsuits alleged, among other things, that various former fiduciaries of ours breached their duties in approving certain transactions including the acquisition of control of MasTec in 1994, and that these former fiduciaries engaged in mismanagement, waste and breach of fiduciary duties in managing our affairs prior to the acquisition of control. The settlement, which must be approved by the court, calls for the payment of certain amounts by another defendant, a dismissal of the actions with prejudice and full release of all parties. The Company is not required to make any payments or to contribute to any amounts paid by other parties. NETOPTIX CORP: Files Motion to Dismiss Shareholders' Complaint -------------------------------------------------------------- In November of 1998 four separate class action complaints were filed by shareholders of NetOptix against NetOptix. In June of 1999 such complaints were consolidated into one action (Civil Action No. 98-12129-RCL). NetOptix has filed a Motion to Dismiss which has not been decided. The plaintiffs allege that NetOptix, and two of its former officers, violated the federal securities laws by knowingly making false or misleading statements concerning the company's financial condition. The plaintiffs' claim that the disappointing financial results for the third quarter of 1998, made public on July 23, 1998, resulted from business difficulties which should have been disclosed, or otherwise acted upon, sooner. [NOTE: Documents not provided to Purchaser.] NOVELL INC: Intends to Vigorously Defend Federal Securities Lawsuit ------------------------------------------------------------------- In February 1998, a suit was filed against Novell and certain of its officers and directors, alleging violation of federal securities laws. The lawsuit was brought as a purported class action on behalf of purchasers of Novell common stock from November 1, 1996, through April 22, 1997. The case is in its preliminary stages. Novell believes that the case is without merit and intends to defend vigorously against the allegations. PAYDAY LENDER: Edelman, Combs Sues Indiana Lender Koach's Kash Station ---------------------------------------------------------------------- The Chicago law firm of Edelman, Combs & Latturner and Indiana attorney Lemuel Stigler have filed a class action lawsuit against another Indiana "payday lender," Koach's Kash Station. The complaints in this and the prior cases allege violation of the Truth in Lending Act and Indiana law in connection with "payday loans." The Koach's Kash Station case was filed in the federal district court in South Bend. Roberts v. Koach's Kash Station 3:OOCV77 (N.D.Ind.). One of the Indiana laws alleged to have been violated is the Indiana Uniform Consumer Credit Code. The Code (i) prohibits lenders from charging interest of more than 36% per annum interest, (ii) allows a flat fee not exceeding $33, and (iii) prohibits lenders from using multiple agreements to obtain more finance charges than would otherwise be permitted. Plaintiffs allege that by imposing a finance charge that purports to be justified by the $33 exception to the general 36% limitation on a series of two-week loans -- producing finance charges in the hundreds of dollars and an effective annual percentage rate in triple digits -- the lenders violated the rate restrictions in the Indiana Uniform Consumer Credit Code. A survey conducted by the Indiana Department of Financial Institutions disclosed that the average payday loan borrower "rolls over" her loan about 10 times, so that the loan actually remains outstanding for 5-6 months (5,350 borrowers obtained 54,508 loans and rollovers, with the average loan/rollover lasting 13.67 days). The average annual percentage rate was 498.73%, or more than 10 times the 36% maximum. The average finance charge was $27.29 for each loan or rollover, showing that the lenders tried to use the $33 exception on each loan/rollover. One borrower "rolled over" her loan 66 times, or for about three years. A survey conducted by the Illinois Department of Financial Institutions produced similar results. "Payday lenders" are thus well aware of the fact that borrowers generally cannot pay their loans off in two weeks. The complaints also allege violation of another Indiana statute that makes it unlawful to charge more than 72% interest in any case. Ind. Code section This statute was the subject of the Attorney General's recent opinion. Finally, each lawsuit alleges failure to comply with the disclosure requirements of the federal Truth in Lending Act and the Indiana Uniform Consumer Credit Code. Similar lawsuits are pending against Ace Cash Express, E-Z Payday Loans, Advance America, Hoosier Check Cashing of Ohio, Ltd., Check 'n Go of Indiana, Inc., Fast Cash USA, Check Into Cash, All Checks Cashed, and GRT, Inc. (A-1 Payday Loans and Castleton Cash Advance) in the federal courts in Indianapolis, South Bend and Hammond. Rowings v. Ace Cash Express, Inc., IP 99-1887-C-B/S (S.D.Ind.); Livingston v. Fast Cash USA, Inc., IP99-1226-C-B/S (S.D.Ind.); Rowings v. DSA, Inc., d/b/a E-Z Payday Loans, IP 00-0060-C-B/S (S.D.Ind.); Wallace v. Advance America, 2:OOCV123JM (N.D.Ind.); Wilson v. Check Into Cash of Indiana, LLC, IPOO-0166C-H/G (S.D.Ind.); Smith v. All Checks Cashed, Inc., IPOO-0165-C-T/G (S.D.Ind.); Hudson v. GRT, Inc. IPOO-0163-C-M/S (S.D.Ind.); Bonds v. Hoosier Check Cashing of Ohio, Ltd., 3:OOCV70 (N.D.Ind.); Niblack v. Check 'n Go of Indiana, Inc., 3:OOCV72 (N.D.Ind.). Contact: Daniel A. Edelman of Edelman, Combs & Latturner, 312-739-4200, 800-644-4673, or fax, 312-419-0379 ST JOHN KNITS: Contests CA Suits Alleging Fiduciary Breach Re Merger -------------------------------------------------------------------- St John Knits International Inc. says in its report to the Securities and Exchange Commission that the Company is a party to six lawsuits that allege claims against some of its current and former directors for breach of fiduciary duty alleged to have arisen in connection with the mergers consummated in July 1999. All of these lawsuits were filed in the Superior Court of the State of California for the County of Orange. The principal relief sought in the six actions is certification of the putative class and a rescission of the mergers and damages and attorneys' fees in an unspecified amount. These six lawsuits were consolidated into one action on February 24, 1999, and the court has set a March 6, 2000 trial date. On September 9, 1999, three of the plaintiffs filed another lawsuit in the Superior Court of the State of California, County of Orange, naming SJKI, Pearl Acquisition Corp., Vestar/Gray Investors LLC, SJK Acquisition, Inc., Vestar Capital Partners III, L.P., Vestar Capital Partners and Merrill Lynch, Pierce, Fenner & Smith, Inc. The plaintiffs claim that each of the defendants aided and abetted the breach of fiduciary duties alleged in their earlier actions against St. John, Bob Gray and Kelly Gray. Since the claims in this litigation are based exclusively on secondary liability and are completely contingent upon the success of the claims in the earlier action, on November 16, 1999, at the request of several defendants, the court stayed all proceedings in this litigation pending the outcome of the earlier action. The Company says it intends to contest these lawsuits vigorously if the plaintiffs elect to proceed with their actions. ST JOHN KNITS: Reaches Agreement to Settle Securities Fraud Suit in CA ---------------------------------------------------------------------- On January 23, 2000 St John Knits International Inc. reached an agreement in principle to settle a case filed in 1998 by Binary Traders, Inc. for $5 million, an amount the company's insurance carrier has agreed to pay. On October 13, 1998, Binary Traders, Inc. had filed a complaint on behalf of purchasers of publicly traded securities of St. John during the period of February 25, 1998 to August 20, 1998 (the "Class Period") against St. John, Bob Gray, and Kelly Gray in the United States District Court, Central District of California, Southern Division (Binary Traders, Inc. v. St. John Knits, Inc. et al.). The complaint, which sought class action certification, alleged that the defendants violated federal securities laws by allegedly making fraudulent statements during the Class Period and sought an unspecified amount of compensatory damages. The settlement is subject to court approval, which is expected to occur in the spring. SUNNYVALE'S CYLINK: Judge Appoints Innelli & Molder As Lead Counsel ------------------------------------------------------------------- For the second time since November, a U.S. district judge from California has thrown a major curveball at firms seeking lead counsel status in a class action. Judge Vaughn Walker appointed Philadelphia's two-lawyer Innelli & Molder to lead the case -- a relatively minor class action against Sunnyvale's Cylink Corp. The firm, which had no prior interest in the suit, trumped Los Angeles' Weiss & Yourman and New York's Abbey, Gardy & Squitieri in the bidding for lead counsel status. Walker's decision piggybacks on what many called a landmark ruling by U.S. District Judge William Alsup in In re Network Associates, 99-1729, where Alsup closely examined the qualifications of shareholders seeking to be lead plaintiff. Where judges once routinely awarded lead counsel status to plaintiffs with the biggest losses, Alsup's November order held that judges now have the discretion to hand out that crown -- and the financial rewards that come with it as they see fit. The duo from Philadelphia is now standing among the redwoods, going up against Cylink's defense firm, Palo Alto's Wilson Sonsini Goodrich & Rosati, and representing plaintiffs previously counseled by a who's who of firms specializing in securities litigation. "I'm under no illusions that I'm up against just a couple of guys," said Wilson Sonsini partner Boris Feldman. "It's not the Pep Boys." While Walker noted that Innelli & Molder's bid would deliver a 12-14 percent higher recovery to the plaintiffs, he added that price should not be the only factor. While Weiss & Yourman emphasized its experience and familiarity with defense counsel and the court (Abbey, Gardy had dropped out of the bidding), Innelli countered its smaller size means more focused representation, reduced overhead and, Walker added, an "incentive to succeed." "This case represents an opportunity for Innelli & Molder to establish a reputation in a new and important market," Walker continued. After noting the bids were not far apart, Walker concluded that "had Weiss & Yourman offered a significant qualitative advantage, that could have overcome a price disadvantage of the magnitude present here. But Innelli appears to offer both a qualitative advantage and a price advantage, making its selection the appropriate choice." (The Recorder, February 9, 2000) TOBACCO LITIGATION: CA Consumers Sue for Damages from Price Fixing ------------------------------------------------------------------ Fred Furth, senior partner in the San Francisco law firm of Furth, Fahrner & Mason, and Walter Umphrey, senior partner in the Texas law firm of Provost Umphrey, announced on February 10 a class action lawsuit brought on behalf of millions of California indirect purchasers of cigarettes against the major tobacco companies, including R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, B.A.T. Industries P.L.C., British American Tobacco Company, Ltd., Liggett Group, Inc., Brooke Group, Ltd.; Philip Morris, Companies, Inc., Lorillard Tobacco Co., And Loews Corporation. This suit, filed in San Francisco, alleges that defendants unlawfully conspired and agreed to fix, raise, stabilize, and maintain the prices of cigarettes sold to California consumers in violation of California's Cartwright Act and Unfair Competition Act. It seeks to recover treble damages and obtain equitable relief and is believed to be the first state antitrust action brought against the tobacco companies for alleged price-fixing. Contact: Furth, Fahrner & Mason Fred Furth, 415/433-2070 ffm@furth.com TOBACCO LITIGATION: MI Smokers Sue for Damages from Price Fixing ---------------------------------------------------------------- A group of smokers filed a class-action lawsuit in Wayne Circuit Court on February 8, accusing the tobacco industry of decades of price fixing. The smokers -- from Oakland, Macomb, Wayne and St. Clair counties -- accused Philip Morris Cos.; R.J. Reynolds Tobacco Holdings Inc.; Brown & Williamson Tobacco Corp., a unit of British American Tobacco Co. Ltd.; Lorillard Tobacco Co., a unit of Loews Corp., and Liggett Group, a unit of Brooke Group Ltd. The action seeks up to $ 74,000 in damages with interest for every smoker in Michigan, along with attorneys' fees. The figure was chosen to keep the case in a state court. The cigarette companies "have participated in a long-running and systematic series of agreements to fix, raise, stabilize and maintain cigarette prices about competitive levels in violation of Michigan law," the lawsuit claims. "It's bad enough the tobacco makers used illegal and deceptive marketing practices, but now we learn they were fixing prices, too," said Troy attorney Gerard Mantese, who filed the suit on behalf of the smokers. The suit is similar to one filed in federal court in Washington on February 8 on behalf of two wholesalers. In the federal suit, Buffalo Tobacco Products of Buffalo, N.Y., and F&F Tobacco Products of Bryan, Texas, sought triple damages for price fixing. Both suits claim the major tobacco companies that control 99 percent of the market fixed prices during meetings of company lawyers who "frequently discussed and reached agreements regarding future price increases for cigarettes." The MI suit argued there was almost no cigarette price competition from the 1950s until 1980, when Liggett introduced low-price "generic discount" cigarettes. Other companies introduced generic brands, and after a 1993 price war, a price increase announced by Philip Morris signaled to the other companies "that they would resume their illegal agreement not to compete in the U.S. cigarette market on the basis of price," the lawsuit said. The Washington law firm that filed the federal suit, Cohen, Milstein, Hausfeld and Toll, is working with 25 firms across the country and more suits are expected to be filed. The tobacco industry called the suits unfounded. "These lawyers are scurrying around in a pathetic and desperate attempt in an effort to find first, the money, and, second, the clients," Phillip Morris spokeswoman Laurie Guzzinati said. The MI suit has been assigned to Judge Isidore B. Torres. No court date has been set. (The Detroit News, February 9, 2000) TOBACCO LITIGATION: Philip Morris Loses appeal of 1998 Gag Order in FL ---------------------------------------------------------------------- Philip Morris Cos unsuccessfully appealed a gag order imposed in 1998 by Dade County, Florida Circuit Judge Robert Kaye in a class action smoking-related injuries case, in a bid to to be able to reassure Wall Street investors and protect the company's stock price, the Wall Street Journal reported, citing Judge Kaye. Judge Kaye told the company in early February, "I'm not convinced of your argument now for immediate action for lifting the gag order at this point," according to the report. Under Judge Kaye's order, both sides are barred from making public statements about the case while it remains pending. According to the story, the case should go to the jury in the next several weeks, and could lead to a major financial award for up to 500,000 class action members, a development likely to pressure the stock price. (AFX European Focus, February 11, 2000) TOBACCO LITIGATION: Women Claim Fraud in Marketing Of Light Cigarettes ---------------------------------------------------------------------- Four Madison County women have joined what has become a trend over the past 14 months: class-action suits claiming that tobacco companies' marketing of "light" cigarettes as having less tar and nicotine was fraudulent and deceptive. "This is in the nature of a fraud on the consumer by virtue of being told the cigarette does one thing and it actually does another," said attorney Stephen Tillery of Belleville. "Many people buy them because they believe they're less harmful to them, when in fact the studies they did show the opposite." The women filed suit on February 10 in Madison County Circuit Court against Philip Morris Inc. and R.J. Reynolds Tobacco Co., claiming the companies deceived them that Marlboro Lights, Doral Lights and Cambridge Lights were less dangerous than regular brands. Because of the nature of class-action suits, each woman is seeking under $ 75,000. According to the suits, the woman bought and smoked their brands for anywhere from 10 to 20 years. The suit is separate from Illinois' part of a 46-state settlement with the tobacco industry in November 1998. The $ 9.1 billion Illinois is to receive over 25 years is to cover smoking-related health care costs. The Madison County suits do not try to claim health-related costs. Since March 1998, lawsuits over light cigarettes have been filed in Pennsylvania, Florida, Tennessee, Texas, Arizona and Ohio. Lawyers for Philip Morris and R.J. Reynolds have said those suits are without factual merit and that most courts will not try fraud cases as class actions. (St. Louis Post-Dispatch, February 11, 2000) U S WEST: Agency Orders Refund Re Service Quality; Won't Sue for Fines ---------------------------------------------------------------------- A report on the Communications Daily says that Colo.PUC decided not to ask state courts to fine U S West for service quality failures. Agency last month ordered USW to refund $12.8 million to customers affected by late installations and repairs, action company was considering challenging. State law would allow PUC to ask courts for fine of more than $160 million; PUC has no legal authority to fine utilities and must file lawsuit, and it generally doesn't sue for utility fines. USW also faces private class-action lawsuit in Colo. scheduled to go to trial early in 2001. (Communications Daily, February 11, 2000) VALENCE TECHNOLOGY: Announces Settlement Reached for Securities Lawsuit ----------------------------------------------------------------------- Valence Technology Inc. (Nasdaq: VLNC) announced on February 10 that a settlement has been reached in the securities class-action lawsuit that had been pending against the company and certain of its present and former officers and directors. Under the settlement, which is subject to court approval and certain other ordinary contingencies, the claims against the company and all other defendants will be dismissed without presumption or admission of any liability or wrongdoing. The full amount of the cash settlement and associated legal costs to date has been either previously expensed, reserved for or fully covered by the company's insurance carriers. Under the terms of the settlement Valence will pay $1.3 million in cash and 950,000 shares of common stock to the class fund. The company will take a charge for the impact of the stock portion of this settlement during the fourth quarter ending March 26, 2000. VALUE AMERICA: Schiffrin & Barroway Files Securities Lawsuit in VA ------------------------------------------------------------------ The law firm of Schiffrin & Barroway, LLP filed a class action lawsuit in the United States District Court for the Western District of Virginia on behalf of individuals and institutional investors that purchased the common stock of Value America, Inc. in the April 7, 1999 IPO, or between April 7, 1999 and December 28, 1999, inclusive. The complaint charges Value America and certain of its officers and directors with issuing false and misleading statements concerning the Company's true operating condition and financial performance. For more details on the above-mentioned lawsuit, please contact Stuart L. Berman, Esq. of Schiffrin & Barroway, LLP, toll free at 1- 888-299-7706 or 1-610-667-7706, or via e-mail at info@sbclasslaw.com or visit website at http://www.sbclasslaw.com VALUE AMERICA: Wolf Haldenstein Files Securities Lawsuit in VA -------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP filed a securities class action lawsuit in the United States District Court for the Western District of Virginia on behalf of investors who bought Value America, Inc. stock in the April 7, 1999 Initial Public Offering or between April 7, 1999 and December 28, 1999. The lawsuit charges Value America and certain officers of the Company, with violations of the securities laws and regulations of the United States. The lawsuit alleges that defendants issued a series of false and misleading statements during the Class Period concerning the Company's revenues, business model and general operating condition. The complaint alleges that defendants' false and misleading statements artificially inflated the price of the Company's stock during the Class Period. The complaint further alleges that certain individual defendants took advantage of their inside knowledge of the stock's inflated price to sell significant amounts of their personal holdings and reaped large profits on the proceeds. For more information concerning this lawsuit, please contact Wolf Haldenstein Adler Freeman & Herz LLP at 270 Madison Avenue, New York, New York 10016, by telephone at 800-575-0735 (Michael Miske, George Peters, Gregory Nespole, Esq., Fred Taylor Isquith, Esq. or Shane T. Rowley, Esq.), via e-mail at classmember@whafh.com or visit website at http://www.whafh.com * Bush Proposes Reforms: Curb Frivolous Suits; Large Ones in Fd Courts ---------------------------------------------------------------------- George W. Bush rolled out on February 9 a package of proposed legal reforms he said would discourage frivolous lawsuits and make it harder for lawyers bringing suit to shop around for the most sympathetic courts. Campaigning in Newberry, Bush said the ''tort reform'' proposals were similar to legislation he signed into law in Texas in 1995. They tied into Bush's theme in recent days that he is a political reformer who has achieved results during two terms as governor. He contrasts that with Sen. John McCain of Arizona, who Bush says talks about government reform without achieving it in Congress. McCain said he would soon unveil his proposal for a ''Veterans' Bill of Rights,'' including geriatric care and other improved benefits. This battleground state includes a large military population that both candidates are courting in what has become a two-man race, with polls showing McCain gaining on the front-runner. McCain told a military-laden crowd in North Charleston that theirs is ''arguably the most patriotic state'' and said he wanted ''to give them a commander in chief they can respect.'' Bush rolled out his legal plan during a meeting with business leaders at Newberry College. He said the changes would help protect entrepreneurs from costly and frivolous legal action. ''I want America to hear that a tort reform can positively effect people's lives,'' Bush said. ''I understand that small business and entrepreneurship is the backbone of our economy.'' Bush called for ''three strikes'' legislation that would bar a lawyer found to have filed three frivolous lawsuits from federal court for three years. He said an attorney who rejected a pretrial settlement and ultimately lost the case, or received a much smaller settlement, should pay his opponents' legal fees as punishment for continuing the case. And he called for changes to steer large class-action lawsuits to federal court, instead of allowing ''forum shopping'' in several state courts. Bush said he also would allow clients to challenge the reasonableness of their attorneys' fees in federal court, and ban federal agencies from paying lawyers with contingency fees. The shift back to issues came after escalating character accusations threatened to eclipse all other issues in the Republican fight for South Carolina. McCain said he hoped policy debates would replace the exchanges on trustworthiness. ''Whatever happened to education, Social Security and Medicare?'' he asked on his campaign bus bound for North Charleston. Bush rejected McCain's call for a cease-fire on negative ads as coming too late. ''Each of us needs to stand by what we're putting on TV,'' Bush said on NBC's ''Today.'' A McCain ad accuses Bush of twisting the truth and compares him to President Clinton. Bush aired a new commercial charging the senator ''solicits money from lobbyists with interests before his committee and pressures agencies on behalf of contributors.'' The accusations flew as Bush got a much-needed lift over McCain's insurgent candidacy with a 51-25 percent win in Delaware. McCain did not campaign in Delaware, bypassing it to campaign in South Carolina and Michigan. The South Carolina primary is Feb. 19, and the candidates are crisscrossing the state in search of votes. The Texas governor said McCain was not the political maverick he claimed, repeatedly referring to the senator as ''the chairman'' and saying that as head of the Senate's Commerce Committee and as a campaigner he ''tends to say one thing and do another.'' The latest example, Bush said, was McCain's statement a day earlier that he had always opposed public funding of elections. The Bush campaign offered a list of five McCain votes from 1990 to 1993 in favor of a bill that proposed partial public funding of Senate campaigns. ''Senator McCain voted not once, not twice, but five times to support publicly funded congressional campaigns,'' Bush told reporters after speaking to a cheering student crowd at North Greenville College. McCain said he couldn't recall whether he had ever voted for public funding of federal campaigns, but that he was philosophically opposed to the idea ''because of my view that my tax dollars should not be used to subsidize the campaigns of another candidate.'' His spokesman, Howard Opinsky, said: ''This is the same old Washington Clintonian politics that voters have become so cynical about, trying to twist John McCain's 17-year record of reform and consistent opposition to public financing to Governor Bush's advantage.'' Opinsky said all of the votes were against cloture motions, that is, voting to continue debate to keep opponents from stifling campaign finance reform. (AP Online, February 9, 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. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *