/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000222.MBX C L A S S A C T I O N R E P O R T E R Tuesday, February 22, 2000, Vol. 2, No. 37 Headlines AMOCO OIL: 8th Cir OKs Settlement for 3 Subclasses of Property Owners ARENA FOOTBALL: Players File with NLRB, FL Unfair Labor Practice Claims BANKAMERICA, NATIONSBANK: MO Suit Re Fraud in Merger Survives Dismissal CENTURY BUSINESS: Schatz & Nobel Files Securities Suit in Ohio CHRISTIE'S, SOTHEBY'S: Update on Antitrust Case; Mounting Suits Filed HMOs: Patients' Rights under Doctors' Incentive Scheme Go to Supreme Ct JDN REALTY: Berger & Montague Files Securities Lawsuit in Georgia JDN REALTY: Finkelstein, Thompson Files Securities Suit in Georgia LOUISIANA PACIFIC: Contests with ABT Lawsuit in AL Re Hardboard Siding LOUISIANA PACIFIC: Contests with ABT Lawsuit in MO Re Hardboard Siding LOUISIANA PACIFIC: FL Ct OKs Settlement with Users of OSB Siding LOUISIANA PACIFIC: OR Ct OKs Nationwide Settlement for OSB Siding Users MICROSOFT CORP: Mediation Talks for Antitrust Lawsuit Sputter PUBLISHERS CLEARING: Fed Judge OKs $30 Mil Sweepstakes Settlement SOTHEBY'S HOLDINGS: Savett Frutkin Files Securities Complaint in MI SUNTERRA CORP: Berger & Montague Files Securities Suit in Florida THQ INC: Milberg Weiss Files Securities Complaint in California THQ INC: Spector, Roseman Files Securities Lawsuit URANIUM MINING: Scheduling Order Violations Lead to Dismissal of Claims ********* AMOCO OIL: 8th Cir OKs Settlement for 3 Subclasses of Property Owners --------------------------------------------------------------------- In a class action brought to recover damages to property from pollution, the 8th U.S. Circuit Court of Appeals affirmed a district court's approval of a settlement that issued varying awards to three subclasses. (Petrovic v. Amoco Oil Co., No. 98-3816 (8th Cir. 12/30/99).) Christopher Petrovic and over 5,000 other people brought a class action against Amoco Oil Co. seeking injunctive and monetary relief for damage to their property allegedly caused by underground oil seepage from an Amoco petroleum refinery. The U.S. District Court for the Western District of Missouri approved a settlement of the class action. The settlement agreement provided both injunctive and compensatory relief. Various plaintiff class members appealed their objections to the settlement to the 8th Circuit. The appellants also challenged the District Court's decision granting a motion for summary judgment in favor of Amoco on CERCLA claims brought by the class. The 8th Circuit affirmed the District Court's decision on all counts. No Conflict Between Class Members The settlement agreement approved by the District Court divided the property owners affected by the pollution into three groups and awarded different monetary benefits to each group. The first group owned property located on top of the underground oil. The second group owned property surrounding the first group's properties. And the third group, which included approximately 5,000 properties, was the farthest removed from the underground oil. The property owners of the third group did not receive a sum certain. Rather, the owners were permitted to make a showing of damages on a case-by-case basis to receive compensation. The appellants argued that the District Court's failure to divide the certified class into subclasses deprived the class members of adequate representation because the interests of the three groups conflicted. The 8th Circuit discussed the District Court's duty to ensure that a class remains certifiable once certified and that the court's decision would only be reviewed for an abuse of discretion. The court pointed out that the litigation had been pending for over three years and the class had been certified long before the settlement. The 8th Circuit found that the appellants' arguments that the boundaries between property owners were arbitrary and inaccurately established and that different class members received very different monetary awards did not clearly explain why the class members' interests in cleaning up the pollution caused by Amoco differed. Rather, the court explained, the arguments were directed at the settlement itself. The 8th Circuit held that a conflict of interest is not created when different class members receive different awards, as long as the harm suffered can be clearly identified and quantified. Further, the 8th Circuit held that the interests of the class members do not all have to be identical if common objectives are shared. Larger award for a litigant who opted out of settlement. The 8th Circuit held that the first group of property owners received more compensatory damages than the property owners that had opted out and were victorious at trial. Their awards were large due to punitive damages awarded. The 8th Circuit held that "the speculative possibility of punitive damages ... [w]as not enough to find that the District Court abused it discretion in approving the settlement." Settlement Was Adequate As part of the settlement, Amoco agreed to work towards containing and remediating the underground oil, to perform future tests of the community drinking water, to work with the property owners to make the contaminated property useful again, and to make concessions to facilitate the building of a local road. Although the appellants argued that the measures agreed to would probably not be very effective, the 8th Circuit found that the arguments were not sufficient to warrant finding that the District Court had abused its discretion in approving the settlement and it probably was not likely that any injunctive relief would have been received at trial. The 8th Circuit held that the settlement agreement only prevented cases brought on the same claims against Amoco to be estopped. The parties always had the right to bring actions based on a third-party governmental agency's failure to enforce the law in an area affected by the settlement. The 8th Circuit further held that no subgroup of the class was treated unfairly and the District Court weighed all of the evidence. Settlement Notices Do Not Have to Include Specific Formulas for Awards The 8th Circuit held that prior cases require that the notice only needs to satisfy the broad reasonableness standards imposed by due process. The 8th Circuit held that the notice did not need to contain the complete formula for calculating individual awards to be adequate. Petroleum Byproducts Are Not Hazardous Substances The District Court had found that all of the contaminants on the properties derived from petroleum hydrocarbon products and granted summary judgment because petroleum is specifically excluded from the definition of hazardous substance under CERCLA. The 8th Circuit affirmed based on the "petroleum exclusion" found in the CERCLA statute. (Opinion: Circuit Judge Morris Sheppard Arnold) ((Real Estate/Environmental Liability News, February 18, 2000) ARENA FOOTBALL: Players File with NLRB, FL Unfair Labor Practice Claims ----------------------------------------------------------------------- Arena Football League (AFL) players on February 21 filed unfair labor practice charges with the National Labor Relations Board (NLRB) against all the owners of AFL teams. The charges, filed with the NLRB in Tampa, Fla., allege that the owners are illegally attempting to coerce players into supporting a union they do not want, as part of the owners' plan to avoid liability for their violations of federal and state antitrust laws. The players, who have already made it clear that they do not want to form a union, are seeking injunctive relief to restrain owners from continuing to threaten and coerce them. James Guidry, a quarterback with the Oklahoma Wranglers and the president of the AFL Players Association, is one of the players who filed the unfair labor practice charges with the NLRB. According to Guidry, "The AFL teams are holding all AFL players hostage, trying to force us to support a union selected and financed by the owners, as part of their continuing efforts to keep player salaries, insurance, medical care and injury protection below any reasonable standards. The few players who are supporting the union selected by the league are only doing so in response to the illegal threats to cut off their pay and benefits and to terminate the 2000 season. The players are simply not going to tolerate a continuation of this type of conduct." The charges the players filed with the NLRB include allegations that the owners are: * Coercing players to give up their right under federal law to refrain from forming or supporting a union; * Withholding pay and benefits from players who refuse to support the owners' union; * Threatening players who refuse to support a union with firing, blacklisting from ever being a player or a coach in the league, and the shutdown of the 2000 season; * Providing financial support and other assistance to the union the AFL owners want the players to support; Refusing to offer contracts to players and engaging in other illegal reprisals because players have exercised their right not to join a union. On Feb. 3, the players filed a major class action antitrust lawsuit in the United States District Court in Newark, N.J., seeking damages and an injunction against the illegal practices by AFL teams and owners that eliminate competition for AFL players' services. The suit contends that the owners of AFL teams have joined together in violation of the Sherman antitrust act, to reduce the owners' costs for player services, by fixing the terms of employment for AFL players at unfair and noncompetitive levels, prohibiting injury and other contractual guarantees, and forcing the players into "take it or leave it" situations in which the owners can dictate whatever terms they want. The players are seeking judicial orders ending the owners' illegal contracts and three times the damages suffered by AFL players since 1996. For more information about the NLRB charges or the players' antitrust lawsuit, contact Jeffrey L. Kessler of Weil, Gotshal & Manges, 212-310-8646 or Mark S. Levinstein of Williams & Connolly, 202-434-5012. Jeffrey L. Kessler of Weil, Gotshal & Manges, 212-310-8646, or Mark S. Levinstein, of Williams & Connolly, 202-434-5012 BANKAMERICA, NATIONSBANK: MO Suit Re Fraud in Merger Survives Dismissal ----------------------------------------------------------------------- The Eastern District of Missouri has refused to dismiss a securities fraud class action challenging disclosures made during the NationsBank Corp. (NB) and BankAmerica (OBA) merger. Shareholders allege the banks did not reveal the extent of OBA's investment in D.E. Shaw & Co. that resulted in a $372 million charge-off shortly after the merger due to downswing in the foreign currencies market. In re BankAmerica Corp. Securities Litigation, MDL No. 1264 (ED MO, Dec. 15, 1999). In April 1998, NB (a North Carolina corporation) and OBA (a Delaware corporation) agreed to a merger in a stock-for-stock exchange in which NB shareholders received about 54 percent of the new BankAmerica (NBA) and former OBA shareholders got 46 percent. NB filed a registration statement (including a joint proxy/prospectus) for the combined companies' stock in August 1998, which was also sent to shareholders for their approval. The merger was described as a "merger of equals," based on the percentage control of the new entity by NB and OBA shareholders. The proxy incorporated OBA's 1997 annual report, which said that OBA had "established a relationship" with D.E. Shaw & Co. to enhance its ability to offer additional financial products to its customers. However, OBA did not disclose that the relationship involved a $1.4 billion unsecured loan from OBA to Shaw, which Shaw managed as a separate trading portfolio. Under the terms of their agreement, 50 percent of any resulting profits went back to OBA. Subsequently, Shaw leveraged the loan to support a bond portfolio valued at $20 million. When Russia defaulted on its debt on Aug. 17, 1998, many financial institutions declared losses in their foreign securities portfolios, and even OBA announced a $220 million trading loss. Nevertheless, the merger was approved by shareholders on Sept. 24, 1998. At an Oct. 1, 1998 press conference, Hugh L. McColl, Jr., Chairman and CEO of NBA, said the bank had outstanding loans to hedge funds in an amount "below $300 million" and reiterated that the company had an "investment" in Shaw. Later that month, NBA took the $372 million charge-off from the Shaw loan and reversed $70 million in related income. Additionally, the company revealed its investment in the relationship was $1 billion after the charge-off. A few weeks later, NBA's CFO James Hance said in a Wall Street Journal interview that, "BankAmerica Corp. knew as early as August about losses at its high-risk trading operation with D.E. Shaw & Co., but decided not to disclose the problem [yet] because it feared the publicity could cause the bank to lose its entire $1.4 billion loan to the fund." The article also stated Hance, McColl and other top executives had been scrambling since late September to deal with the Shaw situation. David M. Coulter, President of NBA and heir apparent to McColl, resigned shortly after the article was published. The Class Action Shareholders of the banks filed multiple class actions alleging securities fraud due to the misleading statements regarding the Shaw investment and Coulter's resignation. They allege: -- false or misleading statements in the proxy in violation of Sec. 14(a) of the Exchange Act; -- false statements in the registration statements in violation of Sec. 11 of the Securities Act; -- fraud under Sec. 10b and Rule 10b-5 thereunder; and -- control officer liability under Sec. 20(a) of the Exchange Act. The banks moved for dismissal claiming, among other things, failure to fulfill the heightened pleading standards of the Private Securities Litigation Reform Act. (PSLRA). Judge John F. Nangle, writing for the district court, adopted the Second Circuit's standards as the Eighth Circuit has not addressed the issue yet. The court concluded plaintiff's claims raised a strong inference of fraud even though the allegations are not as specific as the Second and Ninth Circuit require. Judge John F. Nangle said the internal reports regarding the progress of OBA's portfolio with Shaw and Hance's published statements were sufficient to meet the heightened pleading standards. The court also concluded the "group pleading doctrine" survived the PSLRA. This doctrine attributes knowledge of information to all officers and directors with involvement in the day-to-day affairs of the corporation. Allegations of False Statements Regarding the allegedly misleading statements in the proxy, the defendants argue that there was no duty to disclose the details of the financing relationship and, moreover, they didn't decide to take the charge off until the night before. Citing Chiarella v. U.S. (U.S. 1980), the court ruled that corporate insiders, due to their fiduciary obligations, have a duty to disclose material information when a failure to disclose would be a detriment of shareholders. "Because the failure to disclose the information caused the stock of OBA to be overvalued, the BA holders received a better exchange rate under the terms of the merger than they should have," the court said. The allegations of false statements in the registration statement are based on its usage of the term "merger of equals." Plaintiffs allege that defendants had no intention for control of NBA to be shared, or for Coulter to succeed McColl. Although defendants argued the term was too vague to be actionable, the court was not persuaded, stating that the proxy/prospectus and registration statements define the term. "If the BA holders had known that defendants never intended for control to be shared and for Coulter to succeed McColl, they would likely not have voted for the merger," the court said. Consequently, this information is not so vague as to be immaterial, Judge Nangle concluded. Overall, the court allowed the securities fraud and misrepresentation claims by the stockholders to survive the motion to dismiss. Only individual or control person liability against certain defendants was dismissed. (See Document Section D for the opinion.) (Securities & Commodities Litigation Reporter, January 26, 2000) CENTURY BUSINESS: Schatz & Nobel Files Securities Suit in Ohio -------------------------------------------------------------- The law firm of Schatz & Nobel, P.C. filed a securities complaint in the United States District Court of the Northern District of Ohio on behalf of all persons who purchased or otherwise acquired the common stock of Century Business Inc. between November 9, 1999, and January 28, 2000, inclusive. The complaint asserts among others that Century Business Services Inc. and its officers sought to inflate results through false and misleading statements regarding the Company's internal financial reporting structure. The complaint also charges that during the Class Period, the Company and certain of its officers violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Complaint alleges, among other things, that during the Class Period, the Defendants made false and misleading statements regarding its internal financial reporting structure. The Complaint further alleges that by making these material misrepresentations, the Defendants artificially inflated the price of the common stock during the Class Period. Prior to the Class Period, in 1997 and 1998, Century had engaged in an aggressive acquisition campaign during which time Century acquired over 100 companies. As a result of these acquisitions, Century did not have in place adequate internal controls and management reporting structures to assure that it timely reported material changes in its operation results. For more information on the above-mentioned lawsuit, you may contact Andrew M. Schatz or Jeffrey S. Nobel toll-free at (800) 797-5499, or by e-mail at SN06106@aol.com and for more information about Schatz & Nobel, P.C., you may visit website at http://www.snlaw.net CHRISTIE'S, SOTHEBY'S: Update on Antitrust Case; Mounting Suits Filed --------------------------------------------------------------------- Thirty-eight class-action lawsuits were filed in Manhattan as of February 14, said Robert A. Skirnick, an antitrust lawyer representing some of the customers. Others have been filed in other states, and Sotheby's shareholders have also sued, according to a report on the New York Times, and Judge Lewis Kaplan, a federal judge in Manhattan, has scheduled a hearing to begin consolidating the lawsuits. Disgruntled customers contend they were overcharged because of collusion by the two rival auction houses, and they are basing their class-action suits on a criminal antitrust investigation the United States Justice Department has been conducting. As part of that process a federal grand jury in Manhattan is looking into whether the auction houses conspired to fix the commissions they charge buyers and sellers at auctions dating back to 1992, said people in art and legal circles who are involved in the matter. About three dozen other people have sued, some of whom may have simply bought a wristwatch or sold a great aunt's antique commode, the New York Times reports. Some of these people, like Mr. Black the copper trader, may have had longstanding disagreements with the auction houses; last year, Sotheby's admitted that a pair of antique chairs for which Mr. Black paid about $2.7 million were, in fact, recent reproductions. But others were simply shocked when they learned of the antitrust investigation. Civil suits like these are common in the wake of a criminal antitrust investigation, class-action lawyers said. But plaintiffs in these cases are not just any old consumers. They are richer, and probably tougher. The unusual makeup of the plaintiffs -- mainly angry rich people -- should come as no surprise, said Joseph J. Tabacco, one of the lawyers involved in the suits against Sotheby's and Christie's. After all, he said, "The zone of greatest impact is probably up and down Park Avenue." The fallout could be not just embarrassing but also expensive for Sotheby's and Christie's, which could end up paying their clients tens of millions of dollars, according to the New York Times. The report says some worry that publicity from the antitrust case will shake the public's confidence at a time when the art market has been booming. "For a lot of people to whom the art world is hype anyway, does it increase their fears and cynicism?" wondered Angela Westwater, a dealer of contemporary art in SoHo. If the Justice Department's investigation results in criminal charges, Sotheby's could face fines and its top executives short prison terms. Last month Christie's announced that in return for immunity from criminal prosecution it was cooperating with the investigation and turning over information to the Justice Department. Under the department's amnesty program, leniency can be extended only to the first member of a cartel to come forward and spill the beans. Sotheby's stock price has plunged, from its high last spring of $47 to $17 3/4 on February 18. Ron Baron, president of Baron Capital Management, by far the largest outside shareholder in Sotheby's, described himself as "surprised, puzzled and disappointed" at the antitrust news, though he said he was confident that the outcome would not be financially significant. Christie's, which was bought by a French businessman for more than $1 billion in 1998, is now a private company and no longer obligated to report its financial results publicly. Both companies, which control about 95 percent of the $4 billion worldwide auction market, will have to cope with the class-action lawsuits by disgruntled customers, who could number in the thousands. If the customers win, they could recover three times the damages they suffered. The losses for the auction houses could come at a bad time. Both businesses have just spent huge sums on snazzy headquarters, and Sotheby's is pouring millions of dollars into an Internet auction business. The investigation could also result in increased governmental regulation. The New York City Department of Consumer Affairs, which regulates auctioneers, is "following the antitrust action closely, said Jules Polonetsky, commissioner of the department. Moreover, the art dealers fear that more regulations in the auction business could hurt the entire art trade. Many in the insular art world are riveted by the drama and waiting for Sotheby's next move, the New York Times says. Some dealers and collectors, who generally have a love-hate relationship with the two big houses, seem to be privately aghast and slightly gleeful at their problems. Lawyers, too, are watching with interest as a patient and painstaking federal prosecutor named John J. Greene deals with some of the most experienced, expensive and aggressive defense lawyers in the country (Skadden, Arps, Slate, Meagher & Flom for Christie's and Weil, Gotshal & Manges for Sotheby's). The report points out that the investigation comes at a time when the art auction business seems finally to have recovered from the deep recession that followed the frenzied art sales of the late 1980's. After a drop in revenues, the auction houses began raising their fees, and by exactly the same amount. In 1992 Sotheby's announced that it was increasing the commission that buyers pay to 15 percent of the purchase price on the first $50,000 and 10 percent on the rest. In 1995, another tough year in the auction business, the pattern of price increases was repeated, this time on the commissions that Sotheby's and Christie's charge sellers. Within six weeks of each other, the two announced a sliding scale that would apply to all sellers; previously, the two had officially charged fixed commissions, but often cut them to woo big sellers. "Once they instituted that elaborate sliding scale, there was no negotiation unless maybe for the Onassis estate," said Jeffrey A. Klafter, a lawyer representing customers in some of the 40-odd class-action cases that have been filed in the last month. Financially, the price changes worked out well for the houses. In 1996 the amount of art sold at auction at Sotheby's edged down by almost 4 percent, but its revenues from auctions rose 7 percent. By that time Mr. Greene was already taking a close look at the art world. He had brought several cases against antiques dealers who secretly agreed not to bid against one another at auctions. In the spring of 1997 both the auction houses and a dozen top art dealers were subpoenaed for truckloads of documents, including datebooks, phone lists and correspondence. Though the main focus seemed to be on dealers, some lawyers suggested that the Justice Department was also looking at the commission increases. According to the New York Times, lawyers for several dealers who received subpoenas said recently that their clients had not heard from prosecutors for a long time, suggesting that the investigation may have stalled or that prosecutors began focusing on only the auction houses. Meanwhile things were changing at Christie's. Francois Pinault, who owns the auction house, installed a team of accountants to comb through its books and records. He also began shaking up Christie's management. On Christmas Eve Christie's announced the resignation of Christopher M. Davidge, who had been the auction house's chief executive for six years. Mr. Davidge's lawyer, Joseph Linklater, declined to comment on his client's departure. A month later Christie's said it "recently became aware of information relevant to the antitrust investigation," and had turned it over to the Justice Department. Christie's added that it had entered the department's amnesty program, which allows companies to turn themselves in for antitrust violations in return for leniency or immunity from criminal prosecution. According to the New York Times, one reason for a company to confess to a crime that might otherwise seem difficult to prove is simple the threat of jail time and large fines. Criminal antitrust cases are notoriously difficult to prove, the report says, but a trial is a risk for targeted businesses, especially when there is tangible evidence. So rather than recommending that their clients try to tough it out, lawyers often tell them to cooperate with prosecutors -- before someone else does. "There's a footrace to the prosecutors," said Stephen M. Axinn, a specialist in antitrust defense. It is not enough just to turn state's evidence, antitrust lawyers said. For the courts to recognize that a conspiracy has ended, the conspirator must make an open, public break with the cartel agreement. Then there is the broader question of what Sotheby's will do about the antitrust investigation, the article in the New York Times brings up. Some lawyers said that the auction house would reach a settlement with the government rather than go to trial. "There's no possible benefit, in terms of the art world, in having all this ugly stuff in the newspaper every day," said Mr. Axinn, the defense expert. (The New York Times, February 21, 2000) HMOs: Patients' Rights under Doctors' Incentive Scheme Go to Supreme Ct ----------------------------------------------------------------------- The Supreme Court will hear a case on February 23 that goes to the heart of the current national furor over managed care: Can patients trust doctors who are paid bonuses by their health plans to cut medical costs? The outcome may determine whether the 125 million Americans who are in group health plans have legal recourse when they suspect that their doctors have denied them care because of a financial incentive paid by the managed care company that employs them. Until now, aggrieved HMO patients have found little relief in federal courts. But the case of Cynthia Herdrich may change all that. Herdrich, now an environmental planner in Loveland, Colo., was 33 years old in 1991 when she went to her Illinois HMO doubled over in pain. Her doctor diagnosed her with a urinary tract infection and sent her home with an antibiotic. When Herdrich returned nearly a week later, still in pain, her physician, Lori Pegram, said that she had an ovarian cyst and recommended an ultrasound. But before Herdrich could have the ultrasound at a hospital in her HMO's network, which was 50 miles away, her appendix ruptured and caused a severe infection. Treatment required a weeklong hospital stay, plus five days of intravenous antibiotics at home. Her lawyer says that this was not merely a case of medical error. "They had hidden incentives that basically say you can receive an annual bonus for not ordering diagnostic tests and not making referrals to specialists," said the attorney, James P. Ginzkey. "That creates a blatant conflict of interest. And it explained what happened here. At every step, they took the cheap way out." Herdrich sued her doctor and her HMO. Among other things, she alleged that because her doctor was paid a year-end bonus for limiting referrals for tests and treatments at out-of-network hospitals, the HMO had violated its responsibilities under a federal law that requires administrators of a benefit plan to put first the interests of people covered by the plan. The fight over the Herdrich case - many of the biggest players in the health care industry have filed briefs - is part of a growing political and legal battle over the rights of patients. If the Supreme Court rules in Herdrich's favor, the decision is likely to have huge financial and legal consequences for the managed health care system, which uses incentive payments to encourage doctors to hold down costs. It also could unleash a flurry of lawsuits against managed health care plans and boost prospects for more than a dozen class-action lawsuits that have been filed against some of the nation's largest plans. "It would open the door to a tremendous amount of litigation against every managed care plan," said Carter Phillips, the prominent Washington-based lawyer who is representing Carle Clinic, the HMO sued by Herdrich. Karen Ignagni, president of the American Association of Health Plans, an HMO trade group, predicted an even more dire result. "If the court rules in her favor, it would potentially unravel the entire health care system because these incentives are used not just by private health care plans but in the federal Medicare and Medicaid programs, and in state employee benefit plans," Ignagni said. Trial lawyers and patient advocates see it differently. Because of the way the federal law has been interpreted until now, most patients who are injured by health plans have had little recourse in either state or federal courts. A ruling in favor of Herdrich, or even partly in her favor, would begin to right the inequities, they say. "Up to now, what federal law has done ... is to insulate managed care from liability, from judicial oversight and from state regulatory oversight," said Peter Jacobson, a law professor at the University of Michigan. "If the court rules in Herdrich's favor, it won't be the end of managed care. Liability didn't undermine hospitals, and it's not likely to destroy managed care," he said. The threshold legal question to be decided by the court is whether an HMO or managed health care plan - like the employer that sponsors the overall benefits plan - functions as a fiduciary of the benefits plan. If so, HMOs likely would have to live up to the same trustee-type responsibilities expected of employers. Those responsibilities include disclosure of the plan's operations, loyalty to plan members and a prohibition against enriching the plan's administrators at the expense of participants in the plan. In the case of HMOs, that implies a duty to act in the sole interest of patients. HMOs have argued that their systems to hold down costs, including physician incentives, benefit all members because they lower the overall cost of the plans. But Herdrich's lawyers argue that some of those cost-saving measures conflict with the interests of patients because they compromise their access to care. The legal question is further complicated, some legal scholars say, by the dual and hard-to-separate roles played by managed care plans. As plan administrators responsible for making benefit decisions, health plans are covered by the 1974 Employment Retirement Income Security Act, or ERISA; as deliverers of health care, they are not. Until recently, courts interpreted the law to mean that, even when an HMO patient was injured because of a doctor's negligence, the HMO was shielded from liability both in federal and state courts. Judges reasoned that since ERISA does not deal with negligence or malpractice and because the HMO was serving a plan regulated under the federal law, it was shielded from malpractice suits in state courts. Patients can, however, sue a specific doctor under state malpractice laws. The only exception to this shield was if an HMO wrongly denied a patient a benefit covered by the plan. In that case, the patient could recover damages under the federal law but only the cost of the benefit that was denied. Thus a woman denied a mammogram, which the plan was supposed to cover, and whose breast cancer then progressed undetected, could be reimbursed only for the cost of the mammogram. Few lawyers took such cases because so little money could be recovered. Now, however, courts are revising some of those rulings and opening the door to some lawsuits against managed care plans by injured patients and doctors. In 1996, a jury heard Herdrich's malpractice claim in an Illinois state court and awarded her $ 35,000 in damages against her physician. But the trial judge tossed out her federal employee benefit claim against her HMO. However, the U.S. Court of Appeals in Chicago, in a ruling that stunned the health care industry, revived Herdrich's claim against the clinic and said the allegations, if true, would justify a damage verdict against the HMO itself. Doctors cannot work "solely in the interest" of the patients if they receive "yearly kickbacks" for denying care, said Judge John L. Coffey for the 7th U.S. Circuit Court. Before the case could go to trial, the HMO, backed by the health care industry, persuaded the Supreme Court to rule squarely on whether HMOs in this type of case are acting as fiduciaries and can be sued under federal employee benefits law for using financial incentives. The Clinton administration filed a brief urging the high court to rule against Herdrich, saying that her HMO's bonus plan did not appear to violate the federal benefit law. But it also argued that other types of financial incentives could violate ERISA, and said that the court should not close the door to such suits. Filing briefs on behalf of Herdrich are health care scholars and ethicists, as well as a number of public-interest health groups. A decision in the case, Pegram vs. Herdrich, will be handed down by the court within a few months. (The News and Observer (Raleigh, NC), February 21, 2000) JDN REALTY: Berger & Montague Files Securities Lawsuit in Georgia ----------------------------------------------------------------- Berger & Montague, P.C. filed a class action lawsuit for violations of the federal securities laws in the United States District Court for the Northern District of Georgia against JDN Realty Corp. and certain of its officers and directors, on behalf of all persons who purchased JDN securities between March 28, 1997, and February 14, 2000, inclusive. The complaint alleges that JDN and certain of its directors and officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that defendants failed to disclose that from 1994 to 1998 certain executives of the Company received $4.9 million in compensation payments in connection with real estate development projects. The complaint also alleges that defendants issued materially false and misleading financial statements which failed to record the payments as expenses or to identify the related party transactions. On February 14, 2000, the Company revealed publicly for the first time that the previously unreported payments would cause it to default on its main credit line and that the Company's 1999 fourth quarter earnings announcement would be delayed in order to restate its earnings for each of the past five years. The company also announced that its chief executive officer had resigned that post immediately, along with the two executives who had received the compensation. Plaintiff seeks to recover damages on behalf of himself and all persons who bought JDN securities during the Class Period. Contact: Sherrie R. Savett Esq., Stuart J. Guber Esq. or Kimberly A. Walker, Investor Relations Manager of Berger & Montague, P.C. 1622 Locust Street, Philadelphia, PA 19103, by telephone at 215-875-3000 or 888-891- 2289, or fax at 215-875-5715 or at InvestorProtect@bm.net via e- mail. JDN REALTY: Finkelstein, Thompson Files Securities Suit in Georgia ------------------------------------------------------------------ Finkelstein, Thompson & Loughran has filed a class action lawsuit in the United States District Court for the Northern District of Georgia on behalf of all persons who purchased JDN Realty Corp. common stock from March 31, 1997 through February 13, 2000, inclusive. The Complaint charges that defendants fraudulently funneled undisclosed compensation to certain officers of the Company, engaged in undisclosed related party transactions, understated expenses and overstated funds from operations and net income in reporting the company's financial results during the Class Period. Specifically, the Complaint alleges that, during the period between 1994 and 1998, defendants concealed at least $5 million of undisclosed compensation, and overstated net income by at least $5 million. The Complaint further charges that officers of the Company engaged in significant insider sales, selling over 50,000 shares of JDN stock to the unsuspecting public, for total proceeds in excess of $1.3 million. On February 14, 2000, JDN Realty announced that J. Donald Nichols had resigned as Chief Executive Officer, and that two corporate vice presidents had also resigned, in light of "the company's discovery of certain real estate transactions which included undisclosed compensation arrangements and related party transactions." The company further stated that "these transactions were not accurately recorded or disclosed in JDN's audited financial statements for its years ended December 31, 1994 through 1998." The company also indicated that "the compensation and other amounts are likely to be accounted for as an expense for each of the years incurred, which would result in a restatement of the company's financial statements for each of those years, and reduce net income and funds from operations for those periods." These revelations spurred a precipitous drop in JDN's share price, with the share price closing at $9 9/16, down 41% from the previous day's closing price. For additional information on this lawsuit, you may contact Donald J. Enright with Finkelstein, Thompson & Loughran, toll-free at 888- 333-4409, or at 202-337-8000, or by e-mail at DJE@FTLLAW.com Web page at http://www.FTLLAW.com LOUISIANA PACIFIC: Contests with ABT Lawsuit in AL Re Hardboard Siding ---------------------------------------------------------------------- On January 25, 1999, Louisiana Pacific Corp. commenced a tender offer to purchase all outstanding shares of ABT Building Products Corporation (ABT) for $15 per share. On February 25, 1999, L-P and ABT merged following the successful completion of the tender offer. L-P acquired approximately 10.7 million shares of ABT for cash proceeds of approximately $160 million. In March 1999, L-P filed a shelf registration statement for $500 million of debt securities to be offered from time to time in one or more series. The amount, price and other terms of any such offering will be determined on the basis of market conditions and other factors existing at the time of such offering. The proceeds from the sale of such securities are anticipated to be used by L-P for general corporate purposes, which may include repayment of debt, including debt incurred in the acquisition of ABT. ABT, ABTco, Inc., a wholly owned subsidiary of ABT ("ABTco" and, together with ABT, the "ABT Entities"), Abitibi-Price Corporation ("Abitibi"), a predecessor of ABT, and certain affiliates of Abitibi (the "Abitibi Affiliates" and, together with Abitibi, the "Abitibi Entities") have been named as defendants in a conditionally certified class action filed in the Circuit Court of Choctaw County, Alabama, on December 21, 1995 and in six other putative class action proceedings filed in the following courts on the following dates: the Court of Common Pleas of Allegheny County, Pennsylvania on August 8, 1995; the Superior Court of Forsyth County, North Carolina on December 27, 1996; the Superior Court of Onslow County, North Carolina on January 21, 1997; the Court of Common Pleas of Berkeley County, South Carolina on September 25, 1997; the Circuit Court of Bay County, Florida on March 11, 1998 (subsequently removed to the U.S. District Court for the Northern District of Florida); and the Superior Court of Dekalb County, Georgia on September 25, 1998. These actions were brought on behalf of various persons or purported classes of persons (including nationwide classes) who own or have purchased or used hardboard siding manufactured or sold by the ABT Entities or the Abitibi Entities. In general, the plaintiffs in these actions have alleged unfair business practices, breach of warranty, fraud, misrepresentation, negligence, and other theories related to alleged defects, deterioration, or other failure of such hardboard siding, and seek unspecified compensatory, punitive, and other damages, attorneys' fees and other relief. In addition, Abitibi has been named in certain other actions, which may result in liability to ABT under the allocation agreement between ABT and Abitibi. Except in the case of certain of the putative class actions that have been stayed, the ABT Entities have filed answers in these proceedings that deny all material allegations of the plaintiffs and assert affirmative defenses. L-P intends to cause the ABT Entities to defend these proceedings vigorously. LOUISIANA PACIFIC: Contests with ABT Lawsuit in MO Re Hardboard Siding ---------------------------------------------------------------------- L-P, the ABT Entities and the Abitibi Entities have also been named as defendants in a putative class action proceeding filed in the Circuit Court of Jackson County, Missouri on April 22, 1999 and brought on behalf of a purported class of persons in Missouri who own or have purchased hardboard siding manufactured by the defendants. In general, the plaintiffs in this proceeding have alleged breaches of warranty, fraud, misrepresentation, negligence, strict liability and other theories related to alleged defects, deterioration or other failure of such hardboard siding, and seek restitution, punitive damages, attorneys' fees and other relief. L-P and the ABT Entities intend to defend this proceeding vigorously. ABT and Abitibi have agreed to an allocation of liability with respect to claims relating to (1) siding sold by the ABT Entities after October 22, 1992 ("ABT Board"), and (2) siding sold by the Abitibi Entities on or before, or held as finished goods inventory by the Abitibi Entities on, October 22, 1992 ("Abitibi Board"). In general, ABT and Abitibi have agreed that all amounts paid in settlement or judgment (other than any punitive damages assessed individually against either the ABT Entities or the Abitibi Entities) following the completion of any claims process resolving any class action claim (including consolidated cases involving more than 125 homes owned by named plaintiffs) shall be paid (a) 100% by ABT insofar as they relate to ABT Board, (b) 65% by Abitibi and 35% by ABT insofar as they relate to Abitibi Board, and (c) 50% by ABT and 50% by Abitibi insofar as they cannot be allocated to ABT Board or Abitibi Board. In general, amounts paid in connection with class action claims for joint local counsel and other joint expenses, and for plaintiffs' attorneys' fees and expenses, are to be allocated in a similar manner, except that joint costs of defending and disposing of class action claims incurred prior to the final determination of what portion of claims relate to ABT Board and what portion relate to Abitibi Board are to be paid 50% by ABT and 50% by Abitibi (subject to adjustment in certain circumstances). ABT and Abitibi have also agreed to certain allocations (generally on a 50/50 basis) of amounts paid for settlements, judgments and associated fees and expenses in respect of non-class action claims relating to Abitibi Board. ABT is solely responsible for such amounts in respect of claims relating to ABT Board. Based on the information currently available, management believes that the resolution of the foregoing matters will not have a material adverse effect on the financial position or results of operations of L-P. LOUISIANA PACIFIC: FL Ct OKs Settlement with Users of OSB Siding ---------------------------------------------------------------- A settlement of a class action in Florida, similar to the nationwide action on OSB Siding Matters, was approved by the Circuit Court for Lake County, Florida, on October 4, 1995. Under the settlement, L-P has established a claims procedure pursuant to which members of the settlement class may report problems with L-P's OSB siding and have their properties inspected by an independent adjuster, who will measure the amount of damage and also determine the extent to which improper design, construction, installation, finishing, painting, and maintenance may have contributed to any damage. The maximum payment for damaged siding is $3.40 per square foot for lap siding and $2.82 per square foot for panel siding, subject to reduction by up to 75 percent for damage resulting from improper design, construction, installation, finishing, painting, or maintenance, and also subject to reduction for age of siding more than three years old. L-P has agreed that the deduction from the payment to a member of the Florida class will be not greater than the deduction computed for a similar claimant under the national settlement agreement described above. Class members will be entitled to make claims until October 4, 2000. LOUISIANA PACIFIC: OR Ct OKs Nationwide Settlement for OSB Siding Users ----------------------------------------------------------------------- Louisiana Pacific Corp. reports in its filing with the SEC that it has been named as a defendant in numerous class action and nonclass action proceedings, brought on behalf of various persons or purported classes of persons (including nationwide classes in the United States and Canada) who own or have purchased or used OSB siding manufactured by L-P, because of alleged unfair business practices, breach of warranty, misrepresentation, conspiracy to defraud, and other theories related to alleged defects, deterioration, or failure of OSB siding products. The U.S. District Court for the District of Oregon has given final approval to a settlement between L-P and a nationwide class composed of all persons who own, have owned, or subsequently acquire property on which L-P's OSB siding was installed prior to January 1, 1996, excluding persons who timely opted out of the settlement and persons who are members of the settlement class in the Florida litigation described below. Under the settlement agreement, an eligible claimant whose claim is filed prior to January 1, 2003 (or earlier in certain cases) and is approved by an independent claims administrator, is entitled to receive from the settlement fund established under the agreement a payment equal to the replacement cost (determined by a third-party construction cost estimator and currently estimated to be in the range of $2.20 to $6.40 per square foot depending on the type of product and geographic location) of damaged siding, reduced by a specific adjustment (of up to 65 percent) based on the age of the siding. Class members who previously submitted or resolved claims under any other warranty or claims program of L-P may be entitled to receive the difference between the amount payable under the settlement agreement and the amount previously paid. The extent of damage to OSB siding at each claimant's property is determined by an independent adjuster in accordance with a specified protocol. Settlement payments are not subject to adjustment for improper maintenance or installation. A claimant who is dissatisfied with the amount to be paid under the settlement may elect to pursue claims against L-P in a binding arbitration seeking compensatory damages without regard to the amount of payment calculated under the settlement protocol. A claimant who elects to pursue an arbitration claim must prove his entitlement to damages under any available legal theory, and L-P may assert any available defense, including defenses that otherwise had been waived under the settlement agreement. If the arbitrator reduces the damage award otherwise payable to the claimant because of a finding of improper installation, the claimant may pursue a claim against the contractor/builder to the extent the award was reduced. The settlement requires L-P to contribute $275 million to the settlement fund in seven annual installments payable during the period from 1996 through 2002 in the following amounts: $100 million; $55 million; $40 million; $30 million; $20 million; $15 million; and $15 million. As of December 31, 1998, L-P had funded the first three installments. L-P also had funded a significant portion of the last four installments through the Early Payment Program discussed below. The estimated cumulative total of approved claims under the settlement, as calculated under the terms of the settlement (without giving effect, in the case of unpaid claims, to discounted settlements under the Early Payment Program), exceeded $500 million at December 31, 1998. In these circumstances, unless L-P makes an additional contribution of $50 million to the settlement fund by August 2001, the settlement will terminate as to all claims in excess of $275 million that remain unpaid. In addition, unless L-P makes a second additional contribution of $50 million to the settlement fund by August 2002, the settlement will terminate as to all claims in excess of $325 million that remain unpaid. If L-P makes both of these additional contributions, the settlement would continue in effect until at least August 2003, at which time L- P would be required to make an election with respect to all unpaid claims that were filed prior to December 31, 2002. If, in August 2003, L-P elects to pay pursuant to the settlement all approved claims that remain unpaid at that time, 50% of the unpaid claims must be paid by August 2004 and the remaining 50% must be paid by August 2005. If L-P elects not to pay the unpaid claims pursuant to the settlement, the settlement will terminate with respect to such unpaid claims and all unpaid claimants will be free to pursue their individual remedies from and after August 2003. If L-P makes all payments required under the settlement agreement, including all additional payments as specified above, class members will be deemed to have released L-P from all claims for damaged OSB siding, except for claims arising under their existing 25-year limited warranty after termination of the settlement agreement. The settlement agreement does not cover consequential damages resulting from damage to OSB Inner-Seal siding or damage to utility grade OSB siding (sold without any express warranty), either of which could create additional claims. In addition to payments to the settlement fund, L-P was required to pay fees of class counsel in the amount of $26.25 million, as well as expenses of administering the settlement fund and inspecting properties for damage and certain other costs. After accruing interest on undisbursed funds and deducting class notification costs, prior claims costs (including payments advanced to homeowners in urgent circumstances) and payment of claims under the settlement, as of December 31, 1998, approximately $5.8 million remained of the $195 million paid into the fund to date (all of which was dedicated to the payment of expenses or held in reserve). On October 26, 1998, L-P announced an agreement to offer early payments to eligible claimants who have submitted valid and approved claims under the original settlement agreement (the "Early Payment Program") and to establish an additional $125 million fund to pay all other approved claims that are filed before December 31, 1999 (the "Second Fund"). The Early Payment Program is available to all claimants who are entitled to be paid from the $80 million of mandatory contributions to the settlement fund that remained at December 31, 1998 to be made under the settlement agreement, and to all claimants who otherwise would be paid from the proceeds of the two optional $50 million contributions to the settlement fund that L-P may elect to make under the settlement agreement. The early payments in respect of the $80 million of mandatory contributions are discounted at a rate of 9% per annum calculated from their original payment dates (1999-2002) to the date the early payment offer was made. The early payments in respect of the two $50 million optional contributions are discounted at a rate of 12% per annum calculated from 2001 and 2002, respectively, to the date the early payment offer was made. For purposes of determining whether L-P has made any such mandatory or optional contribution to the settlement fund as of the respective due date therefor, L-P will receive credit for the undiscounted amount of such contribution in respect of which discounted amounts have been paid pursuant to the Early Payment Program. In November, 1998, L-P commenced the implementation of the Early Payment Program by starting to mail checks reflecting discounted early payments to eligible claimants. Such claimants may accept or reject the discounted early payments in favor of remaining under the original settlement, but may not arbitrate the amount of their early payments. At December 31, 1998, approximately $106.7 million in Early Payment Program checks had been mailed and $60.8 million had been cashed in settlement claims, while approximately $26.6 million in such checks remained to be mailed. Giving effect only to Early Payment Program checks that had actually been cashed, L-P had effectively satisfied a cumulative total of approximately $266.5 million of its mandatory and optional contributions to the settlement fund at December 31, 1998. The $125 million Second Fund represents an alternative source of payment for all approved and unpaid claims that are not eligible for the Early Payment Program and all new claims filed before December 31, 1999. In early 2000, claimants electing to participate in the Second Fund will be offered a pro rata share of the fund in complete satisfaction of their claims, which they may accept or reject in favor of remaining under the original settlement. Claimants who accept their pro rata share may not file additional claims under the settlement or arbitrate the amount of their payments. Claimants who elect not to participate in the Second Fund remain bound by the terms of the original settlement. If L-P is dissatisfied with the number of claimants who elect to be paid from the Second Fund, L-P may refuse to proceed with funding at its sole option. In that event, the Second Fund will be canceled and all the claimants who had elected to participate in it will be governed by the original settlement. MICROSOFT CORP: Mediation Talks for Antitrust Lawsuit Sputter ------------------------------------------------------------- Combatants in the Microsoft antitrust trial see little chance of a settlement before February 22's closing arguments, though analysts say a deal in coming weeks is still possible. The two sides set February 22 as an unofficial deadline because the case would then be back in the hands of Judge Thomas Penfield Jackson. Microsoft and government lawyers have made little progress in talks mediated by Judge Richard Posner. Representatives of the Justice Department and 19 states have proposed a breakup of the company; Microsoft has suggested limited conduct restrictions, say people familiar with the matter. Still, a pact could be struck in the weeks before Jackson hands down a ruling on whether the company violated antitrust laws. Most lawyers expect Jackson to find Microsoft liable in light of his harsh November findings that the software giant is a monopoly that stifled innovation and bullied rivals. Such a liability ruling is expected to be used by plaintiffs in the 107 class-action lawsuits filed against the titan. "The potential of an adverse decision on the private lawsuits is still huge," says lawyer Rich Gray of San Jose, Calif., adding there's a chance for a deal by Tuesday, February 22. "You settle it just before a deadline." But people familiar with the case are not optimistic. While Microsoft CEO Bill Gates has said he's working hard to settle, some analysts think the company's strategy is to keep fighting, especially since any penalty would likely be stayed during appeal. "The longer they stall, the more things can happen," says Bob Lande, professor at University of Baltimore Law School. First, he says, Microsoft still believes an adverse ruling from Jackson could be overturned by a more conservative appeals court. Also, a Republican presidential victory this fall would mean a new attorney general who might settle for minimal sanctions, Lande says. In that event, "I have no doubt a large number of the states would step up to the plate" and pursue the case, says Stephen Houck, former lead lawyer for the states, now at Reboul MacMurray in New York. Still, Lande says a divided prosecution team would not bode well. Finally, Lande says, the marketplace in a year or two may shift so dramatically from the personal computers Microsoft dominates to the Internet that it "can claim (the sanction) is obsolete," and present new evidence. Lande doesn't think the class-action suits make Microsoft quiver. The company, he says, will likely argue that final judgments in those cases should be suspended until Jackson's ruling is appealed. (USA Today, February 21, 2000) PUBLISHERS CLEARING: Fed Judge OKs $30 Mil Sweepstakes Settlement ----------------------------------------------------------------- Settlement approved in sweepstakes suit A federal judge in East St. Louis, Ill., has approved a $ 30 million settlement of a class action lawsuit that accused Publishers Clearing House of misleading its sweepstakes entrants. The suit claimed the company duped people into buying magazines by falsely leading them to believe it would increase their chances of winning millions of dollars. The settlement had won preliminary approval last June by U.S. District Judge G. Patrick Murphy. But attorneys general from many states objected, contending it would prevent further claims. Murphy's order, issued February 18, does not stop the states from pursuing their own legal actions. However, they cannot sue for further restitution. Murphy concluded the settlement was fair, reasonable and adequate. (The Atlanta Journal and Constitution, February 21, 2000) SOTHEBY'S HOLDINGS: Savett Frutkin Files Securities Complaint in MI ------------------------------------------------------------------- Savett Frutkin Podell & Ryan, P.C filed a class action complaint in the United States District Court for the Eastern District of Michigan on behalf of a Class of persons who purchased the common stock of Sotheby's Holdings, Inc. at artificially inflated prices during the period February 11, 1997 through January 28, 2000 and who were damaged thereby. The complaint charges Sotheby's and its senior officer with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that defendants issued a series of false and misleading statements about the Company's revenues which resulted in artificially inflated stock prices during the Class Period. The complaint further alleges that defendants failed to disclose that the Company's revenues were both reliant upon and unsustainable at the Class Period levels in the absence of an illegal price fixing arrangement with Christie's International PLC. For questions or information regarding this action, you may contact Robert P. Frutkin or Barbara A. Podell of Savett Frutkin Podell & Ryan. P.C. at 800/993-3233 or 215/923-5400 or via e-mail at sfprpc@op.net SUNTERRA CORP: Berger & Montague Files Securities Suit in Florida ----------------------------------------------------------------- The law firm of Berger & Montague, P.C. filed a lawsuit in the United States District Court for the Middle District of Florida on behalf of all persons who purchased the common stock of Sunterra Corp. during the period of October 4, 1998 through January 19, 2000, inclusive. The Complaint alleges that Sunterra and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of l934 and Rule 10b-5 promulgated thereunder by, among other things, misrepresenting and/or omitting material information from press releases and SEC filings. On January 20, 2000, the company revealed that its fourth quarter results would be between $.01 to $.08 per share, compared with $.31 per share for the prior year, and that the company planned to take a $38 to $45 million charge in order to write-off delinquent receivables improperly left on its books. For additional information on the above-mentioned lawsuit, you may contact Sherrie Savett at 888-891-2289, 1622 Locust Street, Philadelphia, PA l9103, or by e-mail at InvestorProtect@bm.net with your name, mailing address and telephone number. THQ INC: Milberg Weiss Files Securities Complaint in California --------------------------------------------------------------- Milberg Weiss (http://www.milberg.com)announced on February 19 that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of THQ Inc. (Nasdaq:THQI) publicly traded securities during the period between October 26, 1999 and February 10, 2000. The complaint charges THQ and certain of its officers and directors with violations of the Securities Exchange Act of 1934. THQ develops, publishes and distributes interactive entertainment software worldwide for a variety of hardware platforms including PC CD-ROM and those manufactured by Sega, Nintendo and Sony. The complaint alleges that during the Class Period, THQ falsely represented the state of its business, financial results, and prospects causing its stock price to be inflated to as high as $38-1/4 (split-adjusted). The Individual Defendants named herein took advantage of this inflation and sold 522,912 shares (split-adjusted) of their THQ stock for $14.7 million. Later, THQ selectively disclosed to certain analysts that its first half 2000 results would be much lower than previously represented. After this information was belatedly disseminated to the market, THQ's stock then dropped to as low as $17-3/8 per share. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach, toll free: 800/449-4900 or by e-mail at wsl@mwbhl.com THQ INC: Spector, Roseman Files Securities Lawsuit -------------------------------------------------- Spector, Roseman & Kodroff announced that a class action lawsuit has been filed on behalf of all persons and entities who purchased the common stock of THQ, Inc.. (Nasdaq:THQI) between October 26, 1999 and February 10, 2000, inclusive. The Complaint alleges that THQ and certain of its officers and directors violated the federal securities laws. According to the Complaint, defendants knew that the first and second quarter earnings f 2000 were going to be materially below the first and second quarters of 1999. Although the defendants knew that the disclosure of this information would have an adverse affect on THQ's stock price, rather than timely disclose this material information publicly, as required by the federal securities laws, on or about February 8, 2000, THQ selectively disclosed this information to certain analysts. As a result of this selective disclosure, top clients of these analysts were able to unload significant holdings in THQ stock prior to the public becoming aware though third party disclosure of THQ's true financial condition. As a direct result of defendants' affirmative decision to selectively disclose material information to a limited group, and not to the investing public, the price of THQ stock was artificially inflated. Contact: Spector, Roseman & Kodroff, P.C. Robert M. Roseman toll free at 888/844-5862 or by e-mail at classaction@spectorandroseman.com and more information about the firm is available at http://www.spectorandroseman.com URANIUM MINING: Scheduling Order Violations Lead to Dismissal of Claims ----------------------------------------------------------------------- In two related mass tort cases dismissed by the district court for plaintiffs' failure to comply with a magistrate judge's scheduling orders, the 5th U.S. Circuit Court of Appeals has reminded federal practitioners about the "wide discretion afforded district judges over the management of discovery." Interestingly, in both cases the court's reminder actually speaks to the pre-discovery stage of litigation. (Acuna, et al. v. Brown & Root Inc., No 98-51073; Garcia, et al. v. Conoco Inc., et al., No. 98-51133 (5th Cir. Jan. 11, 2000).) In the two separate suit filings - consolidated for appeal purposes - more than 1,600 claimants sought damages for injuries allegedly arising from uranium mining activity. In both cases, the plaintiffs alleged that their direct or secondary exposure to the defendants' mining and processing activities was the legal cause of their injuries. Although the plaintiffs initially sought damages under Texas law by filing their complaints in state court, the defendants removed the cases to the U.S. District Court for the Western District of Texas. That court asserted jurisdiction under the Price-Anderson Act, 42 USC 2210 - the federal statute that permits public liability claims against entities licensed by the Nuclear Regulatory Agency. Case Management under Rule 16 Given the complexity of the litigation, the magistrate judge assigned to handle pre-trial discovery matters issued pre-discovery scheduling orders in each of the cases. These Rule 16-based orders required the claimants to establish a number of elements of their claims through the use of expert affidavits. The affidavit-related information was to specify each plaintiff's injury or illness, the identity of the material or substance causing the injury or illness, the location of the nuclear facility believed to be a contaminating source, relevant dates and circumstances and the scientific and medical bases for the expert's opinions. The claimants in both cases responded with the submission of affidavits from a single expert whose sworn statements the magistrate judge found did not satisfy the specificity requirements of his scheduling orders. Following the magistrate judge's recommendation in both cases, the District Court dismissed both cases for failure to comply with the scheduling orders. Providing Needed Definition The 5th Circuit found no abuse of discretion by the lower court in its decision to dismiss both multiple-plaintiff cases. The pre-discovery orders issued by the magistrate judge - named for a 1986 New Jersey state court decision, Lore v. Lone Pine Corp. (N.J. Super. Ct.) - provide an appropriate tool to deal with the complexities associated with mass tort litigation. "In the federal courts, such orders are issued under the wide discretion afforded district judges over the management of discovery under Fed.R.Civ.P.16," the court said. As further support for the orders, the court noted that information sought by the magistrate judge related to the basic information required by Rule 11(b). This rule provides - among other things - that a party's attorney certify that "the allegations and other factual contentions have evidentiary support or, ... are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery." (Federal Discovery News, February 15, 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 * * *