/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000316.MBX C L A S S A C T I O N R E P O R T E R Thursday, March 16, 2000, Vol. 2, No. 53 Headlines ASBESTOS LITIGATION: House Judiciary Committee Debates on Process CANADA: Canadian-Serbs Sue Fed Govt for NATO Bombing CINAR CORP: Milberg Weiss Plans to Expand Securities Suit Filed in NY COREL CORP: To Vigorously Defend Itself Against Securities Suit in PA ECONNECT INC: Weiss & Yourman Files Securities Suit FLEMING COMPANIES: Contests Amended Complaints Filed by Investors in OK FLEMING COMPANIES: Kansas Ct Orders Arbitration for Retailers' Case FLEMING COMPANIES: Plans Vigorous Defense of Customers' Case in Utah FLIR SYSTEMS: Milberg Weiss Corrects Period for Securities Suit in OR HASTINGS ENTERTAINMENT: Bernstein Litowitz Files Securities Suit in TX HUGHES ELECTRONICS: EchoStar Alleges of Monopolization in CO HUGHES ELECTRONICS: NRTC Affiliates Sue DIRECTV in CA for Their Members JOSTENS INC: MN Ct Consolidates Investors' Suits Re Price in Merger JOSTENS INC: Overturn of Jury Verdict for TX Antitrust Suit on Appeal NATHANS FAMOUS: FL Ct Strikes Class Status in Suit Re Miami Subs Merger NEFF CORP: Miami-Based Firm Defends Management Buyout Deal NETWORK ASSOCIATES: SEC Writes on Leading Role Issue in Securities Suit PUBLISHERS CLEARING: Lawyers Fined for Delaying Sweepstakes Settlement SOTHEBY'S HOLDINGS: Berger & Montague Expands Securities Suit in NY TELE-CASH INC: DE Ct Refuses to Compel Arbitration for TILA & EFTA Case TOBACCO LITIGATION: Trial nearing End; Jury Deliberations Next Week ********* ASBESTOS LITIGATION: House Judiciary Committee Debates on Process ----------------------------------------------------------------- Lester Skramstad was diagnosed with asbestosis, a deadly lung disease, in 1995, 34 years after he quit working at a Libby, Mont., mine that produced asbestos-tainted vermiculite, a material used in insulation and construction. Since then his wife and two of his children have come down with the disease, possibly from secondhand exposure. ''It's going to kill me, I've accepted that,'' Skramstad, 63, said at a recent Capitol Hill news conference. ''But I hope my wife and children get their day in court. That's what the American justice system is all about.'' Skramstad and the people of Libby, a town ravaged by asbestos-related diseases, are the faces behind a debate raging in Congress over efforts to streamline the claims process for hundreds of thousands of asbestos victims. On one side are business groups and Republicans; on the other, trial lawyers and Democrats. And the first battleground is the House Judiciary Committee, where Chairman Henry Hyde, R-Ill., is pushing a bill this week to channel all asbestos claims through a new Justice Department office that would establish medical eligibility and encourage quick settlements. But not one Democrat on Hyde's committee has indicated support. The committee's top Democrat, John Conyers of Michigan, calls it a ''mean-spirited'' attempt to ''literally shut the door on many who will eventually die from what was often, in my judgment, reckless if not intentional misconduct.'' Committee action on the bill scheduled for Tuesday, March 14 was delayed as six states were holding primary elections, keeping lawmakers away from Washington. Supporters of the bill point to the Supreme Court decision last year that rejected a $1.5 billion asbestos settlement with Fibreboard Corp. of Dallas. At issue was the huge size and unwieldy nature of the class action pool, which ranged from the deathly sick to those not yet suffering from health problems. Chief Justice William Rehnquist said the situation ''cries out for a legislative solution.'' Under the proposed legislation, the new Justice Department office would determine if a person is eligible for payment. The defendant company would make a settlement offer, and the office would propose its own figure. If the claimant was unhappy with the offer, he could appeal to an administrative court for action within 90 days or to a state or federal court. The Coalition for Asbestos Resolution, the industry-backed group lobbying for Hyde's bill, said more than 500,000 asbestos cases have been filed in the past three decades and more than 200,000 are still pending. The legislation will ''reduce today's overwhelming backlog'' and ''ensure that asbestos victims will receive cash in hand rather than years in court,'' the coalition says. ''Sick claimants are victimized twice, once by disease and once by the legal system,'' Hyde said. Richard Middleton, president of the Association of Trial Lawyers of America, has a counterargument: The Supreme Court was dealing with outdated information and, after decades of precedent-setting decisions, there's no longer a backlog in asbestos cases. ''Not only is the bill not necessary, but we have Congress attempting to invade the medical profession,'' Middleton said. The intent of the bill, Public Citizen President Joan Claybrook wrote Hyde, ''would be to relieve corporations of their responsibilities to fairly compensate workers injured by their wrongdoing.'' The bill defines eligible claimants as only those people who are actually sick with asbestosis, lung cancer or other ailments associated with inhaling asbestos, a fibrous mineral once commonly used for insulation and fireproofing in goods and buildings. People who show evidence, such as spots on the lung, but aren't yet ill would not qualify for settlements, although they could be retested in the future at government expense. ''The theme is to take care of the sick right away. The others can come back again and again and again,'' said Hyde's chief of staff, Thomas Mooney. Opponents say the medical criteria would reject many very sick asbestos victims. Roger Sullivan, attorney for numerous Libby victims, said 78 percent of 125 clients, all with debilitating illnesses, would be turned down by the proposed Office of Asbestos Compensation's medical review board. He said Skramstad, who in 1997 settled with the mining company W.R. Grace for $660,000, and his family would all be denied compensation under the bill. ''I will strongly oppose any such medical criteria that could keep people who have clearly been injured from exercising their legal rights,'' Sen. Max Baucus, D-Mont., wrote Hyde. Montana's Republican Sen. Conrad Burns, facing criticism back home, withdrew his name as a co-sponsor of the Senate version of the bill. Mooney disputed contentions that the Libby victims would be excluded, saying the bill sets up an ''exceptional medical claims panel'' for non-occupational victims and those who don't meet traditional criteria. The American College of Chest Physicians and the National Association of VA Physicians and Dentists have endorsed the medical criteria. (AP Online, March 14, 2000) CANADA: Canadian-Serbs Sue Fed Govt for NATO Bombing ---------------------------------------------------- Dozens of Canadian-Serbs who lost family and homes in last year's NATO bombing campaign in Kosovo are suing the federal government for $ 60 million. The 57 people named in the class-action lawsuit are claiming they suffered emotional distress and financial woes during the 78-day bombing campaign that began last March. Most of the plaintiffs have been living in Canada for years, but many still have ties to their homeland. Some were visiting relatives when the bombing began. "They bombed my clients, they bombed their properties -- the government should be liable," lawyer Emilio Binavince said yesterday outside court. 'No Jurisdiction' But government lawyers, Edward Sojonky and Elizabeth Richards, were asking to have the case tossed out at the Superior Court of Justice on March 14. "Given the facts and circumstances, this claim should not go forward to trial," Sojonky said. "There's no cause of action and no jurisdiction in the court." Slobodanka Borojevic -- who immigrated to Canada 14 years ago with her husband to build a better life for their two children -- was in a "desperate" state during last year's bombing. "All my family is over there -- my sister, my two brothers and my mother who is nearly blind," said the Nepean businesswoman who is one of the plaintiffs named in the suit. Justice Gordon Sedgwick has reserved his decision. (The Ottawa Sun, March 15, 2000) CINAR CORP: Milberg Weiss Plans to Expand Securities Suit Filed in NY --------------------------------------------------------------------- Plaintiff's counsel in the securities class action litigation involving Cinar Corp. (Nasdaq: CINR), which was filed during February 2000, intends to extend the class period in an amended complaint. The proposed extended class period will be April 8, 1997, through March 10, 2000. The amended complaint will cover the recent announcement by Cinar that it expected to restate financial results from 1997, 1998 and the first three quarters of 1999 because, among other things, Cinar had improperly claimed Canadian government subsidies in the form of tax credits, the Company's financial statements failed to disclose certain related party transactions and that certain of the Company's officers were engaged in unauthorized investment transactions. The amended complaint will further allege that the Company's financial statements issued during the Class Period were materially false and misleading and in violation of Generally Accepted Accounting Principles. During February 2000, plaintiff initiated a class action lawsuit in the United States District Court for the Eastern District of New York, on behalf of all persons who purchased the common stock of Cinar between February 4, 1999 and February 18, 2000, inclusive. The complaint alleged that Cinar was falsely representing that scripts written by United States citizens were written by Canadian citizens in order to obtain favorable tax credits and that, as a result, the Company's financial results were artificially inflated. Contact: at Milberg Weiss Bershad Hynes & Lerach ("Milberg Weiss"), Steven G. Schulman or Samuel H. Rudman, One Pennsylvania Plaza, 49th Floor, New York, New York 10119-0165, by telephone 1-800-320-5081 or via e-mail: endfraud@mwbhl.com or visit website at http://www.milberg.com COREL CORP: To Vigorously Defend Itself Against Securities Suit in PA --------------------------------------------------------------------- Corel Corporation (NASDAQ: CORL)(TSE: COR) has become aware that a lawsuit had been filed against it by named plaintiffs Anthony Basilio and Fred Spagnola in the United States District Court for the Eastern District of Pennsylvania. The complaint also names as a co-defendant, Michael C.J. Cowpland, Corel's Chairman, President and Chief Executive Officer. The named plaintiffs are seeking class certification in this action and have filed the complaint on behalf of all persons who purchased or otherwise acquired Corel common shares during the period between December 7, 1999 and December 21, 1999 inclusive. The complaint alleges that the defendants violated various provisions of the federal securities laws, including Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Securities and Exchange Commission Rule 10b-5, by misrepresenting or failing to disclose material information about Corel's financial results for its fiscal quarter ending November 30, 1999. The complaint seeks an unspecified amount of money damages. Corel is currently reviewing the complaint and consulting with its legal counsel. Corel intends to defend the litigation vigorously. ECONNECT INC: Weiss & Yourman Files Securities Suit --------------------------------------------------- A class action lawsuit was filed in U.S. District Court on behalf of purchasers of EConnect, Inc. (OTC Bulletin Board: ECNC) common stock between November 23, 1999 and March 13, 2000 inclusive (the "Class Period"), including those individuals who acquired their EConnect securities in exchange for shares, ADRs, or options in other companies which were acquired by the Company. EConnect is a provider of a merchant portal, powerclick.com, that features over 200 merchant listings aimed at generating revenues based on fees per click. Also, EConnect has "internet cash payment portals" which aim to sign up merchants and generate revenues through merchant application fees, listing fees, affiliate link fees and transaction fees. Additionally, EConnect is in the business of developing hardware and software systems designed to enable online remote, credit and ATM card based transactions, such as those used for online gambling. According to the complaint, during the Class Period, defendants made false and misleading statements and/or omissions concerning the financial condition and business prospects of the Company, as well as the financial benefits that would enure to EConnect and its shareholders, while disregarding information which would have been of material importance to any reasonable shareholder. For example, the complaint alleges that defendants failed to disclose: (a) that, contrary to EConnect's November 23, 1999 press release, EConnect had never acquired Top Sports SA; (b) that, contrary to EConnect's February 22, 2000 press release, EConnect was not generating anywhere near $10,000 a day from its PowerClick division's network of websites; (c) that, contrary to EConnect's February 28, 2000 press release, EConnect did not have a strategic alliance with Empire Financial Group, Inc.; and (d) that, contrary to the implication of EConnect's February 29, 2000 SEC filing, EConnect did not have an agreement to use an internet cash payment system developed by SafeTpay. According to the complaint, since the disclosure of these, and other, adverse facts would have caused a severe collapse in the price of the Company's stock, defendants set out on a scheme to conceal these facts in order to artificially inflate EConnect's stock price. The Company's common stock traded as high as $21 on March 9, 2000, and was maintained at these allegedly inflated levels until the SEC halted trading in the shares on March 13, 2000 in view of suspicion that the Company was issuing false and misleading press releases to artificially inflate the Company's share price. Contact: Mark A. Gordon, Esq. of Weiss & Yourman, 800-437-7918, wyinfo@wyca.com FLEMING COMPANIES: Contests Amended Complaints Filed by Investors in OK ----------------------------------------------------------------------- In 1996, certain stockholders and two noteholders filed purported class action suits against the company and certain of its present and former officers and directors, each in the U.S. District Court for the Western District of Oklahoma. In 1997, the court consolidated the stockholder cases as City of Philadelphia, et al. v. Fleming Companies, Inc., et al. The noteholder case was also consolidated, but only for pre-trial purposes. During 1998, the consolidated noteholder case was dismissed and during the first quarter of 1999, the consolidated stockholder case was also dismissed, each without prejudice. Amended complaints were filed in both cases during the first quarter of 1999. In May 1999, the company filed motions to dismiss in both cases, and in July 1999, the plaintiffs responded. The court has not yet ruled on the motions. FLEMING COMPANIES: Kansas Ct Orders Arbitration for Retailers' Case ------------------------------------------------------------------- In 1998, the company and two retired executives were named in a suit filed by approximately 20 current and former customers of the company (Don's United Super, et al. v. Fleming, et al.). Plaintiffs operate retail grocery stores in the St. Joseph and Kansas City metropolitan areas. Six plaintiffs who were parties to supply contracts containing arbitration clauses were permitted to withdraw from the case. Previously, two cases had been filed in the same court (R&D Foods, Inc. et al. v. Fleming, et al. and Robandee United Super, Inc. et al. v. Fleming, et al.) by 10 customers, some of whom are plaintiffs in the Don's case. The earlier two cases, which principally seek an accounting of the company's expenditure of certain joint advertising funds, have been consolidated. All causes of action in these cases have been stayed pending the arbitration of the causes of action relating to supply contracts containing arbitration clauses. The Don's suit alleges product overcharges, breach of contract, breach of fiduciary duty, misrepresentation, fraud, and RICO violations and seeks recovery of actual, punitive and treble damages and a declaration that certain contracts are voidable at the option of the plaintiffs. During the third quarter of 1999, plaintiffs asserted approximately $109 million in damages. In October 1998, a group of 14 retailers (ten of whom had been or are currently plaintiffs in the Don's case and/or the Robandee case whose claims were sent to arbitration or stayed pending arbitration) filed a new action against the company and two former officers, one of whom was a director (Coddington Enterprises, Inc., et al. v. Dean Werries, et al.). The plaintiffs assert claims virtually identical to those set forth in the Don's complaint and have not quantified damages in their pleadings. Plaintiffs have made a settlement demand in the Don's case for $42 million and in the Coddington case for $44 million. In July 1999, the court in the Coddington case (i) granted the company's motion to compel arbitration as to two of the plaintiffs and denied it as to the other plaintiffs, (ii) denied the company's motion to consolidate the Coddington and Robandee cases and (iii) denied the company's motion for summary judgment as to one of the plaintiffs. The company has appealed the ruling. Although currently unable to predict the ultimate outcome of this litigation, based upon the plaintiffs' allegations, the Company believes an unfavorable outcome could have a material adverse effect on the company. FLEMING COMPANIES: Plans Vigorous Defense of Customers' Case in Utah -------------------------------------------------------------------- In 1998, the company and one of its associates were named in a suit filed in the United States District Court for the District of Utah by three current customers and one former customer of the company (Storehouse Markets, Inc., et al. v. Fleming Companies, Inc., et al.). The plaintiffs allege product overcharges, fraudulent misrepresentation, fraudulent nondisclosure and concealment, breach of contract, breach of duty of good faith and fair dealing and RICO violations and seek declaration of class action status and recovery of actual, punitive and treble damages. Damages have not been quantified. However, the company anticipates that the plaintiffs will seek substantial monetary damages. The company intends to vigorously defend its interests in this case and, based upon the plaintiffs' allegations, believes that an unfavorable outcome could have a material adverse effect on the company. FLIR SYSTEMS: Milberg Weiss Corrects Period for Securities Suit in OR --------------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/flir/)announced that a class action has been commenced in the United States District Court for the District of Oregon on behalf of purchasers of FLIR Systems Inc. (Nasdaq:FLIR) common stock during the period between Feb. 9, 2000 and March 3, 2000 (the "Class Period"). The complaint charges FLIR and certain of its officers and directors with violations of the Securities Exchange Act of 1934. FLIR is involved in the design, manufacture and marketing of thermal imaging and broadcast camera systems for a wide variety of applications in the commercial and government markets. The complaint alleges that on Feb. 8, 2000, FLIR announced its expected results for the fourth quarter ended Dec. 30, 1999, including net earnings of at least $0.57 per share, later telling analysts that demand and order rates were still strong and the Company would report revenues of approximately $57 million. Although these amounts were a shortfall from previous expectations, FLIR management told analysts it expected to make up the shortfall in the following quarter. As a result of management's positive statements, FLIR's stock price did not collapse but declined only to the $14 range, later recovering most of its losses and increasing to $17-1/2 per share. Then on March 6, 2000, FLIR admitted that its fourth quarter 1999 results would be much lower than previously forecast due to "accounting errors," simultaneously announcing the immediate resignation of the Company's Chief Financial Officer. On these shocking disclosures, FLIR's stock price declined to as low as $9 per share from $17-1/8 in its most recent trading session. Contact: Milberg Weiss Bershad Hynes & Lerach William Lerach, 800/449-4900 wls@mwbhl.com HASTINGS ENTERTAINMENT: Bernstein Litowitz Files Securities Suit in TX ---------------------------------------------------------------------- Pursuant to 15 U.S.C. 78u-4(a)(3)(A)(I), Bernstein Litowitz Berger & Grossmann LLP gives notice that on March 13, 2000, it filed a class action lawsuit against Hastings Entertainment, Inc., and certain of its former officers and directors, in the United States District Court for the Northern District of Texas. The class includes all purchasers of Hastings common stock (Nasdaq: HAST) from June 12, 1998, through March 7, 2000, inclusive (the "Class"). Excluded from the Class are defendants, officers and directors of the corporate defendant, and predecessors, successors, assigns or affiliates of any such excluded party. The Complaint alleges that, during the Class Period, Hastings materially overstated the gross profit and net income for the first three quarters of fiscal 1999 and for the prior four fiscal years, and included these false and misleading statements in various press releases and filings with the Securities and Exchange Commission. Plaintiff further alleges that these false statements caused the price of Hastings common stock to be artificially inflated, trading as high as $19_ per share. On the final day of the Class Period, the company announced that it would restate its previously disseminated financial results for the Class Period. Following this announcement, the price of Hastings common stock closed at $3 1/16 per share, reflecting a decline of 84% from its Class Period high. Contact: Robert S. Gans or Blair A. Nicholas of Bernstein Litowitz at 800/380-8496 or 212/554-1400, or by E-mail: Robert@blbglaw.com and more information about the firm is available on Website at http://www.blbglaw.com HUGHES ELECTRONICS: EchoStar Alleges of Monopolization in CO ------------------------------------------------------------ EchoStar Communications Corporation and others commenced an action in the U.S. District Court in Colorado on February 1, 2000 against DIRECTV, Hughes Network Systems and Thomson Consumer Electronics, Inc. seeking, among other things, injunctive relief and unspecified damages, including treble damages, in connection with allegations of monopolization and that the defendants have entered into agreements with retailers and program providers and engaged in other conduct that violates the antitrust laws and constitutes unfair competition. DIRECTV believes that the complaint is without merit and intends to vigorously defend the allegations raised. Huges believes that the claims are material to Hughes, but will not result in a material adverse impact on Hughes' results of operations or financial position. HUGHES ELECTRONICS: NRTC Affiliates Sue DIRECTV in CA for Their Members ----------------------------------------------------------------------- Pegasus Satellite Television, Inc. and Golden Sky Systems, Inc., the two largest NRTC affiliates, filed a purported class action suit on January 11, 2000 on behalf of certain NRTC members and affiliates against DIRECTV, a unit of Hughes Electronics Corp. in the U.S. District Court in Los Angeles. The plaintiffs allege, among other things, that DIRECTV has interfered with their contractual relationship with the NRTC. The plaintiffs plead that their rights and damages are derivative of the rights and claims asserted by the NRTC in its two cases against DIRECTV and will seek to consolidate their case with those cases. JOSTENS INC: MN Ct Consolidates Investors' Suits Re Price in Merger ------------------------------------------------------------------ On December 27, 1999, Jostens Inc. entered into a merger agreement with Saturn Acquisition Corporation, a newly formed corporation controlled by Investcorp S.A., a global investment group, and its co-investors. Under this agreement, Saturn Acquisition Corporation will merge with and into Jostens. The merger will be accounted for as a recapitalization by Jostens. Upon completion of the merger, Investcorp and its co-investors, including Jostens' senior management, will own approximately 94 percent of Jostens' common stock. The remaining 6 percent of our post-merger common stock will be retained by some or all of Josten's pre-merger public shareholders. Following the public announcement of the merger, three purported class actions were filed, two on December 30, 1999 and the third on January 14, 2000, in the Fourth Judicial District of the District Court for the State of Minnesota, County of Hennepin. By order of the Honorable Daniel H. Mabley dated January 21, 2000, the Actions were consolidated, and the Complaint in File No. MC 99-18533 was thereafter designated as the Consolidated Complaint. The Consolidated Complaint is purportedly brought on behalf of a class of "all holders of Jostens common stock who are being and will be harmed" by the actions alleged in the Consolidated Complaint. In the Consolidated Complaint, the plaintiffs allege that the individual defendants, by virtue of their positions as officers and directors of Jostens, owe fiduciary duties to the shareholders of Jostens, and that by allegedly failing to take all steps reasonably required to maximize the value shareholders will receive in a sale of Jostens, the defendants have breached such duties. More specifically, the plaintiffs allege that the defendants have taken actions designed to halt any other offers and deter higher offers from other potential acquirers including, among other things: * allegedly concealing Jostens' fourth quarter results until after the defendants entered into and disclosed the existence of the merger agreement, thus allegedly capping the price of Jostens' common stock; * allegedly agreeing to include in the merger agreement a termination fee provision which would under specified circumstances require Jostens to pay Saturn Acquisition the sum of $24 million, together with Investcorp's expenses, in the event that Jostens receives a superior offer and terminates the merger agreement; * allegedly structuring a "preferential deal" pursuant to which some of the defendants would receive "change of control" payments following the consummation of the proposed merger; and * allegedly failing to announce any active auction, open bidding, or any other procedures best calculated to maximize shareholder value. The Consolidated Complaint seeks an order of the Court: * enjoining the defendants from proceeding with the merger; * enjoining the defendants from consummating the merger, or a business combination with a third party, unless and until Jostens adopts and implements a procedure or process, such as an auction, to obtain the highest possible price for Jostens; * directing the individual defendants to exercise their fiduciary duties to obtain a transaction which is in the best interests of shareholders until the process for the sale or auction of Jostens is completed and the highest possible price is obtained; * awarding compensatory damages against the defendants; * awarding the plaintiffs the costs and disbursements of the Consolidated Complaint, including reasonable attorneys' and experts' fees; and * granting such further relief as the Court may deem just and proper. JOSTENS INC: Overturn of Jury Verdict for TX Antitrust Suit on Appeal --------------------------------------------------------------------- In January 1999, a federal judge in Texas overturned a jury's $25.3 million verdict against Jostens in an antitrust lawsuit. The judge, acting on Jostens' post-trial motions, set aside the jury's verdict and dismissed all claims against Jostens in the case. Yearbook competitor Taylor Publishing Company, who is also the plaintiff in the case, has appealed the decision and is seeking to have the jury verdict reinstated. Briefs have been filed and oral arguments were held on December 8, 1999. The date for the decision from the Fifth Circuit Court of Appeals has not been determined. NATHANS FAMOUS: FL Ct Strikes Class Status in Suit Re Miami Subs Merger ----------------------------------------------------------------------- As has been reported in the CAR, on January 5, 1999, Miami Subs was served with a class action lawsuit entitled Robert J. Feeney, on behalf of himself and all others similarly situated vs. Miami Subs Corporation, et al., in Circuit Court, in Broward County, Florida, which was filed against Miami Subs, its directors and Nathans in a Florida state court by a shareholder of Miami Subs. Since that time, Nathans and its designees to the Miami Subs board have also been served. The suit alleges that the proposed merger between Miami Subs and Nathans, as contemplated by the companies' non-binding letter of intent, is unfair to Miami Subs' shareholders based on the price that Nathans is paying to the Miami Subs' shareholders for their shares and constitutes a breach by the defendants of their fiduciary duties to the shareholders of Miami Subs. The plaintiff seeks among other things: class action status; preliminary and permanent injunctive relief against consummation of the proposed merger; and unspecified damages to be awarded to the shareholders of Miami Subs. On March 19, 1999, the court granted the plaintiff leave to amend his complaint. The plaintiff then filed an amended complaint. Miami Subs moved to dismiss the complaint on April 13, 1999. Nathans and its designees on the Miami Subs' board moved to dismiss the complaint on April 29, 1999. The court denied the motions. On February 4, 2000, the court held an evidentiary hearing. As a result of the hearing, the court struck the class action allegations from the plaintiff's complaint. Accordingly, the case will proceed as an individual, not as a class action. Nathans intends to defend against this suit vigorously. NEFF CORP: Miami-Based Firm Defends Management Buyout Deal ---------------------------------------------------------- Neff Corp. said that a management-led buyout proposal would not treat the controlling shareholders, the Mas family, in a more beneficial manner than regular shareholders. One day after some shareholders publicly criticized a buyout of the Miami heavy-equipment rental company, a Neff lawyer said the $ 9 a share buyout proposal does not favor insiders. Shareholders have filed a class-action lawsuit alleging that the current proposal does not offer public stockholders the most value for their holdings. The proposal offers to take the company private by giving shareholders $ 9 a share. General Electric Capital, a controlling shareholder along with Miami's Mas family, and the company chief executive and president Kevin Fitzgerald made the proposal. GE Capital would keep its stake in the company. Neff attorney Stephen Glover said the Mas brothers, Jorge, Juan Carlos and Jose Ramon, will get $ 9 per share for 40 percent of their holdings. Of the remaining shares, the Mas family will get 7.1 million shares of preferred stock. Those shares could be converted to common stock at $ 13 per share. It's unknown whether the preferred shares will carry a dividend. The proposal said dividends and other terms will be determined in the future. "It's designed that way to avoid suggestions they are benefiting unfairly," Glover said. The proposal also states that if the preferred shares are liquidated, the Mas family will receive $ 10 a share. Local investment experts said the Neff buyout group must be confident they can increase the value of the company, in which case the stock price would rise, allowing the Mas family to convert at $ 13 a share and still earn a premium. Neff went public in 1998 at $ 14 per share. Shareholders have filed a class-action lawsuit alleging that the current proposal does not offer public stockholders the most value for their holdings. (The Miami Herald, March 15, 2000) NETWORK ASSOCIATES: SEC Writes on Leading Role Issue in Securities Suit ----------------------------------------------------------------------- The Securities and Exchange Commission recently weighed in on a raging securities litigation case pending before the Ninth Circuit U.S. Court of Appeals that will probably define exactly who can serve as a lead plaintiff, and just as important: who can serve as the lead counsel, accoriding to The Recorder, March 14, 2000. "This may be the first court of appeals decision to address the lead plaintiff provisions," reads the amicus curiae brief sent to the Ninth Circuit on Feb. 29. The Ninth Circuit last month agreed to review U.S. District Judge William Alsup's novel decision in a case against Network Associates Inc. to appoint as a lead plaintiff a small-time investor who lost relatively little compared to several other plaintiffs, including two institutional investors alleging millions in losses. Going a step further, Alsup ordered the lead plaintiff to put the lead counsel position out to bid. Historically, judges have allowed lead plaintiffs to simply choose their counsel without a beauty pageant, The Recorder remarks. Alsup had appointed retired San Jose lawyer Robert Vatuone to serve as lead plaintiff. And after interviewing and soliciting fee proposals from several firms, Vatuone chose Lieff, Cabraser, Heimann & Bernstein to lead the litigation. But several jilted firms -- including Milberg Weiss Bershad Hynes & Lerach filed a writ with the Ninth Circuit asking it to overturn Alsup's rulings. The Recorder says that the Ninth Circuit rarely grants such appeals, preferring instead to address all appellate issues simultaneously and once the case has concluded, but a two-judge motions panel ordered more briefing on the issue and stayed Alsup's order until the matter is resolved. The jilted firms, the report says, allege that Alsup erred by not appointing the plaintiff alleging the largest losses as lead plaintiff. The Private Securities Litigation Reform Act, which governs securities cases, holds that the plaintiff alleging the most losses is the "presumptive lead plaintiff." But Alsup and, Lieff, Cabraser argue that the PSLRA also holds that the lead plaintiff owes a "fiduciary responsibility" to the rest of the class. One of those duties, the argument goes, is to hire the best-qualified lead counsel at the cheapest price possible. While the SEC did not address any of these issues head-on, it's clear, according to The Recorder, in Moore v. Network Associates, 00-70006, that the SEC is sympathetic toward Alsup's ruling. "In this case, the district court was entitled to consider information whether plaintiffs competing to be lead plaintiff qualify under the Reform Act ... as adequate class representatives," wrote Washington, D.C.-based SEC staff attorney Luis De La Torre. "If they do not, then they should not be appointed lead plaintiff, together or separately, regardless of their financial interest in the litigation." PUBLISHERS CLEARING: Lawyers Fined for Delaying Sweepstakes Settlement ---------------------------------------------------------------------- On Feb. 25, a federal judge fined Richard H. Rosenthal and Lynde Selden II $ 50,000 for delaying the recently approved $ 30 million settlement of the case, the St. Louis Post-Dispatch reported. The two attorneys filed an objection to the settlement on behalf of class member Frederick L. Hawk. When the judge interviewed Mr. Hawk, however, he said that he'd be happy just to get back what he spent on magazine subscriptions. The lawyers have appealed. (The National Law Journal, March 13, 2000) SOTHEBY'S HOLDINGS: Berger & Montague Expands Securities Suit in NY ------------------------------------------------------------------- The following notice is issued by the law firm of Berger & Montague, P.C. on behalf of its clients, who on March 14, 2000, filed an amended complaint in the United States District Court for the Southern District of New York on behalf of all persons who purchased the common stock of Sotheby's Holdings, Inc. (NYSE: BID) during the period of February 11, 1997, through February 18, 2000, inclusive (the "Class Period"). On February 21, 2000, Sotheby's announced that in wake of a sweeping U.S. Department of Justice investigation of alleged commission price fixing in the fine-art industry, Sotheby's Chairman Alfred Taubman and its President and CEO Diana Brooks resigned their positions. The Company also announced that the investigation and related litigation may have a material impact on its financial operations. Following these latest revelations, the Company's stock price fell to $15.675 per share at the close of trading on February 22, 2000, after having traded as high as $36.00 as recently as November 1999. The complaint charges Sotheby's Holdings, Inc. and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of l934 and Rule 10b-5 of the Securities Exchange Commission. The lawsuit alleges that the defendants issued a series of false and misleading statements during the Class Period concerning the Company's revenues. The complaint alleges that defendants failed to reveal that during the Class Period, Sotheby's revenues were both reliant upon, and unsustainable in the absence of an alleged price fixing arrangement with Christie's International PLC. The complaint also asserts that defendants' false and misleading statements artificially inflated the price of the Company's stock during the Class Period. Contact: Sherrie R Savett, Esquire at 888-891-2289, 1622 Locust Street, Philadelphia, PA l9103. If you prefer you can e-mail the firm at InvestorProtect@bm.net with your name, mailing address and telephone number. You may also contact Gary E. Cantor, Esquire, Kimberly A. Walker, Investor Relations Manager, Berger & Montague, P.C., 1622 Locust Street, Philadelphia, PA 19103, (215) 875-3000, (888) 891-2289, Fax: (215) 875-4604, e-mail: InvestorProtect@bm.net Website: http://home.bm.net TELE-CASH INC: DE Ct Refuses to Compel Arbitration for TILA & EFTA Case ----------------------------------------------------------------------- The U.S. District Court for the District of Delaware recently denied a motion to compel arbitration citing an "inherent conflict" between compelling arbitration and the underlying purposes of the Truth in Lending Act and the Electronic Funds Transfer Act. (Johnson v. Tele-Cash Inc., et al., No. 99-104-GMS (D. Del. 12/29/99).) Terry Johnson filed a class action lawsuit against Tele-Cash Inc. and the County Bank of Rehoboth Beach, Del., in federal court for violations of the TILA and the EFTA. Johnson alleged that the creditors failed to properly disclose the "excessively high rates of interest" associated with their short-term loans and required borrowers to consent to an improper electronic fund transfer scheme to obtain the loans. Because the loan agreements contained an arbitration clause whereby all claims or disputes must be resolved by binding arbitration, the creditors moved the District Court to stay its proceedings pending the outcome of arbitration. The court denied the creditors' motion. The TILA The court examined both the text and the legislative history in determining that arbitration would eviscerate the TILA's purpose. The court stated, "The intended purpose of the TILA was 'to encourage class actions in the truth-in-lending context because of the apparent inadequacy of the Federal Trade Commission's enforcement resources and because of a continuing problem of minimum compliance with the Act on the part of creditors.'" Agreeing with Johnson that Congress expressed a clear intent to guarantee class relief under the TILA, the court found that an order compelling arbitration would "contravene the express congressional intent to 'encourage the use of class actions as an important tool for enforcing Truth in Lending.'" Because an arbitrator cannot award class-wide relief, the court held the loan agreements' "boilerplate" arbitration clause to be unenforceable. Focusing on the TILA's legislative history, the court quoted another District Court's impression as follows: "The possibility of class-action exposure is essential to the prophylactic intent of the Act and is necessary to elevate truth-in-lending lawsuits 'from the ineffective nuisance category to the type of suit which has enough sting to insure that management will strive with diligence to achieve compliance.'" Finding that Congress intended class actions to provide creditors with meaningful incentive to comply with the law, the court held that class actions served the act's remedial and deterrent functions. Although it recognized that the act did not create a statutory right to bring class actions, the court held that there was an "inherent conflict" between compelling arbitration and the underlying purposes of the TILA. The EFTA The court denied the creditors' request to subject the EFTA claims to arbitration because the EFTA contains language similar to the TILA. Specifically, the EFTA contains a cap on class action damages that is "virtually identical" to that provided under the TILA. Regarding the TILA, the court found that Congress enacted the cap to encourage federal courts to certify class actions in TILA lawsuits so that a "workable structure" for the private enforcement of the TILA through class actions could be provided. Although the court found no legislative history as to the class action cap under the EFTA, the court presumed that Congress was trying to encourage courts to certify class actions under the EFTA as well and presumably for the same reasons. Thus, similar to the TILA claims, the court held that there was an "inherent conflict" between the underlying purposes of the EFTA and compelling arbitration. Dismissal of claims In addition to their motion to stay proceedings pending arbitration, the creditors moved the court in the alternative to dismiss Johnson's claims. The creditors argued that the TILA claims failed as a matter of law because any alleged violations were mere technicalities at best and Johnson failed to allege any injuries as a result of the alleged violations. Regarding the EFTA, the creditors similarly argued that the claims were inadequately pled. The court disagreed on both counts. The District Court stated that Congress amended the TILA to discourage creditors from providing the "very type" of disclosures contained in the loan agreements at issue in this case. Noting that "hyper-technicality reigns" in TILA lawsuits, the court held that the creditors' failure to disclose the annual percentage rate and finance charge more conspicuously than other terms in connection with the transactions was a sufficient basis for a TILA claim. As for damages resulting from the alleged violations, the court stated that under the TILA, private parties may recover its statutory penalties regardless of a lack of actual damages. Finally, regarding the EFTA claims, the court held that Johnson sufficiently stated a claim regarding "pre-authorized electronic fund transfers" recurring "at substantially regular intervals." Judge Gregory M. Sleet delivered the opinion of the court. William L. O'Day in Wilmington, Del., and Daniel A. Edelman, Kathleen M. Combs, James O. Latturner, Sheila A. O'Loughlin and Heather C. Sullivan of Edelman, Combs & Latturner in Chicago represented Johnson. James D. Griffin and David R. Hackett of Griffin & Hackett P.A. in Georgetown, Del., and Walter Weir in Philadelphia represented the creditors in the action. (Consumer Financial Services Law Report, March 7, 2000) TOBACCO LITIGATION: Trial nearing End; Jury Deliberations Next Week ------------------------------------------------------------------- Miami, March 14 (UPI) - The penalty phase of the first class-action suit against the tobacco industry to go to trial resumes Wednesday, [March 15] in Miami after a break. Final arguments are expected later this week, and jury deliberations begin next week. (United Press International, March 14, 2000) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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