/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000403.MBX C L A S S A C T I O N R E P O R T E R Monday, April 3, 2000, Vol. 2, No. 65 Headlines CARNIVAL CORPORATION: Spector, Roseman Files Securities Lawsuit in FL COCA-COLA: Receives Detailed Proposal on Settlement for Race Bias Suit DETECTION SYSTEMS: Reaches Settlement for Shareholder Suit FEDERAL RESERVE: Judge Certifies Employment Racial Discrimination Suit FEN-PHEN: Objections to Proposed AHP Settlement Filed ILIFE.COM INC: Rabin & Peckel Files Securities Suit in New York INMATES LITIGATION: Judge Orders KY Dept to Give Treatment for Hep. C KATE KOTTS: Reaches Settlement Agreement for Securities Lawsuit in NY MICROSTRATEGY, INC: Pomerantz Haudek Files Securities Suit MICROSTRATEGY: Stock Fraud Allegations Could Signal Stormy Weather RAINFOREST CAFE: Columnist Says Investors Ignore Fundamentals STANFORD UNIVERSITY: $545,000 Award to Researcher in Sex Bias Suit TOBACCO LITIGATION: Australian Smokers to Seek Special Leave to Appeal VISIONAMERICA INC: Cauley & Geller Files Securities Lawsuit in TN WOODLAWN CEMETERY: Class Action Filed Against Cemetery Closed By State YBM MAGNEX: Judge Clears Way for Cross-Border Securities Fraud Suits * Racial Factor in Lending Reduced by Technology; Fed May Reintroduce ********* CARNIVAL CORPORATION: Spector, Roseman Files Securities Lawsuit in FL --------------------------------------------------------------------- Spector, Roseman & Kodroff announced that a class action lawsuit has been filed in the United States District Court for the Southern District of Florida on behalf of all persons and entities who purchased the common stock of Carnival Corp. (NYSE: CCL) from February 25, 1999 through February 16, 2000, inclusive (the "Class Period"). The Complaint charges Carnival and certain of its officers and directors with violations of the federal securities laws. Specifically, the Complaint alleges that defendants issued false and misleading statements about the Company's business, financial condition, earnings and prospects and failed to disclose the extreme operational problems with which Carnival Cruise Line was faced. As a result of these false and misleading statements, the price of Carnival common stock was artificially inflated during the Class Period. Contact: Robert M. Roseman, 888-844-5862, or classaction@spectorandroseman.com of Spector, Roseman & Kodroff, P.C. COCA-COLA: Receives Detailed Proposal on Settlement for Race Bias Suit ---------------------------------------------------------------------- Coca-Cola has received a detailed settlement proposal from the plaintiffs in a racial discrimination lawsuit and is in the process of formulating a counterproposal. That process is taking place as pressure for a speedy settlement continues to build --- from both the investment and civil rights arenas. On March 30, a large institutional investor that owns $ 370 million in Coke stock urged the company to act quickly. On the same day, for the second day in a row, the Rev. Jesse Jackson met with high-ranking company officials to push for a settlement. Jackson, president of RainbowPush Coalition, was joined by Larry Jones, a former company manager who is organizing a bus "ride for justice" to Coca-Cola's annual meeting in Delaware on April 19. "I am sure Coke is carefully weighing their options," said Janice Mathis, RainbowPush's chief of staff and general counsel, who also attended the meeting at the company's North Avenue headquarters. "I think they want to get this behind them. ... But there are lots of issues to be resolved, and they're complicated issues. I do think both sides are motivated." The company could be a little more motivated after it received a letter from New York State Comptroller H. Carl McCall, who is the sole trustee of the state's common retirement fund. The fund owns 7.4 million Coke shares. "This lawsuit has already damaged Coca-Cola's reputation and its shareholder value," McCall wrote in a letter to Chairman Doug Daft. "It is important that you take the steps necessary to halt this damage and strengthen Coca-Cola's commitment to tolerance and inclusion in the workplace. " Company observers and analysts said it's possible for McCall's letter to spur other large public pension funds into taking similar actions. Carl Ware, the company's executive vice president of global public affairs and administration, spoke with McCall after receiving the letter, said company spokesman Chuck Reece. "We're always attentive to the concerns of our shareholders," Reece said. According to Reece, Ware told McCall that he would continue to keep McCall informed as the company works "toward a quick and equitable resolution of the lawsuit." Ware was busy working on the fallout from the lawsuit. He, along with President Jack Stahl and Vice President Ingrid Saunders Jones, met for more than two hours with Jackson, Jones, Mathis and Joe Beasley, RainbowPush's regional director. "We had a candid and productive discussion," said company spokesman Ben Deutsch. "We welcome Rev. Jackson's input and counsel, and we expect to continue these discussions as we move forward." Mathis said Jackson left Atlanta on Thursday March 30 but is willing to return if he can help move the settlement process along. "It is my understanding that the plaintiffs have forwarded a settlement proposal to the company," Mathis said. "The company can settle. They can fight. They have to decide how to respond to the plaintiffs' proposal to them. " The formal negotiating process between the company and plaintiffs' attorneys is confidential, so neither side has commented publicly on what is occurring. But Mathis provided details of the informal meeting she attended. A lot of the discussion, she said, was dominated by Ware and Jones, who was laid off last month after 15 years at the company. Jones is organizing a three-bus convoy that will hold ralllies in three cities before reaching the shareholders meeting in Wilmington. According to Mathis, who took notes during the meeting, Ware said he has a mandate to change the company to create a new environment that will be more open and responsive to employee concerns. But Jones told Ware, according to Mathis, that it will be difficult to rebuild the trust lost because of the way African-Americans have been treated at the company. According to Mathis, Jones also said the bus trip was taking on a life of its own and that he is not sure he could stop it, even if the suit was settled prior to the annual meeting. In addition to meeting with the company, Jackson met with a few of the plaintiffs, as well as some of the bus trip organizers, Mathis said. The federal suit, filed by eight former and current employees, alleges that the company has discriminated against African-Americans in pay, promotions and performance evaluations. The plaintiffs seek class-action status to represent 2,000 current and former black employees in the United States. The company has denied the suit's allegations and opposed efforts to make it a class-action case. DETECTION SYSTEMS: Reaches Settlement for Shareholder Suit ---------------------------------------------------------- Detection Systems, Inc., (Nasdaq:DETC) announced on March 31 that it has reached an agreement in principle to settle the shareholder class action suit that has been pending since February 1998. The settlement is subject to certain conditions, including court approval. The Company will record a one-time charge of $1.6 million, or approximately $0.15 per share, in the fourth quarter ending March 31, 2000, for costs not covered by insurance. Detection Systems designs, manufactures and markets electronic detection, control and communication equipment for security, fire protection, access control, and closed circuit television applications. FEDERAL RESERVE: Judge Certifies Employment Racial Discrimination Suit ---------------------------------------------------------------------- A federal judge has granted class-action status for a discrimination lawsuit filed against the Federal Reserve Bank of Chicago, whose territory includes an office in Milwaukee. In his ruling on March 30, U.S. District Judge William Hibbler said lawsuit could include black employees who worked below the level of officer from 1964 to the present. The lawsuit was filed in February 1998. It alleges the federal bank refused to promote qualified black employees. It also argues those employees received lower wages, were denied training and were degraded by on-the-job racial slurs. In addition to more than $25 million in damages, the lawsuit seeks lost wages and 10 percent of the bank's net worth. Edward Stein - attorney for more than 34 employees in the lawsuit - said it could grow to more than 2,000 employees in the bank's district because of the class-action status. Other offices in the district are in Peoria and Detroit. Besides Illinois and Wisconsin, the district includes parts of Indiana and Iowa. The judge's ruling "allows us to reach back to 1964 to examine the practices and policies of the Federal Reserve Bank for the last 35 years," Stein said. "We know we're going to find the skeletonsand the evidence on the trail." Bob Lapinski, a spokesman for the Federal Reserve, said the bank plans to appeal the ruling to the 7th U.S. Circuit Court of Appeals. "We were very disappointed with the ruling. We don't agree with it," he said. The Federal Reserve of Chicago is a branch of the Washington-based Federal Reserve and handles such things as check processing for the Midwest region. FEN-PHEN: Objections to Proposed AHP Settlement Filed ----------------------------------------------------- Lawyers opposed to the proposed settlement for the millions of people who took the diet drug combination fen-phen filed objections in federal court on March 30 charging that the plan was illegal and unfair. The lawyers' objections were filed on the last day available to diet drug users to opt out of the national settlement and instead pursue separate lawsuits against American Home Products, the drug company that sold half of the diet pill combination. Thousands of the six million people who took fen-phen -- a combination of American Home's Pondimin, its brand name for fenfluramine, and phentermine, another diet drug -- have decided to opt out of the proposed settlement. Under the plan, American Home has agreed to pay $3.75 billion to the plaintiffs, ranging from small payments of $30 to $60 to those who took the drug for less than two months to as much as $1.5 million to people with significant injuries. A spokesman for American Home said that the company did not yet know how many people had opted out. The final numbers would not be available for several weeks, he said. "We don't foresee a high percentage of claimants opting out," he said. If too many people do not agree to the settlement, American Home can terminate the deal. But that would only continue the financial uncertainty that has plagued the company since it pulled the diet drugs off the market in September 1997. "This settlement is very important," said Neil B. Sweig, an analyst at Ryan, Beck & Company. If it fails, he said, "it would have a dramatically negative effect on American Home's stock price." More than 9,000 lawsuits are now pending against the company -- a legal mess that is hurting the company's chances of merging with one of its competitors. The drug industry is now in a frenzy of consolidation and American Home has tried to make three mergers in the last two years, but failed at each one. The legal objections filed in federal court in Philadelphia joined those of other lawyers who are arguing that the settlement should be abandoned because it does not adequately compensate those who took the diet drugs. One of the objections filed by a group of lawyers representing thousands of plaintiffs argued that the settlement would leave out people who had not yet developed the heart defects associated with fen-phen. The group of lawyers, including the firm of Blizzard & McCarthy in Houston, said that people developing heart valve defects after the 18-month screening period would not be able to pursue another claim against the company. The lawyers argued that the settlement was "little more than a series of traps" for diet pill users that shifted part of American Home's liability onto people who may fall ill in the future. The law firms also argued that the fees proposed to be paid to the plaintiffs' lawyers overseeing the national settlement were excessive. Judge Louis Bechtle of United States District Court in Philadelphia will review the objections at hearings scheduled to begin on May 1. Stanley Chesley, a lawyer in Cincinnati and a co-chair of the committee of lawyers overseeing the settlement, disputed the claims filed. Mr. Chesley said that current scientific research had shown that diet drug users who have not yet shown signs of heart defects are not likely to become ill in the future. And, he said that the legal fees of $430 million were fair, since they were less than 10 percent of the total amount that American Home could ultimately pay out over the years under the proposed deal. (The New York Times, March 31, 2000) ILIFE.COM INC: Rabin & Peckel Files Securities Suit in New York --------------------------------------------------------------- A class action has been commenced in the United States District Court for the Southern District of New York, on behalf of purchasers of Ilife.com Inc. (Nasdaq: ILIF) common stock during the period from May 13, 1999 through March 27, 2000, inclusive (the "Class Period"). The Complaint alleges that Ilife, certain of its officers and directors, ING Baring Furman Selz LLC, Warburg Dillon Read LLC, and KPMG LLP violated section 11 of the Securities Act of 1933 and that certain defendants violated section 10(b) of the Securities Exchange Act of 1934. In particular, it is alleged, among other things, that the Registration Statement and Prospectus were materially false and misleading because it failed to disclose the massive loss for the March 1999 quarter, even though that quarter had ended 43 days before the Offering, it misrepresented the true financial condition of the Company as of the effective date, it misrepresented the use of proceeds of the Offering, and it failed to disclose the stockholder deficit as of the effective date of the Offering. The Complaint alleges that as a result of these material misstatements and omissions, Ilife's stock price was artificially inflated throughout the Class Period. Contact: RABIN & PECKEL LLP Joseph V. McBride 800/497-8076 212/682-1818 email@rabinlaw.com INMATES LITIGATION: Judge Orders KY Dept to Give Treatment for Hep. C --------------------------------------------------------------------- A federal judge has ordered medical treatment for a prisoner suffering from hepatitis C. Michael Paulley has only a 50-50 chance of living until 2004, when he is eligible for parole, without the treatment, according to his doctor, Bennet Cecil. U.S. District Judge John G. Heyburn II said March 30 that he agreed with federal Magistrate Judge C. Cleveland Gambill, who recommended in January that Heyburn require the Kentucky Department of Corrections to treat Paulley. The Eighth Amendment, which prohibits cruel and unusual punishment, "guarantees a prisoner that prison officials will not ignore his serious medical problems," Heyburn wrote. Paulley is an Army veteran, and the $18,000-a-year drug treatment that Cecil recommends would cost the Corrections Department nothing because Paulley's veteran's benefits would pay for it. Paulley is serving a 20-year sentence at the Luther Luckett Correctional Complex near La Grange for burglary and being a persistent felon. He sued the Corrections Department in August to force it to give him treatment. He also seeks unspecified damages for the violation of his constitutional rights. That part of the lawsuit has yet to be resolved. Also unresolved is a request by one of Paulley's lawyers, Alan S. Rubin, that Heyburn certify the case as a class action. Heybury wrote on March 30 that he would decide that issue later. Rubin wants the case to be made a class action on behalf of all Kentucky prisoners who have hepatitis C but were denied treatment since December 1998, when the treatment was approved by the Food and Drug Administration. The Corrections Department claimed Paulley shouldn't get the drug treatment because he has cirrhosis of the liver and the side effects could do him more harm than good. Heyburn, however, said he agreed with Gambill, who found in January that the Corrections Department's real motive for denying Paulley treatment was to avoid having to pay to treat other prisoners with hepatitis C. The Corrections Department should take "all steps necessary" to allow Cecil to treat Paulley, Heyburn wrote. He did not set a date. The Corrections Department might appeal, Rubin said. A department spokesman could not be reached for comment. (The Associated Press, March 31, 2000) KATE KOTTS: Reaches Settlement Agreement for Securities Lawsuit in NY --------------------------------------------------------------------- Rabin & Peckel LLP notifies all persons who during the period February 22, 1996 to April 15, 1997 purchased shares of the common stock and/or class A warrants of Kaye Kotts Associates, Inc. (OTC: KTAX KTAXW) that, a proposed $425,000.00 settlement has been reached in the Class Action by Lead Plaintiffs with defendants Kaye Kotts Associates, Inc. and et al. A hearing has been scheduled on June 29, 2000. Contact: FRG Information Systems Corp. Mary Mathews 212/490-3550 MICROSTRATEGY, INC: Pomerantz Haudek Files Securities Suit ---------------------------------------------------------- Pomerantz Haudek Block Grossman & Gross LLP (www.pomerantzlaw.com) has filed a class action complaint on behalf of all persons or entities who purchased the common stock of the following company during the period between July 11, 1998 and March 20, 2000, inclusive (the "Class Period"). MicroStrategy, Inc. and the Company's senior executives allegedly reported materially false and misleading financial results during the Class Period as to the Company's financial performance. In particular the Company allegedly significantly overstated the Company's 1998 and 1999 revenues and earnings per share by improperly recognizing revenue in connection with software sales and service contracts. Contact: Pomerantz Haudek Block Grossman & Gross LLP Andrew G. Tolan, Esq. 888/476-6529 or 888/4-POMLAW agtolan@pomlaw.com MICROSTRATEGY: Stock Fraud Allegations Could Signal Stormy Weather ------------------------------------------------------------------ Plaintiffs lawyers rushed to Alexandria last week to file at least 15 stock fraud class actions against Vienna, Va.-based MicroStrategy on news that the company had to dramatically restate earnings for the past two years. While the cases are not the first stockholder suits to be filed in the Eastern District, local litigators and attorneys for emerging companies see the flurry as a signal of stormy weather ahead. Such suits, often resulting in seven-figure settlements, are commonplace in Silicon Valley, where the tech sector has matured, gone public, and suffered the slings and arrows of accusations from plaintiffs attorneys. While only six consolidated cases against companies have gone forward in the Eastern District since 1996, more than 180 such cases have gone to court in the Northern District of California, according to a securities litigation Web site run by Stanford University law Professor Joseph Grundfest, a former member of the Securities and Exchange Commission. "It's almost become an unfortunate rite of passage for high-tech companies," says Laurie Smilan, a securities litigator in the recently opened McLean office of Palo Alto's Wilson Sonsini Goodrich & Rosati. Northern Virginia, Smilan says, "is like Silicon Valley 10 years ago." Because there have been so few publicly traded companies in this area historically, securities litigators "are still in the early stages of recognizing the potential for increased class action litigation," says William Donnelly, a partner in the D.C. office of Richmond's McGuire, Woods, Battle & Boothe. It's taken a shock like MicroStrategy's losing 79 percent of its market value in three days-though it has partially recovered-for many law firms to wake up and smell the business. At least some of the top securities firms have seen the future. New York's Skadden, Arps, Meagher, Slate & Flom, Wilson Sonsini, and Boston's Hale and Dorr have all opened Northern Virginia offices in the last few months. But the work may not come easy to firms just because they have an outpost in Reston or because they coddled a company from the basement to the boardroom. "We look for the 800-pound gorilla who is a specialist in this sort of thing regardless of whether it's a firm we've used before," says the general counsel of a local high-tech company. "Because you're dealing with SEC issues, (that firm) is either a very very large Washington or New York firm." The firms that GCs have on the tips of their tongues include Wilmer, Cutler & Pickering and Wall Street players Skadden and Fried, Frank, Harris, Shriver & Jacobson. Most securities lawyers contacted for this article declined to comment on the record, fearing that it might diminish their prospects of getting a piece of the MicroStrategy litigation. But several litigators watching last week's events point to Hale and Dorr as MicroStrategy's likely choice. Boston partner Thomas Ward has been handling the company's SEC work, and securities litigator James Quarles III is in the firm's new Reston office. Neither returned phone calls, and MicroStrategy General Counsel Jonathan Klein could not be reached for comment. On the plaintiffs' side, two D.C. firms are considered major players in the securities class action arena: 32-lawyer Cohen, Milstein, Hausfeld & Toll and 10- lawyer Finkelstein, Thompson & Loughran. Cohen, Milstein has been lead or liason counsel in many of the securities class actions filed in the Eastern District, including cases against Information Analysis Inc. and and LCI International Inc. The record in those cases, though, is mixed. The case against LCI was dismissed by the court, while Information Analysis resulted in an undisclosed settlement. Cohen, Milstein has a track record in other types of class actions, having worked on the Exxon Valdez case, a price-fixing case against vitamin manufacturers, and litigation accusing industrial companies of profiting from slave labor in Nazi Germany. Andrew Friedman, the Cohen partner who filed Harad v MicroStrategy on March 21, says technology companies face pressure to engage in questionable tactics in order to keep their stock buoyant. "One of the overriding concerns is that they pay their employees greatly in stock, so there's an overwhelming incentive to influence earnings or to delay bad announcements," he says. "More companies going public," he says, "more opportunity to defraud investors." Rise and Fall The dynamics of stockholder suits are remarkably similar from case to case. A company's stock takes a dive, often related to news that promising predictions of revenues have failed to pan out. Plaintiffs attorneys representing stock holders-both individuals and institutional investors such as retirement funds-file claims based on the overinflated purchase value of their investments. While a number of cases are dismissed because plaintiffs fail to show fraud on the part of corporate officers, almost every case that makes it past the summary judgement stage results in settlement, sometimes with shares of the company included in the payout and attorney compensation. MicroStrategy found itself in the land of multiple class actions on March 20, when the company announced its restatement of earnings for the past two years. The business-to-business software firm's revenue for 1999, originally reported as $ 205.3 million, were dropped to between $ 150 million and $ 155 million. Revenue for 1998 was downgraded from $ 106.4 million to between $ 95. 9 million and $ 100.5 million. That same day, Schiffrin & Barroway, a Bala Cynwyd, Pa.-based firm, filed a class action against MicroStrategy in the Eastern District of Virginia. So far, 14 other law firms have followed, including New York's Milberg, Weiss, Bershad, Hynes & Lerach and Boston's Berman, DeValerio & Pease. The suits allege that MicroStrategy and its officers and directors violated federal securities law by issuing false and misleading statements about the company's finances. Specifically, the suits allege that MicroStrategy recognized as revenue money not yet received from contractors. MicroStrategy has not commented on the allegations other than to say the restatements were made to conform with SEC accounting guidelines. The company's outside auditor, PricewaterhouseCoopers, has withdrawn its certification of MicroStrategy's filings. Pricewater-houseCoopers has been named as a defendant in at least one of the cases. MicroStrategy's accounting practice is not uncommon among aggressive technology companies. But it's a practice SEC Chairman Arthur Levitt called " accounting hocus pocus" in a 1998 speech. The SEC issued new accounting guidelines in December, and a March 10 Bear Stearns & Co. report says 32 companies have restated their earnings or adjusted their accounting practices since then. For the securities bar, that could mean that more cases are in the pipeline. In fact, one of the companies that joined MicroStrategy in restating profits, Milwaukee-based Cumulus Media Inc., was also hit with stock fraud suits last week stemming from a restatement of its earnings. As for the forecast predicting a torrent of stock fraud litigation in Northern Virginia, securities experts suggest it was inevitable. Grundfest, the Stanford University professor who tracks such cases, says, "Sunrise to sunset, it's no more surprising than that." (Legal Times, March 27, 2000 RAINFOREST CAFE: Columnist Says Investors Ignore Fundamentals ------------------------------------------------------------- An article on Saint Paul Pioneer Press says that investors apparently bought Rainforest stock without heeding one of the first lessons of investing -- to examine company fundamentals, including management's track record. Under a proposal that will go before shareholders in April, Landry's Seafood Restaurants will buy the 37-unit theme restaurant chain for about half of its book value. Investors are crying foul -- accusing Rainforest directors of caring more for themselves than the company's shareholders. The Wisconsin Investment Board, with more than 11 percent stake in the company, called the offer a "ridiculous price." In a recent letter to shareholders, the board asked investors to defeat it. Heartland Value Fund, which holds 6 percent of the stock, filed a class-action lawsuit to stop the deal. Wisconsin Investment Board said Rainforest's current directors "suffer from sufficient conflicts of interest to raise serious questions about their ability to act in the best interest of their shareholders." Rainforest executives say there is no conflict of interest and shareholders are getting a fair price. Heartland claims that while investors will receive an insufficient price for their stock, four of the six members of Rainforest's board will each receive $ 1.5 million in payments in addition to the buyout price. In addition, Heartland objects to Rainforest's agreement to pay $ 2 million to Lakes Gaming as part of an earlier merger deal that collapsed. Three of Rainforest's directors also are directors at Lakes Gaming, which is led by Lyle Berman, who is also chairman of Rainforest. The Saint Paul Pioneer Press raises the question: "What's the big surprise?" It says that for years, Rainforest Chairman Lyle Berman has operated with a tight group of directors -- friends and relatives who sit on each other's boards in intertwined companies. And over and over again shareholders in some of those companies have complained that directors seemed to care more about enriching each other than the shareholders. For example, shareholders have complained bitterly about stock option deals granted Berman and other insiders by directors who weren't independent, the article says. When Grand Casinos and Rainforest stock prices tumbled, essentially erasing the value of the options Berman and other executives were granted, directors cut the price of those options even further. That essentially preserved their profit. The same couldn't be said for investors, the article goes on Stock options are supposed to be incentives for strong management performance. While there was nothing illegal with what they did, the directors seemed to reward Berman and others for a poor job, enriching them as shareholders suffered for management's mistakes, the article comments. These actions have been widely reported. Yet, people who buy companies like restaurants and casinos tend to ignore some of the most basic lessons about researching stocks, the article says. Instead of evaluating management, growth rates, stock valuations and the potential for return on investment, they focus on liking the place. Here's what one investor posted about Rainforest on an Internet investment message board in January: "My girlfriend and I visited the Long Island restaurant.... It was crowded.... I tried the Tuscan Chicken and my girlfriend tried the Buffalo chicken salad. I enjoyed mine, but she wasn't too thrilled about the sesame dressing on her salad.... Anyway, we enjoyed ourselves." (Saint Paul Pioneer Press, March 31, 2000) STANFORD UNIVERSITY: $545,000 Award to Researcher in Sex Bias Suit ------------------------------------------------------------------ A former Stanford University medical school researcher was awarded $545,000 yesterday by a jury that concluded she was fired in retaliation for her complaints of sex discrimination. The unanimous verdict was the maximum award allowed under federal law in such cases. It comes even as the U.S. Labor Department is investigating charges that the prestigious university violated affirmative action law in the hiring, promotion and retention of women faculty and researchers. The sexual discrimination allegations brought by acclaimed researcher Colleen Crangle, 48, marked the first time in memory that Stanford has defended itself against such charges in court. Typically, the university has settled such matters out of court or has seen the suits dismissed. The eight-person jury in U.S. District Court in San Jose found that administrators at a Stanford Medical School laboratory abruptly fired Crangle in March, 1997, in retaliation for her complaints of discrimination by her bosses. Jury Award Under federal law, the most a jury can award for punitive and compensatory damages in a retaliation case is $300,000. The jury handed Crangle the $300,000 amount and tacked on an additional $ 245,000 in lost salary and benefits. Stanford also will have to pay her attorneys' fees, but that amount has yet to be determined. "I'm elated," Crangle said. "But this case is not just about me, but about a lot of women and people of color who have been discriminated against by Stanford." Stanford lawyers said they plan to appeal the verdict. They argued during the eight-day trial in U.S. District Court that Crangle was laid off her job at the Stanford Medical Infometrics laboratory because her research money had dried up, and she refused to accept a subsequent job offer. Crangle's attorney, Dan Siegel, said he hopes the award will force Stanford to "wake up and realize this is the 21st century, and women need to be treated equally." A Girl Friday' Crangle, a senior researcher in medical computer science, testified she had been forced to be a "Girl Friday" to a fellow scientist who she said was threatened by her "strong opinions." During her testimony last week, Crangle asserted that when she brought her concerns to Dr. Edward Shortliffe, associate Medical School dean, he told her to leave if she didn't like the situation. The jury of four men and four women accepted Crangle's version and concluded that Stanford had acted with malice against her. Two jurors embraced the teary-eyed Crangle as they were leaving the courtroom of Judge James Ware. "You have a great future, ma'am," drawled one, an unidentified male in a cowboy hat said. Key E-Mail Message Jurors declined to comment on their verdict or award. But a key piece of evidence that may have influenced their ruling was an e-mail sent by Medical Infometrics director Mark Musen to Shortliffe one day after Crangle complained to her bosses in December, 1996. 'I'd like to see what options we have right now simply to lay her off," Musen wrote. In a statement by Stanford Medical Center, Debra Zumwalt, the university's acting general counsel, noted that Judge Ware had previously ruled there was no evidence of discrimination by Stanford, and that the jury's verdict was limited to the "narrow issue" of retaliation. "Obviously, we are disappointed with the jury's verdict," she said, noting that five male colleagues of Crangle's had also been laid off at the same time when the grant money ran out. Zumwalt said the university intends to appeal the verdict. She contended that the judge had made several errors prejudicial to the university's defense, particularly in allowing testimony by Stanford brain surgeon Fran Conley, a longtime critic of the university in regard to gender equity issues. The Labor Department investigation focuses on allegations of widespread sex discrimination at Stanford in hiring and promotions of women. More than a dozen women brought a class-action complaint in November 1998, but their numbers grew to 32, including some minority men, by the time the probe was announced in February. Many of those who brought their complaints to the Labor Department have since left Stanford, and some have settled their claims out of court and withdrawn from the federal complaint. Crangle was among those who filed discrimination complaints with the Labor Department. At stake is $500 million in federal contracts and grants Stanford receives annually. The contracts and grants could be jeopardized if investigators of the Federal Office of Contract Compliance uncover a pattern of bias. (The San Francisco Chronicle, MARCH 31, 2000) TOBACCO LITIGATION: Australian Smokers to Seek Special Leave to Appeal ---------------------------------------------------------------------- British American Tobacco Australasia Limited has been advised that Slater & Gordon, the solicitors acting on behalf of Nixon and others in a class action against the tobacco companies, have applied to the High Court seeking leave to appeal the decision of the Full Court of the Federal Court of Australia which dismissed the Nixon proceedings and denied them leave to replead. The court's full bench in a majority decision agreed with the companies' appeal that the class action could not continue because it did not comply with Federal Court rules. Six people began a class action last year, suing Philip Morris, WD & HO Wills, and Rothmans for damages, claiming the companies breached the trade practices act with misleading and deceptive conduct and negligence. Slater and Gordon, representing those bringing the case, said a class action was essential if the tens of thousands of individuals and families affected by cigarette smoking were to get justice. Solicitor Peter Gordon said it was appropriate for the court to resolve the common issues in these cases through a single class action. "Our appeal to the High Court has implications not just for this case, but for the future of class actions in Australia," Mr Gordon said. Two of the original six lead applicants have died since the class action began in the federal court last year, but their families are continuing the case. British American Tobacco Australasia will vigorously oppose the application for leave to appeal. "The company believes that this wrongly conceived action has already consumed considerable court time and cost and the Full Federal Court properly found that the proceedings brought by Slater and Gordon was not an appropriate class action," said Brendan Brady, Corporate and Regulatory Affairs Director, British American Tobacco Australasia. "The company believes that actions of this nature, which are brought by plaintiff lawyers seeking to emulate US speculative litigation, are not appropriate for Australia," continued Brady. The escalation of such actions potentially affects all businesses in Australia. Where such actions fail, the costs of them should be payable by those who promote this speculative litigation rather than those individuals who have been encouraged, through advertising and other means, to take part. Recent press statements attributable to the Plaintiff lawyers Association seek to promote the inability of companies deducting their costs of litigation as a tax deduction. All that this is really promoting is to further pressure companies to make settlements even where the cause of action may, at best, be dubious. "This is not simply about tobacco companies, it is about all Australian businesses being subjected to American style litigation at the cost of local business and jobs," concluded Brady. British American Tobacco Australasia is the leading manufacturer and distributor of tobacco products in Australasia, with approximately 45 per cent market share in Australia. The company has a wide range of leading brands such as Winfield, Benson & Hedges, Dunhill, Lucky Strike, Holiday and Stradbroke. (AAP Newsfeed, March 31, 2000) A 49-year-old lung cancer victim vowed to continue to fight Australia's tobacco industry for all victims of cigarette smoking. Alex Talay, of South Yarra, faced the media with law firm Slater and Gordon to announce a bid to seek special leave to appeal to the High Court to continue a landmark class action against tobacco giants. Mr Talay was one of six original lead applicants involved in a class action which began in the Federal Court in Sydney last year against Philip Morris, WD&HO Wills, and Rothmans over damages. The six lead applicants, two of whom have since died, claimed the companies had breached the Trade Practices Act with misleading and deceptive conduct and negligence. But the Federal Court threw the case out earlier this month, saying it could not continue because it did not comply with Federal Court rules. Meanwhile, Mr Talay recounted his battle with lung cancer and the tobacco companies. He said he had smoked Marlboro from 1960 to 1990, and John Player and Winfield Blue from 1990. He said he started smoking when he was 12, was diagnosed with lung cancer in early 1999 and was operated on on March 19 last year two days after he stubbed out his final cigarette. "I didn't think I'd live," he told reporters. "I didn't think I'd be here. I've had nearly half of my left lung removed, plus three ribs. And when bones are involved in cancer it's very bad, but I'm still here." He also claimed investigators for the tobacco companies had interviewed his friends, neighbours, clients and former school acquaintances. "For at least six months, probably eight months, there's been a couple of private investigators wandering around knocking on all sorts of doors," Mr Talay said. "They have even approached former teammates from more than 20 years ago when I played football with Chelsea in the Mornington Peninsula League." But British American Tobacco Australasia (BATA), which was formed after WD&HO Wills and Rothmans merged several months ago, denied harassment. BATA's Corporate and Regulatory Affairs Director Brendan Brady said it was common practice for an investigation to be carried out. "We do use investigators to find out about those individuals and we are perfectly within our rights to investigate those individuals because they are seeking damages from our company," Mr Brady said. He also said the latest bid was "wrongly conceived action that's already consumed considerable court time and cost." Philip Morris in Australia said the case should not proceed as a representative proceeding because the claims of each person gave rise to numerous individual issues. "Proceeding of the class action won't avoid the need for hundreds and, maybe thousands, of individual trials ... to prove on an individual basis that they're entitled to compensation," Philip Morris in Australia Corporate Communications Manager Nerida White told AAP. Ms White also said it was common procedure for investigators to be involved in cases involving personal injury cases. (AAP Newsfeed, March 31, 2000) VISIONAMERICA INC: Cauley & Geller Files Securities Lawsuit in TN ----------------------------------------------------------------- The Law Firm of Cauley & Geller, LLP announced on March 30 that it has filed a class action in Federal Court in Memphis Tennessee on behalf of all individuals and institutional investors that purchased or otherwise acquired publicly traded securities of VisionAmerica, Inc. (Nasdaq:VSNA) between November 5, 1998 and March 24, 2000, inclusive (the "Class Period"). The complaint charges that the Company and certain of its officers and directors violated the federal securities laws by providing materially false and misleading information about the Company's financial condition during the Class Period. Among other things, the Complaint alleges that the Company failed to properly pay and account for large payroll taxes. As a result, the Company faces massive tax liabilities, penalties and interest. As a further result, the Company is in default of certain credit agreements with its primary lenders. When the truth about the Company's financial disarray was revealed, the price of the stock dropped significantly, causing unwitting shareholders to suffer losses. Contact: Cauley & Geller, LLP, Boca Raton Sue Null or Sharon Jackson 888/551-9944 E-mail: CauleyPA@aol.com WOODLAWN CEMETERY: Lawsuit Filed Against Cemetery Closed By State ----------------------------------------------------------------- Two days after state officials shut down Woodlawn Cemetery, a lawyer has filed a class action lawsuit on behalf of people whose relatives may have been improperly buried or illegally disinterred. State officials shut down the cemetery after finding fragments of bone and caskets scattered throughout the grounds. They also found evidence that people who had purchased single grave sites had, instead, been laid to rest in graves unlawfully filled with other caskets. Sandra Lindsey, lead claimant in the suit, said her mother had purchased a single site some years before her death. But when her mother died a year ago, Lindsey found that cemetery officials had already buried two people in her mother's grave, said her lawyer, Mike Arias. The lawyer said Lindsey contacted him last month but he held off on filing a lawsuit at the request of officials in the state's Department of Consumer Affairs. State officials--who began looking into the cemetery in February after an inspector on another matter noticed fragments of human bone--did not want a lawsuit to compromise their investigation, Arias said. Meanwhile, state officials have opened a temporary office in Compton City Hall to meet with families distraught over potential mishandling of loved ones' remains. "We are meeting with the families one on one, and taking their names and the names of their loved ones," said Tracey Weatherby, spokeswoman for Consumer Affairs, which oversees the state funeral bureau. The office will be open at least through Sunday, she said. Assemblyman Carl Washington (D-Compton) visited the cemetery and called on the Legislature to study the idea of passing a law to better regulate cemeteries. (Los Angeles Times, March 31, 2000) YBM MAGNEX: Judge Clears Way for Cross-Border Securities Fraud Suits -------------------------------------------------------------------- A U.S. federal court judge has refused to dismiss the case against former insiders and advisors to YBM Magnex International Inc., clearing the way for a U.S. class-action lawsuit to proceed against high-profile directors such as David Peterson, the former Ontario premier, and Owen Mitchell, vice-president of First Marathon Securities, as well as auditors Deloitte & Touche LLP. The ruling is key for Canadian shareholders because it gives them access to the U.S. legal system with its history of jury awards and shareholder protections. The YBM defendants had argued that Canadian investors should be excluded from the U.S. class action because YBM was a Canadian company that traded on the Toronto Stock Exchange, and because two YBM class actions have already been filed in Canada. Judge Clarence Newcomer called the arguments 'very persuasive,' but said the Canadian and U.S. systems can be complementary in protecting the interests of all shareholders. He said that because a large part of the YBM scandal -- from press releases containing false information to crucial audits that missed signs of money laundering -- took place in the U.S. head office, the case legitimately falls under the mantle of U.S. securities law. He took pains to state in the 33-page ruling that although Canadian courts 'can be trusted to be orderly [and] fair,' Canadian investors still cannot access remedies available under U.S. law through any Canadian suit. 'The court feels that dismissal of this action would not be out of a spirit of international co-operation in deference to Canada's legal, judicial, legislative and administrative system,' he said. 'Rather [it] would turn out to be an outright dismissal of plaintiffs' legitimate U.S. securities claims. 'Plaintiffs would lose out on the protections of U.S. law that are available to them under extraterritorial applications.' The ruling was seen as an important development in cross-border securities frauds. 'If Canadians can somehow access the powerful U.S. laws, they should do so,' said Ward Branch, a Vancouver-based class-action specialist. 'What is required in Canada is equivalent protections for shareholders. 'It is going to be important in the long run for the two jurisdictions to work together. So to the extent that this judge is opening the door for co-operation between Canadian and U.S. judges, in the long term, it's a good thing for class actions.' YBM, a commercial magnet manufacturer with a market capitalization of almost $1-billion and a spot on the benchmark TSE 300 index, collapsed in May, 1998, on allegations of ties to Russian organized crime that surfaced following an organized crime raid on its Philadelphia-area headquarters. YBM has since acknowledged that its business had 'many of the indicia of money laundering,' and pleaded guilty in U.S. federal court last year to one count of securities fraud. Judge Newcomer ruled that Mr. Mitchell belongs before the court as a company insider because, for example, he 'allegedly minimized 'inconsistencies' in shareholder records and testimony, and misreported results of an investigation of the special committee' [on links between YBM's original shareholders and Russian organized crime]. The committee was created to investigate possible ties to Russian organized crime. He said Mr. Peterson, along with other officers and directors, 'allegedly made comments in various articles regarding YBM's financial status, when they were in a position to know that their statements were false and misrepresentative.' (National Post (formerly The Financial Post), March 31, 2000) * Racial Factor in Lending Reduced by Technology; Fed May Reintroduce --------------------------------------------------------------------- Thanks to improvements in technology and technique, and a commitment to compliance with stringent lending laws and regulations, the banking industry has made enormous progress towards eliminating racial considerations from the lending process. Banks are serving the needs of minorities in ways that never before were believed to be possible. The fact is that, as banks rely more routinely on non-personal communication with their customers through the Internet or other electronic or telephonic methods, the opportunity to know and consider the race of the customer is virtually eliminated. Moreover, through the process of credit scoring, decisions are being made that only take into account economic factors that exclude strictly racial components. In spite of these successes, the Federal Reserve Board, at the insistence of the Department of Justice, the Office of the Comptroller of the Currency and other regulatory and advocacy groups, recently has attempted to re-introduce race as a factor in loan applications. This effort has come in the form of a proposal to amend the Board's Regulation B in order to permit "voluntary" collection of racial data in loan applications. Initially, it is important to note that incidents of actual discrimination are dealt with harshly and quickly by a variety of legal and regulatory methods. Banks are sensitive to this and train and monitor their employees carefully for any signs of inappropriate behavior. But the Fed's proposal is not aimed at intentional discrimination; it is seeking evidence of statistical "discrimination." Throughout the past eight years, the federal government has attacked "Fair Lending" issues through statistical analyses. Regardless of actual proof, the Department of Justice (DOJ) has sought data that, viewed through a prism which assigns racial discrimination as a primary explanation, suggests disparate treatment between white borrowers and minority borrowers. For example, DOJ has extracted settlements from mortgage lenders after examinations of data collected under the Home Mortgage Disclosure Act (HMDA) suggested that African-American applicants paid higher loan fees or rates than did Caucasian applicants. Similarly, DOJ has relied on such inaccurate methods as a review of applicant surnames to surmise ethnic composition of borrowers in measuring "disparate treatment" and has forced settlements based on such wildly unreliable data. The Fed itself played into these tactics with its now infamous Boston Fed study of racial considerations in the lending process. Given this methodology, it is not surprising that the Fed is seeking to "permit" banks to gather racial data on loan applications. No matter how sporadic or unreliable the information may prove to be, it will be fodder for manipulation by the government and interest groups. The Fed seeks to conceal the motivations for permitting the gathering of heretofore prohibited information by proposing that it be "voluntary." What can be wrong with simply allowing a bank that desires to monitor its own progress in fair lending to gather the information necessary to do so? The answer to this query is painfully obvious. First, once the information is captured, it will be there for the regulators through the examination process and, eventually, for interest groups, through intimidation or subpoena, to see, manipulate, and use to advance their agendas. Second, there will be no uniformity in capturing the data. Definitions of "race" or "ethnicity" will vary institution by institution, and defining such concepts is increasingly imprecise. Third, the "voluntary" nature of the process will produce information that is even less reliable than data currently available through HMDA (which itself is extremely tenuous). Fourth, with an emphasis on privacy pervading the American public, the willingness of applicants to share information about their racial background is unlikely. In actuality, the "voluntary" phase will only exist for a short period. As soon as the data is sporadically available from voluntary sources, it will simply be too tempting to ignore. Fed studies, hearings before political bodies, governmental enforcement actions, class actions and investigative journalism will all command access to such information. Once these drums commence their relentless beat, the Fed will bow to overwhelming demand and make the collection mandatory. While such an outcome may please a limited constituency of regulators and activists, what effect does the pernicious practice of inquiring into race have on minorities? The minority family applying for a personal line of credit with a bank or the minority- owned or operated business seeking a commercial loan will be queried about their background in a way that has been illegal for years. The not so subtle message is that race is considered in the credit granting process. And the detrimental impact of that message cannot be measured against the theoretical benefit of access to faulty racial data generated through loan applications, whether or not voluntary. Finally, the collection of racial information in the application process cannot possibly benefit society, especially minorities. Foremost, the data once collected will not tell the full story in spite of what the proponents maintain. This is because such data fails to take into account statistical variances that result from considerations other than race. Lending is a balance between risk and reward. A good lender will consider many factors in determining creditworthiness of a customer and will price the granting of credit in accordance with the risk involved. Legally, race cannot be a factor considered in this evaluation; but, if data is collected in the application process, it certainly can be manipulated to appear to be the reason for denying credit or pricing credit differently. What seems to be lost on the proponents of the Fed's proposal is that banking today is highly competitive and modern bankers are required to be entrepreneurial. In a financial world where EPS (earnings per share) is paramount and compensation systems reward profitable production, there is no room for racial discrimination. Moreover, combining such an environment with the almost impossible task of determining the racial identity of an applicant virtually assures us of discrimination-free lending. The Federal Reserve needs to re-think its proposal. And those who truly want a lending process that rejects racial considerations need to demand that it do so. (Legal Opinion Letter, March 31, 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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