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/raid1/www/Hosts/bankrupt/CAR_Public/000427.MBX C L A S S A C T I O N R E P O R T E R Thursday, April 27, 2000, Vol. 2, No. 82 Headlines AOL: Groups Oppose; Formal Petitions To FCC Readied BRISTOL-MYERS: Milberg Weiss Files Securities Lawsuit in New Jersey BRISTOL-MYERS: Wolf Popper Accuses of Securities Fraud in New Jersey CALIFORNIA: Ambulance Service Files Federal False Claims Act Petition CONNAUGHT LAB.: American Prison Blood Products Used in Canada DUFFERIN-PEEL: Board Fumes over Funding for Mould Cleanup EQUINOX INTERNATIONAL: Settles Cse with FTC over Pramid Schemes FORD MOTOR: Engine Warranty Program to Include Thunderbirds & Cougars GUN MANUFACTURERS: Suits Spark Legal Powder Keg ILIFE COM: Discloses Securities Lawsuit in New York INPRISE CORP: Corel Deal Faces More Turbulence; Merger May Be in Doubt MICROSOFT CORP: Briefing on Break-up Set; Fierce Legal Battle Seen OFFICEMAX INC: Shareholders Sue in Ohio over Franchise Rights ORBITAL SCIENCES: Discloses Securities Lawsuit Filed in Virginia PATIENTS’ PRIVACY: Malpractice Procedural Fight Set for Hearing PHYSICIAN COMPUTER: Ct Oks Settlement Agreed to Prior to Chapter 11 PLAYA VISTA: Underground Methane Gas Focus of Battle with Developers SUBPRIME LENDING: HUD Secretary in Atlanta to Target Subprime Lending TOBACCO LITIGATION: As FL Case Comes to Close, Judge Sets 1 Trial/Month TOBACCO LITIGATION: States Seek to Cut Losses in Face of Settlement U S WEST: Hoffman Reilly Announces New Mexico Suit over Phone Service ********* AOL: Groups Oppose; Formal Petitions To FCC Readied --------------------------------------------------- A coalition of consumer and media groups today will become the first to publicly call on the federal government to block the pending marriage of America Online Inc. and Time Warner Inc., arguing that the merger "adds a dangerous new dimension to the emerging structure of the cable TV-broadband-Internet industry." Consumers Union and three other groups plan to announce that they will file petitions with the Federal Communications Commission and the Federal Trade Commission asking the agencies to deny the merger outright or at least impose strict conditions on the combination. Representatives from the alliance are expected to be among a parade of AOL and Time Warner rivals who will head to the FCC's downtown offices today--the agency's deadline for public comment--to raise questions and concerns about the merger as the FCC considers whether the combination is in the public interest. Other businesses that will offer their opinions include the nation's largest local telephone company, SBC Communications Inc.; Rockville-based Internet service provider CapuNet LLC; online music entertainment company iCast; and instant message software maker Tribal Voice. The American Cable Association yesterday dropped off a letter with the FCC expressing concern that the powerful giant created by the merger would stamp out smaller cable companies. None of these groups, however, are directly opposing the merger. Consumers Union's FCC filing, which is roughly 120 pages long and cosigned by the Consumer Federation of America, the Center for Media Education and the Media Access Project, expresses concern about the concentration of power in television and Internet content as well as their distribution through narrow-band telephone lines and broadband cable. Consumers Union's co-director, Gene Kimmelman, said the FCC should make AT&T divest itself of its Time Warner holdings in order to prevent the two companies from having any common cable ownership--a condition that appears to already be a part of the FCC's likely approval of AT&T's acquisition of MediaOne. The coalition also wants the FCC to make AOL and Time Warner sign an enforceable requirement for nondiscriminatory "open access" for AOL's competitors to Time Warner's vast cable network. "The modifications are necessary to prevent the next Microsoft problem," Kimmelman said. AOL spokeswoman Kathy McKiernan said the merger "will deliver tremendous benefits to consumers, bringing people around the world more choice and more convenience and accelerating the roll out of broadband services." A Time Warner spokesman echoed those sentiments. Groups that did not make today's deadline will have until May 11 to reply to the initial filings, which are made public. The FCC typically takes six or more months to issue a report. While it would be highly unusual for the agency to take steps to block the merger, it has recently exercised its power to impose conditions on mergers, such as forcing two companies to compete in local markets, as it did with SBC and Ameritech Corp. last year. Dulles-based AOL recently surprised some FCC staffers at the agency's Cable Services Bureau when it curtly answered some questions by saying it was clear they were not issues, according to several people familiar with the review. The FCC then sent AOL a detailed, point-by-point request for more information. Consumers Union as well as other groups filing comments to the FCC said they also plan to send their papers to the FTC, which is conducting an antitrust review. Generally, a great many more parties seek to comment privately with the FTC, rather than in the agency's more public forum, especially because rivals are often allies in today's converging world of Internet, telecommunications and media companies. SBC spokesman Selim Bingol said the company doesn't have any "significant issues with them merging in and of itself." But "thanks to a tangle of equity interests and contracts with them, the merger would give AT&T"--one of SBC's biggest opponents--"huge control over cable networks and content." Officials from CapuNet LLC, one of three Internet service providers that have filed a class-action suit against AOL because version 5.0 of its flagship software in some cases disables other ISP connections, and other competitors don't hesitate to use the word "monopoly" when referring to AOL. "They are claiming that they believe in principle on the open-access issue, yet they are using tactics resembling that of a monopoly to actually reduce choice," said John Dvorak, chief technology officer for CapuNet. Kenneth Yates, the lawyer who filed the CapuNet lawsuit as well as the original consumer suit in February, said that about 40 other consumer suits have been filed since then. AOL has said the suits have no merit. Officials from iCast, based in Woburn, Mass., that has developed an instant messaging service with Tribal Voice, say AOL is continuing to lock them out of its flagship service. AOL had promised more than six months ago to "fast track" its efforts to develop a standard, but iCast officials say it has done little work to create these new rules. ICast will provide the FCC with a 12-page statement alleging "monopolistic behavior." "AOL's espoused commitment to interoperability is a smoke screen and a sham," Margaret Heffernan, president of iCast, said in an interview. According to the iCast filing, "When it was pointed out to AOL that this block hurt AOL's customers as well as iCast's members, AOL expressed no concern." Officials of Denver-based Tribal Voice said the company plans to file a similar document. The allegations echo those of Microsoft Corp. and others who last month sent members of the Senate Commerce Committee a letter saying AOL hasn't honored a commitment to open up its private messaging network. AOL competitors say the incompatibility of AOL's instant messaging services with other Internet service providers' harkens back to the separate telephone systems that existed in the late 1800s and have no place in today's global society. AOL's McKiernan said the company has entered into more than a dozen licensing agreements for its Instant Messenger service and that the company is "willing to work with anyone to bring instant messaging to consumers in a safe and secure way." Meanwhile, the FTC remains in an information-gathering stage and has already sent a lengthy list of questions to Microsoft, EarthLink Inc. and other AOL competitors regarding the potential impact of the merger. Dave Baker, EarthLink's vice president for law and public policy, said the FTC request to EarthLink focused mostly on AOL's and Time Warner's commitment to open access to cable. Baker said the company has not yet made any other official comments to the FCC and FTC, although EarthLink is "looking at all options." Antitrust experts have said they expect few problems with the merger by traditional rules, but several senators in recent months have called for regulators to look at the merger through a special lens, saying the unchartered territory of the Internet raises numerous competition concerns for the future. (The Washington Post, April 26, 2000) BRISTOL-MYERS: Milberg Weiss Files Securities Lawsuit in New Jersey ------------------------------------------------------------------- The law firm Milberg Weiss Bershad Hynes & Lerach announces that a class action lawsuit was filed on April 25, 2000, in the United States District Court for the District of New Jersey on behalf of all persons who purchased the stock of Bristol-Myers Squibb Company (NYSE: BMY) between November 8, 1999, and April 19, 2000, inclusive (the "Class Period"). The complaint charges Bristol-Myers and the Company's CEO with violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that defendants issued false and misleading statements relating to the development of the Company's drug, VANLEV. As alleged in the complaint, defendants began a campaign to herald VANLEV as the most effective drug for treating hypertension and, to allay any safety concerns, conditioned the market to believe that there were no serious side effects to the drug. However, the complaint further alleges that defendants knew but did not disclose that the results of the Bristol- Myers-conducted clinical trials of patients given VANLEV showed that a rare and very serious side effect, that is, a severe form of angioedema which is life threatening, had afflicted some patients in the trials. Defendants' false and misleading statements regarding VANLEV resulted in artificially inflated stock prices during the Class Period. Contact: Milberg Weiss Bershad Hynes & Lerach LLP, Shareholder Relations Dept., 800-320-5081 or endfraud@mwbhlny.com BRISTOL-MYERS: Wolf Popper Accuses of Securities Fraud in New Jersey -------------------------------------------------------------------- Bristol-Myers Squibb Company (NYSE: BMY) and one of its senior officers has been named in a securities fraud lawsuit filed on April 26, 2000 in the U.S. District Court for the District of New Jersey. The lawsuit was filed on behalf of all persons or entities who purchased BMY common stock during the period November 8, 1999 through April 19, 2000, inclusive (the "Class Period"). The lawsuit alleges that during the Class Period, defendants issued false and misleading statements relating to the development of the drug, VANLEV, and promoted VANLEV as the most effective drug for treating hypertension. To allay any safety concerns, defendants conditioned the market to believe that use of VANLEV posed no serious side effects. However, as the complaint alleges, defendants knew but failed to disclose that the results of the Bristol-Myers-conducted clinical trials of VANLEV showed that a rare and life-threatening side effect, angioedema, had afflicted some patients participating in the trials. Defendants' false and misleading statements concerning VANLEV artificially inflated Bristol-Myers' stock price during the Class Period. Contact: Robert C. Finkel, Esq., 212-451-9620, Catherine E. Anderson, Esq., 212-451-9623, or Doug Rotela, Investor Relations, 212-451-9625, all of Wolf Popper LLP, 877-370-7703, fax, 212-486-2093, IRRep@wolfpopper.com CALIFORNIA: Ambulance Service Files Federal False Claims Act Petition --------------------------------------------------------------------- The Supreme Court of the United States is currently considering a petition in a "whistle-blower" Federal False Claims Act case filed by California physician/attorney Eugene Dong on behalf of A-1 Ambulance Service of Salinas, California and a former manager of the company. At issue in the Court is whether the company can litigate the claims because the allegations were allegedly publicly disclosed prior to filing of the suit. However, the case also raises the level of public scrutiny of state and county ethics in regulating the cost of ambulance services in the state of California. At issue is how the cost of ambulance services for indigent medical patients is being covered in California. An indigent ambulance user is one whose own resources, or those of family and friends, are inadequate to pay the cost of service. California courts have unequivocally stated that those costs are to come out of the county treasury. In that manner, the financial risks of emergency illness of the poor are borne evenly by society by spreading it over all taxpayers. Dr. Dong asserts, on the basis of its own experience, counties are colluding with private ambulance companies to dodge their responsibility by shifting the expense of all ambulance services to uninformed Medicare and private medical insurance clients. While the counties require no billing, or heavily discounted billing, for their own patients in contracts they let for ambulance services, they routinely look to the contractor to offer a price to the public far in excess of their actual costs, with approval by the state EMS authority. "Though the counties have a legal responsibility to bear the cost of indigent transport, counties are saying, We don't care what you charge the public, as long as you don't bill us.'," said Dong. The company has contracted with a web design company to use internet technology to inform the public of the counties' activities. The information, based upon court documents filed by the counties of San Mateo, Monterey and Los Angeles, is explained in detail at http:/www.emsripoff.org "The average cost of ambulance service to the public was 44% higher because of the discount to the county in San Mateo," said Dong In 1995 in Monterey County, Peninsula Paramedics boasted that its service was economical for the elderly since they only had to pay $110 as co-payment. "What the contractor did not say publicly was that that amount was the total payment by the county for exactly the same level of service," observed Dong. In Los Angeles County, between 1988 and 1995, the insured user's average ambulance bill increased from $280.00 to $407.00, while Los Angeles County decreased its payments from $3 million to near zero. "Calculations reveal that LA County was only paying about $28.00 per patient up to 1995 and about $6.00 per patient after 1995," Dong said. Recently revealed LA County documents show that the ambulance contractors shifted the costs of over 28,000 indigent patients per year to the insured patients and their insurers. "That is about an $11 million differential per year," Dong said. The web site documents how San Mateo County and its ambulance operator, Baystar, meld a "dispatch" fee of $32.06 into the insured patient's bill to finance county functions, yielding an excess of$249,000 per year over the operator's cost of service. "A fee," Dong says, "insurers would rightly decline to pay if they knew it was charged. But they do not since it does not appear on patients' bills." All told, in San Mateo County, the web site shows that ambulance costs have increased in excess of $2 million per year over the legitimate costs of service. The counties examined have passed their obligation for transport and emergency medical services care of the indigent onto Medicare, the privately insured public, and the working poor. How? They raised rates paid by everyone but themselves. It is a de facto transfer of responsibility from the counties to the insured, Dong said. To paraphrase the New York Times' recent complaint, "Nobody has satisfactorily explained why the insured have to pay the debts of the county and state," Dong said. CONNAUGHT LAB.: American Prison Blood Products Used in Canada ------------------------------------------------------------- A secret Canadian government memo obtained under Access-to-Information legislation states that American prison blood products continued to be used in Canada after use was stopped in the United States because U.S. authorities didn't tell a Canadian broker that the products were unsafe. The document, written in 1998 by a pair of Health Canada officials, blames U.S. authorities for the fact that Canada still used the blood products that had a "high probability" of being contaminated with both HIV and the hepatitis C virus. Regulators Faulted "The use of these blood products in Canada can be attributed to a failure by U.S. blood and regulatory authorities to inform a Canadian blood broker that blood collected at prisons was no longer safe and, as a result, was no longer being used in the U.S.," stated the memo to a senior adviser to Health Minister Allan Rock. "At the time, these blood centres were still licensed by the U.S. Food and Drug Administration, but blood coming from them for the most part was exported." Blood products manufactured from plasma collected through U.S. prisons - particularly from convicts at the Cummins Unit of the Arkansas Department of Corrections in Grady, Ark. - were given to an estimated 1,000 Canadians in the mid-1980s. It was revealed in the fall of 1998 that Miami-based North American Biologicals Inc. collected tainted blood from Arkansas inmates then sold it abroad. At the request of the FDA in 1983, U.S. companies stopped buying prison plasma to manufacture blood products. The FDA expressed concerns at the time that the prisoners' blood had a high risk of containing HIV because of the common practices of unprotected gay sex and intravenous drug use among inmates. Business Continued But at least two Canadian companies, Connaught Laboratories in Toronto and Continental Pharma Cryosan in Montreal, continued to do business with those U.S. firms. Connaught officials testified during a four-year public inquiry into Canada's tainted blood scandal of the late 1980s that they didn't realize they were purchasing prisoners' plasma since shipping papers didn't reveal the ADC Plasma Centre at Grady was in a prison. They weren't aware that ADC stood for Arkansas Department of Corrections. Toronto lawyer David Harvey launched a $ 300 million class action lawsuit in January 1999 on behalf of those Canadian hemophiliacs infected by the blood received from the U.S. penitentiaries (Michael McCarthy, Christine McCarthy, et al., v. Connaught Laboratories Ltd., Connaught Biologics Ltd., Continental Pharma Cryosan Inc., North American Biologicals Inc. and the Attorney General of Canada, No. 99-CV-162855, Ont. Ct. Gen. Div.). Lead plaintiff Michael McCarthy, vice president of the Canadian Hemophilia Society, told Mealey Publications on March 15 that "about 400 of the 1,000 (plaintiffs) have already died of AIDS or hepatitis C and the rest of us are real sick." McCarthy is also lead plaintiff in another class action against the federal and provincial governments as well as the Canadian Red Cross Society in the name of people who contracted hepatitis C or AIDS before 1986 (McCarthy, et al., No. 98-VC-143334, Ont. Sup.). Ineligible for Fund Approximately 20,000 Canadians infected outside the January 1986-July 1990 window aren't eligible to share in a $ 1.2 billion compensation fund offered by the governments two years ago. "There's a lot of finger-pointing going on here," McCarthy said. "It shows that federal officials are trying to limit their liability by placing the blame on our American cousins." He suggested that if Ottawa believes U.S. authorities are responsible for infected prison plasma contaminating the Canadian blood supply, it should seek compensation from the U.S. government. McCarthy is trying to start another class action, a $ 5 billion suit in the United States against the FDA alleging it was negligent in continuing to license prison blood centers despite strong evidence that penitentiaries are rife with infection, drug use and high-risk sex. (Mealey's Emerging Drugs & Devices, March 17, 2000) DUFFERIN-PEEL: Board Fumes over Funding for Mould Cleanup --------------------------------------------------------- Peel's Catholic and public school boards will get more than $26 million from the province to reimburse them for a massive cleanup of mouldy portables. But while the Dufferin-Peel Catholic District School Board is happy with the $20.4 million it will get toward the $30.7 million it billed for mould cleanup, the public board is flabbergasted that it will get only about $5.6 million. ''The Peel District School Board is one of the largest public boards in the province and it received about a quarter of the funding the Catholic board received," chair Janet McDougald said. Both boards petitioned the province last year to pay for the cleanup of mouldy portables that displaced thousands of students. The cleanup could cost as much as $60 million. McDougald said the Peel board spent more than $15 million to inspect 549 portables, and a further $27 million on permanent additions, renovations and leasing municipal space for classrooms. Parents claimed the mould damaged students' health. Some medical officials have linked prolonged exposure of some toxic moulds, such as stachybotrys atra, to problems such as migraines and asthma. A Mississauga family launched a $2 billion class-action lawsuit last July claiming their daughter suffered breathing problems and became lethargic as a result of exposure to mould in a school portable. The suit names the Dufferin-Peel Catholic District School Board, but other boards across the Greater Toronto Area are expected to be included. (The Toronto Star, April 26, 2000) EQUINOX INTERNATIONAL: Settles Cse with FTC over Pramid Schemes --------------------------------------------------------------- Consumers who lost money investing in a pyramid scheme they thought was a legitimate multi-level marketing business, will share in as much as $40 million dollars under the terms of a settlement between the Federal Trade Commission and law enforcement authorities from eight states, and William Gouldd and Equinox International of Las Vegas, Nevada. The settlement also will bar Gouldd from any future involvement in any multi-level marketing scheme, for life, and requires dissolution of Equinox, Advanced Marketing Seminars, Inc. and BG Management, Inc. Gouldd and Equinox faced charges by the FTC and law enforcement authorities from Hawaii, Maryland, Michigan, Nevada, North Carolina, Pennsylvania, Tennessee, and Virginia. In a suit filed jointly with the states on August 3, 1999 the FTC alleged that the defendants operated an illegal pyramid scheme, made deceptive earnings claims, and provided distributors with the means and instrumentalities to violate federal law. State law enforcers alleged violations of state securities laws, deceptive trade practices laws, false advertising laws, pyramid laws, and licensing requirements laws. Private class action plaintiffs' lawyers also joined the suit. At the request of the FTC and state law enforcers, a U.S. District Court in Las Vegas halted the allegedly illegal operations of Equinox International Corporation; Advanced Marketing Seminars, Inc.; BG Management, Inc.; and William Gouldd, their principal, froze the defendants' assets, and appointed a receiver, pending trial. The trial began April 3, 2000. The settlement announced today will end the trial process. The terms of the settlement bar Gouldd, for life, from engaging in any multi-level marketing operations. It also provides that cash and corporate and individual assets will be placed in the hands of the court-appointed receiver for liquidation. The assets have an estimated book value of nearly $50 million, and once liquidated are expected to yield approximately $40 million. Proceeds from the sale of assets will be used for consumer redress and payment of certain court-approved expenses, including the payment of states plaintiffs' fees and costs and fees and costs to defendants' and private class action plaintiffs' lawyers. Redress will be paid by the court-appointed receiver following what likely will be months of accounting and liquidation proceedings. FTC's Equinox hotline, 202-326-2103; Sate AG Contacts: North Carolina Glenn Aldridge - 919/716-6000, Pennsylvania J.P. McGowen - 570/963-4913, Nevada Tracey Brierly - 702/486-3128 JoAnn Gibbs - 702/486-3782, Virginia Greg Fleming - 804/786-2116 David Bodkins - 804/786-3518, Hawaii Dean Soma DCCA Securities Enforcement Branch - 808/586-2740, Maryland Dale Cantone - 410/576-6368, Tennessee Sharon Curtis-Flair - 615/741-5860, Michigan Katharyn Barron - 517/335-0855 The provisional stipulated final judgment and order was filed on April 20, 2000 by Judge Johnnie B. Rawlinson. The court will hold a fairness hearing before entering a final order. FORD MOTOR: Engine Warranty Program to Include Thunderbirds & Cougars --------------------------------------------------------------------- Plagued by a rash of blown head gaskets, Ford Motor Co. is extending warranty coverage on nearly 300,000 1994-95 model Mustangs, Thunderbirds and Mercury Cougars. The move expands one of largest auto warranty extensions in recent years. Ford will now offer a seven-year, 100,000-mile warranty on more than 1 million 1994 and 1995 model vehicles. The program will cost Ford about $300 million, estimates Joe Grant of J & L Warranty Pros in Auburn, Mich. The problem stems from faulty head gaskets on 3.8-liter V-6 engines in some Fords. In February, Ford extended the warranty on 717,688 front-wheel drive vehicles. The extension included 1994-95 Tauruses and Mercury Sables, 1995 Windstars and 1994 Lincoln Continentals. Ford spokesman Mike Vaughn confirmed the rear-wheel-drive 1994-1995 Mustangs, Thunderbirds and Cougars will now be included. Affected customers will be notified by mail in May. Under the program, Ford will reimburse customers for past repairs or give them $4,000 toward the purchase of a new Ford vehicle. Ford was under pressure from customers and consumer groups to expand the special warranty. Two class-action lawsuits have been filed against Ford. "It was well-documented that the rear-wheel-drive vehicles had the same problems," said Jason Kennedy of the Washington, D.C.-based Center for Auto Safety. (The Detroit News, April 26, 2000) GUN MANUFACTURERS: Suits Spark Legal Powder Keg ----------------------------------------------- In the past 18 months, Bridgeport and more than two dozen other cities and counties around the country have sued the nation's gun manufacturers, seeking millions of dollars in damages and a change in the way guns are designed and marketed. They achieved a significant victory last month, when one of the nation's largest gun makers, Smith & Wesson of Springfield, Mass., folded its tent rather than do battle in court. The gun maker agreed March 17 to make its guns safer and to restrict their distribution. Smith & Wesson spokesman Ken Jorgensen said the company's decision was a matter of economic survival. Gun owners and others who might criticize the agreement, he said pointedly, "are not spending millions on lawsuits." "Others are willing to sacrifice our company, our employees and our customers for their principles," he said. "We will not allow this to happen." Gun control advocates lauded the Smith & Wesson settlement. Critics, however, said the company was caving in to the plaintiffs' back- door strategy of achieving through the courts what they could not secure in their legislatures. They see it as legislation by litigation, and Yale Law School senior research scholar John R. Lott Jr., for one, doesn't like it. Lott is the author of the controversial More Guns, Less Crime, in which he contends that allowing citizens to carry concealed weapons deters violent crime. He says the plaintiffs in the gun litigation are sidestepping not only the legislative process, but the judicial process as well. The municipalities' real purpose in swamping gun makers with costly lawsuits, he argues, is not to achieve victory in the courts, but to pry concessions from gun manufacturers or to drive them out of business. "They're making it so people can't afford to go through the legal process," Lott asserts. "You could have fooled me," replies Richard A. Bieder, of Bridgeport's Koskoff, Koskoff & Bieder. "It looks to me like *the gun companies* have got lawyers and they're entering appearances." Bieder, who is not involved in the gun litigation, said the gun cases are no different than other lawsuits. "It happens in every case," he said. " People make economic decisions on whether they ought to pursue it or not." "One gun company made a decision about what was in its best interest. Let the others decide what's in their best interest," he said. "When you're a corporation in America," Bieder said, "the state doesn't give you a bulletproof vest that says you're immune from lawsuits." Robert M. DeCrescenzo, of Hartford's Updike, Kelly & Spellacy, represents the city of Bridgeport in Ganim v. Smith & Wesson. He says Bridgeport is not part of a concerted nationwide effort to "put anybody out of business." "We're trying to force gun manufactures to be responsible for the damages caused by the negligent distribution of their product," he said. "It's no different than any other *negligence* case." Bridgeport claims, among other things, that the gun industry has failed to make its guns as safe as possible; that it engaged in misleading advertising about handgun safety; and that it negligently has allowed the weapons to fall into the wrong hands. Waterbury Superior Court Judge Robert F. McWeeny dismissed Ganim in December 1999, finding any harm suffered by the city to be too remote and indirect to allow recovery. Bridgeport is appealing the ruling. Attorneys for the Center to Prevent Handgun Violence, Washington, D.C.- based co-counsel in the Bridgeport case and many others, have said that the gun litigation is patterned in part on lawsuits failed by states against cigarette makers. Those actions resulted in a $206 billion national settlement in November 1998. The problem for gun companies, Lott said, is that their pockets are a lot shallower than those of the tobacco giants. "These aren't the R.J. Reynolds Tobacco Co.," he said. "They simply don't have the resources to defend themselves." If the plaintiffs seriously want to duke it out in the courts, Lott said, they should join in one class action suit, rather than sue in dozens of different jurisdictions. But Tom Baker, a professor at the University of Connecticut School of Law and director of its Insurance Law Center, sees nothing wrong with the plaintiffs' tactics. "If your vision of tort law is bringing power to bear against very large economic actors," he said, the plaintiffs' strategy is " perfectly appropriate. ...Why shouldn't the plaintiffs open a multi-front war to put the maximum amount of pressure on manufacturers?" West Hartford solo Ralph D. Sherman, chairman of Gunsafe, a 1,500-member state organization committed to Second Amendment rights, says the proper plaintiffs in the gun cases would be the individuals injured by guns, not the cities. Sherman says the municipalities are trying to "bully" the gun manufacturers in the courts because they've failed to persuade state legislatures to enact gun control. Their attitude, he said, is "disagree with us politically, and we'll issue you subpoenas and hassle you to death." But well-heeled special interest groups such as the NRA, says Connecticut Bar Association President William F. Gallagher, "can frustrate legislation that's for the common good." "Where Congress or a state legislature can't act because of the gun lobby or the tobacco lobby," Gallagher said, it is "completely appropriate" for the courts to act, "so long as there is a viable theory of liability based on sound common law principles." End Runs "Our lawsuit seeks damages for what we allege to be violations of existing laws," DeCrescenzo said. "We're not making an end run around anything." "In any emerging area of the law there's a progression or interpretation of laws that result in new theories of liability," he said. "That's really where we are. Theories of liability are catching fire across the country." But Yale Law School professor Steven B. Duke finds the idea of holding gun manufacturers liable for the illegal use of legal products "staggering." "I don't fault lawyers for bringing lawsuits," Duke said. "I do fault the courts for entertaining them seriously...I can't think of any principle of products liability that would make any sense. Finding liability on the part of gun manufactures because somebody uses the gun in a crime -- that's just unprecedented." "Where do gun companies have an obligation to market guns where criminals can't get hold of them?" Duke asks. "Of course criminals will get hold of guns. Criminals like guns." "Eventually one might sue gun manufacturers for failing to put some safety device on a gun, if some technology comes along that is quite inexpensive and a gun manufacturer refuses to do that," he said. "That's not what's involved here." Duke also is disturbed that municipalities are blaming the gun industry for crime in their cities. A city, he said, "has a greater responsibility for crime in the city than a gun manufacturer in a distant state...How can a mayor say a gun manufacturer should pay when there are things the mayor could have done that are far more effective than gun manufacturers...There's a lot of scape-goating going on here." (The Connecticut Law Tribune, April 10, 2000) ILIFE COM: Discloses Securities Lawsuit in New York --------------------------------------------------- Ilife Com Inc discloses in its report to the SEC that on March 28, 2000, a purported class-action lawsuit was filed against the Company and certain of its directors and officers, its auditor and underwriters in the United States District Court for the Southern District of New York (Civil Action No. 00CIV.2337). The complaint, which seeks an unspecified amount of money damages, was filed by Brian DeMaria, a single stockholder, purportedly on behalf of all stockholders who purchased shares of our stock during the period from May 13, 1999 through March 27, 2000. The plaintiff alleges that the Company violated federal securities laws by, among other things, misrepresenting and/or omitting material information concerning the Company's financial results for the quarter ended March 31, 1999, in its registration statement and prospectus filed with the Securities and Exchange Commission in connection with the Company's initial public offering. More particularly, the plaintiff alleges, among other things, that the Company failed to disclose in its registration statement and prospectus the fact that the Company incurred a net loss of approximately $6 million in the quarter ended March 31, 1999. The plaintiff alleges that the information was not made public until May 24, 1999 when the Company issued a press release with respect to the results for that quarter. The Company contends that the loss for the quarter ended March 31, 1999. The Company intends to vigorously defend against the lawsuit. INPRISE CORP: Corel Deal Faces More Turbulence; Merger May Be in Doubt ---------------------------------------------------------------------- A U.S. shareholder has filed a class-action suit against Inprise Corp. in an attempt to halt the merger proposed between the California software developer and Corel Corp. as officials at the U.S. company are reassessing the controversial union. In the second legal salvo fired against the deal, Paul Berger has asked the Court of Chancery in Delaware to issue an injunction against the proposed transaction because Inprise shareholders 'will be irreparably harmed' if the merger is completed. Mr. Berger's lawsuit, filed against the company's board of directors, claimed 'the merger with Corel is unfair to Inprise stockholders' and alleged the directors 'violated their fiduciary duties by failing to protect Inprise's public shareholders from a decline in the value of Corel stock by neglecting to bargain for a collar or other price protection in the merger agreement.' Named in the action are Dale Fuller, chief executive, William Miller, chairman of the board and directors David Heller and William Hooper. Asked if the merger was in jeopardy, Marilee Adams, vice-president of corporate communications for Inprise, said Inprise executives will discuss the merger when the company issues its first-quarter results April 27. 'At this point we can't comment further. We need to wait to see what the board will actually be doing.' But she said 'At this point, we do have a definitive agreement and we are going forward.' Last week, the Financial Post revealed that Corel filed a cash-deficiency warning with the Securities and Exchange Commission in a 10-Q regulatory filing, stating it could run out of cash in the next 90 days if the deal is not completed. Sources say Inprise officials are expected to comment on the state of the merger tomorrow when it posts its first-quarter earnings. The class-action filing and the lawsuit filed two weeks ago by Robert Coates, a former director and major shareholder of Inprise, could jeopardize the all-important timing of Corel's biggest deal. Barring legal or regulatory delays, Inprise shareholders are to vote on the merger at a special meeting scheduled for mid June. If approved by shareholders of both companies and securities regulators, the beleaguered merger is expected to close on Oct. 31. However, Corel can afford few, if any, delays in the approval process given its weakening financial health. 'If the proposed merger with Inprise Corp. does not occur, other sources of financing are not secured and/or Corel's operating results do not improve a cash deficiency may occur within the next three months,' Corel's warning declared. The startling revelation was issued a few weeks after Corel posted a surprising net loss of $12.4 million on revenue of $44.1 million (all figures in U.S. dollars) and had warned that its financial position may not improve for six months. 'That's the kind of statement that has to be made when a company is losing money,' explained Jean Orr, an analyst at Bluestone Capital in New York. 'This is not an indication that they are going out of business.' Michael Cowpland, Corel's founder and chief executive, said yesterday that the high-tech firm would focus on 'getting costs whittled down even further,' although most industry observers note the deal with Inprise - and its $ 250-million in cash -- would help solve Corel's immediate cash-flow problem. In his class-action filing, Mr. Berger alleged Inprise's board of directors 'did not obtain all of the material information readily available, including an assessment of the reliability of Corel's representations regarding its current and expected financial performance.' Under the terms of the agreement, Inprise shareholders are to receive 0.747 Corel common shares for each share of Inprise stock they hold. At the time the transaction was announced on Feb. 7, Corel was trading in the $20 range on Nasdaq and Inprise was trading at $12.94. At the time, the deal would have pegged a value of $14.94 for each Inprise share -- or a $2 premium. Yesterday, Corel's shares closed down 1/8 at $6 1/2 on Nasdaq while Inprise ended the day at $4 29/32. Galling for Inprise shareholders is the absence of a so-called collar to protect them in the event that Corel's stock price continues to fall. As a result, shareholders of the Silicon Valley company will receive 0.747 of whatever Corel's share is at the time the deal is finally closed. At the same time, the deal also contains a no-shop provision that prohibits Inprise from obtaining a better offer in the face of Corel's share price meltdown. As well, the U.S. company faces a hefty break-up fee of $29.5-million if it walks away from the deal. 'The net effect of these provisions is to render any proposal for an alternative to the Corel transaction prohibitively expensive,' the court documents stated. 'Accordingly, the merger agreement has effectively locked up Inprise and is preventing the company from receiving any further solicitations of interest.' (National Post (formerly The Financial Post), April 26, 2000) MICROSOFT CORP: Briefing on Break-up Set; Fierce Legal Battle Seen ----------------------------------------------------------------- According to a report on the Washington Post, Justice Department antitrust attorneys were scheduled to brief White House lawyers and economic advisers on Tuesday about the government's proposal to break Microsoft into separate companies. Microsoft officials, faced with what they consider a radical proposal that would ravage the company, are preparing to launch a fierce legal battle, attacking a breakup as unnecessary, unwarranted and unprecedented, according to people familiar with the company's thinking. The Justice Department and 19 states have until Friday to file their remedy plan and they appear to be rallying around a proposal to divide Microsoft into a Windows operating system company and a software applications company. Support is dwindling for breaking off a third new company from Microsoft=92s Internet operations. In an interview with the Associated Press, Microsoft Corp. chairman Bill Gates said that future products, and consumers would suffer if the company were broken up. He said the company needs to have research people, Office people, Windows people all in one group taking breathtaking risks on this breakthrough user interface that is delivered in this next phase of the Internet. OFFICEMAX INC: Shareholders Sue in Ohio over Franchise Rights ------------------------------------------------------------- On March 24, 2000, Charles Miller and Great Neck Capital Appreciation, L.P. initiated two separate, but virtually identical, purported class actions against the Company and its directors. The cases, both filed in the Court of Common Pleas for Cuyahoga County, Ohio, allege claims for interference with shareholders' franchise rights against the Company and its directors and breach of fiduciary duty against the directors relating to the adoption of a shareholder rights plan on March 17, 2000. The cases are at their earliest stages and discovery has not yet commenced. The Company believes that the cases are without merit and intends to vigorously defend against the allegations set forth in both complaints. On April 7, 2000, Crandon Capital Partners initiated a purported class action against the Company and its directors. The case, filed in the Court of Common Pleas for Cuyahoga County, Ohio, also alleges claims for interference with shareholders' franchise rights against the Company and its directors and breach of fiduciary duty against the directors relating to the adoption of the shareholder rights plan. The case is at its earliest stages and discovery has not yet commenced. The Company believes that the case is without merit and intends to vigorously defend against the allegations set forth in the complaint. In addition, there are various claims, lawsuits and pending actions against the Company incident to the Company's operations. It is the opinion of management that the ultimate resolution of these matters will not have a material effect on the Company's liquidity, financial position or results of operations. ORBITAL SCIENCES: Discloses Securities Lawsuit Filed in Virginia ---------------------------------------------------------------- Orbital Sciences Corp. says in its report to the SEC that in the first quarter of 1999, a number of class action lawsuits were filed in federal court in the Eastern District of Virginia against Orbital, an officer and an officer/director, alleging violations of the federal securities laws during the period from April 21, 1998 through February 16, 1999 and seeking monetary damages. In December 1998, Thomas van der Heyden filed a lawsuit in the Circuit Court for Montgomery County, Maryland alleging that Orbital is in actual or anticipatory breach of obligations allegedly imposed on Orbital in a judgment in a previous action brought by plaintiff against CTA. The plaintiff claims that he is entitled to a sum exceeding $30 million from Orbital, as successor-in-interest to CTA. The Company believes that under the terms of the CTA acquisition, it is entitled to indemnification from CTA for all or a part of any damages arising from the van der Heyden litigation. PATIENTS’ PRIVACY: Malpractice Procedural Fight Set for Hearing --------------------------------------------------------------- Plaintiff lawyers and defense attorneys representing several area hospitals will square off before a judge Wednesday over a recently enacted law involving privacy rights of hospital patients that plaintiff attorneys contend usurps the role of jurists. Cook County Associate Judge Joseph N. Casciato is set to hear arguments concerning the constitutionality of the law allowing hospital attorneys and risk-management employees to have ex parte conversations with doctors affiliated with but not directly employed by a hospital. Arguments are set to begin at 11:30 a.m. Wednesday in Room 2208 of the Daley Center. At issue is an amendment to the Hospital Licensing Act, 210 ILCS 85/6.17 (d) and (e), that took effect Jan. 1 and allows hospital lawyers and risk-management workers to talk to patients' doctors about the defendant physicians' care without the patients' knowledge. Plaintiff attorneys contend that the language in the amendment relating to the ex parte contact already has been declared unconstitutional by the Illinois Supreme Court in rulings striking down the Civil Justice Reform Amendments , also known as tort reform" legislation. Best v. Taylor Machine Works, 179 Ill.2d 367, 689 N.E.2d 1057 (1997), and Kunkel v. Walton, 179 Ill.2d 519, 689 N.E.2d 1047 (1997). We certainly believe that it's the obligation of the trial court to find the statute unconstitutional based on those cases," Chicago lawyer Bruce R. Pfaff said Tuesday. But attorneys for several local hospitals disagree. They will urge Casciato to uphold the amendment. Plaintiffs would have this court believe that the new law is simply an act to revive the Tort Reform Act struck down in Best and Kunkel," Sidley & Austin partner Eugene A. Schoon wrote in a brief. Schoon is co-lead defense counsel. It is nothing of the kind." Pfaff, who heads a law firm bearing his name, and Chicago lawyer William J. Harte, will argue the other side before Casciato Wednesday. Pfaff is co-lead plaintiff counsel with Keith A. Hebeisen, a partner with Clifford Law Offices in Chicago. The role between a health care provider and patient is protected by the privacy clause of the Illinois Constitution, as well as under statutes and case law, Pfaff said. When a patient files a medical malpractice complaint, it causes a limited waiver of the privacy privilege, and under the Constitution judges must decide which matters remain privileged, he added. The new amendment destroys the physician-patient privilege as to any physicians on staff, regardless of whether the doctor's care is at issue in the suit," Pfaff noted in a court document filed two weeks ago. The new measure usurps the judiciary's role, this violating separation of powers," he wrote. The amendment also violates the separation of powers doctrine because the legislature is attempting to involve itself in discovery issues, which remain the purview of the Supreme Court, plaintiff attorneys assert. The new law also should be struck down because it constitutes special legislation, they say. Plaintiff attorneys also are attacking section (h) of the amendment, which states, Any person, who, in good faith, acts in accordance with the terms of this section shall not be subject to any type of civil or criminal liability or discipline for unprofessional conduct for those actions." The section should be struck down because it would prohibit the Illinois Supreme Court from disciplining a lawyer for conduct under the amended act, plaintiff attorneys maintain. But attorneys for the hospitals, which include The University of Chicago Hospitals, Michael Reese Hospital and Lutheran General Hospital, counter that Casciato should reject all of the constitutional challenges. The law does not lead to an intrusion on judicial independence, the attorneys say. In sum, sections (d) and (e) level the playing field so that both plaintiffs' counsel and defense counsel may speak freely, without fear of sanction, to those persons whose conduct is or may potentially be at issue," states a court document filed by Hugh C. Griffin, a Lord, Bissell & Brook partner, who is co-lead defense counsel. On Feb. 18, Casciato entered a protective order that prevents risk-management employees from having any ex parte conversations at issue. Casciato's ruling protected the status quo as it was before Jan. 1, plaintiff attorneys said. That case is Doris Burger v. Lutheran General Hospital, et al., No. 98 L 11618. More than 100 motions have been filed in the Cook County Circuit Court challenging the constitutionality of the new law, and those matters were consolidated before Casciatio. The challenged amendment relates to an important discovery issue in many pending malpractice cases, Law Division Presiding Judge Judith Cohen has said. There are about 3,000 medical malpractice cases pending in the Circuit Court, according to the clerk's office. (Chicago Daily Law Bulletin, April 25, 2000) PHYSICIAN COMPUTER: Ct Oks Settlement Agreed to Prior to Chapter 11 ------------------------------------------------------------------- Physician Computer Network, Inc. is a provider of information technology to the office-based physician market. The Company's flagship practice management software product, the PCN Health Network Information System, is a multi-functional, advanced system which automates scheduling, billing, financial reporting and other "back-office" functions, and provides electronic links to payors and other parties providing services to a physician's practice. In order to supplement its practice management product offerings with knowledge-based clinical products and services, in January 1996, the Company and Glaxo Wellcome, Inc. formed a joint venture, Healthmatics G.P. (formerly Healthpoint G.P.) The Company's interest in this venture was sold during 1998. Beginning in 1993, the Company instituted a strategy of developing and expanding its business by acquiring practice management software businesses having an installed base of physician practice customers and developing a common software platform to which such customers could migrate over time. In execution of this strategy, the Company made a series of acquisitions through 1998 in order to expand various software and support services. In 1996 and 1997, the Company sold support obligations for various customer sites using legacy systems in order to concentrate on its three major software platforms. In 1998, the Company announced the need to restate financial information previously issued to the public. Instead of the reported profits during the first three quarters of 1997, the Company would be reporting a substantial loss and was in default of its bank agreement. The negative effects of publicity surrounding the Company's announcements affected operating results in 1998. Subsequent to the Company's announcements in early 1998 concerning the delay in its annual audit and its expected restatement of previously issued reports, numerous purported class actions were filed against the Company, certain directors and former officers. These matters were consolidated into one action in the United States District Court for the District of New Jersey. Prior to the bankruptcy filing, this Securities Class Action was settled by the Company, subject to the approval of both Federal District Court and the Bankruptcy Court. The settlement provided for a payment of $21.15 million plus a share of certain other proceeds. The Class Plaintiffs also agreed that the settlement is subject to downward adjustment risk based on the ultimate sale price of the Company. The Bankruptcy Court approved the settlement when the Plan reorganization was confirmed; the Federal District Court approved the settlement on March 22, 2000. In December 1999, immediately prior to the filing of Chapter XI, the Company entered into an Asset Purchase Agreement with Medical Manager Corp. for the purchase and sale of all PCN's operating assets and the assumption of substantially all of PCN's operating liabilities. The parties executed an amendment to the Asset Purchase Agreement on December 23, 1999. On December 7, 1999, as part of the plan to consummate the sale of the assets, PCN filed for protection under Chapter XI of the Federal bankruptcy laws in the United States Bankruptcy Court in Newark, N.J. A Plan of Reorganization was filed immediately thereafter, based on the agreement to sell the Company to MMHS. On March 15, 2000, the Amended Plan of Reorganization was confirmed by the Bankruptcy Court. A closing for the sale to MMC was scheduled for March 31, 2000. PLAYA VISTA: Underground Methane Gas Focus of Battle with Developers -------------------------------------------------------------------- The extent of underground methane gas has become the latest debating point in the long-running dispute between developers of the Playa Vista complex and a band of tenacious opponents. Developers of the 1,000-acre commercial and residential development acknowledged Tuesday that methane exists beneath the sprawling Westside construction site in Playa del Rey, but insisted that the naturally occurring gas poses no health or safety risk. Citing the recommendation of a study commissioned by the city of Los Angeles, project officials said the construction of a network of gas vents would prevent accidental explosions at the site, which could one day have 30,000 residents. However, a group of project opponents announced Tuesday that they had filed a lawsuit seeking to stop or at least delay construction because of alleged gas dangers. Gathered on a high bluff overlooking the early stages of Playa Vista construction, those opponents demanded that work be halted until the city performs a more detailed study of the methane issue. Among other accusations, opponents said that Playa Vista officials failed to accurately describe the extent of methane gas when applying to the city for construction permits in the early 1990s. Opponents say that the gas has caused several eruptions at the construction site. Development officials characterized the suit as one in a series of frivolous legal challenges, a characterization that project critics resent. Opponents want to keep the tract, which includes a portion of a former Hughes Aircraft facility, as open space and have challenged the project on several fronts, including its impact on the Ballona Wetlands. David Herbst, a Playa Vista vice president, said that methane gas did burst from the ground while investigators drilled monitoring wells during the recent study, but that the episodes have been exaggerated by opponents. "The fact is, we've done more methane testing at this site than anywhere else in Los Angeles and this report says it can be mitigated," Herbst said. "This is just another attempt to block much needed housing on the Westside of Los Angeles." Herbst also said that methane gas exists under much of Los Angeles, and that the Playa Vista site is by no means unusual. The opponents' lawsuit was filed by three environmental groups--Grassroots Coalition, Earthways Foundation and Spirit of the Sage Council--and focuses also on a nearby gas storage facility owned by Southern California Gas Co. The storage site, where natural gas is pumped deep into the cavities of a former oil field, is roughly one half mile from Playa Vista. Rosemary Woodlock, the environmental groups' lawyer, said that gas was leaking from storage pockets and filtering up through the Playa Vista property. Neighbors of the storage facility earlier this year filed a class action suit against the gas company, saying that they were poisoned by the gas. On Tuesday, gas company representative Sharon O'Rourke denied claims that the storage site was leaking. (Los Angeles Times, April 26, 2000) SUBPRIME LENDING: HUD Secretary in Atlanta to Target Subprime Lending --------------------------------------------------------------------- Predatory mortgage lending practices are exploding nationwide, and minorities are the prime targets in Atlanta, federal Housing and Urban Development Secretary Andrew Cuomo said Tuesday. Cuomo was to host a forum at Atlanta City Hall to hear testimony from victims of schemes that have buried them in unnecessary mortgage debt and often cost them their homes to foreclosure. It will be Cuomo's first stop on a five-city tour he's sponsoring with Treasury Secretary Lawrence Summers to build support for federal regulation of so-called "subprime" lending, or lending to borrowers with poor credit. An alarming proportion of subprime loans involve predatory practices, such as charging exorbitant fees, interest rates and penalties, Cuomo said. "Federal regulators are really taking notice now," said Bill Brennan, an Atlanta Legal Aid Society attorney and national expert on predatory lending. In Atlanta, subprime loans grew by more than 500 percent between 1993 and 1998, according to a report Cuomo released Tuesday. And while overall volume of mortgage foreclosures in Atlanta dropped 7 percent between 1996 and 1999, foreclosures by subprime lenders soared 232 percent. The report found that subprime home refinancings were nearly five times more likely in black neighborhoods in Atlanta than in white neighborhoods. "Lenders identify a black neighborhood," Brennan said. "They go into the deed record rooms and do profiles of homeowners." They aggressively solicit clients, particularly elderly women, by encouraging them to consolidate credit card debt or medical bills into new mortgage loans, he added. Legitimate subprime lending helps borrowers obtain needed credit, Cuomo said in a conference call. "However, there's been an increase in fraudulent practices. Minorities seem to be targeted." Predatory mortgage lending became a national issue in recent months following news reports on a California-based subprime lender and a speech by Federal Reserve Board Chairman Alan Greenspan. Major banks, including Bank of America and Citigroup, own major subprime lenders, and Wall Street investment banks have played a key role in financing the subprime lending boom. Some states have been aggressive in regulating subprime lending, while Georgia hasn't placed significant controls on the industry. However, Gov. Roy Barnes is familiar with the issue. In the early 1990s, he served as an attorney for the plaintiffs in a class-action suit against the consumer finance division of Fleet Financial Group. The suit alleging predatory lending eventually was settled for $ 6 million, and the Fleet division went out of business, said Howard Rothbloom, Barnes' co-counsel in the matter. (The Atlanta Journal and Constitution, April 26, 2000) TOBACCO LITIGATION: As FL Case Comes to Close, Judge Sets 1 Trial/Month ----------------------------------------------------------------------- As A 2-YEAR-OLD tobacco class action trial grinds toward a conclusion in Miami, a federal judge in Brooklyn is quietly pushing to trial a series of potentially multibillion-dollar tobacco cases, starting in June -- at a clip of one trial a month. Industry lawyers are scrambling to derail or slow down the litigation train. They say that the cases before U.S. District Judge Jack B. Weinstein are legally indistinguishable from suits that have been thrown out of federal courts across the country. And they're not alone. A New York state judge has criticized Judge Weinstein's refusal to dismiss two of the cases. A federal appellate judge all but accused him of insubordination for declining to apply a recent 2d Circuit precedent in one of them. Although some plaintiffs' lawyers deny it, others acknowledge that they are using a procedural technicality to steer tobacco cases to Judge Weinstein, hoping that the maverick judge will rule favorably in big cases that others probably would have dismissed. Steven B. Rissman, Philip Morris' senior assistant general counsel, says, "Jack Weinstein's court is the only safe harbor left in this country for this kind of case, and plaintiffs' lawyers and their nominal plaintiffs have flocked there." The cases: An action in which Blue Cross and Blue Shield entities from around the country are suing tobacco companies for, among other things, money spent on sick smokers. Blue Cross and Blue Shield of New Jersey v. Philip Morris Inc., No. 98-3287. Two parallel cases, filed in Chicago and Seattle, were dismissed by the 7th Circuit and the trial court in Seattle. The Seattle case is on appeal to the 9th Circuit. A case in which labor union health care trust funds are seeking reimbursement for money used to care for smokers. National Asbestos Workers Medical Fund v. Philip Morris Inc., No. 98-1492. Union trust fund cases have been rejected in five circuits -- including Judge Weinstein's -- and numerous state and federal district courts. A single federal case managed to survive to trial last year in Akron, Ohio. A jury found for the defense. In January, the Supreme Court declined to review three of the circuit dismissals, sounding "the death knell for these types of lawsuits," in the words of longtime anti-tobacco advocate John F. Banzhaf III, a professor at George Washington University Law School. A national class action by union health fund trustees. Bergeron v. Philip Morris Inc., No. 99-6142. Judge Weinstein is to consider a dismissal motion this month. A national class action by lung cancer victims who smoked at least "20 pack-years," the equivalent of a pack a day for 20 years. Simon v. Philip Morris Inc., No. 99-1988. Although the class is structured differently from those in previous cases, 11 federal courts have rejected tobacco class actions, and none have let a smokers' class action go forward. Three cases by former asbestos makers claiming that the industry should carry part of the burden of paying smokers for asbestos-related injuries. Falise v. American Tobacco Co., No. 97-7640; H. K. Porter Co. v. American Tobacco Co., No. 97-7658; Raymark Industries v. American Tobacco Co., No. 98-675. What most upsets industry lawyers is Judge Weinstein's refusal to apply a 2d Circuit opinion to dismiss their cases. In Laborers Local 17 Health and Welfare Fund v. Philip Morris Inc., No. 98-7944, Manhattan federal Judge Shira Scheindlin denied a motion to dismiss a union fund case but certified the opinion for immediate review by the 2d Circuit. Last April, that court reversed and directed Judge Scheindlin to dismiss. It said that the funds lacked standing because they are far removed from any harm to smokers. Judge Weinstein has declined to dismiss any of the cases before him based on Laborers Local 17 -- not even his union trust fund case, National Asbestos Workers. In a long opinion in September, he drew distinctions between Laborers Local 17 and the facts of National Asbestos Workers, Blue Cross and H. K. Porter, one of the asbestos cases, agreeing with the plaintiffs' lawyers that they were sufficiently different. Industry lawyers say that the differences are illusory. At least three other judges with tobacco cases agree. Dismissing a union trust fund case in Chicago, 7th Circuit Judge Frank Easter-brook called Judge Weinstein's failure to apply Laborers Local 17 a thinly disguised refusal to accept and follow the second circuit's holding." A New York state judge, dismissing union health fund cases in a Manhattan state court, criticized Judge Weinstein for failing to apply Laborer's Local 17 to dismiss the Blue Cross and National Asbestos Workers cases. A federal district judge in Minnesota was also critical. Checking the Box The first tobacco case filed in Judge Weinstein's court was Falise, another of the three asbestos suits. It was filed on behalf of trustees for the Johns-Manville Trust, created from assets of the bankrupt asbestos-maker in the 1980s. When they filed Falise, the plaintiffs' lawyers checked a box on the cover sheet indicating that the case was "related to" the Manville Trust, which was supervised by Judge Weinstein. Under Eastern District procedure, cases marked "related to" are assigned to the judge presiding over the related case, an exception to the normal random assignment of judges. Falise opened the court's door to other tobacco cases. A tobacco plaintiff in the Eastern District can now be reasonably sure of getting Judge Weinstein by saying that the case is related to Falise and subsequent tobacco cases. Despite defense motions and pleas to the 2d Circuit, the industry has been unable to get the cases transferred to another judge. And while Judge Weinstein has dismissed some claims in some of the cases, he has dismissed none entirely. He has also declined to certify his orders for appeal to the 2d Circuit, leaving the defendants to ask the appellate court for rarely granted orders of mandamus to overrule him. On April 13, the 2d Circuit denied a whole-court review of mandamus petitions in National Asbestos Workers and Blue Cross, which apparently eliminated any hope of a pretrial review. If the industry goes to trial and loses, court rules could require the companies to post a stiff appellate bond, an issue raised in the class action in Miami. Four-week Trials Meanwhile, Judge Weinstein is keeping the heat turned up, scheduling four-week trials beginning with Falise on June 5. Although the 78-year-old judge is on senior status, he has told lawyers that he plans to hear tobacco cases through the summer, pausing for just two weeks. Philip Morris' Mr. Rissman says he fears the breakneck schedule may be designed to force a settlement on "the politically unpopular tobacco industry." At a March conference, Judge Weinstein mused on the possibility of "relatively modest settlements" with the industry, to permit "their employees, farmers and suppliers, and those who wish to continue smoking, or to start smoking, to proceed without this overhanging cloud of expensive litigation." Mr. Rissman and lawyers for codefendants R. J. Reynolds and Brown & Williamson say that they don't plan to settle. Settlement rumors are the natural result of the failed $ 368.5 billion proposed global tobacco resolution of 1997. The deal would have capped most industry liability in exchange for concessions on marketing and regulation by the U.S. Food and Drug Administration. Congressional approval was necessary because the parties that negotiated the deal -- the industry, state attorneys general and private plaintiffs' lawyers -- lacked the power to deliver the immunity from liability that the industry required. After the deal failed in Congress, state attorneys general struck a more modest deal with the industry in 1998, without resolving hundreds of remaining individual and aggregated cases (see chart). And while most courts have rejected class actions by injured smokers, the stakes are very high in cases, such as the one in Florida, in which courts have allowed them to go forward. Despite their complaints, defense lawyers join plaintiffs' lawyers in calling Judge Weinstein smart and respected. Judge Weinstein has long been in the forefront of mass torts and complex litigation, with a penchant for engineering big solutions to big problems -- asbestos, handguns and tobacco among them -- that run counter to the recent trend in the Supreme Court and circuit courts. (The National Law Journal, April 24, 2000) TOBACCO LITIGATION: States Seek to Cut Losses in Face of Settlement ------------------------------------------------------------------- State governments fearful of losing billions in tobacco settlement money are scurrying to find ways to keep the cash coming in the face of lagging cigarette sales and high-stakes litigation in Florida. The states already took a billion-dollar hit this month after their payments were decreased to reflect last year's 9 percent decline in U.S. cigarette shipments. Pennsylvania received $198 million, about $28 million less than projected, and other states reported similar declines of 10 percent to 15 percent. The losses, which some state officials say may continue, could shave more than $20 billion from the $206 billion due to 46 states over 25 years to cover health-related costs, under a "volume adjustment" clause of the settlement agreement. Even worse, states worry that payments could be delayed for years in the event of a crippling punitive award in a Florida class-action lawsuit. It's a potential problem for many states, which are using their cut of the settlement to pay for projects ranging from smoking prevention programs and health insurance for the uninsured to schools, water projects and new jails. With so much at stake, state governments are keeping close watch on the health of the very industry at the core of the health-related problems to begin with. "I do think state appropriators have been very cautious where they put these dollars, knowing they're going to change," said Joan Henneberry, a health policy expert at the National Governors Association. "I think state budgeters would be more concerned not about the amount (of payments), but whether bankruptcy of the industry delays the process." Many states, like Pennsylvania, want to cushion the impact of fluctuating payments with plans to set aside portions in rainy day investment funds and by appropriating the settlement money for programs year by year. Other states are bolder. Four tobacco states - Georgia, Kentucky, Virginia and North Carolina - have passed or are pondering bills to shield industry assets during a court appeals process. That came after some analysts predicted record damages in Florida and as the Justice Department sues the industry to recover billions the federal government says it spent on smoking-related health care. And a handful of states, including Florida, Virginia and Louisiana, cite the declining payments and the industry's bankruptcy risk as reasons why they may sell some of their settlement to investors at a discount. They say it's better that than counting on the industry to stay fully afloat for 25 years. "We can't afford to take that risk," said Louisiana State Treasurer John Kennedy. "If your rich uncle died and left you $4.6 billion, you wouldn't buy all Philip Morris stock; you'd diversify ... but every day we wait and more bad news comes out about the tobacco industry, the price goes down." Under the settlement agreement signed Nov. 23, 1998, the tobacco companies agreed to pay 46 states for smoking-related health costs. The companies earlier signed separate deals, also with "volume adjustment" provisions, with Mississippi, Florida, Texas and Minnesota for a combined $40 billion. The agreements forced companies to end billboard advertising and certain other marketing tactics, such as cartoon images like Joe Camel. Companies then raised cigarette prices about 45 cents per pack to help pay for the settlement, leading to about a 9 percent decline in shipments last year, analysts say. Analysts don't expect similarly sharp sales declines in future years - one projected a 1 percent to 2 percent drop annually. But they are encouraging state governments nevertheless to consider ways to minimize risk, either by legislating against the impact of large damage awards or selling some of their shares to investors. "It would be imprudent for any state not to consider the best ways of protecting the annual revenues to that state," said Martin Feldman, an analyst with New York-based Salomon Smith Barney. The two best methods, he said, are legislation and securitization, selling to investors. In Pennsylvania, Attorney General Mike Fisher said he is not too worried about losing the state's projected $11.3 billion in settlement money. He called selling to investors a "risky venture" for now since investors would expect a discount. The best way to cushion the impact of fluctuating payments is to devote funds to health care, the costs of which will decrease as smoking levels dwindle, said Fisher, a member of the tobacco committee of the National Association of Attorneys General, which negotiated the multistate settlement. "We shouldn't be concerned that the amount of cigarettes being sold is going down," he said. "It's a good sign and the primary goal behind bringing this litigation in the first place." Anti-tobacco activists, meanwhile, worry that exaggerated fears of losing settlement payments may undermine anti-smoking efforts. Even if smoking were reduced by one percent annually for five years, they said, the country would save billions of dollars that would otherwise go toward treating smoking-related heart attacks, strokes, low-birth rate babies and other costs. "I do think that so far there has been much too much focus on lost settlement revenues and too little on the benefits from reduced smoking levels," said Eric Lindblom of the Campaign for Tobacco-Free Kids. (The Associated Press, April 26, 2000) U S WEST: Hoffman Reilly Announces New Mexico Suit over Phone Service --------------------------------------------------------------------- The New Mexico state court suit was filed in Santa Fe and says 90,000 telephone customers in New Mexico were affected by U S WEST's action. Contact: Hoffman Reilly Pozner & Williamson, Denver Daniel M. Reilly, 303/888-5748 (available for comment beginning at 10:30 a.m. MDST on 4/26/00) ********* 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. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *