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/raid1/www/Hosts/bankrupt/CAR_Public/000511.MBX C L A S S A C T I O N R E P O R T E R Thursday, May 11, 2000, Vol. 2, No. 92 Headlines BANK OF AMERICA: Superior Ct Addresses Injunction on Securities Suit COCA-COLA: cable Network Ad Deal Links with Atty in Racial Bias Suit COLORADO SCHOOLS: Governor Signs Bill to Settle Schools Lawsuit CONSECO, INC: Cauley & Geller Files Securities Lawsuit FEN-PHEN: Medical Economist Calls ahp Settlement Adequate FEN-PHEN: Objectors Claim ahp Settlement a Sham GPU INC: Notice Sent to N.J. Power Customers in Outage Case INMATES LITIGATION: TX Brazoria County Ends Dispute With Missouri LAIDLAW, INC: Spector, Roseman Files Securities Lawsuit in SC MEGAN LAW BAN: NJ Files Papers Arguing Ban Harms Residents NAPSTER: Record Companies Sue over Music copyright claims SCB COMPUTER: Wolf Haldenstein Files Securities Suit in Tennessee STONE & WEBSTER: Schiffrin & Barroway Files Securities Suit in MA TERAYON COMMUNICATIONS: The Pomerantz Firm Files Securities Suit in CA TOBACCO LITIGATION: B&W Issues Statement on Legislation Re Bonding ********* BANK OF AMERICA: Superior Ct Addresses Injunction on Securities Suit -------------------------------------------------------------------- Accusing a major securities class action firm of forum shopping and "outrageous" conduct, a federal judge has enjoined a California court from proceeding with a shareholder stock drop case against Bank of America. U.S. District Judge John Nangle of St. Louis severely criticized San Diego-based Milberg Weiss Bershad Hynes & Lerach for allegedly trying to circumvent federal law in its rush to become lead counsel in the case. But Milberg has found a defender in San Francisco Superior Court Judge William Cahill, who issued an order Tuesday praising Milberg's handling of the state court cases that are before him. At stake in the jurisdictional scuffle is control of what Milberg Weiss lawyers believe to be a $6 billion case. In his order, Nangle called a halt to a mediation set to go forward in the California cases. "Hindsight now reveals that the simultaneous filing of suits in state and federal court was a blatant attempt at forum shopping," Nangle said in a blistering 19-page injunction issued late last month. When the federal forum proved unsavory because Milberg Weiss would not be able to control that case, the firm simply took its marbles and went to play in state court," continued Nangle, chair of the federal judiciary's Panel on Multidistrict Litigation. Cahill, who has been presiding over the state court actions Allison Desmond v. BankAmerica Corp., 998629, held a hearing Tuesday to address Nangle's injunction. "You recognize that your reputation has been attacked," Cahill told Milberg partner Reed Kathrein, who was roughed up in Nangle's order. Kathrein said he was aware of the stinging rebuke, and said he was unfairly singled out. He then urged Cahill to vacate the earlier mediation order to assuage Nangle. Kathrein also asked the judge to please say a few kind words about him and his firm. Cahill obliged. "During this case, this court has found the attorneys for plaintiffs and defendants to be of the highest quality," Cahill's order said. "It appears to this court that all counsel have conducted themselves in a professional and ethical manner throughout this litigation in the California Superior Court." What good that will do for the firm in Nangle's courtroom is uncertain. Meanwhile, Kathrein said he has appealed Nangle's injunction to the Eight Circuit U.S. Court of Appeals, on the grounds that Nangle overstepped his authority. The securities fraud cases arose from the Sept. 30, 1998 merger of the former San Francisco-based BankAmerica Corp. with NationsBank Corp., of Charlotte, N. C. Six lawsuits alleging securities law violations were filed in federal district courts, including one in California. Seven class actions were also filed in California state courts, including five by Milberg Weiss. Plaintiffs allege that two weeks after the merger, the new BofA announced undisclosed losses of about $900 million, triggering an immediate collapse of the bank's stock price. Milberg partner Patrick Coughlin told Cahill on Tuesday that Nangle was concerned that his firm was attempting "an end run around the federal action" by seeking to prosecute the state cases through mediation. "That's simply not true," Coughlin said. "We didn't do anything in the dark of night." Both plaintiffs and defendants had already agreed to submit their case to retired U.S. District Judge J. Lawrence Irving of San Diego. In court papers filed by Kathrein, Milberg argues that Nangle's injunction order could prevent the recovery of billions of dollars in damages that are not recoverable under federal law. "More specifically, damages in the federal action are subject to ... the 90- day 'lookback' provision," Milberg's brief says. "That provision can severely reduce or eliminate recoverable damages if the trading price of the relevant security increases during the 90-day period following the end of the class period. No such limitation exists under California law." Milberg filed with its brief a declaration by its financial expert, Bjorn Steinholt, who estimated that state plaintiffs could lose more than $6 billion in damages that would not be recoverable in federal court. Coughlin said that the lookback provision meant the federal class members were entitled to only $400 to $500 million. In his injunction, however, Nangle suggested that Milberg's actions in the state case could end up costing the federal class -- whose members owned far more shares. "In the instant cases, the federal plaintiffs represent 2,583,505 shares of stocks in the new BankAmerica or its predecessor," the judge wrote. "The _Desmond_ state plaintiffs represent 98,678 shares. The federal plaintiffs . .. clearly have a greater financial stake in the outcome of the litigation." Judson Lobdell, defense counsel for Bank of America, welcomed the federal judge's intercession. "The scope of the injunction is clear: It prohibits the named plaintiffs and their counsel from prosecuting the claims asserted in this action," Lobdell, of counsel at Morrison & Foerster, said in court papers. Nangle's order also criticized Milberg's "lawyer-driven machinations" that he said are meant to skirt federal laws designed to prevent abusive practices in the prosecution of securities class actions. "Clearly, the Desmond case is nothing more than a thinly veiled attempt to circumvent federal law," Nangle said. "The Desmond plaintiffs, and the law firm behind them, do not have the best interests of the class at heart and have proved themselves wholly inadequate to control conduct of this suit. The court finds their attempts to do so outrageous." However Solomon Cera, whose firm represents other members of the proposed state class action, said Nangle was applying a federal law, the Securities Litigation Uniform Standards Act of 1998, that was enacted after he and lawyers from Milberg filed their cases. The 1998 law, he said, has no retroactive provisions. "We were properly in state courts, here in the former home of the Bank of America, and properly litigating our cases," said Cera, a partner in San Francisco's Gold Bennett Cera & Sidener. Cera, whose firm escaped Nangle's blowtorch, said "the whole issue of comity between the federal and state courts" is violated by the federal judge's hostile ruling. "This is about the Bank of America, so what's wrong with having the case in San Francisco? Why have it in St. Louis?" Senior writer Dennis J. Opatrny's e-mail address is dopatrny@therecorder.com (The Recorder, May 10, 2000) COCA-COLA: cable Network Ad Deal Links with Atty in Racial Bias Suit -------------------------------------------------------------------- In a possible conflict of interest, a cable TV network partly owned by an attorney representing some plaintiffs in a racial discrimination lawsuit against Coca-Cola has signed an important advertising deal with the soft drink company. Coke and Major Broadcasting Cable Network, which prominent Florida attorney Willie Gary helped launch, announced a five-year advertising agreement Tuesday covering all of the beverage giant's brands. The amount of the deal was not disclosed. The 24-hour cable network, based in Atlanta, was created in 1998 by Gary, former heavyweight boxing champion Evander Holyfield, former baseball player Cecil Fielder and Marlon Jackson, brother of singer Michael Jackson. It features family-oriented entertainment created for African-Americans. But Gary, chairman and chief executive of the network, represents four of eight plaintiffs in the federal suit against Coca-Cola. The suit alleges that the company has discriminated against black employees in pay, promotions and performance evaluations. "It's a conflict of interest," said Monroe Freedman, a Hofstra University law professor and nationally recognized expert on lawyers' ethics. "He can continue to represent his clients only with their fully informed and voluntary consent." Gary denied any conflict and said he already has informed the four plaintiffs of his interest in the cable network. "They had no problem with it," Gary said. "There's absolutely no conflict. We're not friends. We're business people. Coke is not giving me anything. ... It's goods in exchange for service. ... No way this is a conflict." Gary also said he is in the process of representing other Coke employees in the case. Freedman, the ethics expert, said Gary must explain to all of his Coke clients that a lawyer with his financial interests --- consciously or subconsciously --- might go easier on the defendant in the case than a lawyer without such financial interests. Even then, Freedman said, it may be " imprudent" for Gary to represent Coke employees. That's because they could later conclude that he was less than zealous in his representation and sue him for malpractice. Coca-Cola spokesman Ben Deutsch said the lawsuit had nothing to do with the company's decision to buy the advertising. "We're making the ad buy because it is a good business decision," Deutsch said. "It gives us an opportunity to support what we believe to be some very meaningful programming and at the same time connect our brands with African- American consumers in a more frequent and relevant basis." Deutsch also said the company was in negotiations with the cable network long before Gary started to represent Coke employees. Deutsch said discussions began in October, with a final deal reached in March. Gary, who has won large civil awards, only entered the year-old case in April. At that time, four out of the eight plaintiffs in the case left their original attorneys and hired Gary. "This is an issue between Mr. Gary and the four individuals he represents," said Cyrus Mehri, an attorney who represents the four other plaintiffs in the case, as well as 2,000 prospective members of a class of black employees. "Our team's focus is fighting for the best possible resolution for the class." Mehri's team and attorneys for Coke are currently in settlement negotiations that are being facilitated by a mediator. Gary is not part of the settlement talks and does not represent the prospective class of employees. The advertising deal was announced by both companies only a day before a group of current and former Coke employees holds a news conference about a boycott being organized against the company. The group was to give details about its boycott strategy at a May 10 press conference at the World of Coca-Cola, which will initially focus on getting black consumers to avoid buying Coke Classic and Sprite. The group wants the company to agree to a class-action settlement of $ 200 million and substantially improve its diversity programs. Deutsch said the timing of Tuesday's announcement of the ad deal had nothing to do with the press conference. (The Atlanta Journal and Constitution, May 10, 2000) COLORADO SCHOOLS: Governor Signs Bill to Settle Schools Lawsuit --------------------------------------------------------------- A bill Gov. Bill Owens says "will put to rest the ongoing controversy in Colorado over school construction" got the governor's signature on Tuesday. Now it needs the approval of a Denver District Court judge. Flanked by attorneys for 10 families of students in poorer school districts, legislative leaders and Attorney General Ken Salazar, Owens said he hopes the new law will help settle a lawsuit over the state's school construction finance laws that is on hold pending court acceptance of the state's offer. Under terms of the settlement, the class-action lawsuit will be dismissed permanently if the state spends $105 million over the next 11 years for emergency health and safety construction or repair projects in needy school districts. The state must also add $85 million to the School Construction and Renovation Fund for grants and loans to school districts. The decision by a judge on whether to accept the settlement is expected June 9, and could be challenged by any members of the class who feel the settlement is not fair. Announcement of the tentative settlement last month brought a temporary halt to the lawsuit, which already was under way in Denver District Court. The class includes at least 23,000 students from six school districts in Lake County, Sanford, Aguilar, Las Animas, Pueblo 60 and Centennial. Colorado has about 700,000 public school students in 176 school districts. Attorneys representing the students contended that the state funding formula violates the state Constitution's guarantee of a uniform education because it favors wealthier areas and hurts schools in poorer communities. Under Colorado law, state funding covers a little more than half the operating costs of public schools. The rest comes from local property taxes. School districts must finance school construction and repairs through property taxes, which puts districts with low property values in a bind. Glen Keller of the Colorado Lawyers Committee, representing the students, said the money is only a start on the state's $2 billion school construction needs, but agreed "only a part of that should be dealt with by the state." Owens said the money, which will be doled out by the Department of Education, is only to address health and safety needs at poorer schools and is not meant to be a substitute for bond issues for school districts that can afford it. Owens said he does not expect other lawsuits attacking the state's school funding formula, saying the Legislature has dramatically changed the way schools are funded so that the state now provides 60 percent. The lawsuit was filed after poorer school districts complained they did not have the money to fix unsafe fire escapes and fire alarm systems, antiquated wiring and plumbing, leaking roofs, inadequate heating and ventilation systems and structural deficiencies, such as cracked masonry. (The Associated Press, May 9, 2000) CONSECO, INC: Cauley & Geller Files Securities Lawsuit ------------------------------------------------------ Investors have recently sued Conseco, Inc. (Nasdaq: CNC) and Conseco Financial Trust V and Conseco Financial Trust VI for alleged violations of the Securities Exchange Act of 1933. Conseco Financial Trust V: a class action lawsuit has been filed for purchasers of 8.70% Trust Originated Preferred Securities SM ("TOPrS SM") (Nasdaq: CNC-pv) publicly traded securities of Conseco, Inc. and Conseco Financial Trust V purchased in or traceable to the public offering of these securities by Conseco which was completed on or about August 24, 1998 (the "Offering"). Conseco Financial Trust VI: a class action lawsuit has been filed on behalf of all persons who purchased the 9% Trust Originated Preferred Securities SM ("TOPrS SM") (Nasdaq: CNC-G) publicly traded securities of Conseco, Inc. and Conseco Financial Trust VI ("Conseco" or the "Company") purchased in or traceable to the public offering of these securities by Conseco which was completed on or about October 8, 1998 (the "Offering"). These complaints charge Conseco and certain of its officers, directors and company insiders with violations of the Securities Exchange Act of 1933. This action involves defendants' dissemination of materially false and misleading statements concerning, among other things: (i) artificially inflated financial results for Green Tree (the finance segment of Conseco); and (ii) Conseco's use of "gain-on-sale" accounting. Contact: Cauley & Geller, LLP, 888-551-9944, or email, CauleyPA@aol.com FEN-PHEN: Medical Economist Calls ahp Settlement Adequate --------------------------------------------------------- The proposed $3.75 billion national settlement of health claims stemming from the diet drug combination fen-phen would be enough to cover medical costs and other benefits, a medical economist said. Dr. Mark McClellan, a Stanford assistant professor of both economics and medicine, testified Tuesday in federal court that the monetary amounts provided would be adequate to pay for benefits and services for those claiming injuries from the drugs. The drug's maker, American Home Products, and plaintiffs' attorneys who favor the settlement worked out the deal last October. Opponents have said the amounts are inadequate and are asking U.S. District Judge Louis C. Bechtle to throw it out. Bechtle, who began hearing testimony on the settlement Tuesday, gave preliminary approval to the deal last November and is expected to decide after the two-week hearing whether it will stand. McClellan said he expected those qualifying for the highest level of payments to be less than anticipated. Of some 12,000 claims filed, a selection indicates three of five are lacking proper medical documentation, he said. While some may prove valid, the medical evidence required is similar to that needed for disability or worker's compensation claims, meaning many will qualify only for a lower level of payments that are one-fifth of the maximum, he said. Under cross-examination by attorney Edward F. Blizzard, who represents a group of users who object to the settlement, McClellan acknowledged that no detailed analysis of the claims had been done and the total number of those participating could not yet be known. Blizzard told the court he would file documents supporting his contention that his clients were inadequately represented and had no input in the terms of the settlement. He also wants the court to consider medical research indicating that the drugs might also cause nerve damage, and while that might be difficult to prove, the settlement should not close off such claims. More than 9,000 lawsuits have been filed against Madison, N.J.-based American Home, maker of fenfluramine, the "fen" in the fen-phen combination. The company sold the drug under the brand name of Pondimin and also made Redux, a chemical cousin. The drugs were withdrawn in September 1997 after a Mayo Clinic study linked the fen-phen combination to potentially fatal heart valve damage. The second drug in the combination, phentermine, was not linked to the problems. Under the settlement, the fen-phen users would get a maximum of $1.5 million, though most would get far less, depending on their level of injury and how long they took the drugs. The settlement also includes money for their future medical monitoring. Of 6 million people who took fen-phen before it was pulled from the market, 45,000 have refused the multibillion-dollar settlement and retain the right to sue for punitive damages. Those who remained in the class action lawsuit may still reject the settlement and sue for compensatory damages but are forbidden from collecting punitive damages. (The Associated Press, May 10, 2000) FEN-PHEN: Objectors Claim ahp Settlement a Sham ----------------------------------------------- A flurry of last-minute objections and comments have been filed opposing the proposed $4.8 billion settlement offer by American Home Products Corp. (AHP), the lead defendant in thousands of diet drug lawsuits and the major U.S. manufacturer and marketer of the recalled drugs. In re Diet Drugs (Phentermine, Fenfluramine, Dexfenfluramine) Products Liability Litigation , MDL No. 1203; Brown et al. v. American Home Products Corp. et al., Ind. No. 99-20593, objections filed (E.D. Pa., Mar. 30, 2000). The objections will be heard at a fairness hearing scheduled to start May 2 before U.S. District Judge Louis C. Bechtle in the Eastern District of Pennsylvania. Most of the objectors argue that the proposed plaintiff classes cannot meet the requirements for a settlement class action enunciated by the U.S. Supreme Court three years ago in Amchem Products v. Windsor, 521 U.S. 591 (1997), because the interests and claims of the plaintiffs in the five proposed subclasses are too diverse to enable them to form cohesive, adequately represented groups. The objectors also contend that the proposed settlement classes do not meet the requirements of numerosity, commonality, typicality and adequacy of representation enumerated in Rule 23(a) of the Federal Rules of Civil Procedure, nor the requirement that common issues of law or fact predominate over individual issues as specified in Fed. R. Civ. P. 23(b)(3). The Dunn Objections: A Conflict of Interest In one of the most strongly worded objections filed by a group of Texas plaintiffs, the Dunn objectors charge the plaintiffs' class counsel with conflict of interest. They only entered into the settlement agreement with AHP to collect the $429 million in attorneys' fees they improperly agreed to at the same time they negotiated the damages award for the settling plaintiffs, the objection states. Plaintiff Vickie Dunn and the other objectors argue that the representative plaintiffs named for each of the five subclasses are inadequate to represent their subclasses because they were "figureheads" who were never consulted and took no meaningful role in the negotiations, as Amchem requires. In fact, three of the five representatives, including lead plaintiff Sheila Brown, have had to be replaced with new plaintiffs, either because they backed out of the proposed agreement after learning how little the plaintiffs would receive in damages, or because their alleged injuries did not correspond with those of the class they were designated to represent. Each of the five subclasses -- made up of those who took the drug less than 60 days, those who took it for longer, those who have manifested heart valve injuries and those who have not -- is represented by its own subclass counsel. The objectors claim that each of the subclasses should have had vigorous, independent representation during the settlement negotiations, but that in actuality, the five subclass attorneys represent few, if any, plaintiffs in those subclasses and played little or no role in the negotiations leading up to the agreement. "The absence of a real class base means the subclass counsel had no particular motivation to maximize recoveries for their specific subclasses, rather than simply to share in the general settlement fund as a reward for gaining of approval of some settlement," the objectors said. The court should find that the settlement is unfair, the objectors said, because it: -- proposes to pay the plaintiffs too little for their injuries; -- locks the plaintiffs into the conclusions of today's science although the scientific data is still evolving; -- prevents plaintiffs who opt out from seeking punitive damages; and -- excludes plaintiffs with other kinds of injuries, such as neurological damage or primary pulmonary hypertension, from participating in the settlement. The Scuteri Objections: 'A Feigned Proceeding' Another group of objectors, led by Jane Scuteri and represented by a New York law firm, said the absence of any involvement in the negotiations or decision-making by the representative plaintiffs made the settlement agreement "a feigned proceeding" designed to impose an alternate dispute resolution mechanism and not a real case in controversy. The Scuteri objectors also charge that the plaintiffs' attorneys are involved in a conflict of interest. Since the Brown class action was not even filed until after the class counsel arrived at the proposed settlement with AHP, the attorneys effectively entered into a contract with AHP beforehand that severely limits how they can represent their clients, the Scuteri objectors argue. The Brown class counsel are mainly members of the Plaintiffs Management Committee (PMC) in the multidistrict litigation, and it was the PMC that entered into settlement talks with AHP. Referring to a $200 million fund set aside as a guaranteed plaintiffs' attorneys' fee, the Scuteri objectors said: The Brown class counsel would receive access to this $200 million fund, but only if they handled the representation of the Brown class exactly as agreed to with AHP in advance. Only a performance precisely in conformance with the agreement would lead to payment of this money; any other decision made by the Brown counsel in the exercise of their professional responsibilities would not. The Scuteri objectors also charge the plaintiffs' class counsel with a conflict of interest because as the PMC, they also represent other classes of plaintiffs against the same defendants, most notably, the nationwide medical monitoring class in Jeffers v. American Home Products Corp., No. 98-20626 (E.D. Pa., 1998), which Judge Bechtle certified last year. The objectors point out that one conflict arising from that situation is that the Jeffers class is made up of diet drug users who took the drugs for more than 30 days, unlike the Brown classes which are distinguished by whether they took the drugs for more or less than 60 days. The proposed medical monitoring classes in Brown also seriously conflict with state law in the seven states that have certified statewide classes, but the settlement would release all claims in those states, the objectors contend. The Fleming Objectors: A Bad Settlement A third set of objectors named after Fleming & Associates, a Houston law firm, makes essentially the same points. These objectors said that it is a well-established point of law that clients have the right to reject a settlement negotiated without explicit advance approval. "Here, however, a handful of attorneys meeting alone in a room can decide amongst themselves the benefits to be accorded millions of people who will be killed or seriously injured by fen-phen -- without any express negotiating authority from those persons (indeed, without any knowledge, for the most part, of their identity)," said the Fleming objectors. Fleming & Associates also filed a bench brief arguing that AHP was more than just negligent in its actions with regard to the drugs. Its failure to warn of the dangers of valvular heart disease and primary pulmonary hypertension "for the sake of company profit was malicious and inexcusable," the brief stated. In addition, the proposed settlement failed to take in the strength of the liability case against AHP and does not compare with the reported settlements and verdicts that have resulted from state court cases around the country, said the objectors. Although settlement amounts are normally kept confidential, at least two settlements are reported to have been in the $10 million range. "Whether the PMC simply didn't know all the evidence, or chose to ignore it like an ostrich hiding its head in the sand, does not matter. The end result is exactly the same. A bad settlement for those who have been hurt," the bench brief concluded. In their motion to disapprove the settlement, the Fleming objectors also call on the court to bar the PMC from negotiating any further settlement negotiations on the grounds that it negotiated a "wholly inadequate and legally improper" settlement with AHP. In addition to these sets of objectors, other parties to file comments and objections include several other groups of plaintiffs: Interneuron Pharmaceuticals Inc., co-marketer with AHP of one of the recalled drugs, dexfenfluramine (Redux); Cigna Healthcare Inc.; Les Laboratoires Servier, the European maker and distributor of the diet drugs; and HMO Louisiana, lead plaintiff in a class action seeking to join all health plans in the United States that have paid for diagnosing and treating injuries related to the drugs. Interneuron has filed its own suit against AHP alleging that the company misled it about the safety of Redux. Judge Bechtle also issued an order on March 24 allowing several Blue Cross/Blue Shield companies in Alabama, California, Louisiana, Michigan, Minnesota, New Jersey and Wisconsin to intervene in order to assert their objections and participate in the fairness hearing. Those companies are looking to protect any subrogation rights they might have for covering subscribers for the diagnosis and treatment of diet drug-related illnesses. In addition to filing written objections, most or all of objectors will testify at the fairness hearing beginning May 2 before Judge Bechtle. The Dunn objections were filed by Edward Blizzard of Blizzard & McCarthy in Houston; Richard Laminack of O'Quinn & Laminack in Houston; John E. Williams Jr. of the Williams & Bailey Law Firm in Houston; Robert Curran of Curran & Byrne in Media, Pa.; and Kenneth H. Eckstein and Jeffrey S. Trachtman of Kramer, Levin, Naftalis & Frankel in New York. The Scuteri objections were filed by Paul J. Napoli and Marc Jay Bern of Napoli, Kaiser & Bern in New York and by Kenneth J. Cheesebro in Cambridge, Mass. The Fleming objections were filed by George M. Fleming, James L. Doyle II and Rand P. Nolen of Fleming & Associates. (Pharmaceutical Litigation Reporter, May 2000) GPU INC: Notice Sent to N.J. Power Customers in Outage Case ----------------------------------------------------------- Customers of GPU Energy companies in New Jersey who experienced power outages during the weekend of July 4, 1999, will receive class action notices with their bills for March 2000. The class was certified last fall and includes plaintiffs who allegedly suffered monetary damages when their businesses were affected during a series of "rolling blackouts." Tzannetakis et al. v. GPU Inc. et al., No. L-3587-99, class certified (N.J. Super. Ct., Monmouth County., Oct. 12, 1999); see Utilities Industry LR, August 1999, P. 11. The plaintiffs, who include the owners of a restaurant, fishery, catering business and home business, claim GPU Energy (including GPU Inc., Jersey Central Power & Light Co., GPU Generation Inc., GPU Service Inc. and GPU Energy) was negligent and reckless in maintaining its equipment; misrepresented its ability to provide electricity; violated the state's Consumer Fraud Act; and breached express and implied warranties on the provision of safe and reliable power delivery. The complaint says GPU's tariff, filed with the New Jersey Board of Public Utilities, stated that the company would use "reasonable diligence" to provide a regular and uninterrupted supply of energy. While the tariff limits GPU's liability for the effects of "natural disasters," the plaintiffs claim the heat wave leading to the July 4 power outages did not fall into that category. The specific charge involves two substation transformers that GPU allegedly knew needed replacement. The plaintiffs seek an unspecified amount of damages for spoilage of food; damage to computers, appliances and other electronic equipment; inconvenience; emotional and physical pain and suffering; loss of use of electrically powered computers, appliances, equipment and buildings; loss of business income; and other consequential and incidental damages including the cost of alternative energy, living quarters and commercial space. The class, certified on Oct. 12, 1999, by Superior Court Judge Paul F. Chaiet, is described as: All customers of GPU Energy in New Jersey, and all dependents, tenants, employees and other intended beneficiaries of customers of GPU Energy in New Jersey, who suffered damages as a result of the failure of GPU Energy to deliver electricity during the week beginning Sunday, July 4, 1999. The officers, directors and agents of the defendants are specifically excluded from the class. Any persons with claims for personal injury arising out of the power outages are excluded from the class. GPU initially sought an appeal from Judge Chaiet's ruling but has since withdrawn the appeal. GPU is still asking the New Jersey Superior Court Appellate Division to enter an order directing that the state Board of Public Utilities must decide issues of negligence and liability; the company concedes that the Superior Court has jurisdiction on issues related to damages. The plaintiffs are represented by Gerhard P. Dietrich and Tracy C. Nugent of Daller Greenberg & Dietrich in Fort Washington, Pa. (Utilities Industry Litigation Reporter, April 2000) INMATES LITIGATION: TX Brazoria County Ends Dispute With Missouri ----------------------------------------------------------------- A Southeast Texas county's dispute with the state of Missouri over housing inmates who were removed after a videotape of a jail shakedown has ended with a compromise. The deal signed Tuesday resolves a lawsuit originally filed by Missouri Attorney General Jay Nixon, who didn't want to pay the final bill from Brazoria County. Under the compromise, Missouri will pay $295,000 while Brazoria County will pay $203,397 of that sum to a private jail company that leased jail space for the inmates, the Houston Chronicle reported. The move is the latest development in an ongoing prison abuse case sparked after a graphic videotape was unearthed. The 30-minute tape shows jailers beating and ordering dogs to attack Missouri inmates housed at the jail in 1996. The videotape also showed prison guard Lester Arnold kicking and shocking an inmate with a stun gun. Arnold pleaded guilty and was sentenced to a year in prison. Inmates' brutality complaints also led to a prison term for another jailer and a $2.2 million class-action lawsuit settlement. Brazoria County was accused by Missouri officials of breaching its contract to properly care for the inmates. The county countersued, seeking $369,483 that it said was owed for housing the inmates in August 1997, just before they were returned to Missouri. (The Associated Press, May 10, 2000) LAIDLAW, INC: Spector, Roseman Files Securities Lawsuit in SC ------------------------------------------------------------- A May 9 announcement by Spector, Roseman, & Kodroff says that a class action against Laidlaw, Inc. (NYSE: LDW; TSE) and certain of its officers and directors has been commenced in the United States District Court of South Carolina. The suit is on behalf of shareholders who purchased the common stock of Laidlaw between October 15, 1997 and March 13, 2000 (the "Class Period"). The complaint alleges that Laidlaw and certain of its directors and executive officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that the defendants issued materially false and misleading financial statements contained in filings with the Securities and Exchange Commission (the "SEC") and press releases that, inter alia, overstated the Company's assets, income and earnings per share during the Class Period. In a series of announcements beginning on March 6, 2000 and ending on March 13, 2000, it was announced that the Company's affiliate, Safety-Kleen Corp. (NYSE: SK) ("Safety-Kleen"), had placed on "administrative leave" its top three executive officers, because of discovered "accounting irregularities." These events prompted the Company's auditors to withdraw their audit opinion on Safety-Kleen (formerly Laidlaw Environmental Services, Inc.) for the past three fiscal years ending August 31, 1999, 1998 and 1997. During the Class Period, Safety-Kleen accounted for a significant portion of Laidlaw's assets, revenues and operating income and there were interlocking directors and officers. Finally, it was announced that the SEC had commenced an investigation of Safety-Kleen. On this news, between March 6, 2000 and March 14, 2000, the Company's stock fell almost $3.00 per share or 75% on extremely heavy trading volume to close at $1.0625 per share on March 14, 2000. The Company's common stock had traded as high as $16.625 per share on the NYSE during the Class Period. Contact: Eugene A. Spector of Spector, Roseman & Kodroff, P.C., 888-844-5862 or classaction@spectorandroseman.com MEGAN LAW BAN: NJ Files Papers Arguing Ban Harms Residents ---------------------------------------------------------- The state attorney general filed papers Tuesday arguing that a federal court ban on sex offender notifications harms New Jersey residents more than offenders would be hurt if the notices were allowed. The 3rd U.S. Circuit Court of Appeals in Philadelphia on April 18 halted the public disclosures allowed under Megan's Law. Federal Appellate Judge Dolores Sloviter issued the order while the court reviews the law. That review came a week after a U.S. district judge approved changes that the state made in the notification process to ease concerns that offenders privacy rights were violated. Neighbors in a carefully defined area were given the offender's name, age, street address, and other information. The state's Public Defender's Office claimed in a class-action lawsuit that the street address was too much private information being made too public. U.S. District Court Judge Joseph Irenas agreed in part earlier this year. Instead of appealing that ruling, Attorney General John J. Farmer Jr. offered the court new guidelines requiring people who receive such notices to sign forms saying they will not disclose the information. Those who do not sign do not get the exact address. Now that Irenas has approved those modifications, "it's not clear what the 3rd Circuit is doing," Farmer said. A motion filed with the appellate court asks that the order staying the notifications be vacated. "The harm to the community, by not having these notifications, outweighs the harm that would be suffered by any infringement on the privacy rights of the defendants,"Farmer said. (The Record (Bergen County, NJ), May 10, 2000) NAPSTER: Record Companies Sue over Music copyright claims --------------------------------------------------------- Fenwick & West L.L.P. is busy fending off copyright infringement claims against its client Napster in the latest clash over Napster's MusicShare software, which lets users copy music from each other's hard drives. Kathryn J. Fritz, in Fenwick's San Francisco office, and Laurence F. Pulgram, in its Palo Alto, Calif., office, are counsel for Napster. Last week, heavy-metal band Metallica filed the third complaint against Napster, the first having commenced in January -- a class action joined by 18 record companies. Metallica's lawyers, Howard E. King and David M. Corwin, of Los Angeles' King Purtich Holmes Paterno & Berliner, also represent rapper Dr. Dre, who is expected to launch yet another suit. Along with Napster, the complaint lists as defendants several universities where students use the software. Russell J. Frackman, Jeffrey D. Goldman and George M. Borkowski, of Los Angeles' Mitchell Silberberg & Knupp; Hadrian R. Katz, of Washington, D.C.'s Arnold & Porter; and Steven B. Fabrizio, the director of litigation for the Recording Industry Association of America Inc., filed the first case, A&M Records Inc. v. Napster Inc., No. 3:99-CV-5183, in federal court in San Francisco, on behalf of the record companies. The most recent suit, Metallica v. Napster Inc., No. 2:00-CV-3914, was filed on April 24 in U.S. district court in Los Angeles. (The National Law Journal, May 8, 2000) SCB COMPUTER: Wolf Haldenstein Files Securities Suit in Tennessee ----------------------------------------------------------------- The law firm of Wolf Haldenstein Adler Freeman & Herz LLP announces on May that the firm has filed a class action lawsuit in the United States District Court for the Western District of Tennesse, on behalf of investors who bought SCB Computer Technology, Inc. (NASDAQ:SCBI) securities between August 19, 1997 and April 13, 2000, inclusive (the "Class Period"). The lawsuit charges SCBI and several of its officers and directors with violations of the federal securities laws and regulations. The complaint alleges that defendants participated in a scheme to materially misstate the Company's revenues and earnings. It further alleges that as a result of accounting irregularities, the price of SCBI stock traded at artificially inflated levels during the Class Period. Defendants' fraudulent scheme came to an end on April 14, 2000, when the Company revealed that the Audit Committee of its Board of Directors was conducting an independent investigation into allegations of potential accounting irregularities affecting SCBI's financial statements. The Company further revealed that as a result of the allegations and investigation proceedings to date, Ernst & Young LLP resigned as SCBI's independent auditor effective April 10, 2000, and that SCBI anticipates that it will restate its audited financial statements for fiscals 1998 and 1999 and its unaudited financial statements for the first three quarters of fiscal 2000. In response to these revelations, Nasdaq halted trading in SCBI securities on April 14, 2000. Contact: Wolf Haldenstein Adler Freeman & Herz LLP Michael Miske George Peters Gregory Nespole, Esq. Fred Taylor Isquith, Esq. or Shane T. Rowley, Esq. 800/575-0735 whafh@aol.com classmember@whafh.com www.whafh.com or Bramlett Law Offices Paul Kent Bramlett 615/248-2828 or The Law Offices of Bruce G. Murphy Bruce G. Murphy 561/231-4202 STONE & WEBSTER: Schiffrin & Barroway Files Securities Suit in MA ----------------------------------------------------------------- The law firm of Schiffrin & Barroway, LLP gives notice that a class action lawsuit was filed in the United States District Court for the United States District Court for the District of Massachusetts on behalf of all purchasers of the common stock of Stone & Webster, Inc. (NYSE: SW ) from April 27, 1999 through April 28, 2000 inclusive (the "Class Period"). The complaint charges Stone & Webster and certain of its officers and directors with issuing false and misleading statements concerning the Company's revenues, income and earnings. The Complaint claims that, during the Class Period, Stone & Webster and the defendants assured investors that the Company's earnings were increasing each quarter, with the Company experiencing record revenues and income. On April 30, 2000, the Company dropped a bombshell on investors when it disclosed that it will restate its 1999 financial results. Contact: Schiffrin & Barroway, LLP, Bala Cynwyd Marc A. Topaz, Esq. Robert B. Weiser, Esq. 888/299-7706 (toll free) or 610/667-7706 e-mail: info@sbclasslaw.com TERAYON COMMUNICATIONS: The Pomerantz Firm Files Securities Suit in CA ---------------------------------------------------------------------- Pomerantz Haudek Block Grossman & Gross LLP and the Law Office of Klari Neuwelt have filed a class action suit against Terayon Communications Systems, Inc. (Nasdaq: TERN) and five of the Company's executives. The case was filed in the United States District Court for the Central District of California, Western Division on behalf of all those persons or entities who purchased Terayon common stock or call options and/or sold put options during the period between February 2, 2000 and April 11, 2000, inclusive (the "Class Period"). The Complaint charges that Terayon and certain of its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing false and misleading statements to the investing public during the Class Period concerning certification of the Company's proprietary S-CDMA cable modem technology by Cable Television Laboratories, Inc. (the cable industry regulatory organization) as an "industry standard," after the Company had received a "cease and desist" letter from CableLabs warning the Company that it was making "misleading statements" to the public, (ii) Terayon's S-CDMA technology had not been certified as an "industry standard," and (iii) there were no assurances that Terayon's S-CDMA technology would be useful in the near future. During the Class Period, Terayon insiders sold over 70,000 shares of their privately held Terayon common stock at artificially inflated prices, reaping proceeds in excess of $15.6 million. On April 11, 2000, the Company was forced to admit that it had received a cease and desist letter from CableLabs. The belated admission by the defendants caused the price of Terayon's common stock to plummet by 26%. Contact: Andrew G. Tolan, Esq. of Pomerantz Haudek Block Grossman & Gross LLP, 888 476-6529 (888-4-POMLAW) or agtolan@pomlaw.com. TOBACCO LITIGATION: B&W Issues Statement on Legislation Re Bonding ------------------------------------------------------------------ The following announcement was made May 10 by Brown & Williamson following statement after Florida Governor Jeb Bush signed legislation limiting the financial bonding requirements for defendants in the Engle tobacco class action lawsuit: "Governor Bush's action will allow our company and others to appeal the Engle verdict without being subjected to the threat of financial devastation resulting from requirements to post a security bond regardless of the outcome of the punitive damages phase of the trial. "With the security bond cap in place, Brown & Williamson will take its case to the appellate courts, where our company is confident it will prevail. "We are understandably pleased that this ominous cloud has been removed from the horizon." Brown & Williamson is the nation's third largest manufacturer of tobacco products. With headquarters in Louisville, Ky., the company's major brands include KOOL, LUCKY STRIKE, GPC, CARLTON, MISTY AND BARCLAY. (Regulatory News Service, May 10, 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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