/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000531.MBX C L A S S A C T I O N R E P O R T E R Wednesday, May 31, 2000, Vol. 2, No. 105 Headlines CELLUCCI: Fd Ct in MA OKs Settlement Re Services for Mentally Retarded CITGO PETROLEUM: Appeals against Settlement for Property Damage Claims CITGO PETROLEUM: LA Refinery Workers Appeal against Racial Case Ruling CITGO PETROLEUM: Pursues Defense in MTBE Litigation in Various States COCA-COLA: Settlement Talks for Employees's Racial Suit Underway CYBER-CARE, INC: Gallagher Sharp Files Securities Suit in Florida DENNY'S RESTAURANTS: Vows to Fight Suit by Disgruntled Former Manager DEPARTMENT OF CHILDREN: Sued over Foster Care; Audit to Show Problem E.SPIRE COMMUNICATIONS: Berman DeValerio Files Securities Suit in MD FORE SYSTEMS: PA Ct Refuses to Dismiss Securities Suit over GE Offer GTE CORPORATION: Harvey Greenfield Files Securities Lawsuit in New York HANOVER DIRECT: Customers Sue in OK over Delivery Insurance Charge HANOVER DIRECT: FTC Investigates on Marketing of Shopper’s Edge Club KOS PHARMACEUTICALS: Announces Dismissal of Shareholder Suit in Florida REED: Indiana Court of Appeals OKs Graduation Qualifying Exam Case SCB COMPUTER: Berman DeValerio Files Securities Suit in Tennessee SUNRISE INTERNATIONAL: to Amend Merger Agreement to Settle Lawsuit UNION PACIFIC: Lawsuit Filed over Derailment; Evacuations Continue VISA, MASTERCARD: National Post Says US Case Has Implications in Canada WATER CONTAMINATION: Ontario Govt Cutbacks Blamed for E. Coli Tragedy ********* CELLUCCI: Fd Ct in MA OKs Settlement Re Services for Mentally Retarded ---------------------------------------------------------------------- A federal District Court in Massachusetts approved a settlement agreement in a class action suit involving allegations that the defendants violated the ADA's integration mandate by providing services in an institutional rather than an integrated setting. Rolland v. Cellucci, 17 NDLR 161 (D. Mass. 2000) (No. Civ.A. 98-3-208-KPN). The plaintiffs filed a class action suit against the state and state officials seeking broad systematic relief on behalf of all individuals with mental retardation and other developmental disabilities who were, had been, or would be residents of nursing facilities within the state. The plaintiffs sought relief under the ADA, Nursing Home Reform Amendments and the Medicaid provisions of the Social Security Act. The court denied the defendants' motion to dismiss. The defendants then filed a motion for summary judgment. After the plaintiffs obtained an extension to file a response, the parties engaged in a settlement discussion and subsequently entered into a settlement agreement. The court approved the settlement agreement on a preliminary basis. Following a fairness hearing, the court indicated that it intended to approve the settlement agreement. First, the court determined that the case warranted a strong initial presumption that the compromise was fair and reasonable. The issues were vigorously contested, the parties entered into mediated discussions after extensive discovery, the settlement was reached after arms-length negotiations, the parties' attorneys had experience litigating claims in this area of the law, reasonable notice was provided to class members and there was no real opposition to the settlement. Further, the settlement established a presumption in favor of community placement. In considering whether the settlement agreement was fair, adequate and reasonable under the circumstances, court determined that it was "somewhat doubtful" that the plaintiffs would have obtained the relief at trial that they would have obtained under the terms of the settlement agreement. Further, extensive discovery made it possible for the attorneys to assess the merits of the case and negotiate a principled compromise. In addition, the parties' attorneys were sufficiently experienced and knowledgeable enough to represent to the court that the settlement provided fair, reasonable and adequate relief to class members. Also, absent the settlement, the parties would have expended considerable resources. Moreover, there had been no formal objections to the substantive provisions of the settlement agreement. The court also determined that the parties reached the agreement in good faith and in the absence of collusion and that the interests of third parties were not at stake in any adverse manner. Therefore, the court approved the settlement agreement. (Successful Job Accommodations Strategies, May 22, 2000) CITGO PETROLEUM: Appeals against Settlement for Property Damage Claims ---------------------------------------------------------------------- A class action lawsuit is pending in Corpus Christi, Texas state court against CITGO and other operators and owners of nearby industrial facilities which claims damages for reduced value of residential properties located in the vicinity of the industrial facilities as a result of air, soil and groundwater contamination. CITGO has contracted to purchase all of the 275 properties included in the lawsuit which are in an area adjacent to CITGO's Corpus Christi refinery and settle the property damage claims relating to these properties. Related to this purchase, $15.7 million was expensed in 1997. The trial judge recently ruled, over CITGO's objections, that a settlement agreement CITGO entered into in September 1997 and subsequently withdrew from, which provided for settlement of the remaining property damage claims for $5 million is enforceable. CITGO believes this ruling is erroneous and has appealed. The trial against CITGO of these remaining claims has been postponed indefinitely. Two related personal injury and wrongful death lawsuits were filed against the same defendants in 1996 and are scheduled for trial in 2001. CITGO PETROLEUM: LA Refinery Workers Appeal against Racial Case Ruling ---------------------------------------------------------------------- Litigation is pending in federal court in Lake Charles, Louisiana against CITGO by a number of current and former Lake Charles refinery employees and applicants asserting claims of racial discrimination in connection with CITGO's employment practices. The first trial in this case, which involved two plaintiffs, began in October 1999 and resulted in verdicts for the Company. The Court granted the Company's motion for summary judgment with respect to another group of claims; an appeal of this ruling is expected. Trials of the remaining cases are currently stayed. CITGO PETROLEUM: Pursues Defense in MTBE Litigation in Various States --------------------------------------------------------------------- CITGO is among defendants to lawsuits in California, North Carolina, New York and Illinois alleging contamination of water supplies by methyl tertiary butyl ether ("MTBE"), a component of gasoline. The action in California was filed in November 1998 by the South Tahoe Public Utility District and CITGO was added as a defendant in February 1999. The North Carolina case, filed in January 1999, and the New York case, filed in January 2000 are putative class actions on behalf of owners of water wells and other drinking water supplies in such states. The Illinois class action, filed in April 2000, purports to be on behalf of well owners in sixteen states. All of these actions allege that MTBE poses public health risks. The suits seek damages as well as remediation of the alleged contamination. These matters are in early stages of discovery. CITGO has denied all of the allegations and is pursuing its defenses. COCA-COLA: Settlement Talks for Employees's Racial Suit Underway ---------------------------------------------------------------- With settlement talks under way, plaintiffs' attorneys are not going to file an important document by May 30's deadline in the racial discrimination lawsuit against Coca-Cola, according to plaintiffs' attorney Cyrus Mehri confirmed. The federal judge in the case is likely to grant a two-week extension to give negotiators more time to try to reach a settlement, according to former Coke manager Larry Jones, who is the chief organizer of a boycott of company products aimed at pressuring it to settle the suit. The suit alleges that the company has discriminated against African- Americans in pay, promotions and performance evaluations. The class certification brief is a key document in the case. In it, plaintiffs' attorneys are supposed to lay out a detailed analysis of why they believe the case should be expanded from four plaintiffs to include about 2, 000 current and former black employees in the United States. The company, which has denied the allegations, would be able to respond to the certification brief if it eventually gets filed. But Jones said the settlement talks, which are being facilitated by a mediator, apparently have become a priority. Attorneys for both sides are prohibited from publicly talking about the settlement negotiations, which began in mid-April. They can, however, talk about the filing of legal briefs. "What I understand the reason for the delay is that both parties want to continue mediation without the motion being filed," said Jones, who was laid off as a human resources manager in February. "However, I am deeply concerned that this is simply another delaying tactic by Coca-Cola Co." Coke, which declined comment, has repeatedly said it wants a speedy and fair settlement. And the delay in filing the class certification brief could not have happened without plaintiffs' attorneys agreeing to it in hopes of making more progress at the negotiating table. But the issues are complex. They include a possible monetary settlement for the plaintiffs and the prospective class members, as well as proposed changes in the company's diversity practices. Jones said his group will be protesting outside Coca-Cola's headquarters this morning. (The Atlanta Journal and Constitution, May 30, 2000) CYBER-CARE, INC: Gallagher Sharp Files Securities Suit in Florida ----------------------------------------------------------------- Gallagher Sharp Fulton & Norman announces that a class action lawsuit has been commenced in the United States District Court for the Southern District of Florida on behalf of investors who purchased shares of the common stock of Cyber-Care, Inc. (Nasdaq: CYBR) between October 12, 1999 and May 12, 2000 (the "Class Period"). Cyber-Care describes itself as a "technology-assisted disease management company." The complaint charges Cyber-Care and the Company's Chairman and CEO, Michael F. Morrell, with violations of the federal securities laws by, among other things, making materially false and misleading statements. Specifically, defendants issued press releases touting sales and customer interest in the Company's Internet Electronic Housecall System, ("EHS"), despite not having the required Food and Drug Administration approval to market and sell EHS and despite the financial inability of many of the purported customers to purchase the number of EHS units indicated. The text of the specific press releases referenced in the complaint from February 26, 2000 to date can be obtained at http://biz.yahoo.com/n/c/cyber.html. Specific dates of press releases referenced in the complaint include, but are not limited to: October 12, 1999; December 10 & 20, 1999; January 13, 2000; February 4, 24 & 28, 2000; and March 21 & 22, 2000. After having traded as high as $37.00 per share during the Class Period, Cyber-Care's common stock fell as low as $5.60 per share after the true facts were disclosed. Contact: Daniel R. Karon, Esquire, of Gallagher Sharp Fulton & Norman, 800-229-5310, or E-mail, dkaron@gsfn.com DENNY'S RESTAURANTS: Vows to Fight Suit by Disgruntled Former Manager --------------------------------------------------------------------- Denny's announced on May 30 it will fight a lawsuit filed by a disgruntled former Seattle-area manager, saying the wage and hour case is nearly identical to a lawsuit Denny's won in King County, Washington just a year ago. "We will fight this lawsuit all the way, just like we fought the one in 1999," said Jim Adamson, Denny's chief executive officer. "Denny's will prevail in this lawsuit as we did on this same issue only one year ago." The claims in the current lawsuit are almost exactly the same as ones that were previously filed by 10 Denny's managers in King County Superior Court. In that case, Judge William Downing, in issuing his March 1999 decision, agreed with Denny's on the case's central issue: that the plaintiffs were exempt, salaried managers and not hourly employees. The judge ruled "there was no actionable wrong done to them." Denny's on May 30 filed its answer to the current lawsuit in the U.S. District Court for the Western District of Washington at Seattle, requesting that the case be dismissed. In the current lawsuit, plaintiff Robert Husted, who resigned in 1998 after being notified he was required to attend a special nondiscrimination training session, claims Denny's managers were required to do non-managerial work. In his suit, Husted seeks to represent a class of restaurant managers in Washington. "This is an irresponsible attempt to concoct a class-action case on an issue that a Washington judge has already ruled has no merit," Adamson said. "This case is a prime example of frivolous suits that are wasting taxpayer time and money." Denny's managers supervise a significant number of employees and are responsible for the overall operation of the restaurant. Managers exercise constant discretion in making critical business decisions in a number of areas including hiring, training and scheduling of employees, performance management and coaching of employees, as well as customer service. Denny's pays its managers a salary and provides managers with a compensation package not available to hourly employees, including participation in a bonus program. Other management benefits include health, dental, life and disability insurance, paid vacation, free meals, tuition reimbursement and adoption assistance. Denny's parent company is Advantica Restaurant Group (Nasdaq: DINE), one of the nation's largest restaurant companies. DEPARTMENT OF CHILDREN: Sued over Foster Care; Audit to Show Problem -------------------------------------------------------------------- The Associated Press in Tennessee cites a newspaper report which says that a state audit to be released Tuesday is expected to show continued problems in how the Department of Children's Services tracks its foster care cases and manages its money. Some of the audit's findings were included in public documents presented to the federal government on March 31, according to The Tennessean newspaper of Nashville as cited by The Associated Press. Those documents cite a study that found seven of 60 case files examined did not contain "adequate documentation" of services provided to children in DCS care. Auditors also said the agency continues to overpay its vendors and bill TennCare for ineligible children. TennCare was improperly billed $10 million last year, and the state is owed $ 1.2 million in overpayments, according to auditors. Last year, $181,000 was returned or refunded. In a written response to auditors, DCS disputed some of the findings of the March report. Officials said they refunded $1.3 million of the $1.9 million auditors had claimed the agency improperly billed TennCare for ineligible children. The remaining $600,000 was legitimate, officials said. The agency also said 121 new case workers should help ease the problems. Last year, an audit released by the state comptroller criticized the agency for money mismanagement, found DCS could not locate children and their case files in a reasonable period of time and did not promptly process status changes for foster children. DCS is facing a class-action lawsuit alleging mismanagement in the foster care program, and a federal investigation into alleged civil rights violations within the state's adoption program. State Sen. Jeff Miller, R-Cleveland, said lawmakers are willing to spend more to solve DCS' problems, "but are reluctant to give more money without being able to see tangible improvements." (The Associated Press, May 30, 2000) E.SPIRE COMMUNICATIONS: Berman DeValerio Files Securities Suit in MD -------------------------------------------------------------------- Berman, DeValerio & Pease LLP has announced that a shareholder of E.Spire Communications, Inc. (Nasdaq:ESPI) has filed a class action lawsuit in the United States for the District of Maryland. The action seeks damages for violations of the federal securities laws on behalf of all investors who purchased E.Spire Communications common stock between August 12, 1999 and March 30, 2000 (the "Class Period"). The lawsuit charges E.Spire and certain of its directors and officers with issuing a series of false and misleading financial statements and press releases concerning the Company's publicly reported revenues and earnings. Specifically, the complaint alleges that the Company's financial statements issued during the Class Period overstated its revenues, income, earning and net worth through improper recognition of revenue. As a result of these false and misleading statements, the Company's stock traded at artificially inflated prices during the Class Period. Contact: Berman, DeValerio & Pease LLP Patrick T. Egan, (800) 516-9926 bdplaw@bermanesq.com. FORE SYSTEMS: PA Ct Refuses to Dismiss Securities Suit over GE Offer -------------------------------------------------------------------- The Western District of Pennsylvania has denied motions to dismiss a proposed class action against the officers and directors of Fore Systems Inc. on violations of federal securities laws during a tender offer made by General Electric Co. to acquire the company. Millionerrors Investment Club et al. v. General Electric Co. et al. , No. 99-781, report and recommendation filed (W.D. Pa., Feb. 8, 2000). In a case arising out of the "all holders--best price" tender offer rules, Judge David Ziegler overruled the objections to a magistrate judge's opinion that denied defendant's motion to dismiss. In the lower court, claims were sustained against both the acquirer, GE, and the directors and officers of the target company, Fore Systems, who had awarded themselves $26 million in stock options just prior to the takeover. Background On April 26, 1999, GE made a cash tender offer to purchase the outstanding common stock of Fore Systems for $35 per share, and the companies merged on June 14, 1999, with Fore as a wholly owned subsidiary. The plaintiffs contend that GE paid public shareholders $35 for each of their Fore shares, while management of Fore was treated differently. In March, Fore's board allegedly approved giving stock options, ranging from $13.44 to $20.56 per share, to the executive defendants for no consideration. Moreover, the plaintiffs assert "that these stock options totaling 1,300,000 shares were issued for the sole objective of providing them windfall profits." The plaintiffs assert GE was aware that stock options worth $26 million were being provided to the executives in order to secure their support for the tender offer. The plaintiffs also claim the public shareholders were "shortchanged" by the $26 million that would have gone into the money to purchase Fore. Pursuant to the merger agreement, all outstanding stock options were canceled in exchange for the difference between the $35 per share price and the exercise price of the option. The proposed class action asserts GE's tender offer violated the "all holders--best price" rule contained in Section 14(d) of the Exchange Act. Moreover, GE's agreement to buy the stock options from the officers and directors constituted a "side purchase" in violation of Section 10(b), the anti-fraud provisions of federal securities law. The officers and directors allegedly only provided "piecemeal and incomplete disclosures" concerning their ownership interest and any gains they would receive from the sale. They also violated Section 20(a) of the Exchange Act for their influence and control of the transaction, and breached their fiduciary duties as well, the shareholders claim. Procedural History GE moved to dismiss the action, saying its agreement to purchase the unvested stock options did not occur during the tender offer, as payment was not made on the options until at least 90 days after the merger. GE also argued that its purchase of the options did not constitute greater consideration than was offered to other shareholders, and it did not treat the defendants differently, because each outstanding option was redeemed for the difference between the tender offer price and the exercise price. Court Analysis The U.S. Court of Appeals for the Third Circuit has not addressed the issue of whether an offeror has violated federal securities law because it paid executives for their options after -- not during -- the tender offer period. The "all holders--best price" rule provides in part that "no consideration paid to any security holder pursuant to the tender offer is the highest consideration paid to any security holder during such tender offer." Citing Epstein v. MCA Inc., 50 F.3d 644 (9th Cir., 1995), Judge Robert C. Mitchell said, "The 'tender offer' period, as used in federal securities laws, has never been interpreted to denote a rigid period of time." Rule 14d-10's equality requirement "cannot be so easily circumvented," continued the court. The plaintiffs allege the challenged stock option sale was an integral part of the offer and resulted in windfall profits constituting a premium, the court said. They also contend that GE's obligation to pay for the options was "expressly contingent" on the offer and the resulting merger closing. The agreement between GE and Fore was executed on April 26, 1999, four days before the cash tender offer. Regarding the alleged side-purchase agreement, GE maintains that Rule 10b-13 of the Exchange Act does not provide for a private right of action. The Third Circuit has also not addressed this issue, Judge Mitchell said, and there is no consensus on the matter elsewhere. He ruled a private remedy can be implied under the anti-fraud provisions of federal securities law, as it furthers the purpose of full and fair disclosure to investors. Scienter was also properly alleged, concluded the court, under the standard articulated In re Advanta Corp. Securities Litigation, 180 F.3d 534 (3d Cir., 1999). The court also refused to dismiss the alleged violations of Section 10(b) and Rules 10(b)5, 14(e) and 20 under the Exchange Act, as well as the breach of fiduciary duty claim. Plaintiffs are represented by Alfred Yates and Gerald Rutledge of Law Offices of Alfred Yates in Pittsburgh; Jeffrey Krinsk and Arthur Shingler III of Finkelstein & Krinsk; William Lerach, Helen Hodges and David Stickney of Milberg Weiss Bershad Hynes & Lerach, both in San Diego; Stephen Lowey, David Harrison and Michelle Rago of Lowey Dannenberg Bemporad & Sellinger in White Plains, N.Y. Various defendants are represented by John Beerbower of Cravath, Swaine & Moore in New York and Stanley Yorsz of Buchanan Ingersoll in Pittsburgh. (Mergers & Acquisitions Litigation Reporter, May 2000) GTE CORPORATION: Harvey Greenfield Files Securities Lawsuit in New York ----------------------------------------------------------------------- The Law Firm of Harvey Greenfield has filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of investors who were shareholders of record of GTE Corporation (NYSE: GTE) securities as of March 29, 1999, and their successors in interest. The Complaint alleges that GTE and several of its officers issued false and misleading statements, in violation of the federal securities laws and regulations, regarding the impact a proposed merger with Bell Atlantic would have on the amount of dividends received by investors. The complaint alleges that GTE assured investors that they would receive virtually the same dividends after the merger as they had before. In fact, as a result of the merger the combined company will issue dividends one month later than GTE's pre-merger schedule. Such schedule, resulting from GTE's dividend schedule being converted to coincide with Bell Atlantic's, will cause material loss of the time value of dividends on nearly one billion outstanding GTE shares. Contact: Law Firm of Harvey Greenfield, New York telephone 212-949-5500 toll free 877-949-5500 facsimile 212-949-0049 e-mail at hgreenf@banet.net HANOVER DIRECT: Customers Sue in OK over Delivery Insurance Charge ------------------------------------------------------------------ A class action lawsuit was commenced on March 3, 2000 entitled Edwin L. Martin v. Hanover Direct, Inc. and John Does 1 through 10, bearing case no. CJ2000-177 in the State Court of Oklahoma (District Court in and for Sequoyah County). Plaintiff commenced the action on behalf of himself and a class of persons who have at any time purchased a product from the Company and paid for an "insurance charge." The complaint sets forth claims for breach of contract, unjust enrichment, recovery of money paid absent consideration, fraud and a claim under the New Jersey Consumer Fraud Act. The complaint alleges that the Company charges its customers for delivery insurance even though, among other things, the Company's common carriers already provide insurance and the insurance charge provides no benefit to the Company's customers. Plaintiff also seeks a declaratory judgment as to the validity of the delivery insurance. The damages sought are (i) an order directing the Company to return to the plaintiff and class members the "unlawful revenue" derived from the insurance charges, (ii) declaring the rights of the parties, (iii) permanently enjoining the Company from imposing the insurance charge, (iv) awarding threefold damages of less than $75,000 per plaintiff and per class member, and (v) attorney's fees and costs. The Company has filed a motion to dismiss. HANOVER DIRECT: FTC Investigates on Marketing of Shopper’s Edge Club -------------------------------------------------------------------- At the end of January 2000, the Company received a letter from the Federal Trade Commission ("FTC") conducting an inquiry into the marketing of The Shopper's Edge club to determine whether, in connection with such marketing, any entities have engaged in (1) unfair or deceptive acts or practices in violation of Section 5 of the FTC Act and/or (2) deceptive or abusive telemarketing acts or practices in violation of the FTC's Telemarketing Sales Rule. The inquiry was undertaken pursuant to the provisions of Section 6, 9 and 10 of the FTC Act. Following such an investigation, the FTC may initiate an enforcement action if it finds "reason to believe" that the law is being violated. When there is "reason to believe" that a law violation has occurred, the FTC may issue a complaint setting forth its charges. If the respondent elects to settle charges, it may sign a consent agreement (without admitting liability) by which it consents to entry of a final order and waives all right to judicial review. If the FTC accepts such a proposed consent, it places the order on the record for sixty days of public comment before determining whether to make the order final. The Company believes that it complied with all enumerated aspects of the investigation. It has not received notice of an enforcement action or a complaint against it. KOS PHARMACEUTICALS: Announces Dismissal of Shareholder Suit in Florida ----------------------------------------------------------------------- Kos Pharmaceuticals, Inc. (Nasdaq: KOSP) announced on May 30 that the United States District Court for the Southern District of Florida has granted to the Company and its underwriters full recovery of their fees and costs, totaling nearly $503,000, from a group of shareholders who unsuccessfully sued Kos and its underwriters in 1998. A class action complaint, filed in August 1998, alleged that the Company had violated federal securities laws in its October 1997 underwritten securities offering. Kos, represented by Holland & Knight LLP, filed a motion to dismiss in January 1999, and the complaint was dismissed by the United States District Court for the Southern District of Florida in May 1999. In his opinion, Judge Donald M. Middlebrooks stated that the plaintiffs' claims were inadequate and unsupported. The court denied all other pending motions and declared the case closed. The plaintiffs subsequently filed an appeal, which is currently pending. Kos and the other defendants filed a motion with the same court in July 1999 to recover attorneys' fees and expenses in the amount of $502,577. The ruling was handed down by Judge Middlebrooks on May 22, 2000. "By awarding Kos the full relief it sought, the court reinforced its previous judgment," the announcement quotes Tracy Nichols of Holland & Knight. "An award for the total amount sought is unusual, and is significant in that it reflects the lack of merit in the plaintiffs' case." REED: Indiana Court of Appeals OKs Graduation Qualifying Exam Case ------------------------------------------------------------------ The Indiana Court of Appeals held that the parents of a group of disabled students could proceed with their class action, which alleged due process and IDEA violations. The classes satisfied the state class action statute and they were properly defined. Rene by Rene v. Reed, 32 IDELR 92 (Ind. Ct. App. 04/04/00). The parents sought to bring a class action, claiming that the state's requirement that the students take and pass the graduation qualifying examination to receive a diploma violated their due process and IDEA rights. The action comprised two classes. Class A was exempted from standardized testing or not taught the material on the GQE. Class B was required to take the GQE without their IEP accommodations. The trial court denied the parents' motion to certify Class A and narrowed the definition of Class B. The parents appealed. The Appeals Court reversed and remanded the trial court's decision, and certified both classes. The alleged classes satisfied the state class action statute, for they met the requirements of numerosity, commonality, typicality, and adequacy. The actions of the state, in terms of the GQE, were similar toward all members of the classes. It also would have been futile for Class A to exhaust its remedies. As an administrative agency, it did not have authority to declare a state statute unconstitutional. Similarly, Class B met the futility requirement with respect to all of their requested IEP accommodations, not just the reading accommodation, as the trial court erroneously held. Both classes also had standing and their claims were ripe. If the alleged violations occurred, they did so when the classes were required to take the GQE. The students were not required to wait until they were denied a diploma to bring an action. Class A was not overly broad, as it was specific enough for a court to determine whether a student was a member. The court held that both classes were appropriate as originally defined. (Your School and the Law, May 23, 2000) SCB COMPUTER: Berman DeValerio Files Securities Suit in Tennessee ----------------------------------------------------------------- Berman, DeValerio & Pease LLP announced that a shareholder of SCB Computer Technology, Inc. (Nasdaq:SCBI) has filed a class action lawsuit in the United States for the Western District of Tennessee, Western Division at Memphis. The action seeks damages for violations of the federal securities laws on behalf of all investors who purchased the common stock of SCB Computer Technology between August 19, 1997 and April 13, 2000 (the "Class Period"). The lawsuit charges SCB Computer Technology and certain of its directors and officers with issuing a series of false and misleading financial statements and press releases concerning the Company's publicly reported revenues and earnings. Specifically, the complaint alleges that the Company's financial statements issued during the Class Period overstated its revenues, income and earnings through improper accounting in violation of GAAP. SCB Computer Technology's outside auditors have resigned and SCB's financial statements will be restated as a result. Due to these false and misleading statements, the Company's stock traded at artificially inflated prices during the Class Period. Contact: Berman, DeValerio & Pease LLP Patrick T. Egan or Michael Sullivan (800) 516-9926 bdplaw@bermanesq.com SUNRISE INTERNATIONAL: to Amend Merger Agreement to Settle Lawsuit ------------------------------------------------------------------ Sunrise International Leasing Corporation (Nasdaq: SUNL) announced on May 30 agreement in principle reached to settle litigation. The report says that two purported stockholder class action lawsuits were filed in the Delaware Chancery Court against Sunrise and its directors in connection with Sunrise's pending merger with The King Management Corporation. Sunrise and the defendant directors have reached an agreement in principle with the plaintiffs in these lawsuits to settle this litigation. In consideration of the settlement, Sunrise agreed, among other things, to amend the merger agreement to require the merger to be approved by a majority of the outstanding shares of Sunrise common stock present and entitled to vote in person or by proxy at the special meeting, other than shares held by King Management and its stockholders. Counsel to the parties have entered into a memorandum of understanding, agreeing to execute and present to the court as soon as is practicable an appropriate stipulation of settlement and any other documentation required in order to obtain approval by the court of the settlement. Any proposed settlement would be subject to the approval of the court and would not be effective unless the merger is completed. Sunrise anticipates that any settlement of this litigation will not have a material adverse effect on its financial conditions, operating results or liquidity. UNION PACIFIC: Lawsuit Filed over Derailment; Evacuations Continue ------------------------------------------------------------------ Technicians detonated a train tanker car full of hazardous acid Monday to ward off a more damaging explosion and evacuated about 200 more people living near the site of a weekend derailment. The Union Pacific Railroad tanker was one of 30 that derailed last Saturday and one of several loaded with hazardous chemicals. It had yet to spring a leak, but heat from small fires still burning around the derailed rail cars could have raised the pressure inside the acrylic acid-filled tank, officials said. Acrylic acid has vapors that can irritate the lungs, nose and throat. Other chemicals on the train could cause dizziness, convulsions, lung irritation and even death if people came in contact with large amounts, officials said. Monday's evacuations, prompted by shifting winds, brought the total to about 2,000. Evacuees will not be allowed to return home until it is certain that the cars are safe, officials said. Railroad crews hoped to inspect the cars later Monday. "Until we can get in there and crews can analyze the status of the other cars, we really don't have a timeline on it," said Union Pacific spokesman Mark Davis. Evacuees said they were told it could be days before they are allowed to return. No injuries were reported from the derailment, which sparked several chemical blasts that sent fireballs skyward and shattered glass a quarter-mile away. As of early Monday, state police said air monitoring equipment hadn't picked up any hazardous levels of chemicals. One lawsuit has been filed against Union Pacific. Eunice lawyer Timmy J. Fontenot said a state court representative agreed to a special Sunday meeting to receive the document. The lawsuit, seeking unspecified damages and class-action status, alleges the railroad's negligence caused "considerable fear, anguish, discomfort and inconvenience for the populace of Eunice." "These tankers brought these chemicals into the town where I live, and it was a terrible thing that happened," Fontenot said. "I'm in a position to rectify it." (The News and Observer (Raleigh, NC), May 30, 2000) VISA, MASTERCARD: National Post Says US Case Has Implications in Canada ----------------------------------------------------------------------- The National Post says that the antitrust case that is about to go on trial June 7 in New York City involving the domination, and alleged market abuses, in the credit card business of Visa USA Inc. and MasterCard International shows an interesting contrast between Canada and the U.S. credit card systems because no such case is possible in Canada. That's because Ottawa allows what the Americans are putting on trial. This means that Canadian consumers and merchants are insufficiently protected by Ottawa, the Post says. The difference in rules is simple: Banks in Canada are not allowed to be involved with more than one credit card outfit apiece, the report goes on. According to the National Post, in Canada, the implications of these issues are even greater, and if Washington proves its case, then Canadian consumers and retailers are victims too. The report says that Canadians already are, to a certain extent. The six largest banks, and Canada Trustco, have tied up virtually all of the banking business in this country. Only the National Bank and Bank of Montreal are with MasterCard. The rest are with Visa, including Canada Trustco which had to switch from MasterCard to Visa after being acquired last year by the Toronto-Dominion Bank. That's bad enough in terms of concentration, the report says. That's why the US trial is important to Canadians, according to the report. The report also says that Canadian consumers and merchants should push for better protection than now exists. (National Post (formerly The Financial Post), May 30, 2000) WATER CONTAMINATION: Ontario Govt Cutbacks Blamed for E. Coli Tragedy --------------------------------------------------------------------- The Calgary Sun says that "scapegoatism" is underway for the E. Coli tragedy in Ontario and a target of choice is the Ontario Tory government of Mike Harris, whose cutbacks are being cited by some as the villain. Fanned by the political opposition, which is rarely loath to exploit a target of opportunity, no matter how unreasonable, and accepted by those who see government as a potential cash cow for class-action suits, the Harris government is on the defensive. Harris, in turn, has suggested the former NDP government of Bob Rae bears responsibility for setting testing standards. This is as out to lunch as blaming cutbacks. Dalton Camp, the Liberal echo, even blames Canadian Alliance leadership candidate Tom Long for Walkerton, which is testament to the intensity of his bile. The good but unfortunate folk of Walkerton would also be more comfortable blaming the government than individuals who are friends and members of their own community, but may have been lax, lazy or foolish in their handling of the situation. Besides, in the inevitable legal suits, government has more money to settle claims than individuals or local authorities. Looked at dispassionately, it's hard to see what government cutbacks had to do with this particular case. Overworked officials or not, once it was known E. coli was in the water system, some action should have been taken. Apparently none was. Routine procedures were ignored. The fault seems to boil down to human error, not cutbacks. The moment E. coli contamination was identified in Walkerton's water, someone, overworked or not, should have passed the information on. That's how the system was supposed to work, and everyone knew it. It seems test results were passed on, but nothing done. Warnings to authorities by a clearly frustrated and alarmed medical officer of health, Dr. Murray McQuigge, had little effect. Clearly, the public wasn't alerted to the danger of their water that was known long in advance. That oversight, negligence, misjudgment, whatever, had nothing to do with cutbacks, but everything to do with human error. It's likely Dr. McQuigge, who reacted properly but was ignored, also endures cutbacks in his office. But it didn't prevent him from recognizing danger and acting. The testing lab, too, did its job. It's not their responsibility to issue public statements and usurp the role of those in responsible positions. In hindsight, of course, everyone involved feels terrible, which is small comfort to victims and the dead. It seems likely that when E. coli tests came in positive, someone in charge believed that increasing the dosage of chlorine into the water supply would neutralize the lethal effects of E. Coli, thereby avoiding nasty publicity, confusion and fear. Wrong, but understandable. Signs point to the Tory government coming under increased attack. Defensive reaction demands that some individual be charged with negligence or incompetence leading to deaths. With the police, coroner and government launching inquiries, it's inevitable there'll be a lot of ducking by those anxious to avoid the bull's-eye. Someone is going to take the fall -- as is proper. To automatically blame government cutbacks solves nothing, but may make people feel good. In truth, it can be argued that overspending and over-staffing in government leads to more abuse and less efficiency than cutbacks. One might argue that cutbacks, properly done, can actually increase efficiency. Cutbacks necessitate more conscientious, able and hard-working employees if you keep the best people and get rid of the worst -- unless union power triumphs and seniority overrules merit. E. coli is easily thwarted, but only if standard precautions are adhered to. Tempting as it may be to blame big, impersonal, impervious, amorphous government, which is always suspect, it's hard to avoid that human error alone caused the tragedy of Walkerton. (The Calgary Sun, May 30, 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. 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