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/raid1/www/Hosts/bankrupt/CAR_Public/000615.MBX C L A S S A C T I O N R E P O R T E R Thursday, June 15, 2000, Vol. 2, No. 116 Headlines AUTO INSURANCE: State Farm Returns $1 Bil to Policyholders in 49 States BANK ONE: NY Fd Judge Rejects Hedge Fund as Shareholder Lead Plaintiff CENDANT CORP: Ex-Executives Plead Guilty to Inflating Revenues CHIPPEWA, OTTAWA: Sarnia Landowners Awarded Costs; Govt to Pick up Tab CITRIX SYSTEMS: Barrack Rodos Files Securities Lawsuit in Florida CITRIX SYSTEMS: Cauley & Geller Files Securities Lawsuit in Florida COCA-COLA: Deadline for Employees to Expand Racial Bias Suit Looms COLUMBIA LABORATORIES: Milberg Weiss Files Securities Suit in Florida CYBER-CARE, INC: Chitwood & Harley Files Securities Lawsuit in Georgia DUGGINS: LA Ct OKs Case on Deceptive Atty. Letterhead Debt Collection EASTMAN CHEMICAL: Faces 20 Suits Alleging Price-Fixing of Sorbates EVANS SYSTEMS: Announces Dismissal of Securities Fraud Lawsuit in TX FIRSTPLUS FINANCIAL: TX Bankruptcy Ct Declines Class on Charges Mark-up FLOORING AMERICA: Schiffrin & Barroway Files Securities Suit in Georgia GEORGIA PACIFIC: Expects More Asbestos Related Suits in Coming Years GEORGIA PACIFIC: Faces Suits on Sanitary Paper Prices; Settles with FL GEORGIA PACIFIC: Resin Manufacturing Plan Subject of Lawsuit in Ohio HAROLD RUTTENBERG: Officers of Bankrupt Just for Feet Sued in AL NY BOARD: NYMEX Sues NYBOT Alleging $5 Million CEA Margin Violation NY LIFE: Sprenger & Lang Files Pension Suit Re Assets of Plan RACING CHAMPIONS: Wolf Haldenstein Files Securities Suit in Illinois TESORO PETROLEUM: Seeger Weiss Files Securities Complaint in Texas TOBACCO LITIGATION: Judge Tells CEO State Settlements Arn't Punishment TOBACCO LITIGATION: Philip Morris CEO Says Market Is Shrinking VARI-L COMPANY: Cauley & Geller Files Securities Lawsuit in Colorado VARI-L COMPANY: Dyer & Shuman Files Securities Lawsuit in Colorado * Corporate Leaders Meet in Detroit to Examine Media's Role in Lawsuits ********* AUTO INSURANCE: State Farm Returns $1 Bil to Policyholders in 49 States ----------------------------------------------------------------------- State Farm Mutual Automobile Insurance Co., the largest U.S. auto and home insurer, said it will return slightly more than $1 billion to its automobile insurance policyholders for 1999. The insurer said policyholders in 49 states, the District of Columbia and three Canadian provinces will receive the dividend announced Monday. State Farm has returned a total of $3.3 billion to its policyholders since 1991. Dividends are a one-time return of premiums based on recent financial results. (The Detroit News, June 13, 2000) BANK ONE: NY Fd Judge Rejects Hedge Fund as Shareholder Lead Plaintiff ---------------------------------------------------------------------- A Chicago federal district judge has rejected the application of Thales Fund Management LLC for lead plaintiff in a consolidated Bank One shareholders suit, finding the financial activities of the hedge fund placed it outside the "most adequate plaintiffs" designation. In re Bank One Shareholders Class Actions et al., No. 00-CV-880, opinion filed (N.D. Ill., May 8, 2000). In his ruling, Northern District of Illinois Judge Milton I. Shadur said he based his decision in large part on an opinion by District Judge David Hamilton in Sakhrani v. Brightpoint Inc., 78 F. Supp. 2d 845,849-54 (S.D. Ind., 1999). Thales had sought to become lead plaintiff of 26 consolidated class actions brought by shareholders against Bank One. Thales alleges it lost $1.5 million on the bank's stock. Instead, Judge Shadur chose a group of six pension funds that purchased 77,200 Bank One shares. The pension group, as it is known by the court, must now decide which of three law firms to chose for its counsel, i.e., the group's original counsel -- Schoengold & Sporn and Quinlan & Crisham or a low bidder, Wechsler Harwood & Fiffer. In rejecting Thales as lead plaintiff, Judge Shadur noted that Thales "is an institutional investment manager (a hedge fund) that engaged in extensive day trading, first shorting Bank One stock (presumably because it was regarded as overvalued at market price) and then buying to cover the short position." "In addition to that trading pattern," he continued, " T hales is not simply a buyer for its own account, standing instead in the place of whatever number of investors are participants in its managed fund. "Taken all in all, this Court does not view that posture as qualifying Thales for the 'most adequate plaintiffs' designation in preference to the handful of institutional investors who makeup the Pension Group with greater aggregate claimed losses," the judge concluded. (Derivatives Litigation Reporter, June 5, 2000) CENDANT CORP: Ex-Executives Plead Guilty to Inflating Revenues -------------------------------------------------------------- Three former executives at franchising giant Cendant Corp. pleaded guilty Wednesday to inflating revenues in an accounting scandal that led to the largest-ever settlement in a shareholder class-action suit. All three held senior financial posts at CUC International of Stamford, Conn., which merged with HFS Inc. of Parsippany, N.J., to create Cendant in December 1997. Cendant is now based in New York. Under oath, they said their actions were done at the behest of their superiors at CUC and that they will cooperate in a continuing investigation that involves the FBI and the Securities and Exchange Commission. ''It was a culture that had been developed over a period of years. It was ingrained ... ingrained in us by our superiors,'' said one of those pleading guilty, Cosmo Corigliano, CUC's former chief financial officer. The defendants said CUC's quarterly earnings were inflated in the two years leading up to the merger through improper accounting methods, including underfunding a reserve on membership cancellations and drawing money from a merger account in efforts to boost revenues. ''Don't we call that 'cooking the books?''' U.S. District Judge William H. Walls asked Casper Sabatino, a CUC accountant in charge of external reporting. ''Yes, sir,'' Sabatino replied. ''Honestly, your honor, I thought I was doing my job.'' Also pleading guilty was Anne Pember, CUC's former controller, who said their actions led CUC to overstate its operating income by $116 million in the two years before the merger, and Cendant to overstate its operating income by $170 million for 1997. Corigliano, 40, of Old Saybrook, Conn., who became Cendant executive vice president for international operations after the merger, pleaded guilty to conspiracy and wire fraud. Pember, 40, of Madison, Conn., who became Cendant's senior vice president for accounting, pleaded guilty to conspiracy. Sabatino, 47, of Sherman, Conn., who became Cendant's vice president for business development, pleaded guilty to aiding and abetting wire fraud. All remain free on $100,000 bond pending sentencing Sept. 12, when each faces a term of up to several years in prison. Shares of Cendant, which were trading around $40 when the scandal was revealed in early 1998, were trading up 18.875 cents to $12.438 Wednesday on the New York Stock Exchange. In December, accounting firm Ernst & Young LLP agreed to pay Cendant shareholders $335 million to settle a lawsuit brought against it in connection with accounting irregularities. Also that month, Cendant said it would pay its shareholders $2.83 billion to settle similar allegations. Lawyers for the shareholders say the settlement was the largest ever achieved in a securities class-action lawsuit. Cendant has acknowledged that CUC used irregular accounting practices to inflate earnings. Ernst & Young was the accounting firm representing CUC at the time but has since severed ties. Cendant is the franchiser of brand names such as Ramada, Avis and Century 21. CUC was a direct marketing firm that sold memberships in discount buying clubs. (AP Online, June 14, 2000) CHIPPEWA, OTTAWA: Sarnia Landowners Awarded Costs; Govt to Pick up Tab ---------------------------------------------------------------------- A group of Sarnia landowners who have, so far, successfully defended their title against a Chippewa aboriginal land claim have been awarded party-and-party costs. And if the Chippewas don't pay, the federal government has been ordered to pick up the tab. In a recent costs order, Justice Archie Campbell of the Ontario Superior Court said there is "uncertainty" about whether costs are enforceable against the Chippewas of Sarnia band. The uncertainty stems from, inter alia, the proposition that a Native band's assets may not be exigible because of s. 89 of the Indian Act, which says that "real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian or a band." Justice Campbell said it would be "unconscionable if the innocent landowners could not recover their costs from the Chippewas and had no other alternative recourse."To provide such alternative recourse, he ordered that "any unsatisfied balance shall be paid to the landowners by Canada." However, he also directed Canada to take the solicitor/client costs it owes to the Chippewas (awarded because Canada brought and lost a summary judgment motion with "no reasonable chance of success,") and pay the money instead to the landowners, "to the extent necessary and possible."If that doesn't cover it, Canada must make up the difference. Justice Campbell also noted that "each party fought hard but fair, and there was no allegation or evidence of bad faith by any party in the conduct of the litigation or any conduct that unduly delayed or prolonged the proceedings." The costs award follows Justice Campbell's judgment released April 30, 1999, in which he held that while a four-square-mile chunk of Sarnia had never been properly surrendered, the present-day landowners'title was clear because of the "good faith purchasers for value without notice"doctrine. The Chippewas'claim, he said, crystallized into a damages claim against the Crown. He also found that the Chippewas are "strangers to this land and have no communal memory or oral history of wrongful dispossession,"and that "without speculating on what might be argued or decided in the ongoing damage action, it is uncontradicted that they received for the land substantial if not full payment in trust at a price thought by some at the time to be fair and by their expert witness today to be reasonable. There is no evidence of fraud." Virtually all of Justice Campbell's findings are now being challenged at the Ontario Court of Appeal. (The Lawyers Weekly, June 16, 2000) CITRIX SYSTEMS: Barrack Rodos Files Securities Lawsuit in Florida ----------------------------------------------------------------- Counsel for Class Plaintiff, Barrack, Rodos & Bacine announced on June 13 that a class action has been commenced in the United States District Court for the Southern District of Florida on behalf of all persons who purchased the common stock of Citrix Systems (Nasdaq: CTXS) between October 20, 1999, and June 9, 2000, inclusive (the "Class Period"). The complaint charges the Company and its senior officials with violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, by disseminating false and misleading statements about the Company's business and financial condition during the Class Period. Specifically, the complaint alleges that the defendants failed to disclose that the Company had been experiencing a shift from sales of software in "shrink-wrap" boxes toward a paper/electronic licensing model, which had a negative impact on revenue growth; slower than reported expansion of core business with large enterprise accounts; and slower than reported expansion of the Company's business in certain markets, including Asia. When the company announced that its 2Q of 2000 results would be far lower than investors had been led to believe, the market price fell over 40% to $22 per share in one day. Contact: Counsel for Class Plaintiffs, Barrack, Rodos & Bacine, Shareholder Relations Manager, 800-417-7305, or 215-963-0600, or fax, 888-417-7306, or 215-963-0838, or e-mail, msgoldman@barrack.com CITRIX SYSTEMS: Cauley & Geller Files Securities Lawsuit in Florida ------------------------------------------------------------------- The Law Firm of Cauley & Geller, LLP announced on June 13 that it has filed a class action in the United States District Court for the Southern District of Florida on behalf of all individuals and institutional investors that purchased the common stock of Citrix Systems, Inc. (Nasdaq:CTXS) between October 20, 1999 and June 9, 2000, inclusive (the "Class Period"). The complaint charges that the Company and certain of its officers and directors violated the federal securities laws by providing materially false and misleading information about the Company's financial condition and future growth potential. Specifically, the complaint alleges that on January 19, 2000, the Company reported record operating results and stated that customer demand for the Company's product was favorable, when in fact, the Company knew or recklessly disregarded that the Company's true financial condition was deteriorating and that its seemingly stellar growth was not likely to continue into 2000. As a result of these false and misleading statements the Company's stock traded at artificially inflated prices during the class period. When the Company revealed that its first quarter financial results would be lower than the market had been led to believe, the price of the stock dropped significantly. Contact: CAULEY & GELLER, LLP, Boca Raton Sue Null or Sharon Jackson Toll Free: 888/551-9944 E-mail: cauleypa@aol.com COCA-COLA: Deadline for Employees to Expand Racial Bias Suit Looms ------------------------------------------------------------------ Attorneys for current and former Coca-Cola employees faced a Wednesday deadline to file a legal brief that would expand a pending racial discrimination lawsuit into a class action. According to the lawsuit filed in U.S. DIstrict Court early last year by four workers, the soft-drink company discriminated against blacks in hiring, promotion and employee evaluations. Last-minute negotiations were underway between attorneys for the workers and for Coca-Cola. The plaintiffs want to expand the lawsuit to cover 2,000 former and current employees nationwide. If attorneys for the workers file a brief asking for the lawsuit to be turned into a class action, the company would have 75 days to respond before a judge makes a decision. Coca-Cola and attorneys for the black workers have been meeting with a mediator for the past two months to try and resolve the lawsuit. The company has denied the allegations of discrimination, but has said that it is prepared to reach a fair settlement in the case. The workers' attorneys have been pushing for a monetary settlement that would compensate current and former workers. They are also seeking changes in company policies to benefit future workers. (United Press International, June 14, 2000) COLUMBIA LABORATORIES: Milberg Weiss Files Securities Suit in Florida --------------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on June 13, 2000, on behalf of purchasers of the securities of Columbia Laboratories Inc. (NASDAQ:COB) between November 8, 1999, and June 9, 2000, inclusive. A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/columbialabs/ The action, numbered 00-2112, is pending in the United States District Court for the Southern District of Florida, West Palm Beach Division, located at 701 Clematis St., West Palm Beach, FL 33401, against defendants Columbia, William J. Bologna (Chief Executive Officer since January, 2000, and Director), David L. Weinberg (Chief Financial Officer), and Norman M. Meier (President and Chief Executive Officer until January, 2000). The Honorable James Lawrence King is the Judge presiding over the case. The complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between November 8, 1999, and June 9, 2000. For example, as alleged in the complaint, on November 8, 1999, defendants reported that the Company's operating results for its third fiscal quarter improved over the comparable 1998 period, and stated that a Swiss company, Ares-Sereno, had paid $68 million to the Company for the marketing rights to the fertility drug Crinone which was manufactured by Columbia. Defendants knew, or recklessly disregarded, that the statement was false because Ares-Sereno did not have a finalized license to market the drug, and because additional profitability from Crinone could not be recognized until the second half of fiscal 2000. Defendants further represented, in the Company's March 16, 2000 Annual Report to Shareholders, that the Company was optimistic that a double blind testing of the Company's anti-AIDS spreading drug,"Advantage-S", would prove the drug's effectiveness in the fight against the spread of AIDS. In fact, the Company knew, or recklessly disregarded, that it had no basis for its optimistic statements regarding the Advantage-S study. When the Company reported, on June 12, 2000, that the Advantage-S study revealed the drug to be no more effective at stemming the spread of the AIDS virus than the placebo, the Company's stock price dropped by 55%. As an explanation, defendants stated that because the study was "double blind," they could not, and did not, know of its results until its completion. Contact: Steven G. Schulman or Samuel H. Rudman Phone number: 800/320-5081 Email: Columbiacase@milbergNY.com Website: http://www.milberg.comor Kenneth J. Vianale or Maya S. Saxena 561/361-5000 CYBER-CARE, INC: Chitwood & Harley Files Securities Lawsuit in Georgia ---------------------------------------------------------------------- Chitwood & Harley has filed a securities class action lawsuit against Cyber-Care, Inc. (Nasdaq: CYBR), on behalf of everyone who purchased or otherwise acquired the stock between December 10, 1999 and May 19, 2000, inclusive, (the "Class Period"), in the United States District Court for the Northern District of Georgia. The complaint charges Cyber-Care and certain of its directors and executive officers with violations of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that the defendants violated the securities laws by disseminating a series of false and misleading statements concerning the business and financial operations of Cyber-Care which inflated the trading price of Cyber-Care common stock throughout the Class Period. In particular, defendants misrepresented that its Electronic Housecall ("EHC") Systems was market ready, and that the Company had received hundreds of thousands of orders for the product. In fact, the EHC System was not market-ready, but was still in a testing phase, the FDA had not approved the EHC System for marketing or sale, and the purported orders were merely vague expressions of interest. Contact: Chitwood & Harley Martin D. Chitwood Leigh C. Freer 888/873-3999 or 404/873-3900 DUGGINS: LA Ct OKs Case on Deceptive Atty. Letterhead Debt Collection --------------------------------------------------------------------- The U.S. District Court for the Eastern District of Louisiana recently certified a class on a debtor couple's claim that a collection service violated the Fair Debt Collection Practices Act by using attorney stationery to send a collection letter signed by a non-attorney. (Cope, et al. v. Duggins, et al., No. 98-3599 (E.D. La. 4/13/00).) James and Jeanne Cope received a letter that sought to collect a debt owed to De La Salle High School. The letter was on letterhead from the law firm of David D. Duggins but was signed by Glenn Laigast, who is a collection supervisor. The letter stated that the Copes owed 2,065, including 413 in assessed attorney's fees. The Copes sued Duggins, Laigast and others in federal court claiming the debt collection letter violated the FDCPA. First, the Copes alleged that the defendants assessed attorney's fees without their or the court's consent and prior to the involvement of an attorney. Although the Copes admitted that the terms of their obligation to the school permitted the assessment of attorney's fees, they argued that the defendants unilaterally set the amount of fees to be paid at 25 percent. Second, the Copes alleged that the defendants deceived them and violated the FDCPA by using attorney stationery to send a collection letter signed by a non-attorney. The Copes moved the court to certify a class of plaintiffs with similar claims. The court determined that the Copes satisfied the requirements of Fed. R. Civ. P. 23 on the attorney letterhead deceptive practices claim, but not on the attorney's fees claim. On the letterhead claim, the court held that the Copes satisfied the "numerosity" requirement because they averred that letters were sent on at least 100 accounts for at least three of the defendants' different clients. The defendants did not dispute the Copes' estimation of at least 300 class members. The court held that the Copes satisfied the "commonality" condition because they identified at least one significant question of law or fact that affects all potential class members - whether the defendants violated the FDCPA by using a debt collection letter prepared on attorney letterhead and signed by a non-attorney. The court stated, "While [the Copes] may or may not have a valid cause of action under the FDCPA, they need only present a common factual and legal issue to certify a class." According to the court, the Copes satisfied the "typicality" requirement because all potential class members allegedly received the same letter. The Copes also demonstrated, the court said, that they may fairly and adequately protect the interests of the class because "they are knowledgeable, have no conflicting interests with other class members, and are represented by qualified and competent counsel." Finally, although the FDCPA provides for money damages as opposed to injunctive relief, the court held that the Copes satisfied the requirements of Rule 23(b) because the question of whether the letter prepared by a non-attorney and distributed on attorney letterhead predominated over any individual class member questions. Further, the Copes demonstrated that a class action was the most efficient mechanism for managing numerous claims involving small amounts. The court declined to certify the class on the attorney's fees claim because it found that each debtor agreed to separate terms and conditions in relation to their debts. "To determine whether the defendants properly assessed attorneys fees in each case, the Court will need to examine the terms of each debt agreement," the court said. Judge Fallon delivered the opinion of the court. O. Randolph Bragg of Horwitz, Horwitz & Associates Ltd. in Chicago, and Steven R. Conley in New Orleans, represented the Copes. David S. Daly of Baus, Hammond & Daly L.L.P. in New Orleans, represented the defendants. (Consumer Financial Services Law Report, May 30, 2000) EASTMAN CHEMICAL: Faces 20 Suits Alleging Price-Fixing of Sorbates ------------------------------------------------------------------ The Company, along with other companies, is currently a defendant in twenty antitrust lawsuits brought subsequent to the Company's plea agreements as putative class actions on behalf of certain purchasers of sorbates in the United States and Canada. In each case, the plaintiffs allege that the defendants engaged in a conspiracy to fix the price of sorbates and that the class members paid more for sorbates than they would have paid absent the defendants' conspiracy. Six of the suits (five of which have since been consolidated) were filed in Superior Courts for the State of California under various state antitrust and consumer protection laws on behalf of classes of indirect purchasers of sorbates; six of the proceedings (which have subsequently been consolidated or found to be related cases) were filed in the United States District Court for the Northern District of California under federal antitrust laws on behalf of classes of direct purchasers of sorbates; two cases were filed in Circuit Courts for the State of Tennessee under the antitrust and consumer protection laws of various states, including Tennessee, on behalf of classes of indirect purchasers of sorbates in those states; one case was filed in the United States District Court for the Southern District of New York (and has been transferred to the Northern District of California) under federal antitrust laws on behalf of a class of direct purchasers of sorbates; one action was filed in the Circuit Court for the State of Wisconsin under various state antitrust laws on behalf of a class of indirect purchasers of sorbates in those states; one action was filed in the District Court for the State of Kansas under Kansas antitrust laws on behalf of a class of indirect purchasers of sorbates in that state; one case was filed in the Second Judicial District Court for the State of New Mexico under New Mexico antitrust laws on behalf of a class of indirect purchasers of sorbates in that state; one lawsuit was filed in the Ontario Superior Court of Justice under the federal competition law and pursuant to common law causes of action on behalf of a class of direct and indirect purchasers of sorbates in Canada; and one suit was filed in the Quebec Superior Court under the federal competition law on behalf of a class of direct and indirect purchasers of sorbates in the Province of Quebec. The plaintiffs in most cases seek treble damages of unspecified amounts, attorneys' fees and costs, and other unspecified relief; in addition, certain of the actions claim restitution, injunction against alleged illegal conduct, and other equitable relief. Each proceeding is in preliminary pretrial motion and discovery stage, and the only proposed class which has been certified is a conditional settlement class relating to other defendants in the federal direct purchaser cases pending in California. The Company intends vigorously to defend these actions unless they can be settled on terms acceptable to the parties. These matters could result in the Company being subject to monetary damages and expenses. The Company recognized charges to earnings in the fourth quarter 1998, the fourth quarter 1999, and the first quarter 2000 for estimated costs, including legal fees, related to the pending sorbates litigation described above. Because of the early stage of these putative class action lawsuits, however, the ultimate outcome of these matters cannot presently be determined, and they may result in greater or lesser liability than that currently provided for in the Company's financial statements. EVANS SYSTEMS: Announces Dismissal of Securities Fraud Lawsuit in TX -------------------------------------------------------------------- Evans Systems Inc. (OTCBB:EVSI) announced on June 14 that the federal securities class action filed against the company and three of its officers and directors in July 1999 in the United States District Court for the Southern District of Texas has been dismissed with prejudice. The court concluded that the plaintiffs, a small group of disgruntled shareholders, failed to plead any facts supporting their claim that the company or its officers and directors violated the federal securities laws. The law firm of Brobeck, Phleger & Harrison LLP represented Evans Systems and its officers and directors. HOLOCAUST VICTIMS: Breakthrough in Germany May Speed Process in Austria ----------------------------------------------------------------------- Austria said Tuesday that a breakthrough in Germany's efforts to compensate Nazi-era forced laborers would speed up its own restitution process and lead to payments within months. Austria has drafted legislation, backed by all four parliamentary parties, to set up a $418 million fund for people forced to work for the Nazis. The U.S. administration assured Germany late Monday that U.S. courts would dismiss future claims from people the Nazis forced to work during World War II. This so-called legal peace removed the last obstacle to Germany setting up a $4.9 billion compensation fund. "This is an important point for Austria as it was always our stance that we need legal closure to be sure that payments by industry and the taxpayer will be once and for all," said Maria Schaumayer, Austria's envoy on Nazi-era labor issues. "If this can be done according to the German-American model, this is very good for the victims because it would enable us to synchronize with the parliamentary process and reach some date in late autumn to start up the reconciliation fund." Schaumayer dismissed criticism from lawyers representing Holocaust victims that Austria's compensation discriminates against Jews because it does not cover laborers who were worked to death in concentration camps. Slave laborers must seek compensation from Germany. "The Germans have taken responsibility for all concentration camps on whatever territory--Austria did not exist during '38 to '45," she said. Austria was part of Adolf Hitler's Third Reich from 1938 to 1945. It has passed a series of restitution laws since World War II, but there has never been a comprehensive settlement. U.S. Holocaust lawyer Ed Fagan, who filed an $18 billion class-action suit against Austria in a U.S. court in April, said the government had underestimated the number of forced laborers and was not giving property restitution enough attention. "The Austrian federal government will continue to treat the claims of Jewish Holocaust victims as a low-priority issue," Fagan said after meeting Austrian envoy Ernst Sucharipa. (Chicago Tribune, June 14, 2000) FIRSTPLUS FINANCIAL: TX Bankruptcy Ct Declines Class on Charges Mark-up ----------------------------------------------------------------------- The Bankruptcy Court for the Northern District of Texas recognized that it took the minority position when it refused to certify a class for filing proofs of claims against a bankrupt lender. (Kahler, et al. v. FirstPlus Financial Inc. (In re: FirstPlus Financial Inc.), No. 99-31869-HCA-11 (Bankr. N.D. Tex. 4/26/00).) Charles Kahler and other consumers filed a class action alleging the mortgage originators, FirstPlus Financial Corp. and Capital Direct Funding Group Inc., improperly marked up charges for third-party vendor services. Specifically, they contended the mortgage originators: charged "excessive loan fees and interest; misrepresented that consumers were to receive competitive interest rates; improperly charged borrowers for third party related loan expenses (i.e., credit reports, appraisals, mortgage insurance, and flood certification); received kickbacks from some third party service providers; and manipulated and withheld loan disclosure documents to hide effective interest rates, loan costs, and fees." The plaintiffs raised nine separate causes of action under the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Racketeer Influenced and Corrupt Organizations Act, the California Consumer Legal Remedies Act and other provisions of California law, including fraud and conversion. Proof of Claim Fed. R. Bankr. P. 3001(b) requires creditors, or their authorized agent, to file a proof of claim. However, courts are divided as to whether a class representative is an authorized agent permitted to file class proofs of claims. The 7th U.S. Circuit Court of Appeals ruled that the filing of class proofs of claim is at a court's discretion if the class representative obtains authorized agent status through Rules 9014 and 7023. Rule 9014 says in a contested case a court "may at any stage in a particular matter direct that one or more of the other rules ... shall apply." Rule 7023 makes Fed. R. Civ. Pro. 23, governing class actions, applicable to bankruptcy proceedings. The 7th Circuit allows a class representative to become an "authorized agent" by applying Rule 7023 to the Code's proof of claim provision. Other courts, however, follow Rule 3001(b) and the principles of agency to the letter, holding that an authorized agent is one who performs a delegable act, which the creditor could do himself. An agent is not "authorized" if he first files a proof of claim and then notifies the creditor. The Texas bankruptcy court considered the appropriateness of a class action in a bankruptcy proceeding when the Kahler plaintiffs moved for class certification. Judge Harold C. Abramson opined, "The chief purpose of a class action outside the bankruptcy context - to avoid litigation in a multiplicity of fora - is of little concern in the bankruptcy context since the Bankruptcy Court has jurisdiction over all claims against the Debtor. Also, while there is a deterrent effect to class actions outside of bankruptcy, deterrence is less likely in bankruptcy because the incentive to monitor is destroyed by the lack of available funds, by the fact that the equity interests have been wiped out, and by the fact that the reputations of the managers have been tarnished no matter what happens in the class action." Authorized agent Admitting it was adopting the minority view, the Dallas bankruptcy court held that Rule 3001(b) requires an authorized agency relationship to file a proof of claim and a class representative does not qualify as "authorized agent." Without the required agency relationship, the court ruled the class proof of claim was defective and could not be extended to anyone other than the named plaintiffs. The court barred the claims of any party who did not file an individual proof of claim and who received actual notice of the claims bar date. Rule 23 As previously stated, class actions apply to bankruptcy proceedings under Rule 7023. Thus, the Texas bankruptcy court addressed numerosity, commonality, typicality and adequacy of representation. It concluded that the Kahler class only demonstrated adequacy of representation. Although the plaintiffs claimed they satisfied the numerosity prong of Rule 23 because the proposed class had 30,000 potential members, the court held otherwise. It reduced the number of plaintiffs to 50 after determining class proofs of claims were inapplicable, only 2,000 individuals filed proofs of claim and only 50 of those claims remained after the claims adjudication process. Joinder of 50 claims, said the court, was not impractical. The court also held that the class failed to fulfill Rule 23's commonality and typicality elements. It ruled individual issues predominated because "each ... class member will have to prove the particular way in which they were defrauded and ... their reliance upon that fraud." Individualized analysis Despite holding that the class failed Rule 23(a), the court nonetheless analyzed the motion for certification under Fed. R. Civ. P. 23(b). It considered whether a class action would be superior to resolving the plaintiffs' RESPA, TILA, RICO and state fraud claims on an individual basis. With regard to the plaintiffs' contentions that the mortgage originators violated the RESPA by paying yield spread premiums to third parties for services not actually performed, the court held it would be required to examine the defendant's conduct in each loan transaction. A case-by-case analysis of the loans would also be necessary to determine if a class member's claim complied with the act's one-year statute of limitations, said the court. According, Judge Abramson denied the motion for class certification of the RESPA claims. The court also ruled a TILA action is not suited for class treatment because individualized proof in necessary to obtain recession of the contract and to challenge the adequacy of the disclosures given in each transaction. The proximate causation prerequisite for filing a RICO claim defeated the plaintiffs' charge that a class action was the superior device to resolve their disputes. In the memorandum opinion, Judge Abramson said each class member would have to prove his mortgagor originator's conduct was the legal cause of his alleged injury to bring a RICO action. Finally, the court said given the many debtors, assignees and intervenors involved, "Individualized inquiries must be made as to which or any or all of these defendants may be liable, to whom they may be liable, and for how much." William Hirsch and Barry Himmelstein of Lieff, Cabraser, Heimann & Bernstein in San Francisco and Marc Spector of Dallas represented the plaintiffs on brief. Trey Monsour and Maxim Litvak of Verner, Liipfert, Bernhard, McPherson & Hand of Houston represented FirstPlus on brief. William L. Stern of Severson & Werson in San Francisco represented Bank One Corp. and Residential Funding Corp., on brief along with Judith Ross of Thompson & Knight in Dallas. Steven Linkon of Wolf & Richards in Newport Beach, Calif., represented PSB Lending Inc. (Consumer Financial Services Law Report, May 30, 2000) FLOORING AMERICA: Schiffrin & Barroway Files Securities Suit in Georgia ----------------------------------------------------------------------- A class action lawsuit was filed in the United States District Court for the Northern District of Georgia, Atlanta Division, on behalf of all purchasers of the common stock of Flooring America, Inc., (Nasdaq: FRA) from November 11, 1999 through May 22, 2000 inclusive (the "Class Period"). The complaint charges Flooring America and certain of its officers and directors with issuing false and misleading statements concerning the Company's financial condition. Contact: Schiffrin & Barroway, LLP Marc A. Topaz, Esq. Robert B. Weiser, Esq. 888/299-7706 (toll free) or 610/667-7706 info@sbclasslaw.com GEORGIA PACIFIC: Expects More Asbestos Related Suits in Coming Years -------------------------------------------------------------------- In its report filed with the SEC, Georgia Pacific Corp. sayst that the Corporation and many other companies are defendants in suits brought in various courts around the nation by plaintiffs who allege that they have suffered personal injury as a result of exposure to asbestos-containing products. These suits allege a variety of lung and other diseases based on alleged exposure to products previously manufactured by the Corporation. In many cases, the plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that any injuries they have incurred in fact resulted from exposure to the Corporation's products. The Corporation generally settles asbestos cases for amounts it considers reasonable given the facts and circumstances of each case. The amounts it has paid to date to defend and settle these cases have been substantially covered by product liability insurance. The Corporation is currently defending claims of approximately 43,700 such plaintiffs as of April 1, 2000 and anticipates that additional suits will be filed against it over the next several years. GEORGIA PACIFIC: Faces Suits on Sanitary Paper Prices; Settles with FL ---------------------------------------------------------------------- In May 1997, the Corporation and nine other companies were named as defendants in a lawsuit brought by the Attorney General of the State of Florida alleging that the defendants engaged in a conspiracy to fix the prices of sanitary commercial paper products, such as towels and napkins, in violation of various federal and state laws. Shortly after the filing of this suit, approximately 55 similar suits were filed by private plaintiffs in federal courts in California, Florida, Georgia and Wisconsin, and in the state courts of California, Wisconsin, Minnesota and Tennessee. On July 28, 1999, the Corporation and the Attorney General of the State of Florida entered into a Settlement Agreement pursuant to which the State has dismissed its claims against the Corporation. The Agreement provides that the Corporation continues to deny that there is any evidence that it engaged in the alleged price-fixing conspiracy. In addition, the Corporation agreed to donate an immaterial amount of real property to the State of Florida. As part of the formation of the joint venture with Chesapeake, the Corporation and Wisconsin Tissue assigned, and Georgia-Pacific Tissue agreed to assume, the liabilities of both companies in connection with these antitrust cases. The Corporation and Wisconsin Tissue have denied that they have engaged in any of the illegal conduct alleged in these cases and intend to defend themselves vigorously. GEORGIA PACIFIC: Resin Manufacturing Plan Subject of Lawsuit in Ohio -------------------------------------------------------------------- On May 6, 1998, a lawsuit was filed in state court in Columbus, Ohio, against the Corporation and Georgia-Pacific Resins, Inc. (GPR), a wholly owned subsidiary of the Corporation. The lawsuit was filed by eight plaintiffs who seek to represent a class of individuals who at any time from 1985 to the present lived, worked, resided, owned, frequented or otherwise occupied property located within a three-mile radius of the GPR's resins manufacturing operations in Columbus, Ohio. The lawsuit alleges that the individual plaintiffs and putative class members have suffered personal injuries and/or property damage because of (i) alleged "continuing and long-term releases and threats of releases of noxious fumes, odors and harmful chemicals, including hazardous substances" from GPR's operations and/or (ii) a September 10, 1997 explosion at the Columbus facility and alleged release of hazardous material resulting from that explosion. Virtually all activity in this case has been stayed pending a decision on a motion by plaintiffs for reconsideration of a case management order issued by the court. The Corporation has denied the material allegations of this lawsuit. The Company says it is premature to evaluate the claims asserted in this lawsuit, but believes it has meritorious defenses. Prior to the filing of the lawsuit, the Corporation had received a number of explosion-related claims from nearby residents and businesses. These claims were for property damage, personal injury and business interruption and were being reviewed and resolved on a case-by-case basis. On January 12, 2000, five plaintiffs, including one of the class representatives in the state class action, filed a lawsuit against the Corporation and GPR pursuant to the citizen suit provisions of the federal Clean Air Act and the Community Right-to-Know law. This suit alleges violations of these federal laws and certain state laws regarding the form and substance of the defendants' reporting of emissions and violations of permitting requirements under certain regulations issued under the Clean Air Act. This suit seeks civil penalties of $25,000 per day, per violation, an injunction to force the defendants to comply with these laws and regulations, and other relief. The defendants have denied the material allegations of the complaint and have sought a ruling from a federal appeals court to the effect that the regulations under which the alleged violations of the Clean Air Act are premised are not applicable to them. While it is premature to completely evaluate these claims, the Corporation believes it has meritorious defenses. HAROLD RUTTENBERG: Officers of Bankrupt Just for Feet Sued in AL ---------------------------------------------------------------- Goodkind Labaton Rudoff & Sucharow LLP announced on June 13 that pursuant to Section 21(D)(a)(3)(A)(i) of the Securities Exchange Act of 1934, notice is hereby given that a class action lawsuit was filed on May 24, 2000 in the United States District Court for the Northern District of Alabama, Southern Division in Birmingham, Alabama on behalf of all persons who purchased the 11% Senior Subordinated Notes due 2009 (the "Notes") of Just For Feet, Inc. between April 12, 1999 and November 1, 1999 (the "Class Period"). The Complaint names as defendants against Harold J. Ruttenberg, Helen Rockey and Randall L. Haines (collectively, the "individual defendants") senior officers and/or directors of the Company, and Bank of America Securities LLC f/k/a NationsBanc Montgomery Securities LLC ("NationsBanc") an underwriter of the April 12, 1999 Note Offering (the "Offering"), individually and as a representative of the defendant class of underwriters. The Complaint has been assigned to the Honorable U.W. Clemon and has been designated as case number CV-00-C-1404-S. It is possible that the case may be transferred to the Honorable H. Dean Buttram, Jr., who is presiding over the common stock class actions, as discussed below. The Company is not named as a defendant as it is or was the subject of bankruptcy proceedings. The Complaint alleges that the defendants violated Section 12(2) of the Securities Act of 1933 (the "1933 Act") and that the individual defendants violated Section 15 of the 1933 Act. The Complaint further alleges that the defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and that the individual defendants violated Section 20(a) of the Exchange Act. The Complaint alleges that the Offering Memorandum for the Offering contained materially false and misleading statements and/or omissions regarding, among other things, the Company's inventory and inventory controls. The Complaint also alleges that these false statements and/or omissions effectively allowed Just For Feet to sell the $200 million of Notes. Specifically, the Complaint alleges that the Offering Memorandum contained materially false and misleading statements and/or omissions. For example: The Offering Memorandum indicated that the Company utilized sophisticated information systems to monitor or track its inventory on a daily basis and to send purchase orders and receive invoices from vendors electronically on a daily basis. Yet, at least one subsequent press report indicated that the Company's information systems were in chaos. The Offering Memorandum indicated that the Company's purchasing systems, internal controls and management information systems were adequate. The Offering Memorandum omitted the material fact of the Company's excess inventory. The Complaint alleges that on June 14, 1999, approximately two months after the Note Offering, the Company filed a Form S-4 with the SEC in which it revealed that it had $50 million or more in excess inventory as of May 1, 1999. The Complaint alleges that the Company had material excess inventory at the time of the Offering. The Complaint also alleges that the Company made several materially false and misleading statements and/or omissions during the Class Period, after the Offering. For example: In a May 25, 1999 press release, the Company mentioned that it was planning to significantly reduce inventories, but failed to reveal the extent of the inventory and inventory control problem. In connection with this news the Notes dropped to 76 1/4 on May 27 from 92 on May 25, 1999. In a June 16, 1999 article defendant Rockey falsely characterized the Company's inventory and inventory control problems as "one time" in nature, suggesting that the problem would pass. In a press release dated August 26, 1999 the Company announced various management changes to assist it in becoming "the dominant player in the athletic footwear retail market place." The Complaint alleges that this statement was false and misleading as there was no reasonable basis to assert that the Company would revive itself, let alone become the dominant player, particularly in light of the fact that the Company declared bankruptcy approximately nine weeks later. The Complaint also alleges that the Company made a false and misleading statement on October 4, 1999 wherein it indicated that it would make its November 1, 1999 Coupon Payment on the Notes. On November 2, 1999 the Company announced that it would file a plan to reorganize under bankruptcy court protection. In connection with this news the Notes closed at 8, down from 15 the prior day. There are also at least two class action lawsuits filed on behalf of Just For Feet common stockholders. Those cases are also in the Northern District of Alabama, Southern Division in Birmingham, Alabama and they are styled as Peter H. Burke, et al. on behalf of themselves and all others similarly situated against Harold Ruttenberg et al. CV 99-BU-3097-S and George W. Massey on behalf of himself and all others similarly situated v. Harold Ruttenberg, et al. CV 99-BU-3129-S (collectively the "common stock class actions") The common stock class actions, among other things, propose a different class period than the Complaint, name certain defendants which are not named in the Complaint and do not name certain defendants which are named in the Complaint. The common stock class actions also assert a theory or theories of liability which vary in certain respects from the theories of liability alleged in the Complaint. The Noteholders believe that the differences between the common stock class actions and the Noteholders' claims warrant a separate class and separate class counsel for the Noteholders. Counsel has informed the Court that they will agree to the coordination of the instant case with the common stock class actions for purposes of discovery. The cases may ultimately be consolidated for purposes of discovery. The plaintiffs are AAL High Yield Bond Fund, located in Appleton, Wisconsin, which is part of a family of mutual funds affiliated with Aid Association for Lutherans, and Delaware Delchester Fund, headquartered in Philadelphia, Pennsylvania, which is a mutual fund affiliated with Delaware Management Holding, Inc. Plaintiffs are represented by the law firms of Goodkind Labaton Rudoff & Sucharow LLP and James L. North & Associates in Birmingham, Alabama. Contact: Goodkind Labaton Rudoff & Sucharow LLP Thomas A. Dubbs, Esq. 212/907-0700 Internet address: dubbst@glrs.com NY BOARD: NYMEX Sues NYBOT Alleging $5 Million CEA Margin Violation ------------------------------------------------------------------- The New York Mercantile Exchange (NYMEX) has filed a $5 million proposed class action against the New York Board of Trade (NYBOT), alleging that the NYBOT violated the Commodity Exchange Act (CEA) by seizing assets from the segregated customer accounts of a futures commission merchant (FCM). The seizure was allegedly made to a cover a margin call for several million dollars in only one of the FCM's customer accounts. New York Mercantile Exchange et al. v. New York Board of Trade et al., No. 00-CV-3739, complaint filed (S.D.N.Y., May 17, 2000). FCM's are companies that handle futures-contract trades for customers and guarantee their customer's financial obligations, including margin calls, on the NYBOT and other derivatives exchanges. Under the rules of the NYBOT, all FCM customer accounts are liable for any of an FCM's margin deficiencies, even if the deficiency is isolated to only one FCM customer account. In the case at bar, First West Trading Inc. was unable to make a $6 million margin call based on losing NYBOT options trades. First West was one of at least 15 customers of New York City-based FCM Klein & Co. Futures Inc., which did not have the financial resources to cover the deficiency in the First West account. According to the suit filed in the Southern District of New York, NYBOT and clearing agent New York-based Clearing Corp., which makes sure payments are made on all trades conducted on the NYBOT, seized as much as $6 million from the segregated accounts of the other Klein customers to make up the First West deficiency. The lead plaintiff in the suit, NYMEX, claims its interests have been affected by NYBOT's action because the CEA gives NYMEX regulatory authority over FCMs. The complaint goes on to allege that NYBOT's seizure violates CEA @ 4d, which prohibits FCMs from using funds in one segregated customer account to pay off financial obligations in another segregated customer account. NYMEX says its proposed class action seeks to represent Klein's customers as well as the customers of any other FCM's who have either had their assets seized, or been threatened with asset seizure by NYBOT and Clearing Corp. The suit makes claims for violation of CEA @ 4d, breach of fiduciary duty and conversion, and seeks class certification, a permanent injunction preventing the seizure of segregated customer accounts, at least $5 million in damages, attorneys' fees, and other costs. The NYMEX plaintiffs are represented by Martin I. Kaminsky, Edward T. McDermott, W. Hans Kobelt, and Justin Y.K. Chu, Pollack & Kaminsky, New York. (Derivatives Litigation Reporter, June 5, 2000) NY LIFE: Sprenger & Lang Files Pension Suit Re Assets of Plan ------------------------------------------------------------- Sprenger & Lang announced that James A. Mehling, a former Vice President of New York Life Insurance Company (NYL), filed a class action lawsuit in federal district court in Philadelphia June 14, charging his former employer with improperly manipulating the assets of its own pension and 401(k) plans for corporate gain, and illegally firing him in an effort to prevent him from blowing the whistle on the fraudulent scheme. The suit, brought under the Racketeer Influenced and Corrupt Organizations Act (RICO) and the Employee Retirement Income Security Act (ERISA), seeks hundreds of millions of dollars in damages and disgorgement of ill-gotten gains. The suit alleges a decade-long scheme by NYL and its top officials to exploit the assets in the plans to help establish NYL in the lucrative, but highly competitive institutional mutual fund business. The suit contends that in 1991, rather than create and finance their proposed new line of institutional mutual funds using their own capital, NYL raided its pension plans and converted hundreds of millions of dollars of the plans assets into seed money for the new funds, called the MainStay Institutional Funds. The self-dealing scheme continued in 1994 and 1995, the suit alleges, when NYL created additional MainStay institutional funds, this time using hundreds of millions of dollars from employees pension and 401(k) plans. Since then, the MainStay institutional funds have depended on the continued use of the plans assets for their very existence because their fees are too high and their performance too spotty to attract sufficient outside investors. Without those captive assets of the Pension and 401(k) Plans, according to the suit, the MainStay institutional funds would collapse. The suit contends that NYLs use of plan assets to further its corporate business objectives violated the duties of loyalty and due care that ERISA imposes on plan fiduciaries. According to Eli Gottesdiener, a partner with the Washington, D.C. office of Sprenger & Lang, No prudent and loyal fiduciary would have placed the assets of the plans, especially the pension plans, in even the lowest-cost mutual funds. Although a mutual fund may be an appropriate investment vehicle for relatively small investors, it is entirely inappropriate for large pension plans like the multi-billion dollar NYL Pension Plans, which can obtain expert, individualized investment management services for a fraction of the cost of even the least expensive mutual fund. The suit contends that NYL engaged in a pattern of racketeering activity in violation of the federal RICO statute. Jennifer C. Jaff of Sprenger & Lang explained, The self-dealing here is breathtaking. NYL created the MainStay institutional funds out of whole cloth using the pension and 401(k) plans assets. In fact, 60%, 70%, 80%, even 90% or more of the assets of some of the funds came from the plans. In the aggregate, one half of the money in the funds comes from the plans. NYL intentionally converted its employees retirement assets, using them to prop up its sagging proprietary mutual funds. If thats not self-dealing, I dont know what is. The suit accuses NYL of making hundreds of millions of dollars from the scheme and intentionally concealing it from the plans participants, government regulators, and outside investors alike. According to Gottesdiener, In addition to collecting tens of millions of dollars in excess fees and expenses from the pension and 401(k) plans over the past 10 years, NYL has made tens of millions of dollars more from outside investors, mostly third-party 401(k) plans. To the extent that the MainStay funds have been able to attract outside investors at all, it is largely because of the illusion NYL was able to create, using the plans assets, that the market thought the funds were good investments. The suit alleges that total losses to the plans from NYLs self-dealing scheme run into the hundreds of millions of dollars. Mehling seeks on behalf of himself damages for the losses he sustained as a result of NYLs termination of his employment as a result of its concern that he would blow the whistle on the illegal operation. Clyde W. Waite, a partner in the firm of Stief, Waite, Gross, Sagoskin & Gilman, commented that Jim Mehling spent ten years building up NYLs business. He was a loyal employee with a spotless record of truly unparalleled achievement. In fact, only six days before Mehling was fired, NYLs CEO wrote to him praising his accomplishments during the previous year. NYLs fear that he was about to blow the whistle is the only plausible explanation for his firing. The four employee benefits plans at issue are the two in-house pension plans and the two in-house 401(k) plans, one of each for employees and the others for agents. The two pension plans currently have combined assets of $3 billion, of which $1.75 billion is invested in MainStay funds. The two 401(k) plans currently have combined assets of approximately $1.1 billion, of which half is invested in MainStay funds. The action is filed by a trio of law firms with nationally-recognized experience in class actions, ERISA, RICO, and complex litigation: Sprenger & Lang, PLLC, a Washington, D.C. and Minneapolis, Minnesota firm; Stief, Waite, Gross, Sagoskin & Gilman of Bucks County, Pennsylvania; and Sandals, Langer & Taylor, based in Philadelphia. Copies of the Complaint, links to the firms websites, and other information are available on a website dedicated especially to the suit: www.newyorklifesuit.com. Contact: Sprenger & Lang, PLLC Eli Gottesdiener, Esq. Jennifer C. Jaff, Esq. 202/265-8010 or Stief, Waite, Gross, Sagoskin & Gilman Clyde W. Waite, Esq. 215/968-3900 or Sandals, Langer & Taylor Alan Sandals, Esq. 215/419-6505 RACING CHAMPIONS: Wolf Haldenstein Files Securities Suit in Illinois -------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP, announces that a class action is being commenced on behalf of purchasers of the common stock of Racing Champions Corporation (NASDAQ: RACN - news) between February 1, 1999, and June 23, 1999, inclusive. A copy of the complaint filed in this action is available from the Court, or can be viewed on the Wolf Haldenstein website at www.whafh.com. The action is pending in the United States District Court for the Northern District of Illinois, Eastern Division, located at the Dirksen Bldg., 219 S. Dearborn Street, Chicago, IL, 60604, against defendants Racing Champions, Robert Dods (Chairman, Chief Executive Officer, and President,) Curtis Stoelting (Chief Financial Officer,) and Victor Shaffer (Director.) The complaint charges that defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between February1, 1999, and June 23, 1999, thereby artificially inflating the price of Racing Champions common stock. For example, as alleged in the complaint, on February 23, 1999, the Company reported seemingly record earnings for its 1998 fiscal year, and represented that the Company would continue to experience growth in 1999. These statements were materially false and misleading when made because defendants did not disclose, and knew or recklessly disregarded, that the Company's sales were then being negatively impacted by the competition from Star Wars related merchandise and as a result, sales of the Company's products were declining significantly. When Racing Champions revealed, on June 23, 1999, that it was expecting a per share loss of $0.30 to $0.35 for its second fiscal quarter of 1999, Racing Champions common stock dropped by 60%. Defendants attributed the loss to poor sales, and the taking of a $6.4 million restructuring charge in connection with a corporate acquisition. Contact: Wolf Haldenstein Adler Freeman & Herz LLP, New York Gregory M. Nespole, Esq., Michael Miske 800/575-0735 classmember@whafh.com whafh@aol.com nespole@whafh.com Gnespole@aol.com TESORO PETROLEUM: Seeger Weiss Files Securities Complaint in Texas ------------------------------------------------------------------ Pursuant to 15 U.S.C. 78u-4(a)(3)(A)(i), Seeger Weiss LLP hereby gives notice that on June 14, 2000, a class action lawsuit was filed in the United States District Court for the Western District of Texas, San Antonio Division, on behalf of all persons who purchased the publicly traded securities of Tesoro Petroleum Corp.(NYSE:TSO - news; "Tesoro" or the "Company"), from January 3, 2000, through May 3, 2000, inclusive (the "Class Period"), and who were damaged thereby. Tesoro is a natural resource company engaged in petroleum refining, distribution, and marketing of petroleum products, marine services, and the exploration and production of natural gas and oil. The complaint alleges that during the Class Period, the Company and several of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. On May 3, 2000, the Company announced its financial results for the first quarter of 2000. Tesoro's CEO admitted that the results were below analysts' expectations because the indicator of Tesoro's refining profit margins that had been posted on the Company's website did not reflect the volatility of oil prices during the quarter. He also admitted that the Company had failed to adjust the "discount factor" used to account for variations when oil prices became volatile. As a result, analysts and the investing public were misled by the indicator margins posted on Tesoro's website and incorrectly believed that the Company's average margins were higher than they actually were, and the Company's stock price was artificially inflated. Contact: Seth A. Katz, Esq. Seeger Weiss LLP One William Street New York, New York 10004 E-Mail: skatz@seegerweiss.com Tel.: (212) 584-0700 TOBACCO LITIGATION: Judge Tells CEO State Settlements Arn't Punishment ---------------------------------------------------------------------- A judge sternly warned the head of the nation's No. 1 tobacco company that he could not consider as punishment billions of dollars being paid to settle state lawsuits. Stanley Rosenblatt, the attorney representing sick Florida smokers, asked Philip Morris President and CEO Michael Szymanczyk if the tobacco industry should be punished for creating a defective product and hiding the truth about the risks of smoking. "Unless punishment already occurred, I would agree," Szymanczyk said. "In this case I believe it already has been determined." Szymanczyk was referring to a 1998 agreement in which cigarette makers paid $ 254 billion to settle state lawsuits. Circuit Judge Robert Kaye said the settlement "was a voluntarily agreed resolution to the case ... This case is about punishment." When Rosenblatt again asked if the industry should be punished, Szymanczyk said "Not in this case because my understanding of punitive damages is to change behavior and punish." Szymanczyk returned to the stand for a third day on Wednesday, testifying that a company computer website is not aimed at attracting underage smokers. He will be followed on the stand by Nicholas Brookes of Louisville, Ky.-based Brown & Williamson Tobacco Corp. Three other tobacco CEOs also are scheduled to testify. Szymanczyk admitted that smoking is addictive, but not under Rosenblatt's definition of addiction as being a habit one cannot quit. "Most people who want to quit smoking can quit," Szymanczyk said. He said he defines addiction as a repetitive behavior that people have difficulty stopping. "Smoking is addictive as the word is commonly used," he said. (The Associated Press State & Local Wire, June 14, 2000) TOBACCO LITIGATION: Philip Morris CEO Says Market Is Shrinking -------------------------------------------------------------- The head of the nation's No. 1 tobacco company testified Wednesday that cigarettes are a declining business and that his company is spending millions to keep its share of a shrinking market. Testifying in the class-action lawsuit brought by sick Florida smokers, Philip Morris President and CEO Michael Szymanczyk said the $67 million his company spent last year advertising Marlboro cigarettes was aimed at keeping its current smokers from switching brands. The company spent millions more advertising its other brands and on promotional activities, such as coupons. "Manufacturers, retailers, wholesalers - all you can do is compete over a portion of a shrinking pie," Szymanczyk said under cross-examination by smokers' attorney Stanley Rosenblatt. The attorney questioned Szymanczyk's assertion about the industry being in decline. He quoted stock analysts who advise clients to buy tobacco stocks and a federal government report that showed teen smoking increased during the 1990s. The pair also clashed over a Philip Morris program that the company says spends $74 million annually to end teen smoking. Szymanczyk says he doesn't want teen-agers to smoke. Rosenblatt questioned the company's sincerity, saying that since 90 percent of smokers acquire the habit before their 18th birthday, Philip Morris would eventually go out of business if no teens smoked. "If that's what happens, that's what happens," Szymanczyk said. Ending teen smoking "is the right thing to do." Rosenblatt then asked Szymanczyk why the company doesn't voluntarily fold if it agrees smoking is hazardous to its customers' health. He replied that the other tobacco companies would simply take over Philip Morris' market share and 400 billion cigarettes would still be sold in the United States annually. "We think the responsible thing to do is to try to reduce the harm caused by our product," said Szymanczyk, who has previously testified about company efforts to create a less carcinogenic cigarette. Szymanczyk spent his third day on the witness stand Wednesday. He will be followed on the stand by Nicholas Brookes of Brown & Williamson Tobacco Corp. Three other tobacco CEOs also are scheduled to testify. The other CEOs expected to testify are Andrew Schindler of R.J. Reynolds Tobacco Co., Martin Orlowsky of Lorillard Tobacco Co. and Bennett LeBow of Liggett Group Inc. The CEOs will tell the jury about how their companies have reformed in the face of lawsuits and public criticism. Their testimony is part of a bid to dissuade the jury from requesting billions of dollars in punitive damages on behalf of 300,000 to 500,000 sick Florida smokers. The appearance of Szymanczyk (pronounced sih-MAN-sihk), and the planned testimony of the other tobacco CEOs, underscored the trial's importance. Tobacco executives generally keep low public profiles and rarely testify under oath. The other CEOs expected to testify are Andrew Schindler of R.J. Reynolds Tobacco Co., Martin Orlowsky of Lorillard Tobacco Co. and Bennett LeBow of Liggett Group Inc. The other CEOs expected to testify are Andrew Schindler of R.J. Reynolds Tobacco Co., Martin Orlowsky of Lorillard Tobacco Co. and Bennett LeBow of Liggett Group Inc. (The Associated Press, June 14, 2000) VARI-L COMPANY: Cauley & Geller Files Securities Lawsuit in Colorado -------------------------------------------------------------------- The Law Firm of Cauley & Geller, LLP announced on June 14 that it has filed a class action in the United States District Court for the District of Colorado on behalf of all individuals and institutional investors that purchased the common stock of Vari-L Company, Inc. (Nasdaq: VARL) between December 17, 1997 and May 17, 2000, inclusive (the "Class Period"). The complaint charges that the Company and certain of its officers and directors violated the federal securities laws by providing materially false and misleading information about the Company's financial condition. Specifically, the Company, on May 17, 2000, revealed that it would be restating its previously reported financial results for the period ended December 31, 1997, and potentially other periods as well. In addition, during the Class Period insiders sold massive amounts of stock, reaping substantial proceeds as a result of the inflated value of Vari-L's stock. After the Company's announcement, Vari-L shares fell roughly $5 per share from their May 16 close of $16.188, to close at $11.25 on May 22, 2000, a drop of roughly 35%, as the market fully absorbed the impact of these disclosures. Contact: Cauley & Geller, LLP, Boca Raton Sue Null or Sharon Jackson Toll Free: 1-888-551-9944 E-mail: Cauleypa@aol.com VARI-L COMPANY: Dyer & Shuman Files Securities Lawsuit in Colorado ------------------------------------------------------------------ Dyer & Shuman, LLP announced that a class action has been commenced in the United States District Court for the District of Colorado on behalf of purchasers of VARI-L Company, Inc. (Nasdaq:VARL) publicly traded securities during the period between January 20, 1998 and May 17, 2000 (the "Class Period"). The complaint charges VARI-L and certain of its officers and directors with violations of the federal securities laws by making misrepresentations about VARI-L's business, earnings growth and financial statements and its ability to continue to achieve profitable growth. By issuing these allegedly false and misleading statements, defendants artificially inflated VARI-L's stock price from just $5 in 1998 to a Class Period high of $36-7/16 on December 23, 1999, allowing VARI-L's top insiders to sell or otherwise distribute 583,000 shares of their VARI-L stock at as high as $27 per share, for over$10 million, before the true facts about VARI-L's troubled operations, diminished profitability and false financial statements were revealed and VARI-L's stock collapsed to as low as $9-1/4 per share. Contact: Dyer & Shuman, LLP, Denver Jeffrey A. Berens, 303/861-3003, 800/711-6483 fax: 303/830-6920 JBerens@DyerShuman.com * Corporate Leaders Meet in Detroit to Examine Media's Role in Lawsuits ----------------------------------------------------------------------- Corporate leaders, worldwide news organizations and attorneys from across the United States are meeting in Detroit to discuss the media's often-controversial role in class-action lawsuits. Representatives from Daimler/Chrysler, Nissan, General Motors Europe, Dateline NBC and PricewaterhouseCoopers will gather on June 16 at the Courtyard by Marriott from 11 a.m. to 5 p.m. as part of a program sponsored by the American Bar Association. "Detroit is the perfect venue for this type of discussion," says Darrell Grams, a presenter and partner in the law firm of Brown McCarroll & Oaks Hartline in Austin, Texas. "Since many class-action lawsuits are leveled against auto manufacturers, it's important that they recognize and understand the media's role in these types of cases." Mr. Grams, who represents Fortune 500 companies in complex business cases, says many large corporations, including auto manufacturers, regularly choose to ignore threatening lawsuits until it's too late. "Unfortunately," Mr. Grams says, "the public often hears about class-action lawsuits through the media's interpretation. What we're trying to do is to show corporate leaders how they can handle these controversies with as little damage to their reputations as possible." Merrie Spaeth, former Director of Media Relations to the White House for President Ronald Reagan, will present how to best handle crisis communications in the event of a corporate lawsuit. A panel discussion on the impact of media coverage in products liability cases will follow. One of the most controversial issues in international law will take center stage during the program's afternoon session when a group of panelists will examine how the European legal community is working toward developing a single legal system for handling products liability cases. Mr. Grams says many U.S. corporations have been reluctant to begin overseas operations because of the many products liability laws currently in effect in Europe. ********* 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 * * *