/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000710.MBX C L A S S A C T I O N R E P O R T E R Monday, July 10, 2000, Vol. 2, No. 132 Headlines ADVANCED TECHNICAL: Berman DeValerio Files Securities Complaint in GA ALLIANCE SEMICONDUCTOR: Contests Securities Suit Filed in CA in 1996 AMERICAN ELECTRIC: Milberg Weiss Files Securities Lawsuit in New York AMERICAN ELECTRIC: Wolf Haldenstein Files Securities Lawsuit in New York BERNAL: TX Supreme Court Overturns Certification in Toxic Tort Case ENTRUST TECHNOLOGIES: Milberg Weiss Files Files Securities Suit in TX EYE BANKS: Agree to Settle Lawsuit over Corneas from Corpses FIRSTWORLD COMMUNICATIONS: Schiffrin & Barroway File CO Securities Suit HARMONIC, INC: Dreier Baritz Files Securities Complaint in California HOLOCAUST VICTIMS: Austria Approves Compensation Fund for Slave Labor INMATES LITIGATION: Suits Filed in Seven States over High Phone Costs MEGO FINANCIAL: 9th Cir OKs Fairness Ruling on Shareholder Settlement PACIFIC GAS: CA Ct OKs Dismissal of Housing Complex Toxic Injury Case ROAD PROJECTS: Judge Adjourns Ruling on Sacramento Citizens' Suit SMITH-GARDNER: Wolf Haldenstein Files Securities Lawsuit in Florida TAINTED BLOOD: Monroe Area Hospitals, Blood Banks Face Hep. C Lawsuits TURBODYNE TECHNOLGIES: Amended Securities Lawsuit in CA at Early Stage U.S. FRANCHISE: Milberg Weiss Files Securities Suit in Georgia VIAGRA COVERAGE: Admin. Remedies Must Be Exhausted Before Judge Can Sue VISA, MASTERCARD: Retailers' Antitrust Suit Delayed; No Tria Date Set VISUAL NETWORKS: Wolf Haldenstein Files Securities Lawsuit in Maryland WHITWORTH ENERGY: Owner and Broker Barred from Securities Industry ********* ADVANCED TECHNICAL: Berman DeValerio Files Securities Complaint in GA --------------------------------------------------------------------- Advanced Technical Products, Inc. (Nasdaq:ATPX) and its wholly-owned subsidiary Alcore, Inc. were named as defendants in a shareholder class action filed in the United States District Court for the Northern District of Georgia. The action, brought by Berman, DeValerio & Pease, LLP, www.bermanesq.com, seeks damages for violations of the federal securities laws on behalf of all investors who purchased ATP common stock between April 22, 1998 through and including March 3, 2000 (the "Class Period"). The lawsuit charges Advanced Technical Products, Alcore and certain former officers of Alcore, with violations of the federal securities laws by issuing materially false and misleading financial statements concerning Advanced Technical Products. The Company has restated its financial statements for the year-end 1998 and its first three fiscal quarters of 1999. The restatement resulted in a substantial reduction to the Company's previously reported earnings. Contact: Berman, DeValerio & Pease LLP Alicia M. Duff, (800) 516-9926 bdplaw@bermanesq.com ALLIANCE SEMICONDUCTOR: Contests Securities Suit Filed in CA in 1996 -------------------------------------------------------------------- In March 1996, a putative class action lawsuit was filed against the Company and certain of its officers and directors and others in the United States District Court for the Northern District of California, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder. The complaint alleged that the Company, N.D. Reddy and C.N. Reddy also had liability under Section 20(a) of the Exchange Act. The complaint, brought by an individual who claimed to have purchased 100 shares of the Company's common stock on November 2, 1995, was putatively brought on behalf of a class of persons who purchased the Company's common stock between July 11, 1995 and December 29, 1995. In April 1997, the Court dismissed the complaint, with leave to file an amended complaint. In June 1997, plaintiff filed an amended complaint against the Company and certain of its officers and directors alleging violations of Sections 10(b) and 20(a) of the Exchange Act. In July 1997, The Company moved to dismiss the amended complaint. In March 1998, the court ruled in defendants' favor as to all claims but one, and dismissed all but one claim with prejudice. In April 1998, defendants requested reconsideration of the ruling as to the one claim not dismissed. In June 1998, the parties stipulated to dismiss the remaining claim without prejudice, on the condition that in the event the dismissal with prejudice of the other claims is affirmed in its entirety, such remaining claim shall be deemed dismissed with prejudice. In June 1998, the court entered judgment dismissing the case pursuant to the parties' stipulation. Plaintiffs have appealed the court's ruling dismissing the claims and the parties have filed appeal briefs. The Company intends to continue to defend vigorously against any claims asserted against it, and believes it has meritorious defenses. Due to the inherent uncertainty of litigation, the Company is not able to reasonably estimate the potential losses, if any, that may be incurred in relation to this litigation. AMERICAN ELECTRIC: Milberg Weiss Files Securities Lawsuit in New York --------------------------------------------------------------------- On June 23, 2000, a complaint was filed, alleging violations of the federal securities laws by American Electric Power Company (NYSE: AEP) and certain of its officers and/or directors. The class action was commenced in the United States District Court for the Eastern District of New York on behalf of purchasers of American Electric Power securities during the period between July 25, 1997 and June 25, 1999, inclusive. 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 materially false and misleading statements to the market. A copy of the complaint can be obtained from the Court, or can be viewed on Milberg Weiss' website at http://www.milberg.com/aep/ Contact: Milberg Weiss Bershad Hynes & Lerach LLP, New York Steven G. Schulman or Samuel H. Rudman Phone Number: (800) 320-5081 Website: http://www.milberg.comEmail: AEPcase@milbergNY.com AMERICAN ELECTRIC: Wolf Haldenstein Files Securities Lawsuit in New York ------------------------------------------------------------------------ On July 7, 2000, Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit in the United States District Court for the Eastern District of New York on behalf of investors who bought American Electric Power Company (NYSE:AEP) stock between July 25, 1997 and June 25, 1999, inclusive (the "Class Period"). The lawsuit charges American Electric and several of its top officers with violations of the securities laws and regulations of the United States. The complaint alleges that defendants issued a series of false and misleading statements concerning the Company's operations and finances. Specifically, American Electric is alleged to have misled the market concerning the existence and impact of problems at one of its nuclear power plants. Upon the disclosure of the truth concerning the power plant, the Company's stock price declined 14% on heavy trading volume. Contact: Wolf Haldenstein Adler Freeman & Herz LLP (800) 575-0735 Michael Miske or Fred Taylor Isquith, Esq. www.whafh.com whafh@aol.com or classmember@whafh.com BERNAL: TX Supreme Court Overturns Certification in Toxic Tort Case ------------------------------------------------------------------- In a ruling that may make it difficult in the future to certify class action suits in personal injury cases, the Texas Supreme Court has overturned certification of a class of 904 plaintiffs claiming harm when a slop tank at a refinery exploded, sending plumes of toxic smoke into the air. Southwestern Refining Co. et al. v. Bernal et al., No. 98-0154 (Tex., May 11, 2000). The petition for review was sought by Southwestern Refining Co. after the state trial court certified the class and the state appeals court modified the certification order to require determination of the plaintiffs' actual damages before punitive damages were assessed. Background In 1994, a slop tank at a Southwestern refinery in Corpus Christi, Texas, exploded, resulting in soot and ashes descending into the surrounding neighborhood. Four nearby residents sued the company and four other defendants for extreme fear, mental anguish, personal injuries and property damage caused by the toxic exposure. After an additional 900 claimants joined the lawsuit, the plaintiffs moved to certify the personal injury claims as a class action. The trial court granted the motion under the Texas Rules of Civil Procedure. The court established a three-phase trial with: Phase One Liability; Phase Two If liability is found, punitive damages for the certified class; and Phase Three The individual members of the class that were actually injured and, therefore, entitled to punitive damages. Southwestern brought an interlocutory appeal seeking to reverse the certification order arguing that the prerequisites to class certification, most notably that common issues predominate over individual ones, were not met. Appellate Decision The appeals panel modified the court ruling to add a phase for actual or economic damages. This ruling brought the class in line with the Texas Supreme Court ruling in Transportation Insurance Co. v. Moriel, 879 S.W.2d 10 (Tex., 1994), which said liability and actual damages have to be determined before it can be decided whether to award punitive damages. Southwest appealed to the state high court, arguing that no class action is maintainable because individual issues predominate over common issues. The defendant also claimed that punitive damages for an entire class cannot be tried until the jury determines actual damages for the entire class. The Texas Supreme Court agreed with Southwestern and ruled that the company is entitled to an individual determination of liability and damages for each of the 904 plaintiffs. Justice Albert Gonzales wrote the majority opinion for the court. Two justices dissented, saying that although they disagreed with certification, the state supreme court should exercise judicial restraint because interlocutory appeals are final in the court of appeals and the supreme court does not have jurisdiction to judge the merits of the class certification order. Christopher Kesler of Fleming & Associates in Houston represented the plaintiffs. Frank Weathered of Dunn & Weathered in Corpus Christi, Texas, represented Southwestern Refinery Co. (Toxic Chemicals Litigation Reporter, June 16, 2000) ENTRUST TECHNOLOGIES: Milberg Weiss Files Files Securities Suit in TX --------------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/entrust/)announced on July 7 that a class action has been commenced in the United States District Court for the Eastern District of Texas on behalf of purchasers of Entrust Technologies Inc. ("Entrust") (Nasdaq:ENTU) common stock during the period between April 19, 2000 and July 3, 2000 (the "Class Period"). The complaint charges Entrust and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Entrust develops, markets, and sells products and services that allow enterprises to manage trusted, secure electronic communications and transactions over networks. The complaint alleges that defendants misrepresented the revenues that Entrust was deriving from its public key infrastructure business which together with defendants' false representations that Entrust would post 2Q 2000 EPS of $0.08, operated to artificially inflate the price of Entrust stock to a Class Period high of $ 82-3/4 on 6/30/00. This upsurge in Entrust's stock caused by defendants' false and misleading statements enabled Entrust to complete the $703 million stock-for-stock acquisition of enCommerce. On 7/5/00, two business days after the acquisition of enCommerce was completed, Entrust revealed that it was in fact suffering a huge decline in revenues, was not posting earnings per share growth, and contrary to defendants' repeated assurances, Entrust was forced to reveal the problems it had been experiencing during the Class Period in attempting to grow its business. This announcement caused its stock price to drop to as low as $34-3/8 (or over $40 per share) on record volume of 19 million shares on 7/5/00, causing hundreds of millions of dollars in damages to members of the Class. Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach, 800/449-4900 wsl@mwbhl.com EYE BANKS: Agree to Settle Lawsuit over Corneas from Corpses ------------------------------------------------------------ Hamilton County and two eye banks have tentatively agreed to pay more than $ 5 million to settle a lawsuit against the former county coroner for allowing corneas to be taken from about 600 corpses without the permission of next of kin. Under the proposed settlement, the county would pay $ 4.95 million and the eye banks $ 300,000 to 545 plaintiffs, officials said. The settlement is subject to approval by the county commission and a federal judge. Deborah Brotherton of suburban Cincinnati sued in 1989 after discovering from an autopsy report that her husband's corneas had been taken after his death in 1988. The lawsuit later became a class-action to include other families with similar claims. Coroner Frank Cleveland's policy from 1985 through 1991 was to allow corneas to be taken unless expressly denied by the deceased's next of kin. The county's lawyers argued that Cleveland was following state law. But a federal appeals court ruled in 1999 that Cleveland's 1 policy violated federal law. (The Record (Bergen County, NJ), July 7, 2000) FIRSTWORLD COMMUNICATIONS: Schiffrin & Barroway File CO Securities Suit ----------------------------------------------------------------------- A class action lawsuit was filed in the United States District Court for the District of Colorado on behalf of all purchasers of the common stock of FirstWorld Communications, Inc. (Nasdaq:FWIS) pursuant or traceable to the Company's initial public offering ("IPO") on March 8, 2000. The complaint charges FirstWorld and certain of its officers and directors with issuing a false and misleading Registration Statement and Prospectus for the IPO of FirstWorld common stock. The complaint alleges that, as a direct result of the falsity of the Registration Statement and the Prospectus, FirstWorld's IPO was sold at a price far exceeding the true value of the stock at that time. Contact: Schiffrin & Barroway, LLP, Philadelphia Marc A. Topaz, Esq. Robert B. Weiser, Esq. 888/299-7706 (toll free) or 610/667-7706 e-mail: info@sbclasslaw.com HARMONIC, INC: Dreier Baritz Files Securities Complaint in California --------------------------------------------------------------------- Dreier Baritz & Federman filed a securities class action lawsuit on behalf of purchasers of the publicly-traded securities of Harmonic, Inc. (Nasdaq: HLIT), between March 27, 2000 and June 26, 2000, inclusive (the "Class Period"), in the United States District Court for the Northern District of California. The complaint charges Harmonic and certain of its directors and executive officers with violations of the Securities Exchange Act of 1934 and Rule l0b-5 promulgated thereunder. The complaint alleges that the defendants misled the market by projecting 2000 EPS of at least $1.19. These projections were materially false and misleading because, among other things, they were based on unreasonable and false assumptions of the revenues Harmonic would receive from its largest customer, AT&T, and its newly acquired C-Cube division. Defendants were aware that revenues from AT&T and C-Cube were declining rapidly, yet they failed to disclose this information in order to permit Harmonic to complete its acquisition of C-Cube's Divicom business with inflated stock. When the truth was revealed, Harmonic's stock dropped to $22-11/16 from a Class Period high of $102. Contact: William B. Federman of Dreier Baritz & Federman, 405-235-1560, or fax, 405-239-2112, or wFederman@aol.com HOLOCAUST VICTIMS: Austria Approves Compensation Fund for Slave Labor --------------------------------------------------------------------- Austria's parliament unanimously approved a dlrs 415 million fund to compensate aging victims who were forced into hard labor by the Nazis during World War II. Members of parliament from all four political parties expressed their support for the fund. They said it is a gesture but one that can never truly make up for the suffering of the estimated 150,000 people thought to be alive today who worked as slave and forced laborers in Austria. The restitution law is also ''an act of liberation'' for Austrians, who shared responsibility with Germany for the events of the past, said Chancellor Wolfgang Schuessel. Under the law setting up the fund, one-time payments will range up to about dlrs 7,250 for slave laborers those forced to work in Nazi concentration camps. Those forced to work in factories would receive about dlrs 2,420, while agricultural laborers would get about dlrs 1,380. Women who gave birth while serving as forced laborers in Austria would receive an extra dlrs 345. Maria Schaumayer, the Austrian envoy responsible for negotiating the establishment of the fund, told the Austria Press Agency she was pleased by the law's passage in the 183-seat parliament. ''The first chapter is closed,'' she said. The fund will be financed by both the Austrian government and businesses that profited from the laborers. Officials said they hope the first payments can be made before the end of the year. The German parliament last Thursday passed a similar bill, setting up a dlrs 5 billion fund to compensate slave and forced laborers who worked on their territory during World War II. Austria's fund was criticized by American attorney Ed Fagan, who has filed a class-action lawsuit in New York in the name of Holocaust and slave labor victims. He has demanded that Austrian banks and companies pay damages of dlrs 18 billion. But Schaumayer defended the agreement, saying, ''The reconciliation fund is an instrument to make amends and humanitarian payments to the greatest number of victims possible _ according to my intentions 100 percent. That is a number that could never be reached through a lawsuit.'' (AP Worldstream, July 7, 2000) INMATES LITIGATION: Suits Filed in Seven States over High Phone Costs --------------------------------------------------------------------- Inmates in seven states are suing over the high cost of making phone calls from prison. They are challenging the deals under which a state or county government gets as much as 60 cents on the dollar from a telephone company that is given exclusive rights to handle all calls from behind bars. AT&T Corp. spokesman Tom Hopkins said that the highinmate rates in Indiana, $3.95 for the initial long-distance hookup, plus 69 cents a minute are necessary to pay for the accompanying security measures. But critics consider the leasing commissions legalized kickbacks and point to Nebraska, where inmates' long-distance collect calls cost just 19 cents a minute while being subject to similar security controls. ''It's gouging and profiteering,'' said Stephen Seliger, a Chicago lawyer involved in class-action lawsuits against three states and Corrections Corp. of America, a company that runs 70 prisons nationwide. Class-action lawsuits have been filed in Illinois, Indiana, Ohio, New Mexico, New York, New Hampshire and Wisconsin. The contracts have become a significant source of revenue for states. Indiana took in $6.3 million last year from all state pay phones, most of them in prisons. New York made $25 million; California $24 million; and Illinois $12 million. While some states, including Oregon, Florida and New York, require that at least some of the state's profits pay for inmate-related programs, others do not. The 53 percent cut of revenue that Indiana gets under its contract with AT&T goes into the state's general fund to pay for everything from renovations to the Statehouse to Y2K computer compliance. Nebraska has never accepted commissions. It has a contract with Sprint that allows for the same security measures common in other states including prisoner ID numbers, pre-approved call lists and monitoring of the calls, all of which must be collect. ''We decided that we didn't want to make money at the expense of the inmates,'' said Steve King, a Nebraska Corrections Department spokesman. In Indiana, 38-year-old Selena Kingsley racked up $7,000 in phone bills during the four years her husband was imprisoned on drug charges. She said she still owes the phone company, and the costs ruined her financially. ''They espouse this theory of wanting to keep families together, and the only way we had to keep in contact was the telephone,'' she said. ''The phone companies have got you. They know you'll accept the calls.'' (AP Online, July 7, 2000) MEGO FINANCIAL: 9th Cir OKs Fairness Ruling on Shareholder Settlement --------------------------------------------------------------------- he Ninth Circuit upheld a Nevada federal judge's fairness ruling regarding the $1.725 million shareholder class action settlement reached by Mego Financial Corp. The panel rejected the challenges raised by a protesting shareholder and found the trial judge properly determined the settlement to be fair, given the difficulties of proving the case. In re Mego Financial Corp. Securities Litigation; Dunleavy et al. v. Nederlander et al. v. Nadler, No. 99-15361 (9th Cir., May 22, 2000). Restated Earnings The class claims brought against the real estate loan financier Mego Financial Corp. stemmed from its November 1995 disclosure that its 1994 reported net income had been overstated. Two separate class actions were filed that month by Christopher Dunleavy, who had purchased 100 shares of Mego stock on Nov. 9, 1995, and by A. Peyser, who had recently purchased 1,500 shares of the stock. The suits identified classes of shareholders that purchased Mego common stock between January 1994 and Nov. 9, 1995. Michael Nadler, a purchaser of 100,000 shares of Mego during the class period, filed his own class suit in the wake of Mego's March 1996 disclosure that its earnings had been overstated for each year between 1992 and 1994. Nadler brought the complaint after the District of Nevada rejected his bid to intervene in the prior suits. Nadler's complaint was ultimately consolidated with Dunleavy and Peyser's. Mego, Dunleavy and Peyser submitted a memorandum of understanding to the court below in May 1997, outlining the terms of the settlement. Nadler lodged objections to the agreement in August 1998, complaining that its terms denied compensation to any class member that paid less than $6.125 a share; a price that had not been attained by Mego stock until late in the class period. U.S. District Judge Lloyd D. George held the settlement to be fair in October 1998, and Nadler appealed. Lack of Evidence In its review of the lower court's assessment of the settlement terms, the U.S. Court of Appeals for the Ninth Circuit first considered the strength of the plaintiff's case, and found it to be wanting. The panel noted the lower court's observations that the core of the class suits went to the assertion that the Mego officer defendants profited by artificially inflating the stock price. The trial judge, continued the appellate court, found no evidence that these individual defendants sold their shares or profited from the alleged inflation during the relevant period. The Ninth Circuit also agreed with Judge George's findings as to the reasonableness of the settlement amount. While Nadler asserted that the class lost an estimated $12 million, the lower court found his counsel to have failed to consider "account market fluctuations, possible variations in the dimensions of the class, the volatility of stock and the substantial rebound in Mego stock after its initial decline." Even if Nadler's methodology were sound, the Ninth Circuit concluded, a settlement of one-sixth the potential recovery would be fair and adequatein light of the difficulties of proving the case. While agreeing with Nadler's contention that extensive formal discovery had not been completed, the panel upheld the lower court's conclusion that the plaintiffs had sufficient information to make an informed decision regarding the settlement. "The district court noted that Class Counsel conducted significant investigation, discovery and research, and presented the court with documentation supporting those services," the panel wrote. The Ninth Circuit further observed that only one of the 5,400 potential class members who received notice of the settlement chose to opt out, and that Nadler represented a mere handful of objectors at the fairness hearing. Additional Issues Lastly, the panel upheld the rejection of Nadler's assertion that class counsel were in collusion with the defendants. While the class plaintiffs did vigorously contest his intervention, the Ninth Circuit observed, Nadler did file his claims after the effective date of the Private Securities Litigation Reform Act (PSLRA), "and he arguably would have placed the class on a different statutory footing." The appellate panel next upheld the plan of distribution approved by the district judge. In so ruling, the Ninth Circuit compared the plan's methodology with the method of calculating damages stated in the PSLRA. Section 78u-4(e) of the act, observed the court, "essentially caps a plaintiff's damages to those recoverable under the rescissory measure. Thus, if the mean trading price of a security during the 90-day period following the correction is greater than the price at which the plaintiff purchased his stock then that plaintiff would recover nothing under the PSLRA's limitation on damages." The Ninth Circuit found the sole real distinction between the methodologies of the plan and the PSLRA to be that the plan sets the recoverable market value as the value on the date the corrective information was disclosed. "This result is actually more advantageous to the plaintiffs," the panel wrote. The appellate court also affirmed the trial court's certification of the plaintiff class. While Nadler asserted a conflict of interest between the class representatives and purchasers, such as himself, who bought stock prior to April 1995, the Ninth Circuit deemed the conflict "illusory." The panel concluded, "The early purchasers could never get out-of-pocket damages because they, including Nadler, did not file suit prior to the effective date of the PSLRA. Therefore, while they would have been free to bring a class action suit against Mego, it would have been subject to the PSLRA, which would have limited their damages to the rescissory measure of damages." The Ninth Circuit also rejected Nadler's assertion that class counsel failed to prosecute the action vigorously on the class' behalf. "There were many reasons not to pursue further litigation," wrote the court. "Complex litigation is inherently uncertain and Plaintiffs would have had much difficultyproving scienter." Richard G. McCracken of McCracken, Stemerman, Bowen & Holsberry in Las Vegas, and David B. Kahn and Mark E. King of David B. Kahn & Associates, Ltd. in Northfield, Ill., represented Nadler. Patricia I. Avery of Wolf, Popper, Ross, Wolf & Jones in New York represented Dunleavy and Peyser. Andrew C. Houston of Wachtell, Lipton, Rosen & Katz in New York represented the director appellees. (Securities Litigation & Regulation Reporter, June 21, 2000) PACIFIC GAS: CA Ct OKs Dismissal of Housing Complex Toxic Injury Case --------------------------------------------------------------------- A California appellate panel, affirming a state superior court decision, granted Pacific Gas & Electric Co. dismissal of a class action personal injury suit brought by a group of 190 residents of a public housing complex who claimed they were harmed by exposure to chemicals at the site. Lawrence et al. v. Pacific Gas & Electric Co. et al., No. A080941 (Cal. Ct. App., 1st Dist., May 15, 2000) . Because the state's lower court granted the pretrial motions of Pacific Gas & Electric Co. for the exclusion of the expert witnesses, the appellate court said the plaintiffs could not meet their burden of proof to show that any individual plaintiff's illness or injury was due to exposure to chemicals at the public housing site. Background The public housing complex, Midway Village, is bounded by property owned by PG&E whose predecessor operated a gas manufacturing plant which is thought to have produced a harmful chemical, polynuclear aromatic hydrocarbons (PNA). The discovery of these chemicals in the soil on the northern edge of the complex in 1990 led to this action in which the Midway Village residents claimed that they were injured. Among the injuries claimed were unexplained nosebleeds, persistent skin rashes and respiratory problems. Expert Witnesses Superior Court Judge Joseph Bergeron dismissed the lawsuits because he found the plaintiffs' expert, Rosemarie Bowler, Ph.D., who undertook a health study at Midway, had not measured individual exposure for each participant, had not reviewed any medical records and had no medical evaluations conducted on the plaintiffs. Another plaintiff expert, Rudolf Von Burg, Ph.D., could not state that the plaintiffs' injuries had been caused by a medical certainty from exposure to the chemicals. The appeal court panel upheld the lower court decision because "the law requires specificity in connecting an individual's symptom or illness to that particticular individual's exposure to the toxic substance." PG&E was represented by Stephen Jones in San Francisco. John Burris in Oakland, Calif.,and Charles Bonner in Sausalito, Calif., represented the plaintiffs. (Toxic Chemicals Litigation Reporter, June 16, 2000) ROAD PROJECTS: Judge Adjourns Ruling on Sacramento Citizens' Suit ----------------------------------------------------------------- Lawyers for public transportation agencies and private highway builders argued that the legal challenge to major components of a $400 million road construction plan for the Sacramento region cannot be sustained under the federal Clean Air Act. The act does not allow citizen lawsuits such as the one brought by environmental and transportation activists seeking to halt 59 major projects, the lawyers told U.S. District Judge Lawrence K. Karlton in support of a motion to dismiss the suit. But Joseph Brecher, attorney for the coalition of plaintiffs, countered that the defendants were engaging in semantics and invoking "dubious procedural grounds" to rid themselves of the suit. At the close of the hearing, Karlton took the motion under submission and will rule later. He also took plaintiffs' motions for a preliminary injunction and summary judgment under submission. The lawsuit alleges that the transportation plan was approved by local, state and federal officials based on erroneous assurances from the Sacramento Area Council of Governments that the plan meets nitrogen oxide emission limits developed under terms of the Clean Air Act. SACOG said increased traffic caused by the plan would be offset by less pollution due to stricter state emission rules. But those assurances were based on projections of emission reductions from the California Air Resources Board in 1994 that proved to be too optimistic, the suit says. Targeted projects include the controversial widening of Watt Avenue at the American River, car-pool lanes for Highway 50 and Interstate 80, and the addition of new lanes to crowded portions of Antelope Road, Greenback Lane and Sunrise Boulevard. The suit seeks to stop 22 projects in unincorporated Sacramento County; 12 in the city of Sacramento; 10 in Placer County -- including eight in Roseville; six in Citrus Heights; five in El Dorado County; two in Folsom, and two in Yolo County. SACOG attorney John Kennedy argues that private citizens may sue under the Clean Air Act "only for repeated or ongoing violations of an emission standard or limitation." Case law does not allow a citizen lawsuit over a government determination that a local plan conforms to an emission limitation, Kennedy said. Joining Kennedy in this argument was David Williamson, attorney for a national advocacy group that includes highway builders. "Congress didn't grant citizen-suit jurisdiction for a determination," Williamson told Karlton. "There is no emission limitation currently being exceeded here. A conformity determination is not a source of pollution." But Brecher argued that the limitation is "a living, breathing number that has to be achieved" when all of the new and improved roads are completed. "If you're going in the opposite direction, that is a present violation." A citizen should not have to wait until the air is even more poisonous before a suit may be filed, he said. Referring to the fact that the Sacramento metropolitan area has been designated a "severe nonattainment area" for ozone under Clean Air Act standards, Brecher said, "The reason this area is out of attainment year after year is because these projects are allowed to proceed willy-nilly." Williamson pointed out that if Karlton were to halt the projects, "It would create a hat full of contract disputes between our members and numerous municipalities." If the plaintiffs' theory is believed, Williamson said in a brief filed earlier, all 194 road and transit projects in the Sacramento plan "were somehow illegally approved." Thus, he said, an injunction "would arguably halt the construction of approximately $400 million worth of planned transportation improvement projects, many of which reportedly are in full swing, and some of which have already been completed. "This uncertainty would wreak devastating economic and practical harm on (contractors) by continually interfering with construction contracts." Brecher, however, in his memorandum in support of a summary judgment, said, "By pushing ahead with their highway construction program . . . the defendants exhibit an arrogant contempt for the mandate of the law and a reckless disregard for the health and welfare of the citizens of the Sacramento area." Williamson, both in his brief and at the hearing, argued that, in keeping "with the logic of Congress' system of forward-looking air quality and transportation planning, if the old emissions factors relied on in the July 1999 conformity determination were, for some reason, inaccurate, that inaccuracy will be corrected in the October 2000 . . . determination." Brecher scoffed at that reasoning as "smoke and mirrors." "At some point, every square inch of the Sacramento area will be paved over and there won't be a next time around," he said. (Sacramento Bee, July 6, 2000) SMITH-GARDNER: Wolf Haldenstein Files Securities Lawsuit in Florida ------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP, announces that a class action is being commenced on behalf of purchasers of the securities of Smith-Gardner & Associates, Inc. (NASDAQ:SGAI) between October 27, 1999, and June 16, 2000, 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 Southern District of Florida, against defendants Smith-Gardner, Gary G. Hegna (the Chief Executive Officer), Martin K. Weinbaum (Chief Financial Officer), Allan Gardner (Co-Founder and Chief Technology Officer), and Wilburn Smith (Co-Founder and Executive Vice President). 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 materially false and misleading financial statements. The class period commences on October 27, 1999, when defendants issued a press release announcing "record results." The Company continued to issue "record" financial results causing Smith-Gardner stock to reach a high of over $21 per share in February 2000. The statements made by the Company, however, failed to disclose material adverse facts about its financial condition, such as: (a) many of its Internet related business customers faced severe cash flow problems making near term revenue and earnings growth unlikely; (b) defendants had not adopted a conservative reserve account to provide for doubtful accounts and would soon be forced to take a significant charge against earnings to supplement those reserves; and (c) defendants knew but failed to disclose that Research and Development spending was inadequate and would have to be increased significantly. On June 16, 2000, the Company shocked investors by announcing that it expected to lose between $0.13 and $0.16 per share in the second quarter of fiscal year 2000. On the same day, the stock price plummeted over 50%, to close at $4.91 per share. Smith-Gardner insiders, however, did not share the investing public's losses. Company insiders sold over $35 million worth of Smith-Gardner stock at prices as high as $21.69 per share. Contact: Wolf Haldenstein Adler Freeman & Herz LLP (800) 575-0735 Fred Taylor Isquith, Esq., Michael Miske or George Peters classmember@whafh.com, whafh@aol.com or www.whafh.com TAINTED BLOOD: Monroe Area Hospitals, Blood Banks Face Hep. C Lawsuits ---------------------------------------------------------------------- Six northeastern Louisiana residents claim in lawsuits filed here that they contracted hepatitis C from blood transfusions in the late 1970s and the 1980s. Named in the lawsuits are LSU Medical Center-Monroe (formerly E.A. Conway Hospital), Glenwood Regional Medical Center, St. Francis Medical Center, Lifeshare Blood Centers, Interstate Blood Bank of Louisiana Inc., and unnamed blood banks. The Shreveport law firm of Nelson, Hammons & Self filed the six lawsuits in 4th Judicial District Court, seeking unspecified damages. Victoria Johnson and Laurie Ann Hart Landry, both of West Monroe, Kay W. Breed of Oak Grove, and Monroe residents Joyce Evelyn Vernon, Debbie Hargis and Laura Milton are the plaintiffs. Hepatitis C is a disease that causes inflammation of the liver that can develop into cirrhosis or even cancer of the liver. Shreveport attorney John Hammons describes hepatitis C as "a very insidious disease" and that symptoms may appear up to 30 years after the transfusions. "Hepatitis C was not even identified until 1988. It took two years to develop a test and in 1990, the day the drug and food administration approved the test for use in blood centers, Lifeshare started testing that day," said Lifeshare's Kenneth Hudson, quality assurance coordinator in Monroe and Shreveport. "Basically these lawsuits are trying to hold us responsible for something we didn't know existed at the time," he said. Hammons counters that the medical community and blood centers have known since 1960 that there was a correlation between blood donors with elevated liver enzymes and liver complications in patients receiving blood. "They knew for 20 to 25 years that certain units of blood had a significant chance of causing liver disease, but sold and administered it anyway. Back then they called it hepatitis non-A and non-B," Hammons said. Glenwood Administrator Ray Ford said the hospitals and blood centers should not be held liable for something they did not realize existed. Clark Cosse', vice president of legal and governmental affairs for the Louisiana Hospital Association, said the hospitals are only being sued "because they have the deep pockets. The blood centers are basically nonprofit and they don't have a lot of money even if they win their case." Cosse' said the state Legislature passed a bill two years ago to lessen the affects of hepatitis C lawsuits on hospitals in the state. He said some of the cases involve blood transfusions given as far back as the 1940s. He said the recent lawsuits have been filed because the law states all old cases must be filed by July 1, 2000. The law also states "strict liability must be proven," Cosse' said. "That would be like if a nurse used an infected needle or things like that," he said. Cosse' also said the law requires a plaintiff to prove the virus was received through a transfusion. Cosse' said a class action lawsuit was filed in June 1999 in Orleans Parish Civil Court with more than 200 plaintiffs. Hammons, who said he is currently representing 80 to 100 hepatitis C cases, said he did not choose to enter his clients in the class action. Hammons said he filed a hepatitis C lawsuit in the early 1990s, Branch vs. Willis Knighten Hospital in Shreveport, that has been upheld by the Supreme Court. The court ruled the statute of limitations had not expired even though the plaintiff was infected in 1976. Hammons said the court ruled the plaintiff filed a timely lawsuit after finding out in 1991 that he had hepatitis C. (The Associated Press State & Local Wire, July 7, 2000) TURBODYNE TECHNOLGIES: Amended Securities Lawsuit in CA at Early Stage ---------------------------------------------------------------------- In January through March of 1999, six purported class action complaints were filed against the Company and certain of its officers and directors in the United States District Court for the Central District of California, as follows: ABBREVIATED CASE NAME CASE NO. DATE FILED --------------------- -------- ---------- Takeda, et al. v. Turbodyne Technologies, et al. CV-99-00697-MMM 01/22/99 Zaks, et al. v. Turbodyne Technologies, et al. CV-99-00743-MMM 01/25/99 Lincscott, et al. v. Turbodyne Technologies, et al CV-99-00933-MMM 01/28/99 Siebert, et al. v. Turbodyne Technologies, et al. CV-99-01288-MMM 02/08/99 Gentile, et al. v. Turbodyne Technologies, et al. CV-99-02194-MMM 03/01/99 Giammarco, et al. v. Turbodyne Technologies, et al. CV-99-02751-MMM 03/16/99 On June 4, 1999, the court entered an order consolidating these six actions for all purposes under the caption In Re Turbodyne Technologies, Inc. Securities Litigation, Master File No. CV-99-00697-MMM (BQRx) (the "Consolidated Action"). By the same order, the court appointed the "Kadner-7 Group," comprised of Ralf Kadner, Gordon Williamson & Associates, Louis T. Inglehart, Ronald Shoen, Gunther Wrieden, Combined Atlantic Carriers and Dennis Jones, as Lead Plaintiffs pursuant to the provision of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. sec. 78u-4(a)(3)(B), and approved the Lead Plaintiffs' selection of lead counsel for the plaintiffs in the Consolidated Action. On August 9, 1999, the plaintiffs filed their consolidated class action complaint, which is now the operative complaint in the Consolidated Action. The Consolidated Action purports to be brought on behalf of individuals claiming to have purchased Common Stock of the Company during the time period from March 1, 1997 through January 22, 1999. Plaintiffs seek unspecified damages arising from alleged misstatements concerning such matters as the technological capability and actual and potential sales of the Company's Turbopac(TM) product, and the demand for and market acceptance of the Turbopac(TM) and other Company products. Plaintiffs allege that these alleged misstatements caused the Company's stock price to be "artificially inflated" during the purported class period. The Company has tendered these actions to its insurance carriers who have appointed counsel to represent the Company and the other defendants in these actions. The Company has filed a motion to dismiss which was granted by the court without prejudice. On or about May 4, 2000 plaintiffs filed an amended complaint The Company is reviewing the amended complaint to determine whether to file another motion to dismiss the complaint. Since this action is in the very early stages of litigation, the Company is unable to assess the likelihood of an adverse result, and there can be no assurances as to the outcome of the action. SEC Investigation In June 1999, the Company received a formal request for production of documents from the Securities and Exchange Commission (the "SEC"). The SEC indicated that its inquiry should not be construed as an indication by the SEC or its staff that any violations of law have occurred, nor should it be construed as an adverse reflection on the merits of the Company's securities or any person or entity. U.S. FRANCHISE: Milberg Weiss Files Securities Suit in Georgia -------------------------------------------------------------- On May 18, 2000, a complaint was filed, alleging violations of the federal securities laws by U.S. Franchise Systems, Inc. (NASDAQ: USFS) and certain of its officers and/or directors. The class action was commenced in the United States District Court for the Northern District of Georgia, Atlanta Division, on behalf of purchasers of U.S. Franchise Systems securities during the period between May 6, 1999 and October 29, 1999, inclusive. 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 materially false and misleading statements to the market. A copy of the complaint can be obtained from the Court, or can be viewed on Milberg Weiss' website at http://www.milberg.com/usfs/ Contact: Steven G. Schulman or Samuel H. Rudman One Pennsylvania Plaza, 49th Floor New York, NY 10119-0165 Phone Number: (800) 320-5081 Website: http://www.milberg.comEmail: USFranchisecase@milbergNY.com VIAGRA COVERAGE: Admin. Remedies Must Be Exhausted Before Judge Can Sue ----------------------------------------------------------------------- When U.S. Bankruptcy Judge David A. Scholl was informed by his insurer that it would pay for four Viagra pills each month, he should have appealed that decision to the U.S. Office of Personnel Management instead of refiling his class action lawsuit in U.S. District Court, a federal judge has ruled. In a 12-page decision filed on July 6, U.S. District Judge Joseph J. Farnan ruled that Scholl has not yet exhausted his administrative remedies before the OPM and therefore is not entitled to bring suit yet. According to the suit, Scholl was diagnosed as suffering from erectile dysfunction. His physician prescribed Viagra as a treatment. At first, Scholl's insurer, QualMed Inc., denied coverage for the prescriptions, but later said it would make a coverage decision by "early summer" of 1998. By August 1998, QualMed said it would deny the coverage, and Scholl appealed the decision to OPM. OPM determined in January 1999 that Viagra is a covered benefit. QualMed later said it would retroactively apply a new Viagra policy but limited coverage to just four pills per month. Scholl filed suit, arguing that QualMed adopted its position without regard to his doctor's determination as to the appropriate number of pills to treat the condition. And since the decision was limited only to Scholl, the suit said it had not provided any relief for the members of Scholl's putative class. Lawyers for OPM moved to dismiss the suit, arguing that Scholl had failed to exhaust his administrative remedies under the Federal Employee Health Benefits Act. Judge Farnan of the District of Delaware, who was specially assigned to hear the case so that it could be decided by a judge outside the Eastern District of Pennsylvania, found that the exhaustion requirement in FEHBA is "a practical rule designed to provide the courts with the benefit of an agency's expertise." Farnan agreed that Scholl failed to exhaust because he filed suit immediately after receiving the decision from QualMed that limited his coverage to four pills per month." In the court's view, the proper next step was not to bring an action in federal court. Rather, Scholl should have appealed to OPM about what he considered to be an improper, unilateral limitation on his prescription," Farnan wrote. Farnan emphasized "the key role played by OPM in the FEHBA regulatory scheme." OPM, he said, "is not a rubber stamp for the insurance company." And QualMed, he noted, "could not provide insurance under FEHBA without first agreeing that it would abide by OPM's interpretation of its insurance plans." Farnan found that an appeal by Scholl to OPM could result in two possible outcomes an affirmance of QualMed's decision or a decision that no such limitation applies. As a result, Farnan said, "resort to the administrative process is not futile." Scholl's first appeal was successful, Farnan noted, and resulted in an "immediate reversal" of QualMed's decision that Viagra was not covered at all. That decision, he said, showed that "the statutory and regulatory machinery was working as intended." Scholl insisted that he should still be allowed to sue QualMed because it was ignoring a final decision of the OPM. Farnan disagreed, saying "Scholl's lawsuit did not permit OPM the opportunity to pass on the extent of coverage, and accordingly, the court cannot agree that QualMed is ignoring a final agency determination." (The Legal Intelligencer, July 7, 2000) VISA, MASTERCARD: Retailers' Antitrust Suit Delayed; No Tria Date Set --------------------------------------------------------------------- While Visa USA and MasterCard International were busy fighting a Justice Department antitrust lawsuit, the judge in another antitrust case filed against the card giants postponed a summary judgment hearing scheduled for Aug 4 as well as the Nov 27 trial date. Judge John Gleeson did not establish a new trial date for the case, known as the Wal-Mart suit. That case, pending in US District Court for the Eastern District of New York, was brought by the largest retailers in the United States, including Sears, Roebuck and Co and The Limited Inc The retailers are challenging Visa's and MasterCard's "honor all cards" rules, which require merchants who take credit cards to also take debit cards In June Visa and MasterCard won the right to appeal Judge Gleeson's decision to certify the case as a class action The judge was apparently concerned that the Court of Appeals would not have rendered a decision on the merchants' class-action status before he heard the summary judgment arguments in Augus. (The American Banker, July 7, 2000) VISUAL NETWORKS: Wolf Haldenstein Files Securities Lawsuit in Maryland ---------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP and the Law Offices of Charles J. Piven announce that a class action was commenced on behalf of purchasers of the common stock of Visual Networks, Inc. during the period between February 7, 2000 and July 5, 2000 inclusive, (the "Class Period"), who suffered damages caused by defendants' violation of the federal securities laws. 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 District of Maryland against defendants Visual and its Chief Executive Officer Scott Stouffer. During the Class Period, defendants issued to the investing public false and misleading statements concerning the Company's prospects for the growth of its revenues going forward, prospects in connection with its acquisition of Avesta Technologies Inc. ("Avesta") and with respect to the sale of the Company's core products. Moreover, the Company omitted to state material information concerning integration related problems being experienced following the Avesta transaction necessary to be issued in order to make prior statements not misleading. Once the Company disclosed the true state of its affairs with respect to the Avesta integration problems and weakening revenues, its common stock plummeted nearly 54% or $14.50 points. Contact: Wolf Haldenstein Adler Freeman & Herz LLP Gregory M. Nespole, Esq. Fred T. Isquith, Esq. Michael Miske George Peters 800/575-0735 classmember@whafh.com whafh@aol.com nespole@whafh.com Gnespole@aol.com or our website at www.whafh.com WHITWORTH ENERGY: Owner and Broker Barred from Securities Industry ------------------------------------------------------------------ Judge Robert G. Mahony has barred the co-owner of Whitworth Energy Resources Ltd., and the investment adviser who sold its oil and gas offerings, from having any further association with broker-dealers. According to the decision, their violation of the anti-fraud provisions of federal securities law was egregious and included violations of the preliminary injunction entered against them. In re Anderson and Kerns. (Securities Litigation & Regulation Reporter, June 21, 2000) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. 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