/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/001017.MBX C L A S S A C T I O N R E P O R T E R Tuesday, October 17, 2000, Vol. 2, No. 202 Headlines ALBERTSON'S SUPERMARKETS: Lawsuit over Final Wages Filed in Los Angeles AT&T BROADBAND: Reaches Settlement for Late Fee Charges in Michigan AZURIX CORP: Savett Frutkin Files Securities Suit in Texas AZURIX, CORP: Wechsler Harwood Files Securities Suit in Texas BRIDGESTONE/FIRESTONE: USA Today Says Tire Suits Pile up and Kept Secret BROOKTROUT, INC: Berman DeValerio Files Securities Suit in Massachusetts CORPORATION FINANCIERE: Canada Clears Tax Expert of 3rd-Party Liability EBAY: Online Auction Operator Faces Suit on Sale of Fake Goods EFI, SPLASH: Announce Proposed Settlement of Merger Lawsuit GOLDMAN SACHS: As Underwriter, Named in Laidlaw Bondholders Litigation GOLDMAN SACHS: Resolves Allegations of Preclusion of Multiple Listing GOLDMAN SACHS: Sued in NY and FL over Consipiracy in Fixing IPO Discount HMOs: Industry Angry as Labor Dep't Changes View on Patients State Cases HOLOCAUST VICTIMS: Deutsche Telekom Pays into Nazi Labor Fund METRO GLOBAL: Seeks to Dismiss Securities Suit in Rhode Island NAU: Suit Alleging Pay-Raise Discrimination Set for Trial PRICELINE.COM: Dennis J. Johnson Expands Period of Securities Suit in CT PRIME RETAIL: Milberg Weiss Files Securities Suit in Maryland TOPPS CO: RICO Suit Filed in CA in 1998 Dismissed and under Appeal TOPPS CO: Trading Card Purchaser to Amend Anti-Gambling Suit in CA USDA: The Washington Post Cites Difficulties in Changing Discrimination WATER CONTAMINATION: Canada Examines Town Managers' Role in E.Coli WORLD ONLINE: Dutch Shareholders Sue for Damages in Amsterdam * Closed Landfills Can Be Blamed for Water Contamination and Leaks * FDIC Chief Urges a Severing of Predators' Bank Funding ********* ALBERTSON'S SUPERMARKETS: Lawsuit over Final Wages Filed in Los Angeles ----------------------------------------------------------------------- A class action lawsuit has been filed in Los Angeles Superior Court charging that Albertson's supermarkets (including the former Lucky chain) and Save-On drug stores fail to pay final wages on time when employees quit, retire, or are laid off or are terminated. The lawsuit has been brought on behalf of all former California employees of Albertson's, Save-On and former Lucky supermarket chain. The named plaintiffs, who are all former Albertson's, Lucky or Save-On employees, charge that the three companies have violated a California law that requires employers to pay all final wages, including vacation pay, on an employee's last day of work. The suit seeks one day pay for every day that the final wages were late, up to a maximum of 30 days' pay. The suit also seeks unpaid vacation pay for employees who never received it. The lawsuit also seeks interest, injunctive relief, attorney's fees and court costs. The case began when "laid off Albertson's employees in Orange and Los Angeles counties asked their union, Food and Commercial Workers Union, Local 324, to help them recover unpaid vacation pay," said Bob Bleiweiss, a spokesperson for Local 324. In investigating the charges, Local 324 discovered that "many employees waited weeks or months for their last paycheck, and some never received any of the vacation pay they were entitled to." Local 324 also discovered that many complaining employees had also received their final paychecks late, and that the problem extended to the Save-On and former Lucky chains in addition to Albertson's. Lucky and Save-On are now owned by Boise, Idaho-based Albertson's. "The employees turned to Local 324 for help because they knew how the UFCW International Union had helped union and non-union Albertson's employees in bringing a nationwide suit against Albertson's for cheating its employees out of earned wages," said Bleiweiss. Albertson's recently settled the nationwide class action, and checks are expected to be mailed out to employees early next year. The lawsuit is not related to the nationwide class action, and it has been filed only on behalf of former California employees. The lawsuit, which covers union and non-union workers alike, has been brought by the law firm of Gilbert & Sackman in Los Angeles. Former Albertson's, Lucky and Save-On employees can confidentially discuss the case by calling attorneys Joseph Paller or Robert Cantore at 323/938-3000. For a copy of the amended complaint, which was filed on Oct. 10, call Bob Bleiweiss 818/591-3248. Further information is available from Bob Bleiweiss and on the Internet at www.gslaw.org. Contact: Bleiweiss Communications Bob Bleiweiss, 818/591-3248 www.gslaw.org AT&T BROADBAND: Reaches Settlement for Late Fee Charges in Michigan ------------------------------------------------------------------- AT&T Broadband reached settlement in class action lawsuit against late fee charged by former MediaOne systems in Mich. Under settlement, current customers who had paid $5 late fee for month will get $2.50 pay-per-view coupon and former customers will receive check for amount, spokeswoman said. Company also agreed not to increase late fee for "certain period of time," she said. Former MediaOne system had 400,000 subscribers, spokeswoman said, declining to specify number involved in settlement. AT&T recently settled late fee lawsuit covering 17 states (CD Aug 22 p2) and announced restructuring of late fee structure in those states. (Communications Daily, October 16, 2000) AZURIX CORP: Savett Frutkin Files Securities Suit in Texas ---------------------------------------------------------- Savett Frutkin Podell & Ryan, P.C. hereby gives notice that a class action complaint was filed in the United States District Court, Southern District of Texas on behalf of a class of persons who purchased the common stock of Azurix Corp. (NYSE:AZX) at artificially inflated prices during the period June 9, 1999 through August 8, 2000 and traceable to Azurix's Initial Public Offering ("Class Period") and who were damaged thereby. The complaint charges Azurix and certain of its senior officers and directors with violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 20 of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder. The complaint also charges Enron Corp. as a controlling person under Section 15 of the Securities Act and Section 20(a) of the Exchange Act. The complaint alleges that during the Class Period, defendants disseminated to the investing public false and misleading financial statements and press releases concerning the Company's publicly reported financial condition and future prospects. The complaint further alleges that defendants issued to the public on or about June 9, 1999, in connection with the Company's initial public offering, a false and misleading registration statement and prospectus. These documents touted the Company's primary business strategy - acquiring, owning, operating and managing large privatization water supply and wastewater projects. However, through a series of partial disclosures beginning on March 30, 2000 and ending on August 8, 2000, it was revealed that several large privatization projects were already postponed or canceled at or near the time of the IPO. As a result of defendants' misrepresentations the price of Azurix common stock was artificially inflated throughout the Class Period. Contact: Savett Frutkin Podell & Ryan, P.C. Barbara A. Podell Adam T. Savett Renee C. Nixon Telephone: 215/923-5400 or 800/993-3233 E-mail: sfprpc@op.net AZURIX, CORP: Wechsler Harwood Files Securities Suit in Texas ------------------------------------------------------------- Wechsler Harwood Halebian & Feffer has filed a securities class action lawsuit in the United States District Court for the Southern District of Texas on behalf of all investors who purchased the common stock of Azurix, Corp. during the period June 9, 1999 through and including August 8, 2000 (the "Class Period") including purchases in Azurix's Initial Public Offering on June 9, 1999 (the "IPO"), to recover damages caused by defendants' violation of the Federal securities laws. Plaintiff charges that during the Class Period, defendants disseminated to the investing public false and misleading financial statements and press releases concerning the Company's publicly reported financial condition and future prospects. Moreover, it is alleged that on or about June 9, 1999, defendants issued to the public, in connection with the Company's initial public offering, a false and misleading registration statement and prospectus. These documents touted the Company's primary business strategy - acquiring, owning, operating and managing large privatization water supply and wastewater projects. However, through a series of partial disclosures beginning on March 30, 2000 and ending on August 8, 2000, it was revealed that several large privatization projects were already postponed or canceled at or near the time of the IPO. As a result of the defendants' false and misleading statements, the market price of the Company's common stock was artificially inflated during the Class Period. Contact: Wechsler Harwood Halebian & Feffer LLP, New York Ramon Pinon, Shareholder Relations Department 877/935-7400 rpinoniv@whhf.com BRIDGESTONE/FIRESTONE: USA Today Says Tire Suits Pile up and Kept Secret ------------------------------------------------------------------------ For nearly a decade, lawsuits against Bridgestone/Firestone piled up in courthouses across the USA, detailing deaths and injuries from car wrecks caused by tire tread separation. Yet, until a few months ago, the life-and-death importance of tire safety was not even a whisper in the national dialogue. Blame the delayed realization -- and the highway carnage created in the interim -- on pervasive secrecy in America's court system, say safety advocates and plaintiffs' lawyers. Behind closed doors, Firestone year after year agreed to pay plaintiffs millions of dollars to settle cases and thereby hush up its tire problems. In dozens of cases, the courts made it illegal for anyone to divulge the financial terms of the settlements and possible evidence about safety defects that are allegedly hurting or killing people. Only in the past few weeks has the public learned that 101 U.S. deaths are linked to persistent problems with Firestone tires. Had those documents been available to the public, lives could have been saved, lawyers and safety advocates say. But Florida Circuit Judge Eleanor Schockett of Miami says courts shouldn't be forced to release inside information pried from companies during lawsuits. "You can't say, 'Oh, I feel sorry for the widow and children' and then say the defendant doesn't have any rights, even though nothing has been proven yet," Schockett says. "As long as plaintiffs get the information they need, they don't have any right to gripe." The Firestone tire fiasco refuels a long-running debate among safety advocates and legal experts about what role court secrecy plays in delaying a day of reckoning for manufacturers when the government acts to protect an unsuspecting public from dangerous products. Florida Attorney General Bob Butterworth and lawyers for news organizations have been intervening in Firestone cases, arguing for openness. The secrecy issue is a topic of heated debate among lawyers and legal ethicists and echoes earlier disagreements over bad fuel tank designs, tobacco, intrauterine birth control devices and dozens of other dangerous products. Twice in recent lawsuits, Schockett granted lawyers for tire companies airtight protective orders virtually assuring that the public wouldn't glimpse information raising doubts about the safety of their tires. Anybody can file a lawsuit and, Schockett says, the right is too often abused. Tight protective orders shield defendants from the damage that can be done by dissemination of sensitive information when charges remain unproved. Florida attorney Bruce Kaster keeps a grisly spreadsheet of 300 lawsuits involving wrecks caused by tread separations on tires from various manufacturers. Dating to the 1980s, it catalogs scores of deaths and a long list of injuries: broken skulls, paralysis, brain damage, lost eyes and broken necks. "There's no question that less oppressive protective measures would have allowed the (tire) story to become public much quicker," says Kaster, a plaintiff's attorney from Ocala. Fred Baron, president of the Association of Trial Lawyers of America (ATLA), made up of plaintiff's lawyers, is more succinct: "Secrecy kills." Tire safety seized national attention two months ago when Bridgestone/Firestone, faced with a government investigation, recalled 6.5 million tires. In addition to the deaths, the government has identified 250 injuries linked to tread separation accidents. Bridgestone/Firestone executive Gary Crigger said at a Senate hearing last month that the company never looked at pending lawsuits while evaluating the tires' safety, an omission the company now acknowledges was a mistake. He also defended the practice of seeking confidentiality in lawsuits. "The confidentiality orders applied only to trade secrets and formulations and these kinds of matters. And, of course, the judge had to agree," Crigger told lawmakers. But advocates of openness, including safety groups and the ATLA, call that a cop-out. R. David Pittle, technical director at Consumers Union, told the same Senate panel that withholding of safety-related information by the judges and parties to lawsuits delayed any solution to the tire problem. "If it had been made public, this hearing would have been held months ago -- maybe years ago -- and the injuries and deaths that have occurred during the interim would not have occurred," Pittle says. Many Forms of Secrecy Court secrecy takes many forms: closing courtrooms during hearings or trials; "depublishing," or withdrawing, a judge's ruling; sealing files; and settling lawsuits confidentially. But what rankles openness advocates most is the protective order, a judicial decree issued routinely in business litigation limiting access to company information to participants in the lawsuit. Civil lawsuits are essentially private matters pursued in public courts. Openness advocates argue the public, therefore, has a stake in knowing what transpires at every stage. Many, like Judge Schockett and defense lawyers, disagree. Legal experts say that in the daily administration of justice, none of the parties is looking out first and foremost for the public interest. Here's why: The defense. Defense lawyers have no incentive to do anything but seek the broadest, most restrictive protective order possible. Under the banner of protecting trade secrets, tire company lawyers will typically seek protection for such things as the design for obsolete tires, warranty payment history and lists of other lawsuits related to a particular type of tire. "As an advocate for your client, you're going to start with a position that's fairly broad," says Lloyd Milliken, an Indianapolis defense lawyer. Milliken says not every internal document in which an employee expresses concern about a design or manufacturing process indicates a corporate disregard for safety. Confidentiality limits the ability of a plaintiff's lawyer to argue that defendants "are just bad people." The plaintiff. Plaintiffs' lawyers for the most part benefit from broad dissemination of any inside information they can dislodge from a manufacturer. The information can help other lawyers suing the company on the same grounds. And if the information finds its way into news reports, that burnishes the lawyers' credentials as tough advocates for victims. But in the end, the plaintiff lawyer's ethical obligation is solely to the client. In real life, injured clients usually need money fast. As a practical matter, plaintiff's lawyers usually accept restrictive protective orders just to move the case forward. Likewise, when a defendant offers a financial settlement on the condition of secrecy, the interest of the client prevails over that of the public. Baron, president of ATLA, says he favors a change in court rules to require settlement terms to remain public unless a judge can be persuaded otherwise. Settlement payments to a minor or a mentally incompetent person would be reasonable cases for confidential settlements, he says. The judge. In federal courts, more than nine-tenths of the lawsuits filed are settled before trial. Nonetheless, federal trial judges stay busy with the cases that do make it to trial, both civil and criminal. So busy judges typically agree to whatever protective order is worked out by lawyers for the two sides. U.S. District Judge James Rosenbaum of Minneapolis says he's seen protective orders in business litigation proliferate in his 15 years on the bench. And provisions are becoming increasingly restrictive, he says. "Some are almost laughable," Rosenbaum says of the intricate rules set by the lawyers for the pretrial flow of information. Rosenbaum says lawyers have never asked him to arbitrate terms of a protective order. As with many judges, his policy is to accept whatever the two sides work out between themselves. To inject himself into negotiations in cases that will almost certainly be settled before trial is just not practical, he says, "If neither of them care, it's fine with me," Rosenbaum says. "There are only a finite number of judges." Stopping Baseless Lawsuits For Schockett, the Florida judge, restrictive protective orders are an important check on aggressive and increasingly organized plaintiffs' attorneys. She's put off by what she calls "extortion by litigation," the filing of lawsuits with little or no merit to coerce settlement payments from deep-pocketed corporations. "There are some people who use the law fairly, and some who use it like a bludgeon," she says. Baron calls Schockett's assertion of widespread lawsuit abuse "one of the great myths" put out by defense lawyers. Judges, Schockett included, can dismiss any baseless lawsuit and fine the lawyer who brought it. Schockett calls the deaths involving tire failures "pretty horrendous." But, she says, they don't change her view that tire companies, like all defendants, have the right to be protected from public release of damaging information for no other reason than they've been sued. To do anything but impose strict limits on the sharing of information in a lawsuit, she says, "is asking me to prejudge the case" in favor of the plaintiff. "It's true that many plaintiffs are pitiful, but is the defendant really responsible for their injury?" Last month, a fellow Miami judge, responding to a request from the Florida attorney general, lifted Schockett's year-old order sealing confidential documents in a tread-separation case involving a recalled Firestone ATX tire. On Sept. 6, Schockett approved word-for-word a six-page protective order submitted by lawyers for Goodyear in another tire-failure case. Her approval came despite protests from plaintiffs' lawyers that the order is overly restrictive and violates Florida's Sunshine in Litigation Act. Schockett's protective order is one of three that Butterworth has successfully had reversed in recent weeks. He says he's prepared to intervene in additional cases against Firestone to make records public. "Others are still driving on them, and they have the right to know what the problem is," says Butterworth, who hasn't ruled out criminal charges as more becomes known about the bad tires. Openness advocates recommend new laws and rules to assure that the public has access to information about faulty products. They cite policies in Florida, which outlaws concealment by the courts of a public hazard, and Texas, which has extensive court rules favoring openness, as worthy models for Congress and legislatures in other states. But Richard Zitrin, a trial lawyer and legal ethicist in San Francisco, says lawyers, not judges, have to take primary responsibility for protecting the public's right to know. He has proposed to the American Bar Association a new ethics rule prohibiting lawyers -- for plaintiffs or defendants -- from restricting access to information in a lawsuit that could, if publicized, alert people about a danger to health or safety. Placing the burden on the lawyers, Zitrin says, recognizes that judges have little power, inclination or resources to investigate defense claims that they're just protecting essential trade secrets. Arthur Miller, a Harvard University law professor and privacy expert, says he's never seen hard evidence that freer flow of information during fact-finding or discovery, as lawyers call it -- would have prevented deaths or injuries from dangerous products. Like Schockett, he argues that corporate defendants should be able to shield a good deal of internal information at the early stages of a lawsuit. "We can't spend our lives having fistfights over discovery," he says. Besides, openness advocates should be careful what they ask for, Miller argues. The rush to pry open the secrets of a big corporation like Bridgestone/Firestone could ultimately undermine the privacy rights of individuals who find themselves defendants in future lawsuits. "I don't think the cost of involving the courts in settling a dispute should be a loss of privacy," he says. (USA Today, October 16, 2000) BROOKTROUT, INC: Berman DeValerio Files Securities Suit in Massachusetts ------------------------------------------------------------------------ A shareholder of Brooktrout Inc. (Nasdaq: BRKT) on October 13 filed a class-action lawsuit charging Brooktrout with securities fraud, Berman DeValerio & Pease LLP (www.bermanesq.com) said. The lawsuit, which was filed in the United States District Court for the District of Massachusetts, seeks damages for violations of federal securities laws on behalf of all investors who bought Brooktrout common stock between February 3, 2000 and October 6, 2000 (the "Class Period"). Berman DeValerio & Pease has represented defrauded investors in class actions for nearly two decades. The complaint claims that Brooktrout's statements regarding its consolidated financial results for the fourth quarter and year-end 1999 and for the first two quarters of 2000 were materially false and misleading because they included improperly recognized revenues from the company's majority-owned subsidiary, Interspeed, Inc. Interspeed shareholders are currently suing that company and certain others (including Brooktrout) for securities fraud in the wake of Interspeed's October 6 announcement that it anticipated that its unaudited results for the first three quarters of 2000 would be restated due to improper revenue recognition. Contact: Jennifer L. Finger, Esq. of Berman DeValerio & Pease, 800-516-9926, bdplaw@bermanesq.com. CORPORATION FINANCIERE: Canada Clears Tax Expert of 3rd-Party Liability ----------------------------------------------------------------------- A recent ruling says that a tax accountant advising an R&D general partnership has no 3rd-party liability toward investors. In Meese v. Corporation Financiere Globex, the Superior Court refused to grant Meese, a taxpayer grappling with income tax reassessments, the authorization to institute a class action against the government and against a lawyer and tax accountant whose services had been retained by the promoter. The judge explained in his decision that, under civil law, an accountant's liability may arise from a contractual relationship with a client or from a professional fault resulting to a 3rd party. In the Meese case, since the investors in the group had not retained the services of the tax accountant themselves, the court restricted its analysis to the accountant's liability toward them as 3rd parties. According to the court, even if the accountant had had doubts regarding the future availability of the tax benefits, he had no legal duty to warn the investors about it. Beginning in the late 1980s, thousands of taxpayers invested money- sometimes substantial amounts - in scientific research and experimental development partnerships established by promoters who, sensing a golden business opportunity, tantalized them with the prospect of some attractive tax benefits. When, in the 1990s, Revenue Canada took a closer look at the activities of the partnerships carrying out these projects, the taxpayers got some bad news. The tax authorities said that the deductions and tax credits they had claimed would be refused because the projects in question did not meet Income Tax Act criteria. Revenue Canada (and later, Revenue Quebec) challenged several elements, including the expectation of profits from these projects and the active participation of the partners (taxpayers) in the research work. Faced with this setback, the taxpayers formed lobby groups in an attempt to make the tax authorities change their decision. They also filed notices of objection. Around this time, several groups of investors (Forgues v. Laporte Racine at al., CSM 500-06000054-979; [appeal pending] CAM 50009-009586-009; Vidal v. S.F.S. Logic Fisc Inc. et al., CSM 500-06-000012-969; Rouleau et al. v. Etteloc et al., CSM 500-06000001-954 CAM 500-09-003029-964) decided to go before the Quebec courts to seek authorization to institute class actions against the promoters and vendors and their advisers, namely the lawyers and accountants. Essentially, they complained that the lawyers and accountants had not warned them their investments were ineligible for tax benefits. Revenue Quebec and Revenue Canada were also made parties to these proceedings, because the investors claimed that the tax authorities had implemented a program intended to encourage them to invest in R&D without clearly informing them of the conditions for participation. The investors blamed the governments for having failed to monitor the activities of the partnerships responsible for carrying out the R&D projects and for having failed to act promptly - thereby comforting the investors in their decision to continue investing year after year. One case in which the parties sought the authorization of the Superior Court to institute a class action is particularly interesting for tax accountants in private practice. In Meese v. Corporation financiere Globex (CSM, 500-06-000015-947) Justice Pierre Dalphond rendered a decision on December 15, 1999. In summary, the Superior Court refused to grant Mr. Meese, a taxpayer grappling with income tax reassessments, the authorization to institute a class action against the governments and against a lawyer and a tax accountant whose services had been retained by the promoter. At this stage of the proceedings, Mr. Meese had to show that the recourse he intended to exercise satisfied the conditions for granting the authorization to institute a class action, as established in the Quebec Code of Civil Procedure. The Quebec Code of Civil Procedure sets forth four conditions: the recourses of the members raise identical, similar or related questions of law or fact; the facts alleged by the applicant in support of his or her personal recourse seem to justify the conclusions sought; the composition of the group in question justifies the bringing of a class action rather than several individual actions; and the individual seeking to represent members of the group has the necessary qualities to represent them adequately. In the court's opinion, the applicant did not satisfy the second condition with respect to the professionals and the governments. In particular, Judge Dalphond emphasized that the facts that Mr. Meese had alleged against the tax accountant who provided professional services to the promoter did not show "a serious colour of right" - i.e., sufficient legal basis. After examining the evidence in the court record, including the exhibits and transcripts of Mr. Meese's examinations, Judge Dalphond noted that the tax accountant had not prepared any financial statements or other documents intended for the investors. Moreover, before Mr. Meese invested in the research and development partnerships, he had never heard of the tax accountant, had never seen him, had never attended one of his conferences and had not received any documents bearing his signature or issued by him. Judge Dalphond explained in his decision that, under civil law, an accountant's liability may arise from a contractual relationship with a client or from a professional fault resulting in damage to a third party. In the Meese case, since the investors in the group had not retained the services of the tax accountant themselves, the court restricted its analysis to the accountant's liability toward them as third parties. According to the court, even if the accountant had had doubts regarding the future availability of the tax benefits, he had no legal duty to warn the investors about it. In the absence of any representations on the part of the tax accountant, Judge Dalphond considered that he could not be held liable toward third parties, and he stated the following: "Such a positive obligation to inform as regards the applicant and other persons who were unknown to him and not identified can exist only if set forth in legislation or in the code of ethics of accountants. The failure to warn third parties will result in liability against a given person, only if that person had a duty to carry out what he failed to do.... However, the applicant did not assert any relevant legislative provision or any relevant provision of a text governing the conduct of accountants! In addition, since Mr. Meese admitted that he had been unaware of the tax accountant's involvement before investing in the R&D companies, the court was of the opinion that the professional's conduct could not have influenced Mr. Meese's decisions in any manner whatsoever. The courts are reluctant to dismiss class actions at the preliminatry authorization stage. Nonetheless, by refusing to authorize a recourse that didn't show any "colour of right," the Superior Court strongly confirmed the limits on accountants' liability. Thus, failing direct or indirect representations made to third parties (via documents, opinions, reports, etc.), an accountant cannot be held liable for failing to inform or advise the public. Tax accountants should be watching this case with interest, given that Mr. Meese has decided to appeal Judge Dalphond's ruling (Meese v. Corporation financiere Globex et al., C.A.M. 500-09-009138-009). Hekne Lefebvre is a partner with Ogilvy Renault in Montreal. Along with her junior partner Mtre. lean-Charles Rene, she represented the tax accountant in the Meese case. Technical Editor: Mindy Paskell-Mede, BCL, LLB, partner in the Montreal law firm Nicholl Paskell-Mede (CA Magazine, September, 2000) EBAY: Online Auction Operator Faces Suit on Sale of Fake Goods -------------------------------------------------------------- In a case closely watched by critics of online auctions, a California judge has allowed six people to proceed with a lawsuit that strikes at the core of how eBay runs its business. The ruling involves a lawsuit filed by people who say they bought autographed sports memorabilia later found to be fake. The lawsuit asserts that eBay, the largest online auction operator, has a responsibility to ensure the authenticity of the sports memorabilia sold through its World Wide Web site. EBay, which lists about four million items for sale daily, has repeatedly argued that it merely operates a venue for sales and cannot be held liable for fraudulent transactions. Company officials have said that if eBay were forced to verify every piece of listed merchandise -- or even only sports memorabilia -- eBay would not be able to offer consumers such a large marketplace. Last week's ruling came from Judge Linda B. Quinn of Superior Court in San Diego County, where the lawsuit was filed in April. The ruling was a preliminary response to eBay's assertion that the case should be dismissed. Though she did not grant a dismissal, Judge Quinn sided with eBay on several points and told the plaintiffs to restate their case in terms that would more specifically rebut eBay's arguments. The case is based in part on a California law governing the sale of sports memorabilia. EBay is based in San Jose, Calif. Legal experts say they are watching the case because while several states have laws intended to protect consumers from fraudulent auctions, most of them were written before the Internet made online auctions possible. "It is definitely an open issue as to whether online auctions like this should be regulated under those state auction statutes," said Thomas Bell, a lawyer in Seattle who specializes in Internet law. In the California case, six eBay users filed the complaint after discovering that several autographed baseballs and other sports items carried what law-enforcement officials said were forged signatures. Also included as defendants in the suit are nine sellers and authenticators of sports memorabilia, most of whom live in San Diego and who have been investigated or indicted by federal officials for their roles in what the Federal Bureau of Investigation says is a nationwide swindle. James C. Krause, the plaintiffs' lawyer, said his clients wanted to recoup the $1,100 they spent on the items, and to stop eBay from providing what they said was a channel for the sale of fake merchandise. Mr. Krause has requested class-action status for the lawsuit, which could turn the case into a multimillion-dollar complaint including anyone who can prove that they have unwittingly bought counterfeit sports memorabilia on eBay. The judge is scheduled to begin considering the request for class-action certification on Nov. 17. Lawyers on both sides say a final judgment on the case will probably not come until next year. The case may hinge on how the judge interprets a section of the Telecommunications Act of 1996. The law says that Internet service providers are not liable for the material that is sent out over their networks. EBay declined to comment on last week's ruling, but in court documents, it has said it is not an auctioneer since it does not list the items for sale, does not write the descriptions of the items and does not have the items in its possession at any time. As a result, eBay's lawyers say, the California law on sports memorabilia dealers does not apply to eBay. Mr. Krause said he intended to argue that eBay was a "content provider," rather than a service provider. The lead plaintiff is Lars Gentry, an Illinois resident who used eBay to buy four baseballs whose signatures were found to be forged. He also bought a couple of "cuts" -- documents that feature the autographs of famous sports figures -- that were found to be forged. Mr. Krause is using the California law, adopted in 1992, to support several key parts of the case. The law forbids dealers -- including auctioneers -- to represent items as collectibles if they include forged signatures. It also requires dealers to certify that items are authentic. Under the law, people who have been misled by dealers are entitled to recover 10 times the sales price of the items purchased. Mr. Krause says the law applies to eBay because the company is essentially an auctioneer. "The statute is there for the people to rely upon," said Mr. Krause, adding that eBay was 'not doing a good job of protecting the public." The lawsuit also accuses eBay of not revoking the privileges of the sellers after receiving complaints from other users who asserted that the goods were fraudulent. EBay has said that it makes a good-faith effort to protect its users, and the company has taken a few steps recently to deter fraud, including an announcement in July telling its users that some sellers of sporting items had used fake certificates of authority to entice buyers. EBay has said it would no longer list items that featured those certificates. The eBay users who were named in the F.B.I.'s indictment are facing probation or suspension from the Web site, according to Kevin Pursglove, eBay's spokesman. Meg Smith, a fellow at Harvard's Berkman Center for Internet & Society, said the lawsuit illustrated the dilemmas that face online auction services. "EBay is caught in the cross-fire here," she said. If the providers of the service make no effort to protect its users, "they look like a bad corporate citizens," she said. "But the more responsibility they take, the more they look like an auctioneer and the less they look like they are just a forum." (The New York Times, October 16, 2000) EFI, SPLASH: Announce Proposed Settlement of Merger Lawsuit ----------------------------------------------------------- Electronics For Imaging, Inc. (EFI) (Nasdaq:EFII) and Splash Technology Holdings, Inc. (Nasdaq:SPLH) jointly announced on October 15 the signing of a memorandum of understanding related to a proposed settlement of the class action lawsuit filed against Splash and its directors on August 31, 2000 after the announcement of the merger agreement between Splash and EFI. The memorandum of understanding provides for the settlement and dismissal with prejudice of the litigation. The final settlement, which includes the amount of attorneys' fees to be paid to plaintiff's counsel, is subject to court approval and there can be no assurance that such approval will be obtained. The memorandum of understanding provides that those Splash shareholders who were unable to tender their shares by the October 13, 2000 deadline will have until October 23, 2000 to tender their shares. The memorandum of understanding also calls for the elimination of the termination fee set forth in the merger agreement and certain changes concerning the ability of Splash to solicit another offer. EFI and Splash deny any wrongdoing whatsoever, but agreed to the memorandum of understanding to eliminate the burden and expense of further litigation. As previously announced, EFI and Splash intend to effect a merger pursuant to which Splash will become a wholly-owned subsidiary of EFI and all remaining Splash stockholders (other than EFI) will have the right to receive the same $10 per share in cash paid in the tender offer. It is currently anticipated that the merger transaction will be completed within the next two weeks. Splash and EFI also announced the completion of EFI's cash tender offer to purchase all the outstanding shares of common stock of Splash, and the extension of time for additional shareholders to tender their remaining Splash shares. EFI was advised by Wilmington Trust, FSB, the Depositary for the offer, that a total of 13,442,057 shares had been tendered pursuant to the offer (including 1,787,564 shares subject to guarantees of delivery), which expired at 5:00 p.m., New York City time on Friday, October 13, 2000, and that all such shares have been accepted for payment. After giving effect to the purchase of the shares tendered, EFI beneficially owns approximately 91.5% of the outstanding Splash shares. EFI also announced that it is commencing a subsequent offering period which expires at 5:00 p.m. New York City time on Monday, October 23, 2000, unless extended. During this subsequent offering period, Splash shareholders who did not tender their shares by the expiration of the tender offer may tender their shares by following the directions in EFI's offer to purchase and letter of transmittal. About Electronics For Imaging The announcement says that Electronics for Imaging (www.efi.com) is the world leader in enabling networked printing solutions. EFI technology allows copiers, printers, and digital presses to be shared across work groups, the enterprise, and the internet. The results are greater productivity, improved document management, seamless networking, and the assured quality of color and black-and-white images. The company's OEM partners look to EFI to deliver products that help grow sales and reduce costs associated with internal development and support. Competitive, feature-rich solutions, such as the Fiery and EDOX brands of networked image processors and the eBeam brand of Web-enabled whiteboard systems, are an outgrowth of our determination to offer OEMs and end users alike the highest assurance of innovation, quality, reliability, and support. The company employs more than 800 people and maintains 22 offices worldwide. GOLDMAN SACHS: As Underwriter, Named in Laidlaw Bondholders Litigation ---------------------------------------------------------------------- Goldman, Sachs Co. has been named as a defendant in purported class actions filed on September 24, 2000 in the U.S. District Court for the Southern District of New York and on September 22, 2000 in the U.S. District Court for the District of South Carolina arising from certain offerings of debentures by Laidlaw, Inc. during 1997-1999. The defendants include Laidlaw, certain of its officers and directors, the lead underwriters for the offerings (including Goldman, Sachs Co., which was lead manager in the offerings), and Laidlaw�s outside auditors. The offerings included a total of $1.125 billion principal amount of debentures, of which Goldman, Sachs Co. underwrote $286.25 million. The lawsuits, brought by certain institutional holders of the debentures, allege that the prospectuses issued in connection with the offerings were false and misleading in violation of the disclosure requirements of the federal securities laws. The plaintiffs are seeking, among other things, unspecified damages. GOLDMAN SACHS: Resolves Allegations of Preclusion of Multiple Listing --------------------------------------------------------------------- In the lawsuit alleging of conspiracy to preclude the multiple listing of equity options on the exchanges, certain defendants including Hull Trading Co. L.L.C. have entered into a settlement, subject to court approval, pursuant to which Hull will be required to pay an aggregate of $2.475 million. On July 18, 2000, the federal district court granted plaintiffs� motion for leave to file an amended complaint. Defendants have renewed their motion to dismiss with respect to the amended complaint. The lawsuit brought by Reichhold Chemicals, Inc. and Reichhold Norway ASA was dismissed on August 29, 2000 pursuant to a settlement. The civil action under the qui tam provisions of the federal False Claims Act was voluntarily dismissed without prejudice on August 28, 2000. GOLDMAN SACHS: Sued in NY and FL over Consipiracy in Fixing IPO Discount ------------------------------------------------------------------------ The Goldman Sachs Group, Inc. is a named defendant in a purported class action filed on August 17, 2000 in the U.S. District Court for the Southern District of Florida by an alleged issuer in a 1996 initial public offering. The action asserts substantively similar allegations to the New York action which alleges of conspiracy to fix at 7% the discount that underwriting syndicates receive from issuers of shares in certain offerings. On October 2, 2000, defendants, most of which are named in the New York action, moved to transfer the action to the New York federal court. HMOs: Industry Angry as Labor Dep't Changes View on Patients State Cases ------------------------------------------------------------------------ Health maintenance organizations are facing the sharpest attack on their nearly inviolable protection from patient lawsuits. While lawmakers on Capitol Hill debate a patients' bill of rights-caught between corporate lobbyists on one side and angry consumers on the other-the courts are being urged to move ahead. Using a recent Supreme Court decision originally hailed as a victory for HMOs, plaintiffs attorneys are seeking to remove the federal protections that have kept managed care businesses out of state courts and shielded them from juries with the power to exact large damages for wronged patients. What's given these attorneys a big boost is the Department of Labor's endorsement of a patient's right to sue HMOs under state law. The department, a key player in the policy debate surrounding lawsuits against HMOs, is arguing in a Pennsylvania state case that the U.S. Supreme Court has carved out a broad area under which HMOs can find themselves liable under state law. It is the first time the department has interpreted the Supreme Court's June 12 decision in Pegram v. Herdrich-and marks a reversal from the agency's previous stance in the case. The lawsuit is pending in Pennsylvania Supreme Court, but HMOs are already irate at the Labor Department. Industry associations and attorneys call the department's arguments "overbroad" and dangerous. "The industry is very upset about it," says Stephanie Kanwit, a D.C. partner at New York's Epstein Becker & Green who represents HMOs. "HMOs are going to be sued for everything they do and everything they don't do. What the Department of Labor opinion would do, if adopted by the court, is undermine every single element of managed care." But plaintiffs attorneys and patients' rights advocates, including the powerful AARP, hail the Labor Department's conclusion. "If the position is adopted, it will have an enormous effect," says Marc Machiz, a partner at D.C.'s Cohen, Milstein, Hausfeld & Toll, which specializes in plaintiffs' suits in many areas, including health care. "It will enact into law what the people on the Hill are fighting about. It would decide that you could sue your HMO for damages when it is denying care or denying treatment." ERISA's Reach It has long been established that HMOs have strong legal protections. They can be sued, but due to regulations of the Employee Retirement Income Security Act of 1974 (ERISA), suits against HMOs are usually decided under federal law. And in federal court, HMOs can be sued only for benefits, not damages. That means, for instance, that a woman who develops breast cancer after an HMO refuses to authorize a mammogram can only win the few hundred dollars for the cost of the mammogram. For plaintiffs attorneys, those restrictions make HMOs tantamount to untouchable. ERISA governs employee benefits under federal law, ensuring equal treatment and rights across state lines. That keeps most suits against HMOs out of state court-the preferred grounds for class actions and plaintiffs' lawsuits because of the ability to get punitive and compensatory damages. Several states have passed patients' rights bills, allowing HMOs to be sued in state court, on some grounds. State and federal courts have in recent years found that certain types of HMO decisions, most notably those involving medical judgment, fall under state, not federal law. Then came the U.S. Supreme Court's decision in Pegram v. Herdrich. The actual decision was a win for HMOs. The court unanimously ruled that a patient forced to wait eight days for an ultrasound of her inflamed appendix, which eventually ruptured, did not have grounds to sue the HMO under ERISA. But in further discussion, the Court paved the way for patients to sue by identifying certain types of HMO decisions that could be subject to state laws and civil suits. These so-called mixed decisions involve both coverage issues-those involving what procedures and treatments the plan pays for-and medical judgment-what procedure or treatment is warranted. Such decisions, the court wrote, may not be shielded from suit. But what are mixed decisions? How broad a hole did the Supreme Court mean to carve out of ERISA? These are the questions that future court cases will have to decide. The Labor Department filed an amicus brief in Pappas v. Asbel, a suit originally filed in Pennsylvania trial court by Basile Pappas and his wife. According to Pappas, United States Healthcare Systems of Pennsylvania denied him in May 1990 a transfer to an out-of-network hospital with a spinal cord trauma unit. Pappas had an epidural abscess pressing on his spine that rendered him a quadriplegic. The HMO won in the trial court on ERISA grounds. But the Pennsylvania Superior Court and Supreme Court ruled the HMO could stand trial on the theory that its actions were not protected by ERISA. The case went to the U.S. Supreme Court, which sent it back to be evaluated in light of Pegram. The Labor Department, which originally argued in Pappas that ERISA barred the suit against the HMO, now contends that it is probably permissible to sue in light of Pegram. If the department prevails, it will have taken one of the first steps in hammering out a legal, not legislative, solution to the HMO dilemma. That may bring mixed benefits. "It may be that the way we think the courts are heading may be a better, less disruptive way to sort out the problem," says Phyllis Borzi, a research professor at George Washington University School of Public Health and an attorney at D.C.'s O'Donoghue & O'Donoghue. That doesn't mean that advocates are giving up on the patients' bill of rights. Court decisions can always be overturned, and relying on a legal remedy could mean the right to sue HMOs would vary dramatically from state to state. And the bills in Congress go far beyond just establishing a right to sue, but also enact an external review program and create disclosure obligations for HMOs. In fact some watchers say that in the long run, HMOs may find Congress easier to deal with than the courts. "If Congress truly does nothing on this, then the courts will eventually overturn ERISA," says John Stone, a spokesman for Rep. Charles Norwood, a Georgia Republican. "The worst thing that could happen to HMOs is that this bill doesn't pass." What will most certainly happen soon is more HMO lawsuits. "I think you are going to see an increase in the number of state lawsuits," says Susan Burke, a special counsel at Covington & Burling who specializes in health care. "The other wild card is that many states permit punitive damages. I think you are going to see the plaintiffs bar far more interested in these types of cases." That is not an idea HMOs relish. They argue that if suits start pouring in, HMO premiums will rise astronomically and price many people out of health care. "That kind of accountability doesn't work," says Louis Saccoccio, general counsel for the American Association of Health Plans. "We have seen that in the medical malpractice area. You can't sue your way to better care." Those arguments don't have much resonance beyond the insurance realm. Doctors and physicians argue that if they are liable for poor medical decisions, HMOs should be too. And it doesn't fly with those who worry about what happens to patients if HMOs are immune from suit. "If it did have a major impact, if there were thousands of people winning lots of big punitive damages, what kind of commentary is that on HMOs?" says Rand Rosenblatt, a professor at New Jersey's Rutgers School of Law, Camden. " If lots of people had cases that just shocked juries, I think it would show something needs to be fixed." (Legal Times, October 9, 2000) HOLOCAUST VICTIMS: Deutsche Telekom Pays into Nazi Labor Fund ------------------------------------------------------------- Telecommunications giant Deutsche Telekom AG said it has paid into a 10 billion mark (dlrs 4.5 billion) German fund to compensate Nazi-era slave laborers, the first former state monopoly to back faltering efforts to raise money from corporate donors. Confirming media reports, Telekom spokesman Hans Ehnert said the firm made a contribution ''in solidarity with the rest of German industry.'' The Frankfurter Rundschau newspaper said Telekom gave 100 million marks (dlrs 44 million). German companies and the government agreed to finance the fund 50-50 in June. With industry contributions running slow, the foundation drumming up company donations last week urged formerly state-run companies including Telekom to come forward. While more than 4,000 firms have so far contributed, their part of the total is stuck at about 3.2 billion marks (dlrs 1.4 billion) far short of the 5 billion marks promised. The government has said money from companies it owns or controls such as Telekom, railroad operator Deutsche Bahn and postal service Deutsche Post should go to its half of the fund, while German industry wants any contributions from them to count on its side of the ledger. Telekom, Deutsche Bahn and Deutsche Post together were expected to donate as much as 500 million marks (dlrs 218 million). Some firms are dragging their feet amid concern that backing the fund won't shield them from further claims. Wrangling with the U.S. government over protection from lawsuits by class action attorneys means payments to elderly survivors forced to work for the Nazis, originally due to begin before the end of this year, are now likely to be delayed. Germany, the United States and other countries signed an accord launching the fund last June. More than 1 million former laborers are expected to be eligible for payments, mostly Central and Eastern Europeans. (AP Worldstream, October 16, 2000) METRO GLOBAL: Seeks to Dismiss Securities Suit in Rhode Island -------------------------------------------------------------- George Kinney v. Metro Global Media, Inc., et al. C.A. No. 99-579 (U.S.D.C.,D.R.I.) On November 22, 1999, George Kinney, on behalf of himself and all other similarly situated, commenced a putative class action in the United States District Court for the District of Rhode Island against Metro Global and certain of its present or former officers and directors. Plaintiff seeks to represent a class of all person who acquired securities of Metro Global between September 13, 1996 and September 13, 1999. The Complaint alleges claim based on alleged violations of section 10(b) of the Securities Exchange Act of 1934. Plaintiff alleges that the defendants made a series of false and misleading statements concerning Metro Global's reported financial results during the class period that violated generally accepted accounting principles and ultimately caused Metro Global to restate certain financial statements. On March 15, 2000, Metro Global and certain defendants filed a motion to dismiss the complaint. The plaintiffs filed an amended complaint dated May 15, 2000 and Metro Global moved to dismiss the amended complaint on July 5, 2000. Plaintiffs filed an opposition to Metro Global's motion to dismiss on August 15, 2000. Metro Global replied to the plaintiffs' opposition on September 1, 2000. Metro Global believes it has meritorious defenses and intends to vigorously defend this action. NAU: Suit Alleging Pay-Raise Discrimination Set for Trial --------------------------------------------------------- Seven years after allegations first surfaced, a lawsuit alleging that Northern Arizona University discriminated against some of professors when giving out pay raises is going to trail in December. The suit seeks $2 million in damages, which includes back pay for professors who claimed they were discriminated against. The case began in 1993 after then school president Eugene Hughes gave more than $200,000 in raises to women and minorities who were below the midpoint of their salary range. A class-action lawsuit was filed by 192 Anglo males and 85 women who were making at least $1,200 less than comparable minority males due to what they say was a faulty computer regression analysis. The plaintiffs claim the computer analysis used to determine the raises did not take into account each professor's performance and the highest academic degree earned. "If you were a White male, you were absolutely barred from getting a raise," said Tom Horne, the attorney representing the plaintiffs who filed the class-action suit. "The way these raises were determined was totally fallacious." NAU declined to comment on the case, citing its usual practice of not discussing pending litigation. The Attorney General's Office, which represents the state, also declined comment. The state, along with Hughes, the Arizona Board of Regents and several former regents are also named as defendants. (The Associated Press State & Local Wire, October 16, 2000) PRICELINE.COM: Dennis J. Johnson Expands Period of Securities Suit in CT ------------------------------------------------------------------------ The Law Offices of Dennis J. Johnson announces that a class action lawsuit has been commenced in the United States District Court for the District of Connecticut on behalf of purchasers of the securities of Priceline.com, Inc. (NASDAQ:PCLN) between January 31, 2000, through and including October 4, 2000 (the "Class Period"). The Complaint alleges 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 during the Class Period. For example, as alleged in the Complaint, the Company carried warrants to purchase WebHouse stock as an asset valued at $188.8 million. However, the Complaint alleges, Priceline's valuation of these warrants was without a reasonable basis. Thus, the Company's financial statements were materially false and misleading because the Company's financial results were materially inflated due to the inclusion of these warrants as assets. As alleged in the Complaint, on October 5, 2000, Priceline announced that WebHouse would terminate operations in ninety days, thus rendering the Priceline's WebHouse warrants virtually worthless. Contact: The Law Offices of Dennis J. Johnson Dennis J. Johnson, Esquire Jacob B. Perkinson, Esquire 1-888-459-7855 LODJJ@aol.com PRIME RETAIL: Milberg Weiss Files Securities Suit in Maryland ------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on October 13, 2000, on behalf of purchasers of the securities of Prime Retail, Inc. (NYSE:PRT) between May 28, 1999 and January 18, 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/primeretail/ The action is pending in the United States District Court for the District of Maryland, located at 101 W Lombart St. Baltimore, MD 21201, against defendants Prime Retail, William H. Carpenter (President and Chief Operating Officer), Abraham Rosenthal (Chief Executive Officer and Director), Michael W. Reshke (Chairman of the Board), and Robert P. Mulreaney (Chief Financial Officer). 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 May 28, 1999, and January 18, 2000. For example, the complaint alleges that on May 28, 2000, Prime Retail announced the construction of an outlet center in Puerto Rico without revealing its lack of financing for the project, requiring the Company to fund it with cash that it did not have because-- also unbeknownst to investors--its operations were deteriorating. Furthermore, the complaint alleges, Prime Retail assured investors throughout the Class Period that it would issue a dividend in its fourth quarter of 1999, even though it knew, or recklessly disregarded, that its deteriorating operations and debt-laden balance sheet would make issuing a dividend impossible. On January 18, 2000, Prime Retail announced that it will suspend its common dividend for 2000 because of lowered occupancy rates and cash shortage. In response to the announcement, Prime Retail's stock price dropped by 37% from its prior day close. Contact: Milberg Weiss Bershad Hynes & Lerach LLP, New York Steven G. Schulman or Samuel H. Rudman, 800/320-5081 Email: primeretailcase@milbergNY.com Website: http://www.milberg.com TOPPS CO: RICO Suit Filed in CA in 1998 Dismissed and under Appeal ------------------------------------------------------------------ In November 1998, Topps Co Inc was named as a defendant in a purported class action commenced in the United States District Court for the Southern District of California entitled Rodriquez, et. al. v. The Topps Company, Inc., No. CV 2121-B (AJB) (S.D. Cal.). The Class Action alleges that the Company violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") and the California Unfair Business Practices Act, by its practice of selling sports and entertainment trading cards with randomly-inserted "insert" cards, allegedly in violation of state and federal anti-gambling laws. The Class Action seeks treble damages and attorneys' fees on behalf of all individuals who purchased packs of cards at least in part to obtain an "insert" card over a four-year period. On January 22, 1999, plaintiffs moved to consolidate the Class Action with similar class actions pending against several of the Company's principal competitors and licensors in the California Court. On January 25, 1999, the Company moved to dismiss the complaint, or, alternatively, to transfer the Class Action to the Eastern District of New York or stay the Class Action pending the outcome of the Declaratory Judgment Action pending in the Eastern District of New York. By orders dated May 14, 1999, the California Court denied the Company's motions to dismiss or transfer the Class Action but granted the Company's motion to stay the Class Action pending the outcome of the Declaratory Judgment Action. The California Court also denied plaintiffs' motion to consolidate the Class Action with similar purported class actions. On April 18, 2000, the California Court entered an order requiring plaintiffs in the Class Action as well as in the other purported Class Actions to show cause why all such actions should not be dismissed. By order dated June 21, 2000, the California Court vacated its May 14, 2000 order denying the Company's motion to dismiss the Class, dismissed the RICO claim in the Class Action with prejudice and without leave to replead, and dismissed the pendent state law claims without prejudice. Plaintiffs filed a notice of appeal of the California Court's decision to the United States Court of Appeals for the Ninth Circuit on July 21, 2000. If the Class Action were reinstated on appeal, an adverse outcome in the Class Action could materially effect the Company's future plans and results. TOPPS CO: Trading Card Purchaser to Amend Anti-Gambling Suit in CA ------------------------------------------------------------------ On August 21, 2000, the Company was named as a defendant in a purported class action commenced in the Superior Court of the State of California for the County of Alameda (the "California State Court") entitled Chaset, et al. v. The Upper Deck Company, et al., No. 830257-9. The California Class Action alleges that the Company and other manufacturers and licensors of sports and entertainment trading cards committed unlawful, unfair and fraudulent business acts under the California Unfair Business Practices Act and the California Consumer Legal Remedies Act by the practice of selling trading cards with randomly-inserted "insert" cards allegedly in violation of state and federal anti-gambling laws and state consumer laws. The California Class Action seeks declaratory, equitable and injunctive relief and attorneys' fees on behalf of a purported nationwide class of trading card purchasers. Plantiff has indicated that he intends to amend his complaint, including an amendment to demand compensatory and punitive damages and restitution, and all parties to the action have jointly applied to the California State Court for an order providing that plantiff shall file an amended complaint on or before October 18, 2000 and that defendants shall file an answer or other responsive pleading on or before December 15, 2000. An adverse outcome in the California Class Action could materially effect the Company's future plans and results. USDA: The Washington Post Cites Difficulties in Changing Discrimination ----------------------------------------------------------------------- With his experience as a program specialist and a manager, not to mention a quarter century on the job, Harold Connor saw himself as a prime candidate for a director's post at the U.S. Department of Agriculture. But in the end, Connor, who is black and a college graduate, lost out to a white employee with less time on the job, no management experience and no college degree. It is the kind of thing that critics say was standard practice for years at USDA, a sprawling agency regarded by some as a cesspool of discrimination and openly derided as "the last plantation." It is a reality that USDA Secretary Dan Glickman has been struggling to change for several years. In 1997, he launched a much-touted effort to make civil rights a top priority at USDA. Under Glickman, the agency has restored its office of civil rights, reduced the backlog of discrimination complaints, settled a huge lawsuit by black farmers and increased the percentage of minorities in its ranks. But many other problems have gone unresolved. Minority employees still complain about continued discrimination and a slow-moving civil rights process. For example, Connor told the Senate Agriculture Committee last month that he has yet to receive the compensation ordered by the Equal Employment Opportunity Commission judge who upheld his discrimination complaint nearly a year ago, despite public statements by agency officials that he had. "I have yet to receive a promotion and USDA has yet to begin processing back pay that it awarded me as a result of the unlawful discrimination I experienced," Connor told the committee. When the administrative judge's order was issued last December, a USDA spokesman told The Washington Post that Connor had already been promoted, which was erroneous. Connor, who applied for the promotion in early 1996, has since been offered one promotion, which he rejected because it offered no supervisory role and appeared to be a dead end professionally. Experiences like Connor's have led minority advocates at USDA to question whether Glickman, a former member of Congress from Kansas, has the power, or the will, to extend his civil rights message beyond his executive suite. In a recent interview , he acknowledged continued problems, but said USDA has made substantial progress. "You've got to go back to the beginning," Glickman said. "I turned over the rock here and found a lot of stuff that hadn't been dealt with in decades. The government had neglected these issues for too long." Glickman said he was surprised at the dimensions of USDA's civil rights problems. There were black farmers who were found to be denied loans and other assistance because of their race; minority and female employees complained about harassment; and thousands of discrimination complaints filed by both agency employees and customers were simply backing up, as the department's civil rights operation had been dismantled during the 1980s. Making the problem more difficult is the unusual structure of USDA, whose 89,000 employees are spread through every county in the nation. Also, many of the decision makers on key programs such as farm aid are technically local officials who cannot be removed by their bosses in Washington. Still, Glickman says he has been building management structures and hammering at the need for the agency to make civil rights a true priority. And even amid continued problems, he said he sees sure signs of progress. In the past year, the backlog of complaints filed by USDA customers, including farmers who apply for loans or disaster relief, has been reduced from 1,038 to 480. Meanwhile, the department received fewer complaints in the past year than any year since the anti-discrimination effort began. Among employees, there were fewer complaints filed in the first 10 months of the past fiscal year than at any time since 1996. But even with the improvement, there were 1,804 EEO complaints by USDA employees pending last month. The agency also has averted at least four class actions brought by employees within the past year, as judges have denied class certification. Also, USDA settled a suit by female Forest Service employees whose complaint was filled with lurid examples of harassment and discrimination. But even with that progress, USDA lawyers acknowledged that there are still 19 proposed class action complaints pending against the agency. Just last week, lawyers filed a proposed class action in U.S. District Court alleging that for 20 years USDA systematically discriminated against 20,000 Latino farmers by unfairly denying them loans and failing to investigate bias complaints. "I doubt there is another agency in government that has made anywhere near the progress we have" in addressing civil rights problems, Glickman said. "We started a lot further back. We had a lot farther to go." (The Washington Post, October 16, 2000) WATER CONTAMINATION: Canada Examines Town Managers' Role in E.Coli ------------------------------------------------------------------ Five months after seven people were killed and hundreds sickened in Canada's worst outbreak of E. coli poisoning, a judicial inquiry begins on October 16 to determine what went wrong and how to prevent it from happening again. The inquiry, being held in a nondescript building in the shadow of a sky-blue water tower in a town with still-undrinkable tap water, will be closely watched -- both in Walkerton and across the country. For local residents, the main question is how their water supply became so horribly contaminated and why they weren't told sooner of the danger. For outsiders, it's a question of whether such a calamity could occur in their communities. Dozens of lawyers, reporters and TV crews and residents are expected to cram the hearing room as the first witnesses -- technical experts -- begin giving evidence before Justice Dennis O'Connor. "It's going to be a mob scene," predicts one source close to the inquiry. A central issue in the initial phase of the inquiry, expected to last until January, will be the roles played by those in charge of Walkerton's water system. This is no small matter in the town of 5,000 where, just like in thousands of other small Canadian towns, most folk know one another and where mayors and councils are essentially glorified part-time volunteer positions held by the civic-minded. Many residents blame Stan Koebel, the water manager at the Public Utilities Commission, for failing to relay warnings of contamination from a testing laboratory and Mayor David Thompson for neglecting to alert residents to the menace. Both men, who are expected to testify during the next month, feature prominently in a proposed $ 300-million class-action suit that names the municipality, the water commission and the Ontario government. "The main fear that we have is that the truth will be masked," said Bruce Davidson of the grassroots group Concerned Walkerton Citizens. (The Calgary Sun, October 16, 2000) WORLD ONLINE: Dutch Shareholders Sue for Damages in Amsterdam ------------------------------------------------------------- On September 11, 2000, several Dutch World Online shareholders as well as a Dutch entity purporting to represent the interests of certain World Online shareholders commenced a proceeding in Amsterdam District Court against ABN AMRO Bank N.V., also acting under the name of ABN AMRO Rothschild, alleging misrepresentations and omissions relating to the initial public offering of World Online in March 2000. The lawsuit seeks, among other things, the return of the purchase price of the shares purchased by the plaintiffs or unspecified damages. Neither Goldman, Sach Co. nor Goldman Sachs International has been named in the proceeding, but the firm and ABN AMRO Rothschild served as joint global co-ordinators of the offering. * Closed Landfills Can Be Blamed for Water Contamination and Leaks ------------------------------------------------------------------ As more aging landfills shut down, state and local officials charged with conducting post-closure monitoring confront an array of headaches. Developers in Macedon, N.Y., filed a lawsuit against the town, claiming its closed municipal landfill has leaked chemicals onto company-owned property, making it useless for development (SWR, Sept. 7, p. 274). Now the township of Woodbridge, N.J., has been directed by the state to install a methane collection system at its landfill after complaints from neighbors about gas leaks (see story, p. 306). Residents of a Howard County, Md., subdivision built on a landfill have lodged similar complaints about methane leaks (SWR, Jan. 13, p. 11). Additionally, residents of Franklin and Coffee Counties in Tennessee filed a $ 2.5 billion class action lawsuit earlier this month against the Department of Defense, the Air Force and CH2M Companies, charging they refused to place methane controls on the Coffee County Landfill, allowing explosive gas to migrate, which caused an explosion. Meeting EPA's requirements for monitoring closed landfills is an evolving practice, and local governments and companies could face more lawsuits that cite closed landfills as the sources of ground water contamination and methane leaks. (Solid Waste Report, October 5, 2000) * FDIC Chief Urges a Severing of Predators' Bank Funding -------------------------------------------------------- Federal Deposit Insurance Corp. Chairman Donna Tanoue warned that banks are inadvertently helping predatory lenders by buying their loans or providing them credit. "To effectively combat predatory lending, we must sever the money chain that replenishes the capital of predatory lenders and allows them to remain in business," she said at the annual conference of the National Congress for Community Economic Development in New Orleans. If banks are not careful, they could find themselves embroiled in lawsuits against those lenders or forced to pay back securitized loans to borrowers, she said. "The last several years have seen an increase in both class-action lawsuits and state and federal enforcement activity against finance companies based upon fraud and other deceptive acts and practices in connection with real estate-related loans," Ms. Tanoue said. "This increased -- and increasing -- risk of litigation is a cause for concern." She said the agency will release guidelines by the end of the month to combat the problem. In her speech, Ms. Tanoue outlined steps that banks could take to detect securities that are backed by predatory loans. First, banks should assess the reputation of the originator. That process would include obtaining prospectuses that identify the sellers and master servicers of the loans backing the securities and investigating whether originators have been sued over their lending practices, she said. Second, banks should watch for tell-tale signs of predatory lending, such as frequent prepayments, high delinquencies, or high loss rates from earlier securitizations, Ms. Tanoue said. Banks could spot potential predators by looking for low loan-to-value ratios combined with unusually high interest rates, she said. Other red flags include high prepayment penalties, odd methods of calculating adjustable rates on mortgages, and a high percentage of loans that have been subject to negative amortization. Finally, banks should scrutinize any credit enhancements being used to market the securities, Ms. Tanoue said. FDIC officials said that a seller offering a high number of enhancements -- such as assurance of limited exposure in case of default -- could indicate a risky underlying portfolio. But Ms. Tanoue acknowledged the difficulty of combating predatory lending without hurting legitimate subprime lenders. Wall Street firms have injected more than $300 billion over the past decade into the subprime market, which has expanded access to credit, she noted. The FDIC plans to publish questions for banks on its antipredatory ideas this month on its Web site. The agency wants to know how costly it will be for banks to carry out its recommendations, or whether they would have unintended consequences, Ms. Tanoue said. "Curbing predatory lending will not be easy," she said. "Therefore, I have decided that it would be best to get input ... to ensure that we get things right, to ensure that our efforts ... to combat predators do not inadvertently choke off other sources of credit to low- and moderate-income, elderly, and minority borrowers." Lawmakers have been debating whether new laws or better enforcement of existing rules would stop abusive practices without hurting legitimate activities. Eleven federal agencies, including the Federal Reserve Board and the Justice Department, are expected to issue a policy statement this year or early next year on how to use existing laws to crack down on predators. (The American Banker, October 16, 2000) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *