/raid1/www/Hosts/bankrupt/CAR_Public/001106.MBX
C L A S S A C T I O N R E P O R T E R
Monday, November 6, 2000, Vol. 2, No. 216
Headlines
ALPHARMA, INC: Berman DeValerio Files Securities Suit in New Jersey
BANK OF AMERICA: S. Francisco Ct OKs Settlement for Trust Fees Dispute
CREDIT CARDS: Banks, Retailers Gather Impressive Weaponry As Trial Nears
FORD MOTOR: CA Ct Orders for Recall and Restitution in TFI Module Case
FORD MOTOR: Class Certification Denied in Ignition Switch Action
FORD MOTOR: Expects Consolidation of 13 Hertz Minority Shareholder Suits
FORD MOTOR: Plaintiffs in Liter Engine Transmission Suit Signal Appeal
FORD MOTOR: Seeks to Dismiss Credit Debt Collection Lawsuits
FORD MOTOR: Wins Dismissal of Head Gasket Case in Ohio
MTBE LITIGATION: Illinois, New York Cases Consolidated In Manhattan
MUSIC COMPANIES: Consumers, AGs and Retailers Allege of Antitrust
MUSIC COMPANIES: Retailers CD Antitrust Suit Filed in 1995 Still Pending
MUSIC COMPANIES: UMVD and UMG Sign Reslove FTC Investigation on Pricing
PEREGRINE SYSTEMS(R): Settles for Harbinger Securities Lawsuit in GA
RYLAND GROUP: Residents Don't Bite On Builder's Sinkhole Offer
SLAVE REPARATIONS: Lawyers with Track Record of $ Billions Plan Suit
SOTHEBY'S, CHRISTIE'S: Separate Suit on Overseas Auctions; Fisher Named
UNIVERSAL MUSIC: Australian Arm under Antitrust Investigation
VERIZON COMMUNICATIONS: Obselete Phone Rental Fees Subject of Lawsuit
VETERANS DEPARTMENT: Employees Sue Over Privacy Breach
WATER CONTAMINATION: E Coli Water Said to Be in Compliance with Ont. Law
WESTELL TECHNOLOGIES: Bernstein Liebhard Files Securities Suit in IL
* Nicaragua Enacts New Law for Banana Workers to Sue over DBCP Exposure
* The Lawyers Weekly Says Abuses Shown in U.S. Study Unlikely in Ontario
*********
ALPHARMA, INC: Berman DeValerio Files Securities Suit in New Jersey
-------------------------------------------------------------------Shareholders
on November 3 filed a federal class-action lawsuit charging Alpharma, Inc.
(NYSE: ALO) with securities fraud, the law firm Berman DeValerio & Pease
LLP (www.bermanesq.com) said.
The lawsuit was filed in the United States District Court for the District
of New Jersey. It seeks damages for violations of federal securities laws
on behalf of all investors who bought Alpharma common stock between April
28, 1999 and October 30, 2000 (the "Class Period"). Berman DeValerio &
Pease has represented defrauded investors in class actions for nearly two
decades.
On October 31, 2000, Alpharma issued a press release, announcing that
certain of its employees "collaborated to circumvent established company
policies and controls to create invoices that were either not supported by
underlying transactions or for which the recorded sales were inconsistent
with the underlying transactions." Alpharma stated that it had conducted a
full investigation with the assistance of outside counsel and its
independent auditors. As a result of the investigation, Alpharma concluded
that the Company's financial statements for fiscal year1999 and the first
two quarters of fiscal year 2000 required restatement. In particular,
Alpharma's revenues and earnings were overstated during the Class Period.
Contact: Berman DeValerio & Pease LLP Julayne Lazar (800) 516-9926
bdplaw@bermanesq.comNYSE:ALO
BANK OF AMERICA: S. Francisco Ct OKs Settlement for Trust Fees Dispute
----------------------------------------------------------------------
A San Francisco federal court judge has granted preliminary approval of a
settlement in a class action lawsuit by trust beneficiaries against Bank of
America (NYSE: BAC). Under the Settlement, Bank of America has agreed to
pay $ 35 million (plus accrued interest), plus the administrative costs of
the settlement. The settlement also provides for an appeal by the
beneficiaries of some the Court's prior rulings. If the beneficiaries
prevail on that appeal, it would require Bank of America to make an
additional payment of either $12.5 million or $40 million.
The settlement arises from a seven-year dispute concerning overcharges of
trustee fees on "fixed fee" trusts managed by Security Pacific National
Bank. Security Pacific, which was merged into Bank of America in 1992,
allegedly had overcharged fees for administering approximately 2,600 trusts
that set the amount of fees that could be charged (a "fixed fee"). In 1993
and 1994, Bank of America reduced the fees to the fixed fee rate and
refunded $24 million in overcharges, plus an additional $18 million in
simple interest, for a total refund of $42 million.
In this lawsuit, the trust beneficiaries alleged, among other things, that
Bank of America's simple interest refunds were inadequate and that the
beneficiaries were owed additional compensation. The beneficiaries also
alleged that they were entitled to punitive damages for the overcharges and
related conduct. The Court ruled following a non-jury trial that no
additional compensation was owed, but scheduled a jury trial on the
punitive damages relating to Security Pacific's conduct. Bank of America
maintains that it made full refunds to all trust beneficiaries with
interest before this litigation commenced and that it acted at all times in
good faith and in the best interest of the trusts and their beneficiaries.
Nevertheless, the bank concluded that further litigation would be
protracted and expensive and settled the litigation.
The settlement specifically provides that it shall not indicate any fault
or wrongdoing on the part of Bank of America, nor any weaknesses in the
defenses it asserted.
The settlement is still subject to final Court approval. If the settlement
is finally approved, the trust beneficiaries will be sent further
information about their participation in the settlement.
The Mills Law Firm (www.millslawfirm.com) and Murray & Howard LLP
(www.murrayandhoward.com) served as co-counsel for the plaintiff and the
class. Both the firms specialize in pro-consumer class actions and have
successfully prosecuted cases involving investments, banking, trusts and
other consumer-related activities.
Bank of America, with $672 billion in assets, is the largest bank in the
United States. It has full-service operations in 21 states and the District
of Columbia and provides financial products and services to 30 million
households and two million businesses, as well as international corporate
financial services for business transactions in 190 countries. The
company's stock is listed on the New York, Pacific and London stock
exchanges, and certain shares are listed on the Tokyo Stock Exchange.
Contact: Tommy McDonald, Lisa Chen, or Becca Wieder, 415-255-1946; or
Shirley Norton of Bank of America, 415-622-4041; or Robert W. Mills of The
Mills Law Firm, 415-455-1326; or Gilmur R. Murray or Derek G. Howard of
Murray & Howard LLP, 510-444-2660
CREDIT CARDS: Banks, Retailers Gather Impressive Weaponry As Trial Nears
------------------------------------------------------------------------
Debit cards have been the subject of open warfare for quite a while now,
but it seems that both sides have recently gathered impressive new
weaponry.
Supporters of PIN-based debit cards are rallying behind a product that will
make those cards work on the Internet, while proponents of signature-based
debit cards have been buoyed by rising transaction numbers and by
Citibank's recent decision to issue the cards to its depositors.
Ultimately, the issue of whether one type of debit card will prevail over
the other is likely to be decided in court. The so-called Wal-Mart case --
a class action that pits four million merchants against Visa and MasterCard
-- will likely go to trial in U.S. District Court in the Eastern District
of New York sometime next year, and will challenge the "honor all cards"
rule that requires merchants who take Visa and MasterCard credit cards to
accept those brands of debit cards as well.
Visa and MasterCard debit cards, which are signature-based, bear higher
interchange rates than PIN-based cards, which do not carry the association
logos. Retailers object to the higher fees, and are seeking the right to
decide for themselves which types of cards to honor.
On one side -- the side that has gained the most ground to date -- are Visa
U.S.A., MasterCard International, and the major banks that have lined up
behind signature-based debit cards. Also known as "offline" debit cards,
these products require a customer's signature at the point of sale. The
sale takes place offline, and the transaction is processed within a few
hours.
On the other side are the electronic funds transfer networks and retailers,
which favor PIN-based debit cards. These cards, which require consumers to
enter a personal identification number at the point of sale, debit a
cardholder's deposit account instantly. This type has historically been
known as an online debit card because of the electronic connection that
takes place during the actual transaction, but the term has fallen out of
favor because of potential confusion with the Internet, where, to date,
these cards do not actually work.
The stakes are particularly high for the latter group. The EFT companies
see their bread-and-butter business threatened by the proliferation of
debit cards that do not pass through their networks, and merchants say the
higher rates they pay for signature-based cards are onerous.
Fresh evidence suggests that the signature-based products are gaining
ground, and for good reason: Visa, MasterCard, and banks have been
promoting them heavily. And unlike PIN-based debit cards, signature-based
cards can be used anywhere Visa and MasterCard are accepted -- including on
the Internet. Both types of debit cards have had healthy growth over the
past four years, but signature-based cards are proliferating much faster.
The number of transactions conducted on the two was more closely aligned in
1996 -- 1.1 billion on PIN-based (online) cards and 1.2 billion on
signature-based (offline) cards. But, according to recent projections by
Dove Consulting of Atlanta, this year the number of transactions on
signature-based cards will be five billion, while the number of
transactions on PIN-based cards will be far smaller, 3.6 billion.
Lloyd Constantine, a principal at the New York law firm Constantine &
Associates and the lead attorney for the retailers in the lawsuit, said
PIN-based and signature-based debit cards have not been at a parity since
1990, when it was predicted that signature-based cards would disappear.
"Offline debit was viewed as being an obsolete, unsafe, niche product,"
with "extraordinarily high rates of fraud and unauthorized use," that could
be issued only to the top portion of deposit account customers, Mr.
Constantine said.
But Visa backed offline debit heavily in the early 1990s, and MasterCard --
which in 1990 had put all its efforts into online through its Maestro
initiative changed courses and adopted Visa's tack, according to Mr.
Constantine.
"What has changed is that people are now predicting that maybe online debit
will go away -- not because it isn't faster, safer, and cheaper and permits
cash-back, but because of something Visa and MasterCard have done," he
said. "By 1996, offline was threatening to put online out of business."
Today major issuers continue to introduce signature-based debit cards.
Citibank, perhaps the last major bank without a sizable debit card program,
has just introduced a MasterCard-branded card and plans by yearend to give
it to all deposit account customers as a replacement for their automated
teller machine cards.
Mark Rodgers, a spokesman for the Citigroup subsidiary, said the bank has
issued a PIN-based debit card for about 10 years to a limited number of
customers but for a long time did not perceive customer demand for a
signature-based product. The spokesman said demand has risen over the past
two years, but the product was delayed by the bank's conflict with Visa in
early 1999. Former Citibank co-chairman John Reed clashed with Visa
officials over various philosophical and practical issues, prompting
Citibank to switch its primary allegiance to MasterCard.
Mr. Rodgers said the new Citibank MasterCard debit cards work online and
offline. "If the PIN pad is there, it will settle through the NYCE
network," he said. "If you do a signature-based transaction, it will settle
through the MasterCard network."
Though proponents of signature-based debit have many reasons for glee --
among them, that the Visa check card is "the fastest-growing product in
Visa's history," according to Jeff Kann, the executive vice president of
Visa U.S.A. -- the PIN-based debit faction is fighting back. Some of the
major electronic funds transfer networks are uniting behind a
soon-to-be-introduced product that will for the first time let consumers
use PIN-based debit for purchases on the Internet.
NYCE Corp., the biggest EFT network in the Northeast, developed the
product, SafeDebit, a card with rounded edges that fits in the CD-ROM drive
of a computer and performs the dual function of authenticating the
cardholder to the network and facilitating a debit card transaction that
would run over an EFT network, not an association network. The cardholder
enters a PIN, and the account number is encrypted and sent over the
network. The merchant never sees the number and therefore cannot store it
in a database.
Star Systems Inc., the nation's largest EFT network, agreed in March to
license SafeDebit from NYCE and promote it to its bank members. Last week,
Pulse EFT Association of Houston, the third-largest network, said it would
do the same.
That leaves MAC, the network owned by Concord EFS Inc., as the only large
network that has not signed on. Concord EFS recently made a deal to buy
Star Systems, but the two networks are to be run separately for a while
after the deal closes.
While the support of the EFT networks is important, banks have not rallied
behind SafeDebit the way they have behind the Visa check card and its
MasterCard equivalent. NYCE, which has been promoting SafeDebit for some
time, has so far announced only two banks licensing it: North Fork Bancorp
of Melville, N.Y., and Michigan National Bank, Farmington Hills subsidiary
of National Australia Bank PLC of Melbourne.
NYCE is aiming for a commercial rollout in early 2001. "For SafeDebit to be
successful, it has to be adopted by the majority of the PIN debit networks
throughout the world," said Paul A. Tomasofsky, vice president of NYCE's
advanced product group. "So our strategy has been to work with what would
normally be our competitors."
Mr. Tomasofsky drew an analogy to credit card companies uniting behind the
magnetic stripe. "The adoption of one standard is beneficial to the whole
industry," he said.
Stan Paur, president and chief executive officer of Pulse, said that
several member banks have expressed interest in SafeDebit but his
expectations are low.
"I think it is probably premature to suggest there will be enormous volume
tomorrow or the next day," Mr. Paur said. "We're in the very embryonic
stages. Gradually, debit will be a form of payment over Internet channels."
Industry observers also expressed skepticism. "Is this the wave of the
future?" asked James L. Accomando, a card industry consultant in Fairfield,
Conn. "That's to be seen, because not everybody has joined forces. They're
growing step by step." As a category, merchants may not be technically
prepared to accept SafeDebit, he said.
Alanna Kellogg, president of The Kellogg Group, an electronic banking
consulting firm in St. Louis, called SafeDebit a "brilliant product" but
one with no perceivable market demand and a huge potential downside.
"If the card is compromised, the hassle for the consumer is so much greater
than a credit card because the card draws against" a deposit account, Ms.
Kellogg said. In the event of fraud, instead of disputing a charge on a
credit card, a consumer could wind up fighting with a bank to get money
restored to an account.
Mr. Paur of Pulse said online debit products "will keep evolving over time,
and improving."
Meanwhile, the controversy over the two forms of debit will have its day in
court. A federal judge in Brooklyn, N.Y., granted the retailers' lawsuit
class action status, and an appeal by Visa and MasterCard of that decision
is likely to be heard in December in the U.S. Court of Appeals for the
Second Circuit. After the appellate court rules on the class action issue,
a court date will be set for the trial, according to Mr. Constantine, the
lawyer for the plaintiffs.
Mr. Constantine said he sees several additional phenomena affecting the
debit tug-of-war. The rapid consolidation of the regional EFT networks
means that Star, MAC, NYCE, and Pulse will "have the size, infrastructure,
and merchant relationships to be truly national networks" that could thrive
if PIN-based debit proliferates.
For the moment, Mr. Constantine said, companies are hedging their bets,
awaiting the outcome of the Wal-Mart case. Products such as the Visa check
card 2, which works both online and offline, are an example, as was
Citibank's stalling before putting out a signature-based card, he said.
SafeDebit and other products that bring online debit to the Internet will
probably not take off until the case is settled, Mr. Constantine said.
The merchants are seeking permission to choose what form of debit card they
accept. If they win, Mr. Constantine said, online will be the overwhelming
choice, and the banking industry will be forced to lower interchange rates
for offline. "If our case results in a free-market determination, online
debit will ultimately be the product for the next decade," he predicted.
(The American Banker, November 3, 2000)
FORD MOTOR: CA Ct Orders for Recall and Restitution in TFI Module Case
----------------------------------------------------------------------
On October 11, the California court in the Howard case found that Ford
violated California law by concealing a safety defect. The court ruled that
California consumers who paid to replace distributor mounted TFI modules
were entitled to restitution, that Ford would be required to recall the
vehicles in the class, and that plaintiffs were entitled to attorneys' fees
and expenses. The amount and method of restitution and the nature and scope
of the recall will be determined in further hearings to be scheduled before
a special master.
FORD MOTOR: Class Certification Denied in Ignition Switch Action
----------------------------------------------------------------
The renewed motion for class certification in Snodgrass has been denied.
Ford currently has no class actions pending on this issue.
FORD MOTOR: Expects Consolidation of 13 Hertz Minority Shareholder Suits
------------------------------------------------------------------------
Thirteen class actions have been filed in Delaware state court on behalf of
minority shareholders of The Hertz Corporation ("Hertz") against Ford,
Hertz, and the directors of Hertz, alleging that the defendants breached
their fiduciary duties to the minority shareholders of Hertz by Ford
proposing, on September 20, 2000, a merger transaction under which the
minority shareholders would receive $30 per share for the shares of Hertz
stock they own. The plaintiffs allege that the consideration offered is
unfair and inadequate, was not negotiated at arms length and was designed
to benefit Ford by "capping" the value of the stock, and would deny them
the full value of their stock. They seek to enjoin or rescind the
transaction, recover damages and profits, and an award of attorneys' fees.
Ford expects all of these actions to be consolidated into a single court
proceeding.
FORD MOTOR: Plaintiffs in Liter Engine Transmission Suit Signal Appeal
----------------------------------------------------------------------
3.8 Liter Engine Transmission Class Actions. Ford's motion to dismiss the
Pennsylvania case was granted, and plaintiffs have indicated that they will
appeal.
FORD MOTOR: Seeks to Dismiss Credit Debt Collection Lawsuits
------------------------------------------------------------
Three class actions have been filed against Ford Credit and Primus alleging
unfair debt collection practices. In Pertuso, plaintiffs allege that Ford
Credit's policies and practices for obtaining reaffirmation agreements
violate Federal law and constitute an unfair collection practice. This case
has been dismissed at the trial court level and is now on appeal. All
appellate briefing and oral argument is complete and Ford Credit awaits a
decision on the appeal from the Sixth Circuit. Molloy and Dubois are two
nationwide class action lawsuits brought by the same group of plaintiff
attorneys. Both cases allege that Ford Credit attempts to collect on
discharged, non-reaffirmed debts in violation of the Bankruptcy Code and
the Fair Debt Collection Practices Act. In Molloy, Primus' motion to
dismiss was denied and they are proceeding with discovery. The Dubois case
was recently filed and Ford Credit has filed a motion to dismiss.
FORD MOTOR: Wins Dismissal of Head Gasket Case in Ohio
------------------------------------------------------
Plaintiffs in the Illinois suit have acknowledged that the extended Owner
Notification Program ("ONP") provides the relief sought in their complaint,
and they now seek only attorney fees (alleging that they were responsible
for the decision to extend the ONP).
On October 13, 2000, Ford's motion to dismiss the Ohio case was granted.
MTBE LITIGATION: Illinois, New York Cases Consolidated In Manhattan
-------------------------------------------------------------------
Two MTBE property damage suits pending in the Southern District of Illinois
and one pending in the Southern District of New York were consolidated Oct.
10 in the Manhattan court of Judge Shira Ann Scheindlin (In re MTBE
Products Liability Litigation, No. MD-1358, S.D. N.Y.; See 10/6/00, Page
32).
"On the basis of the papers filed and the hearing held," the Judicial Panel
on Multidistrict Litigation's transfer order says, "the panel finds that
the actions in this litigation involve common questions of fact concerning
i) whether defendants knew about and misrepresented the nature of MTBE and
conspired to market MTBE without disclosing its risks to downstream users,
the federal government or the public; and ii) whether plaintiffs sustained
drinking water contamination as a result of MTBE contamination."
Five oil company defendants in the Southern Illinois cases sought
centralization of the cases under 28 U.S. Code Section 1407 for coordinated
or consolidated pretrial proceedings. The New York plaintiffs and eight
defendants spoke against the consolidation, according to the order. The New
York plaintiffs and at least one of the defendants said they favor New York
for the multidistrict litigation, if the panel chose to order
consolidation.
Centralization Promotes Efficiency
"Centralization under Section 1407 in the Southern District of New York
will serve the convenience of parties and witnesses and promote the just
and efficient conduct of this litigation," the order says. "Section 1407
proceedings are desirable in order to avoid duplication of discovery,
prevent inconsistent or repetitive pretrial rules and conserve resources of
the parties, their counsel and the judiciary."
Two cases filed since the first of September in Florida district courts
will be considered as "potential tag-along actions," the order says (Paul
Douglas Young, et al. v. ExxonMobile Oil Corp., No. 00-cv-1912, M.D. Fla.,
and Sutton Farms [USA] Inc., et al. v. Amerada Hess Corp., et al., No.
00-3544, S.D. Fla.; See 10/6/00, Pages 26 and 28).
Parties in a leaking underground storage tank case (Buddy Lynn, et al. v.
Amoco Oil Co., et al., No. 96-940, M.D. Ala.) recommended consolidating the
case in the Middle District of Alabama on Sept. 22.
Consolidated Cases
The cases thus far consolidated are David England, et al. v. Atlantic
Richfield Co., et al. (Nos. 3:00-370 and 3:00-371, S.D. Ill.; See 10/6/00,
Page 29) and Donna Berisha, et al. v. Amerada Hess Corp., et al. (No.
1:00-1898, S.D. N.Y.).
Berisha and others filed the proposed class action on behalf of all people
who rely on well water for drinking or household and commercial uses. The
proposed class includes subclasses for those who require water tests to
determine the extent of contamination by the gasoline additive MTBE and a
second subclass for those whose water tests verified MTBE contamination.
Judge David R. Herndon issued a memorandum and order Aug. 23 setting out
the discovery deadlines and a presumptive trial date of September 2002 for
England, a proposed national property damage class action in reformulated
gasoline states.
England Moved May 11
Herndon conducted a status conference with counsel in the putative class
action, which was moved May 11 from the Madison County (Ill.) Circuit Court
to the U.S. District Court for the Southern District of Illinois. It was
filed in the state court April 11.
Counsel for plaintiffs and defense agreed to bifurcated discovery between
class certification and merits discovery, according to the memorandum.
Issues solely related to the merits of the case will be conducted after the
hearing on plaintiffs' motion for class certification, which the parties
jointly recommended to be held in March 2001. Feb. 2, 2001, is the deadline
for completion of discovery on class certification issues. Plaintiffs'
motion for class certification is due by Jan. 15, 2001. Defendants have
until Feb. 15, 2001, to file a joint response.
Substantive Issues
Issues recognized by both England parties as substantive for class
certification discovery include defendants' knowledge of methyl tertiary
butyl ether's solubility; biodegradation, fate and transport in
groundwater; remediation; and taste and odor. Also discoverable for class
certification proceedings are circumstances surrounding defendants'
decision to add MTBE to gasoline and statements made regarding MTBE and the
Toxic Substances Control Act.
Defendants also agreed to the discovery of the participation in the
so-called MTBE Committee, the American Petroleum Institute Groundwater
Technical Task Force and communications with the Environmental Protection
Agency regarding the use and regulation of MTBE.
Counsel
Stephen M. Tillery of Carr, Korein, Tillery, Kunin, Montroy, Cates, Katz &
Glass in Swansea, Ill., represents the England plaintiffs. J. Andrew Langen
of Kirkland & Ellis in Chicago represents Atlantic Richfield Co., BP Amoco
Corp. and Amoco Oil Co. Dan H. Ball and Roman R. Wuller of Thompson Coburn
in St. Louis represents Conoco Inc., Chevron USA Inc. and ExxonMobile Corp.
John Galvin and Lyndon Sommer of Sandberg, Phoenix & von Gontard of St.
Louis represent Texaco Refining and Marketing Inc., Shell Oil Co., Phillips
Petroleum Co. and Equilon Enterprises. Nate Eimer of Eimer, Stahl, Klevorn
& Solberg in Chicago represents Citgo Petroleum Corp.
Representing the plaintiffs are Robert J. Gordon and Perry Weitz of Weitz &
Luxemberg in New York; Lewis Saul of Lewis Saul Associates in Washington,
D.C.; Stanley E. Margolies of Kurzman, Karelson & Frank in New York City;
Morris Ratner of Lieff, Cabraser Heiman & Bernstein of New York; and A.
Hoyt Rowell of Ness, Motley, Loadholt, Richardson & Poole in Barnwell, S.C.
Robert Shulman of Howry & Simon in Washington, D.C., represents Amerada
Hess Corp. James Andrew Langen and Mark S. Lillie of Kirkland & Ellis in
Chicago represent BP Amoco. Peter John Sacripanti of McDermott, Will &
Emery in New York; Peter C. Condron, Richard E. Wallace Jr. and Anthony F.
King of Wallace, King, Marraro & Branson in Washington, D.C.; and Eric M.
Kraus of Sedwick, Deter, Moran & Arnold in New York City represent Chevron,
Exxon Corp., Mobile Oil Corp. and Shell Oil Corp.
Katherine L. Adams, Lisa Meyer and Nathan P. Eimer of Eimer, Stahl, Klevorn
& Solberg in Chicago represent Citgo Petroleum Corp.
Charlotte A. Biblow of Rivkin, Radler & Kremer in Uniondale, N.Y.,
represents Getty Petroleum Corp. Mark E. Tully of Goodwin, Proctor & Hoar
in Boston represents Gulf Oil. Ltd. Robert Brager and John Guttman of
Beveridge & Diamond in Baltimore represent Sunoco Inc. Kenneth Pasquale of
Stroock, Stroock & Laven in New York represents Tosco Corp. Mark G.
O'Connor of Hasbruck Heights, N.J., represents COSTAL Corp. (Mealey's
Emerging Toxic Torts, October 20, 2000)
MUSIC COMPANIES: Consumers, AGs and Retailers Allege of Antitrust
-----------------------------------------------------------------
In May, June, and July of 2000, ninety-four purported consumer class action
law suits were filed in various state and federal courts across the country
against Universal Music & Video Distribution Corp., UMG Recordings, Inc.
and PolyGram Group Distribution, Inc. as well as Sony Music Entertainment
Inc., Time Warner Inc., Bertelsmann Music Group, and Capitol Records Inc.
(along with companies affiliated with these defendants). Certain recorded
music retailers are also named as defendants in some of these actions.
Plaintiffs in each of these actions allege that the defendants violated the
federal and/or state antitrust laws and unfair competition laws by
conspiring to fix the wholesale and/or retail prices of compact discs.
Plaintiffs in each of these actions further allege that the purported
conspiracy was related in some fashion to the minimum advertised price
("MAP") policies adopted by each of the record distributor defendants,
including Universal Music & Video Distribution Corp. and PolyGram Group
Distribution, Inc. Plaintiffs in these cases seek treble damages and/or
restitution as well as attorney's fees and costs.
With respect to the federal cases, there is currently pending before the
Judicial Panel for Multi-District Litigation a motion to consolidate and
transfer. The Judicial Panel heard the motion on September 22, 2000 and
subsequently ruled that the federal cases should be consolidated in
Portland, Maine.
With respect to the eighteen state cases pending in California, on
September 11, 2000, the Court ordered that these cases be coordinated for
pretrial proceedings. With respect to the five state cases pending in
Florida, on August 31, 2000, the Circuit Court of the 11th Judicial Circuit
dismissed them with leave to amend for failure to state a claim upon which
relief may be granted.
In addition to the consumer actions, on August 8, 2000, the Attorneys
General for 28 states and 2 territories filed a parens patriae action in
the federal district court in the Southern District of New York entitled
State of Florida, et al. v. BMG Music, Bertelsmann Music Group Inc.,
Capitol Records, Inc. dba EMI Music Distribution, Virgin Records America,
Inc., Priority Records, LLC, MTS Inc. dba Tower Records, Musicland Stores
Corporation, Sony Music Entertainment Inc., Trans World Entertainment
Corporation, Universal Music & Video Distribution Corp., UMG Recordings,
Inc., Warner-Elektra-Atlantic Corporation, Warner Music Group, Inc., Warner
Bros. Records, Inc., Atlantic Recording Corporation, Elektra Entertainment
Group, Inc. and Rhino Entertainment Company. The Attorneys General brought
this suit on behalf of consumers in their respective states or territories,
and they allege that the defendants violated the federal and state
antitrust laws and unfair competition laws by conspiring to fix the retail
prices of compact discs. The Attorneys General seek treble damages, civil
penalties, attorney's fees, and costs. Cleveland, et al. v. Viacom, et al.,
Civil Action No. SA-99-CA-0783-EP, in the United States District Court for
the Western District of Texas, San Antonio Division.
In July 1999, a small video retailer located in San Antonio, Texas filed a
lawsuit in the federal district court in San Antonio alleging that the home
video divisions of the major movie studios, including Universal Studios
Home Video, Inc., had conspired with one another and with Blockbuster Inc.,
a video rental retailer, and with Viacom, Inc., in violation of the federal
antitrust laws. The action was filed on behalf of a proposed class of all
"independent" video retailers that compete with Blockbuster.
Since its original filing, the complaint has gone through several
substantive changes, including the substitution of new proposed class
representatives, and the addition of claims arising under California law.
The core allegation, however, has remained the same: plaintiffs allege that
the studios have entered direct revenue sharing agreements with Blockbuster
that include terms that are unavailable to independent video retailers, and
that give Blockbuster an unfair competitive advantage. Plaintiffs seek
monetary and injunctive relief.
Plaintiffs have filed a motion asking that the court certify the proposed
class. Universal and the other defendants have opposed the motion, arguing
that the case is not amenable to class treatment. All briefing regarding
class certification has been filed.
Seagram and its subsidiaries and affiliates are defendants or respondents
in a number of other actions arising in the ordinary course of business.
MUSIC COMPANIES: Retailers CD Antitrust Suit Filed in 1995 Still Pending
------------------------------------------------------------------------
On May 30, 1995, a purported retailer class action was filed in the United
States District Court for the Central District of California, entitled
Digital Distribution Inc. d/b/a Compact Disc Warehouse v. CEMA
Distribution, Sony Music Entertainment, Inc., Warner Elektra Atlantic
Corporation, Universal Music & Video Distribution, Inc. (formerly known as
UNI Distribution Corp.), Bertelsmann Music Group, Inc. and PolyGram Group
Distribution, Inc., No. 95-3596 JSL.
The plaintiffs brought the action on behalf of direct purchasers of compact
discs alleging that defendants, including Universal Music & Video
Distribution, Inc. (formerly known as UNI Distribution Corp.), and PolyGram
Group Distribution, Inc., violated the federal and/or state antitrust laws
and unfair competition laws by engaging in a conspiracy to fix prices of
compact discs, and seek an injunction and treble damages.
The defendants' motion to dismiss the amended complaint was granted and the
action was dismissed, with prejudice, on January 9, 1996.
Plaintiffs filed a notice of appeal on February 12, 1996. By an order filed
July 3, 1997, the Ninth Circuit reversed the District Court and remanded
the action. Upon reinstatement of this litigation by the Ninth Circuit, a
number of related actions were filed, which all arise out of the same
claims and subject matter. These related actions are captioned: Chandu Dani
d/b/a Compact Disc Warehouse and Record Revolution, et al., v. EMI Music
Distribution (formerly known as CEMA Distribution), Sony Music
Entertainment, Inc.; Warner Elektra Atlantic Corporation, Universal Music &
Video Distribution, Inc. (formerly known as UNI Distribution Corp.),
Bertelsmann Music Group, Inc., and PolyGram Group Distribution, Inc., No.
CV 97-7226 (JSL), filed on September 30, 1997 in the U.S. District Court
for the Central District of California; Third Street Jazz and Rock Holding
Corporation, et al., v. EMI Music Distribution (formerly known as CEMA
Distribution), Sony Music Entertainment, Inc., Warner Elektra Atlantic
Corporation, Universal Music & Video Distribution, Inc. (formerly known as
UNI Distribution Corp.), Bertelsmann Music Group, Inc., and PolyGram Group
Distribution, Inc., No. CV 97-8864 JSL (VAPx), filed on October 21, 1997 in
the U.S. District Court for the Central District of California; T. Obie,
Inc. d/b/a Chestnut Hill Compact Disc v. EMI Music Distribution (formerly
known as CEMA Distribution), Sony Music Entertainment, Inc., Warner Elektra
Atlantic Corporation, Universal Music & Video Distribution, Inc. (formerly
known as UNI Distribution Corp.), Bertelsmann Music Group, Inc., and
PolyGram Group Distribution, Inc., No. 97 Civ. 7764 LMM, filed on October
21, 1997 in the U.S. District Court for the Southern District of New York;
Nathan Muchnick, Inc., et al., v. Sony Music Entertainment, Inc., PolyGram
Group Distribution, Inc., Bertelsmann Music Group, Inc., Universal Music &
Video Distribution, Inc. (formerly known as UNI Distribution Corp.), Warner
Elektra Atlantic Corporation, and EMI Music Distribution, Inc./Capitol
Records, Inc., No. 98 Civ. 0612, filed on January 28, 1998 in the U.S.
District Court for the Southern District of New York. The Digital
Distribution, Chandu Dani, and Third Street Jazz matters have been set for
trial on February 15, 2000.
On February 17, 1998, a purported consumer class action was filed in the
Circuit Court for Cocke County, Tennessee, Civil Action No., 24,885 II,
entitled Doris D. Ottinger, et al., v. EMI Music Distribution, Inc., Sony
Music Entertainment, Inc., Warner Elektra Atlantic Corp., Universal Music &
Video Distribution, Inc. (formerly known as UNI Distribution Corp.),
Bertelsmann Music Group, Inc., and PolyGram Group Distribution, Inc. A
motion to dismiss was filed on May 11, 1998, and is pending. The trial date
of February 15, 2000 was vacated and no new trial date has been set.
MUSIC COMPANIES: UMVD and UMG Sign Reslove FTC Investigation on Pricing
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On or about July 25, 1996, Universal Music & Video Distribution, Inc. and
PolyGram Group Distribution, Inc. were served with an antitrust civil
investigation demand from the Office of the Attorney General of the State
of Florida that calls for the production of documents in connection with an
investigation to determine whether there "is, has been or may be" a
"conspiracy to fix the prices" of compact discs or conduct consisting of
"unfair methods of competition" or "unfair trade practices" in the sale and
marketing of compact discs. No allegations of unlawful conduct have been
made against Universal Musical & Video Distribution, Inc. or PolyGram Group
Distribution, Inc.
By letter dated April 11, 1997, the Federal Trade Commission ("FTC")
advised Universal Music and Video Distribution Corp. (formerly Universal
Music & Video Distribution, Inc.) ("UMVD") and PolyGram Group Distribution,
Inc. ("PGDI") that it is conducting a preliminary investigation to
determine whether minimum advertised pricing ("MAP") policy used by major
record distributors constitute an unfair method of competition in violation
of Section 5 of the Federal Trade Commission Act. UMVD and PGDI received a
subpoena dated September 19, 1997 for the production of documents. No
allegations of unlawful conduct have been made against UMVD or PGDI.
On May 1, 2000 UMVD (PGDI has merged into UMVD) and UMG Recordings, Inc.
("UMGR") (which owns substantially all of the Company's record labels)
signed a Consent Agreement with the staff of the FTC. The Company
anticipates that the Consent Agreement will resolve the FTC's investigation
of the MAP policy. Among other things, UMVD and UMGR have agreed that (i)
for seven years they shall not make the receipt of any cooperative
advertising funds for their prerecorded music product contingent upon the
price or price level at which such product is advertised or promoted, (ii)
for twenty years they shall not make the receipt of any cooperative
advertising funds for their prerecorded music product contingent upon the
price or price level at which such product is advertised or promoted where
the dealer does not seek any contribution from UMVD or UMGR for the cost of
the advertisement or promotion, and (iii) for five years they shall not
announce resale or minimum advertised prices of their prerecorded music
product and unilaterally terminate those who fail to comply because of such
failure.
PEREGRINE SYSTEMS(R): Settles for Harbinger Securities Lawsuit in GA
--------------------------------------------------------------------
Peregrine Systems, Inc. (Nasdaq: PRGN), the leading provider of
Infrastructure Management software and e-Infrastructure solutions,
announced on November 2 that a memorandum of understanding has been entered
into regarding the settlement of a previously disclosed securities class
action lawsuit pending in the United States District Court for the Northern
District of Georgia against Harbinger Corporation and certain of
Harbinger's former officers and directors since September 1999. Peregrine
acquired Harbinger Corporation in June 2000.
Under the terms of the memorandum of understanding, Peregrine has agreed to
pay $2.25 million in cash to a class of shareholders who purchased
Harbinger stock between February 4, 1998 and September 10, 1998. The
agreement is subject to execution of definitive settlement documents, Court
approval and certain other contingencies.
RYLAND GROUP: Residents Don't Bite On Builder's Sinkhole Offer
--------------------------------------------------------------
Ryland asks the homeowners to drop their lawsuits in return for sinkhole
repairs.
The Crystal Oaks subdivision builder has offered to pay for additional
repairs to a retention pond that caved in this summer, but only if
residents drop lawsuits seeking compensation for decreased property values.
Heather Ridge Homeowner's Association, which recently assumed
responsibility for the sinkhole-plagued pond off Crystal Oaks Drive, has
not acted on the proposal, but group officials say it is unlikely the court
action will be dropped.
"I don't think that's an option for us," said president Sarah Mason. "If
this repair job is not effective, subsequent rains may prove it's not
fixable."
Filed in June by about 45 residents, the complaint alleges that Ryland
Group Inc. and Ryland Communities Inc. failed to inform the residents about
sinkholes when they were buying their homes.
"They had a duty under Florida law to disclose any material conditions that
would affect the values of the owners' property," said Dan Pilka, a Brandon
lawyer representing the plaintiffs. "And they didn't do that. In fact, they
concealed the condition."
Ryland denies any wrongdoing. "I don't know how you give assurances for
acts of God," said William Wright, president of Ryland's west Florida
division. "Sinkholes are part of Florida."
Even though the association owns the property on which several sinkholes
developed, Ryland has taken steps to address the problem, Wright pointed
out.
The company spent about $ 40,000 to fill the 40-foot gaping holes in August
and now is willing to pay that much to finish the job, Wright said.
Ryland has urged the association to hold a meeting on or before Nov. 10 to
go over the proposal.
A meeting has been scheduled for Nov. 8 but Ryland is not welcome.
"An invitation has not been extended to Ryland because they are not voting
members," Mason said. "We haven't rebuffed them as much as we are ignoring
them."
The Southwest Florida Water Management District has imposed a Nov. 24
deadline for phase two of the mitigation work. The association intends to
seek an extension, Mason said. To cover the expenses, members of Heather
Ridge and Hunter Ridge, the other gated community within Crystal Oaks,
assessed themselves $ 1,000 each.
Even so, the residents say they should not be liable and view the
additional repairs as a natural extension of the original work.
Putting conditions on the new work is "not fair play," Mason said. "Had we
known they were going to do this, we would have done this ourselves to make
sure the first phase is not a wasted effort."
Although the sinkholes have been plugged, a layer of compacted clay and
sand is needed to further stabilize the area and also to slow down surface
water from reaching an aquifer.
"You want it to be filtered before it goes down there," said Swiftmud
spokesman Mike Molligan.
Ryland offered to pay for the clay liner after Pilka raised the issue in
late September. "As you know, the current ownership of Ryland Communities
was not involved in construction of the drainage retention area which is
subject of the Crystal Oaks litigation," Ryland attorney Darryl R. Richards
wrote in an Oct. 25 letter to Pilka.
"Ryland will waive its claim against the homeowners' association and the
homeowners for the cost of the long-term repair. In exchange for Ryland
having the repair performed at its cost, the homeowners' association and
your clients will waive their claims against Ryland."
The letter goes on to suggest the individual claims be consolidated for the
purpose of settling the entire issue at once.
If the agreement failed, Ryland said, the class-action status would be
"null and void" and the homeowners would have to seek certification through
normal procedures.
Dick Stone, vice president of the association, said he would have never
bought his home if he had known about the sinkholes.
He said members are reluctant to drop the suit because of the potential for
future sinkholes, which could hurt property values even more.
If the suit is successful, he added, the group could win enough money to
cover existing and future repair and also compensate for sagging real
estate values. (St. Petersburg Times, November 03, 2000)
SLAVE REPARATIONS: Lawyers with Track Record of $ Billions Plan Suit
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A powerful group of civil rights and class-action lawyers who have won
billions of dollars in court is preparing a lawsuit seeking reparations for
American blacks descended from slaves. The project, called the Reparations
Assessment Group, was confirmed by Harvard law professor Charles J.
Ogletree and appears to be the most serious effort yet to get American
blacks compensated for 244 years of legalized slavery. Lawsuits and
legislation dating back to the mid-1800s have gone nowhere.
"We will be seeking more than just monetary compensation," Ogletree said.
"We want a change in America. We want full recognition and a remedy of how
slavery stigmatized, raped, murdered and exploited millions of Africans
through no fault of their own."
Ogletree said the group, which includes famed attorney Johnnie Cochran,
first met in July and will hold its fourth meeting in Washington D.C. later
this month.
"This country has never dealt with slavery. It is America's nightmare. A
political solution would be the most sensible but I don't have a lot of
faith that's going to happen. So we need to look aggressively at the legal
alternative," Ogletree said.
For now, there are more questions than answers in the planned litigation.
Left to be determined are when the suit will be filed, exactly who will be
named as defendants and what damages will be sought.
Ogletree declined to discuss specifics but said the federal government,
state governments and private entities such as corporations and
institutions that benefited from slave labor could be targets of the legal
action. "Both public and private parties will be the subject of our
efforts," he said.
Ogletree said the Reparation Assessment Group includes attorneys Cochran
and Alexander J. Pires Jr., who won a $1 billion settlement for black
farmers who claimed discrimination by the U.S. Department of Agriculture;
Richard Scruggs, who won the $368.5 billion settlement for states against
tobacco companies; Dennis C. Sweet III, who won a $400 million settlement
in the "phen-fen" diet drug case; and Willie E. Gary, who won a $500
million judgment against the Loewen Group Inc., the world's largest funeral
home operators.
Also in the group is Randall Robinson, president of the TransAfrica Forum,
a think tank specializing in African, Caribbean and African-American
issues. Robinson recently wrote the book "The Debt: What America Owes to
Blacks," which argues for reparations.
"This will be the most important case in the history of our country," Pires
said Friday. "We all agree the suit has to tell the story of what slavery
has done to blacks in America ...
"We are still suffering from slavery's impacts today," Pires said.
Ogletree said the assessment group will call on experts in education,
politics, family development, health and economics to help trace how
slavery's outgrowths such as segregated schooling and neighborhoods have
affected society today.
Enslavement of Africans in America began in the 1600s. A slave sale was
recorded in 1619 in Jamestown, Va. The "peculiar institution" helped to
fuel the prosperity of the young nation, while also dividing it. Slavery
was not officially abolished until the 1863, during the Civil War.
Reparation supporters point to recent cases where groups have been
compensated in cash for historic indignities and harm.
A letter of formal apology and $20,000 were given by the U.S. government to
each Japanese-American held in internment camps during World War II.
Austria last week established a $380 million fund to compensate tens of
thousands of Nazi-era slave laborers who were born in six eastern European
countries.
Reparation opponents argue that victims in the Nazi and Japanese-American
cases were directly harmed while many generations separate enslaved blacks
and their modern-day descendants. In addition, those opposed to reparations
say it isn't fair for taxpayers and corporations who never owned slaves to
be burdened with possible multibillion dollar settlements.
Neither Ogletree nor Pires mentioned any industry or company that could be
a target of the suit. But Pires said there were overlaps between the
slavery of past centuries and today's corporations. He noted that Aetna
Inc., the nation's largest health insurer, apologized earlier this year for
selling policies in the 1850s that reimbursed slave owners for financial
losses when their slaves died.
In July, The Hartford (Conn.) Courant newspaper published a front-page
apology for running ads for slave sales and the recapture of runaways in
the 1700s and 1800s. Such advertisements were commonplace in many
newspapers until the Civil War.
Pires was one of the lawyers in the assessment group who discussed
reparations in the November issue of Harper's magazine.
Pires said he believes that any monetary settlement or damage figure should
be among the last items discussed as the suit takes shape. He said it is
more important to tell the story to all Americans of what slavery did to
the country "and let people decide what should be done to repay." "Most
people," he said, "don't like having dirt on their hands." (AP Online,
11/04/00)
SOTHEBY'S, CHRISTIE'S: Separate Suit on Overseas Auctions; Fisher Named
-----------------------------------------------------------------------
The proposed $ 512-million settlement in the class action brought by buyers
and sellers in auctions at Sotheby's and Christie's during the 1990s may
have snagged.
The settlement covers only auctions conducted by the two houses in the
United States. In New York, U.S. District Judge Lewis Kaplan has the
proposal but has yet to rule on its legality.
A key part of the settlement requires the plaintiffs to relinquish claims
stemming from overseas auctions. The plaintiffs had accused Sotheby's and
Christie's of conspiring to fix commissions and thereby limit negotiations
to lower buying or selling costs.
Attorneys for clients who participated in auctions overseas seek
compensation in a separate lawsuit. In an amendment to that suit, lawyers
this week added eight defendants to an earlier list. The added include Max
Fisher, 92, the renowned Detroit-area industrialist and Sotheby's director.
Fisher is Sotheby's vice chairman and a major stockholder, and a friend of
A. Alfred Taubman of Bloomfield Hills, who still controls the company.
Taubman resigned as chairman as the antitrust scandal involving the two
auction houses unfolded.
Sotheby's, eager to settle the legal cloud over it, said, "The company and
its outside counsel have thoroughly investigated this matter and are
convinced that" now named Fisher, Michael Ainslie and Kevin Bousquette
"neither participated in nor knew of any wrongdoing."
A source close to the company "expressed outrage at this attempt to
question, in any manner, the reputation of a man of Max Fisher's
distinction."
Bousquette was Sotheby's chief operating officer until 1998. Ainslie was
chief executive officer until 1994. Five other new defendants are current
or former associates with New York-based Christie's.
J. Douglas Richards, an attorney with Milberg, Weiss in New York,
representing buyers and sellers at overseas auctions, declined to comment,
leaving unexplained why the eight have been added to the original
defendants, including the firms, Taubman and others.
Milberg, Weiss presumably hopes to persuade Kaplan to throw out the
stipulation about dropping claims overseas, which would carve a path to
more litigation and, perhaps, a bigger settlement.
Taubman and the two firms, which are paying the $ 512 million, presumably
could balk at paying more for overseas claims.
But if they do, the alternative might be worse: A trial that, if it goes
against them, could result in triple damages, the liability under antitrust
law.
So far the only person to face criminal charges is Diana Brooks, Sotheby's
former CEO, who resigned in February. She pleaded guilty to violating
antitrust laws and agreed to testify against Taubman.
Taubman denies any wrongdoing and promises to fight any charges if they're
lodged against him. Sources close to Sotheby's opine that the
jurisdictional question of whether overseas auctions are included in the
settlement has no bearing on whether the prosecutor decides to move against
the former chairman. (Detroit Free Press, November 3, 2000)
UNIVERSAL MUSIC: Australian Arm under Antitrust Investigation
-------------------------------------------------------------
On August 30, 1999, the Australian Competition and Consumer Commission
("ACCC") commenced proceedings against Universal Music Australia Pty
Limited (formerly PolyGram Pty Limited) and three former employees of
PolyGram, alleging violations of the Australian Trade Practices Act, the
statute which governs competition law in Australia.
The ACCC alleges that Universal has taken certain unlawful steps to
restrict parallel imports into Australia to reduce price competition in the
sale of sound recordings. Separate proceedings making similar allegations
have also been commenced against certain other record companies in
Australia and their current or former employees, and against two industry
trade associations in Australia. The ACCC seeks injunctive relief to
eliminate any unlawful restrictions on parallel imports into Australia and
the imposition of fines against Universal and the three individuals who
were employees of PolyGram. Universal and the three individuals are
vigorously defending these proceedings. Universal has received Answers to
its Request for Particulars from the ACCC along with an amended Statement
of Claim. Universal and the three individuals continue to vigorously defend
these proceedings.
On February 4, 1999, the Antitrust Division issued a civil investigative
demand to Universal as well as to a number of other motion picture film
distributors and exhibitors as part of a civil investigation into
compliance with the consent decrees entered in U.S. v. Paramount Pictures,
et al. and various other practices in the motion picture distribution and
exhibition industry. The civil investigative demands require the
distributors and exhibitors to provide documents and other information to
the Antitrust Division.
VERIZON COMMUNICATIONS: Obselete Phone Rental Fees Subject of Lawsuit
---------------------------------------------------------------------
A woman who rung up $ 2,500 in charges for rotary phones she has not used
in 16 years seeks class-action status. In 1984, Francine Newton moved from
one home in South Tampa to another, leaving behind three old rotary phones
she had rented from GTE. GTE has kept her on the line ever since, charging
a rental equipment fee of $ 4.35 per rotary phone on each monthly bill - or
a staggering $ 2,500 over the past 16 years. "Mrs. Newton had contacted
them on a number of occasions, sending letters and faxes saying, "What are
you doing?' " said Newton's attorney, J. Daniel Clark, who filed suit on
her behalf this week against GTE, now Verizon Communications.
Clark thinks his client is far from alone.
Newton's suit seeks class-action status, alleging that potentially
thousands of other Florida customers have been continuously charged rent
for phones that were tossed out or rendered obsolete years ago. "The
defendants have unfairly and unjustly enriched themselves of tens of
millions of dollars" over at least the past 12 years, the complaint
maintains.
The suit, filed in Circuit Court in Tampa, charges Verizon with deceptive
and unfair trade practices and negligent misrepresentation in addition to
unjust enrichment. It seeks unspecified damages.
Verizon spokesman Bob Elek said he could not respond to specifics of the
suit but defended the rental system. "Phone rental is an option that we
make available to our customers. It's not a deceptive practice at all," he
said. Asked when it makes economic sense to rent a phone instead of
purchase one, however, Elek acknowledged, "It doesn't make sense to me,
either." Elek said rentals are not a significant business, but he could not
specify the number of customers affected.
Before deregulation in the early 1980s, customers used to have no choice
but to rent phones from their local telephone company. Most of the Baby
Bells, formed from the breakup of AT&T, eliminated rental equipment charges
in the late 1980s when customers returned the rentals to buy new phones.
GTE, however, continued to bill its customers for telephone rentals even
after Florida's Public Service Commission discontinued the practice in
1988, the suit claims.
Newton said Verizon unfairly charges customers for unreturned or
unaccounted-for rotary phones that would cost less than $ 20 to buy
outright. Elek said it is up to customers to arrange for the return of any
rental to be spared charges.
The monthly telephone bill does not itemize or explain the telephone rental
charge.
The suit mirrors a case filed in California last month that also seeks
class-action status. (St. Petersburg Times, November 03, 2000)
VETERANS DEPARTMENT: Employees Sue Over Privacy Breach
------------------------------------------------------
Department of Veterans Affairs employees are suing the government, accusing
the VA of breaching their privacy by giving fellow workers and some
patients access to their Social Security numbers and dates of birth.
The class-action suit on behalf of the VA's 180,000 employees seeks $1,000
for each one, the minimum amount under the 1974 Privacy Act. If successful,
that would total about $180 million. The suit says that through an internal
patient record system, employees' personal information appeared along with
the medical information on patients. Workers at any VA facility could check
up on VA workers anywhere else, said the lawsuit filed in U.S. District
Court in Wisconsin last month. It said there were no warning screens or
logs of who accessed the information.
Jim Bensen, a VA spokesman, declined Thursday to comment on the suit's
details. "We take the issue very seriously, not just veteran information
but also employee information," Bensen said.
Employees said they were worried about more than fellow workers peeking at
their private information. "We even have patients who pull this information
up," said Sandy Bond, a plaintiff who works at a VA hospital in
Leavenworth, Kan. "Incentive therapy job patients have access to the
computer. These people are convicts, substance abusers, (people with)
mental illnesses."
The allegations follow a House committee hearing in September in which
lawmakers grilled VA officials about lax computer security. Witnesses said
that during a planned test, hackers could break into VA computers and
quickly gain full access to any VA system, including billing privileges and
the personal records of any veteran.
The department has planned an "Information Security Stand Down" on Friday
for all VA employees. Acting Secretary of Veterans Affairs Hershel W. Gober
will speak to the department's employees via closed-circuit television
about the importance of computer security.
Rep. Terry Everett, R-Ala., who convened the September hearing, said he
could not comment on pending litigation. Everett, who chairs the House
Veterans Affairs oversight subcommittee, said in a statement that he was
aware of the allegations, and his panel "is continuing to review the
matter."
Sen. Arlen Specter, R-Pa., who chairs the Senate Veterans Affairs
Committee, declined to comment for the same reason.
Bond, a union leader for the Leavenworth hospital's workers, learned the
problem from a fellow employee earlier this year. Bond filed a grievance
that was handled over the summer by an independent arbiter who sided with
the employees. However, the arbiter had no authority to award damages or
attorneys' fees. Bond and her fellow employees then decided to sue.
When she told her supervisors about the problem, Bond said she was informed
it involved software that affected every VA facility nationwide and would
be difficult to fix.
Since the arbitration, the VA has installed a software patch that blocks
out the Social Security numbers and dates of birth for the workers.
However, Bond said the information remains available through another
software program used by the VA.
Albert Schmidt, the other named plaintiff, works at a VA hospital in
Milwaukee and suspects someone tried to use his information illegally. He
said a credit card company's fraud department contacted him and said a
Houston resident tried to open an account with Schmidt's date of birth and
Social Security number. "It really scares me," Schmidt said. "There really
is not a way somebody could find my Social Security number and date of
birth other than through the VA. They didn't have my address."
Schmidt said he learned from discussions at a federal employees' conference
that it has become standard practice at some VA hospitals for workers to
check a new employees' birth dates to find out how old they are.
"One person was irate because she was lying about her age for some time,"
Schmidt said. "She was very hurt about it. She said she doesn't like to see
her date of birth accessed by other people, even if it's only to check to
see how old (she is)." When Bond first brought her complaint to
supervisors, she just wanted the problem fixed. Now she says she's
frustrated and saddened by both her employer and Washington officials. She
says they failed to help her and her co-workers. "I was totally shocked
that the VA would do something like this," she said. "... I was baffled
that the people in D.C. that were supposed to be helping us didn't even
help." (The Associated Press, November 3, 2000)
WATER CONTAMINATION: E Coli Water Said to Be in Compliance with Ont. Law
------------------------------------------------------------------------
Despite suffering from several defects when it became tainted with E. coli
in the spring, this town's water system still complied with provincial law,
a public inquiry into the country's largest outbreak of the deadly bacteria
heard on its opening day. (See 10/6/00, page 25.)
Marc Ethier, an official with the Ontario Clean Water Agency, testified
Oct. 17 that the municipality was in full compliance with the certificate
of approval issued by the Ministry of Environment despite glaring
deficiencies with Walkerton's wells.
Environmental lawyer Paul Muldoon told Justice Dennis O'Connor, who is
heading the inquiry expected to last until January, that the contradictions
raise serious questions about whether Ontario legislation can guarantee
citizens a safe supply of drinking water.
"We have guidelines outlining certain things that ought to be done, but it
doesn't translate into legal requirements that ensure they will be done,"
said Muldoon, one of the attorneys representing Walkerton residents.
'Security And Comfort'
"It is that gap that has us all scratching our heads," he said. "Laws
should be in place for a reason - to add a sense of security and comfort to
people using the water so they don't have to second-guess public water
systems."
The contamination has been traced to bacteria-laden cow manure that was
swept into the area around town well No. 5 by heavy rains in April and May.
Ethier, whose nongovernmental agency took over Walkerton's water systems
after the outbreak, said a number of problems were found.
Two of the three working wells, Nos. 6 and 7, had only one chlorinator that
injects disinfecting chlorine into the water before it is sent to people's
homes. Provincial guidelines recommend that each well be equipped with two
chlorinators as a backup system.
The weigh scale under the chlorinator in well No. 6 used to indicate how
much, if any, chlorine is left so the tank can be refilled wasn't working.
'30 Dead Ends'
A number of valves in the wells needed to be repaired or replaced. There
were more than 30 "dead ends" in the network of pipes that carry water to
homes and businesses. Ethier explained that those dead ends are bad because
there's less water flow, and they are more susceptible to rust and
accumulation of bacteria. Almost 5 kilometers of cast-iron water mains that
had become so encrusted with mineral deposits over the years that the
diameter in some spots had narrowed to less than 5 centimeters from 10 had
to be replaced.
Justice O'Connor is expected to look in February at what role, if any, the
Ontario government played in the tragedy that claimed seven lives and left
about 2,000 more ill.
"It's a question of priorities," said Louis Sokolov, a lawyer for
environmental groups at the inquiry. "Is the priority going to be sending a
$ 200 check to every taxpayer in Ontario or is the priority going to be
ensuring the people in this province actually have clean drinking water?"
'No Stone Unturned'
O'Connor has promised to "leave no stone unturned" and said he hopes to
make his recommendations by the end of next year.
Meanwhile, Ontario Superior Court Justice Warren Winkler has given lawyers
in the $ 300-million Walkerton class action lawsuit until Oct. 30 to file
their arguments before he sets a hearing date (Jamie Smith et. al. v. the
Government of Ontario, the Corporation of the Municipality of Brockton, the
Bruce-Grey-Owen Sound Health Unit, the Walkerton Public Utilities
Commission and commission manager Stan Koebel, No. 00-CV-191273CP, Ontario
Super.; See 10/6/00, Page 25).
While all that is going on, the tap water remains undrinkable.
But the boil water and disinfect hands advisory in effect since May 21 has
been credited with lowering the rate of secondary infection, according to
local Medical Officer of Health Dr. Murray McQuigge. "We'd expect in an
outbreak like Walkerton to have a rate of about 60 percent secondary cases
- in other words, people who get sick by being in contact with the first
cases," he reported Oct. 4.
Instead, McQuigge noted that only 3 percent of those who became ill
transmitted it to others close to them. (Mealey's Emerging Toxic Torts,
October 20, 2000)
WESTELL TECHNOLOGIES: Bernstein Liebhard Files Securities Suit in IL
--------------------------------------------------------------------
A securities class action lawsuit was commenced on behalf of purchasers of
the publicly-traded securities of Westell Technologies, Inc. (Nasdaq:
WSTL), between June 27, 2000 and October 18, 2000, inclusive (the "Class
Period"). A copy of the complaint is available from the Court or from
Bernstein Liebhard & Lifshitz, LLP. Please visit our website at
http://www.bernlieb.com
The case is pending in the United States District Court for the Northern
District of Illinois. Named as defendants in the complaint are Westell,
Marc Zionts (Chief Executive Officer), William J. Nelson (President and
Chief Operating Officer), Bruce Albeda (Investment Relations), Howard L.
Kirby, Jr. (Director) and Thomas A. Reynolds (Director).
The complaint charges defendants with violations of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges
that the defendants issued materially false and misleading information and
failed to disclose material information about the Company's financial
condition and prospects. Specifically, the complaint charges that
defendants misrepresented the level of demand for its products from SBC
Communications and failed to disclose that demand from SBC was declining
significantly.
The dissemination of and failure to disclose this materially misleading
information caused Westell's common stock to be artificially inflated
throughout the Class Period. However, certain Company insiders took
advantage of this run-up in Westell's stock price to dump $11 million worth
of their own shares on unsuspecting investors.
Contact: Linda Flood, Director of Shareholder Relations of Bernstein
Liebhard & Lifshitz, LLP, 800-217-1522, or 212-779-1414, or
WSTL@bernlieb.com
* Nicaragua Enacts New Law for Banana Workers to Sue over DBCP Exposure
-----------------------------------------------------------------------
Nicaragua has enacted a law that will allow banana workers and their
families to sue for damages from exposure to dibromochloropropane (DBCP),
Reuters reported Oct. 7. The Association of Banana Workers and Former
Banana Workers says 83 people have died, and thousands more have been
injured, from DBCP exposure (see PTCN, Oct. 5, Page 20). The new law is the
first in Nicaragua to permit class action lawsuits. Victorino Espinales,
who heads the worker group, told Reuters that the litigation will target
such DBCP producers as Royal Dutch/Shell Group, and such food producers as
Standard Fruit Co., Chiquita Brands International Inc. and Dole Food Co. He
did not specify the amount of damages the litigation will seek. (Pesticide
& Toxic Chemical News, October 12, 2000)
* The Lawyers Weekly Says Abuses Shown in U.S. Study Unlikely in Ontario
------------------------------------------------------------------------
Seven years after the introduction of the Class Proceedings Act in Ontario,
class actions are now a well-established feature of the legal landscape.
A vigorous entrepreneurial plaintiffs'bar has emerged. Active class
proceedings are ongoing in most major business sectors. There is a
developing body of jurisprudence -particularly with respect to issues of
certification and settlement.
At the same time, the American class proceedings regime, which formed the
foundation for the development of the Ontario model, has recently been the
subject of a systematic study by the Rand Institute for Civil Justice. That
study, Class Action Dilemmas: Pursuing Public Goals for Private Gain,
raises serious questions about whether the American class action regime
effectively achieves access and recourse for class members in appropriate
cases. It concludes that in many cases class lawyers are over-rewarded for
the pursuit and settlement of class proceedings that achieve little, if
anything, of value.
The report questions the effectiveness of judicial scrutiny, noting that it
has been hampered by a judicial culture that values calendar-clearing over
appropriate results and by its reliance on judges who may have been chosen
by counsel because of a known predisposition to plaintiffs'cases, who may
not be familiar with their obligations and powers in class proceedings, or
who do not have access to a broadly available base of information on the
results of other class proceedings.
In large measure, the report reinforces the impression held by some that a
class action regime, rather than functioning as a means for the private
enforcement of mass wrongs, risks becoming a vehicle for a legalized
shakedown of companies (so-called "strike suits") irrespective of any
alleged wrongdoing, for the benefit of class counsel.
While the validity of this impression is debatable, there is no doubt that
the Rand report provides support for it. We ought to consider, therefore,
whether the Ontario experience to date suggests that we are developing a
jurisprudence of class proceedings that will be free of the problems
described in the Rand report.
While it is still early in the history of Ontario class proceedings, much
of what has occurred to date provides a basis for optimism that the
excesses sometimes experienced south of the border are unlikely to occur
here.
The Ontario judiciary has clearly seen the Class Proceedings Act as
intending to facilitate the bringing of class proceedings. (Indeed, the Act
goes so far as to provide a lower threshold for certification than in the
United States. Unlike the American rule, which requires that the common
issues "predominate"over the individual issues as a condition of
certification, the Ontario Act requires only that the court consider the
class proceeding to be a preferable method for resolution of the common
issues that exist.)
While the result may be that it is easier to bring a class proceeding in
Ontario, it does not follow that the abuses described in the Rand report
are more likely to occur here. Recent decisions have made it clear that our
courts are alert and vigilant to prevent abuses. Moreover, well-established
aspects of the Ontario legal tradition provide other bulwarks against
frivolous proceedings.
For example, in Ontario, unlike the United States, plaintiffs are deterred
from commencing frivolous proceedings by the prospect of an award of costs
in favour of the prevailing party. Ontario's Act does not eliminate the
prospect of an award of costs in respect of an unsuccessful proceeding.
However, it directs the court to consider with respect to costs the
question of whether the case was a test case, raised a novel point or
involved a matter of public interest.
Further protection for plaintiffs is contained in the class proceedings
fund legislation that provides that any adverse costs decision against a
funded plaintiff is borne by the fund. But the prospect remains that cost
awards will be made in appropriate cases -as does the discipline against
bringing unmeritorious actions.
There are other differences. In the United States a significant incentive
to the bringing of a strike suit and to a defendant's decision to settle it
is the perceived risk that a jury animated more by the availability of a
corporate deep pocket than legal principle will find in favour of the
plaintiff class and tack on an astronomical punitive damage award.
To date we have virtually no experience with trials of class proceedings in
Ontario. The use of juries, which is rare to begin with, is not likely to
become more frequent. The courts have yet to address the question of
whether the principles governing the availability of juries or punitive
damages are any different for class proceedings than for other litigation.
There is as yet no reason to think that the factors that constrain the use
of juries and the availability of punitive damages will differ in a class
proceeding.
The inappropriate challenges and advantages identified in the Rand report
(see above) are compounded by the general absence of readily available
reports of U.S. class proceedings. In Ontario, by contrast, the conduct of
class proceedings is restricted to a small number of knowledgeable and
specialized judges in each of the regions, and their decisions are widely
and readily available.
It is not even possible to "forum shop"among the regions. In the case of a
conflict as to the region in which a particular proceeding will be brought,
principles generally analogous to those governing forum conveniens issues
will apply: Vitapharm Canada Ltd. v. F. Hoffman-La Roche Ltd. (2000), 48
O.R. (3d) 21).
Perhaps the most telling distinction between the experience reported in the
Rand study and that of Ontario relates to the approach of the courts to the
review of settlements. The Rand report complains of courts that approach
the review of a proposed settlement with a paramount concern for
calendar-clearing, a disinclination to scrutinize settlements, and a
tendency to allow results that over-reward class counsel who achieve little
in the way of value for the class.
In Ontario, the court has made it clear that the settlement of a class
proceeding will be approved only if the result appropriately protects the
interests of absent class members. The court has shown itself willing to
allow substantial involvement from objectors with concerns about a proposed
settlement and to raise and require answers to its own concerns about
settlement value (Dabbs v. Sun Life (1998), 40 O.R. (3d) 429), to require
as a condition of approval the amendment of a settlement that in the
court's view does not adequately protect against the prospect that future
events will undermine the value of the settlement (Parsons v. The Canadian
Red Cross Society, [1999] O.J. No. 3572), and to refuse approval of a
settlement of an apparent strike suit brought on the eve of a fairness
hearing concerning a proposed merger and settled on the basis that the only
recovery would be of class counsel's fees (Epstein v. First Marathon Inc.,
[2000] O.J. No. 452).
Because of the reality that in most cases the bringing of a class
proceeding requires the plaintiff's counsel to undertake the risk that they
will only be compensated if the action is successful or settled, the level
of compensation available to class counsel is a significant factor in
determining whether a class proceedings regime provides an adequate but not
excessive incentive to the bringing of a class action.
In this area the question of the extent to which the principles applicable
in Ontario may differ from those in the United States may soon be reviewed
at the appellate level. Many who have expressed concern about the American
experience point to the availability of sometimes astronomical counsel fees
-in the billions of dollars -as an indication that in that jurisdiction the
incentives are excessive.
In the United States, class counsel's compensation is sometimes calculated
on the basis of a "multiplier" of the amount of time spent on the matter,
and sometimes on the basis of a percentage of the results achieved. The
latter approach, in particular, can and has produced exorbitant results for
class counsel.
The Ontario Act permits contingency fee agreements. It requires that any
such agreement be approved by the court and authorizes the court to award a
multiplier of the counsel's base fee to reflect the risk undertaken by
class counsel. Although the Act does not expressly authorize a fee
agreement expressed in terms of a percentage of the outcome, courts of
first instance have approved contingent fee agreements containing other
than multiplier-based arrangements, including agreements setting fees based
on a percentage of recovery (Nantais v. Telectronics Proprietary (Canada)
Ltd. (1996), 28 O.R. (3d) 523; Crown Bay Ltd. Partnership v. Zurich
Indemnity Co. of Canada (1998), 40 O.R. (3d) 83).
Whether and in what circumstances percentage arrangements are appropriate
has yet to be addressed at the appellate level. However, we will shortly
have the benefit of appellate review of the general principles that apply
to the determination of class counsel fees in circumstances where very
significant amounts ($20 million to Ontario counsel) have been approved at
first instance in the settlement of the Hepatitis C litigation (Parsons v.
Canadian Red Cross Society, [2000] O.J. No. 2374).
The experience to date suggests the court will be alert to the importance
of establishing principles for the compensation of class counsel that do
not produce windfall gains for them at the expense of the class, the
defendants and the class proceedings regime generally.
Patricia D. S. Jackson is a litigation lawyer at Torys in Toronto, with a
trial and appellate practice in a wide variety of areas including corporate
and commercial litigation, professional negligence, defamation and other
media law, environmental and energy, constitutional and administrative law.
(The Lawyers Weekly, November 3, 2000)
*********
S U B S C R I P T I O N I N F O R M A T I O N
Class Action Reporter is a daily newsletter, co-published by Bankruptcy
Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc.,
Washington, DC. Theresa Cheuk, Managing Editor.
Copyright 1999. All rights reserved. ISSN 1525-2272.
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