/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/001213.MBX C L A S S A C T I O N R E P O R T E R Wednesday, December 13, 2000, Vol. 2, No. 241 Headlines AMERISOURCE HEALTH: 1993 Drug Chargeback Lawsuits Not Fully Resolved Yet CERULEAN COS: Suit Holds up WellPoint Merger; Trigon Offers More COCA-COLA: NYLJ Says Employment Bias Suit Is Wake-Up Call for Employers CRDA: Employment Suit Against Connell Foley Unearths Tax Credits Issues DT INDUSTRIES: Evaluating Possible Defenses for Securities Suits EDUCATION DEPT: Black Employees Win $ 4 Million In Settlement FREE-LANCE COPYRIGHTS: Free-Lancers Fight To Retain Rights Over Work HOLOCAUST VICTIMS: Fed Judge Dismisses Lawsuits against German Insurers INMATES LITIGATION: Women's Allegations Conflict Earlier Statements MAJOR LEAGUE: Fights off Antitrust Suit; It Isn't the Single Big League MONTY GROUP: NY Ap Ct Dismisses All But One Claim Re Insurance Sales MONY GROUP: Insurer Sued in NY Re Demutualization; Not Yet Time to Move MTBE LITIGATION: Hyde Park Residents and Well Owners Outraged at Leak PASMINCO: Sydney Class Action Solicitors Ordered To Pay Legal Costs PRUDENTIAL, CLARICA: 83-Year-Old Cashed out Life Insurance Policy SOUTHERN CO: Customers Say Wholesale CA Electricity Prices Are Inflated STROMBOE: Texas Appeals Court Affirms Class in Defective Software Case TOYS"R"US: Net Files Subpoenaed In NJ Investigation Of Privacy Practices VARIAN MEDICAL: ISOs File Antitrust Complaints over Replacement Parts ********* AMERISOURCE HEALTH: 1993 Drug Chargeback Lawsuits Not Fully Resolved Yet ------------------------------------------------------------------------ In November 1993, the Company was named a defendant, along with six other wholesale distributors and twenty-four pharmaceutical manufacturers, in a series of purported class action antitrust lawsuits brought by retail pharmacies and alleging violations of various antitrust laws stemming from the use of chargeback agreements. In addition, the Company and four other wholesale distributors were added as defendants in a series of related antitrust lawsuits brought by independent pharmacies and chain drugstores, which had opted out of the class action cases. The Company also was named a defendant in parallel suits filed in state courts in Minnesota, Alabama, Tennessee and Mississippi. The federal class actions were transferred along with the individual and chain drugstore cases to the United States District Court for the Northern District of Illinois for consolidated and coordinated pretrial proceedings. In essence, these lawsuits claimed that the manufacturer and wholesaler defendants combined, contracted and conspired to fix the prices charged to retail pharmacies for prescription brand name pharmaceuticals. Specifically, plaintiffs claimed that the defendants used "chargeback agreements" to give some institutional pharmacies discounts that allegedly were not made available to retail drugstores. Plaintiffs sought injunctive relief, treble damages, attorneys' fees and costs. In October 1994, the Company entered into a Judgment Sharing Agreement with the other wholesaler and pharmaceutical manufacturer defendants. Under the Judgment Sharing Agreement: (a) the manufacturer defendants agreed to reimburse the wholesaler defendants for litigation costs incurred, up to an aggregate of $9 million; and (b) if a judgment is entered against both manufacturers and wholesalers, the total exposure for joint and several liability of the Company is limited to the lesser of 1% of such judgment or $1 million. In addition, the Company has released any claims which it might have had against the manufacturers for the claims presented by the Plaintiffs in these lawsuits. Subsequent amendments to the Judgment Sharing Agreement have provided additional protection to the Company from litigation expenses in exchange for updated releases. The Judgment Sharing Agreement covers the federal court litigation as well as the cases which have been filed in various state courts. After a ten-week trial in the federal class action case, the Court granted all of the defendants' motions for a directed verdict and dismissed the claims the class plaintiffs had asserted against the Company and the other defendants. The judgment entered in favor of the Company was affirmed on appeal. The state cases are proceeding. The Minnesota case settled without any payment or admission of liability by the Company. On November 29, 1999, the trial court in Alabama dismissed all of the claims asserted against the Company and the other wholesaler and manufacturer defendants in accordance with a ruling from the Alabama Supreme Court. The Mississippi and Tennessee cases remain pending, but are inactive. On or about October 2, 1997, the group of independent pharmacies and chain drugstores which had opted out of the class action, filed a motion with the United States District Court for the Northern District of Illinois seeking to add the Company and the other wholesale distributors as defendants in their cases against the manufacturer defendants, which cases are consolidated before the same judge who presides over the class action. This motion was granted and the Company and the other wholesale distributors have been added as defendants in those cases as well. As a result, the Company has been served with approximately 120 additional complaints on behalf of approximately 4,000 pharmacies and chain retailers. Discovery and motion practice is presently underway in all of these opt-out cases. The Company believes it has meritorious defenses to the claims asserted in these lawsuits and intends to vigorously defend itself in all of these cases. CERULEAN COS: Suit Holds up WellPoint Merger; Trigon Offers More ---------------------------------------------------------------- Cerulean Cos., the parent company of Georgia's largest health insurer, and WellPoint Health Networks Inc. in Thousand Oaks have entered into a revised merger agreement for $ 700 million in cash to Cerulean shareholders. Trigon Healthcare Inc., based in Richmond, Va., had offered $ 675 million in cash for Cerulean, even though Cerulean's shareholders had previously approved a $ 500-million offer from WellPoint. After learning of Trigon's bid, WellPoint increased its offer. Cerulean announced plans for a merger with WellPoint more than two years ago. That deal was held up, however, in part because of a class-action lawsuit on behalf of 70,000 shareholders who did not accept a 1996 stock offer. Trigon's late bid drove up the value of Class A stock held by 70,000 Cerulean shareholders who did accept the 1996 stock offer of five free shares. The value of the five shares in the original WellPoint offer was $ 4,250. In the new agreement, the five shares are worth approximately $ 5,900. Cerulean is the holding company for Blue Cross and Blue Shield of Georgia, which provides service to more than 1.8 million customers. WellPoint serves about 7.7 million medical members and 38 million specialty members through Blue Cross of California and Unicare. The transaction is subject to approval of Cerulean's shareholders and Georgia's insurance commissioner. Company officials expect the deal to close early next year. (Los Angeles Times, December 12, 2000) COCA-COLA: NYLJ Says Employment Bias Suit Is Wake-Up Call for Employers ----------------------------------------------------------------------- Most international employers, and in particular foreign companies doing business in the United States, have long been aware that insofar as their employment practices are concerned, conducting business here is fraught with legal difficulties. Coca-Cola's $ 192.5 million settlement of a race discrimination class action on Nov. 16 makes it all too clear, however, that even sophisticated American employers must continually guard against potential liability in employment. Furthermore, international employers must also be more concerned than ever about whether their overseas operations are providing a back door for liability in the United States. The Coca-Cola lawsuit and settlement are interesting in several respects. First, in this era of global business and the Internet, the lawsuit was a page lifted from the 1970s. The case, brought in April 1999 as a class action, alleged race discrimination against black employees in rates of pay, promotions, and evaluations. These allegations of discrimination in the Company's domestic operations are reminiscent of the groundbreaking cases filed by minorities in the early days following passage of Title VII of the Civil Rights Act of 1964. The case attracted tremendous adverse publicity to Coca-Cola, and became a cause celebre for prominent civil rights activists, including Jesse Jackson. In the time since the lawsuit was filed the Company's stock price took a substantial beating, largely attributable to difficulties in its overseas markets. The settlement (which dwarfs Texaco's $ 176 million race-discrimination settlement in 1995) provides for payment of back wages ($ 113 million), adjustment of future wages ($ 43.5 million), and oversight of the company's business practices going forward ($ 36 million). The company will establish a seven-member task force to review its diversity efforts and human resources operations. It will also fund annual diversity training, and hire an ombudsman to investigate claims of discrimination and harassment. Coca-Cola has denied any wrongdoing. Nevertheless, the plaintiffs' lead lawyer, in announcing the settlement, said, "Our goal was to change the Coca-Cola Company. We think that this company is going to change in dramatic ways." That lawyer's conclusions may be broader than he realizes. The Coca-Cola settlement provides good reason for all employers to consider anew the risks presented by domestic and overseas employment disputes. Even if the Coca-Cola lawsuit's allegations remind us of an earlier time, the case was filed in a very different era. In contrast to the 1970s, multi-million dollar jury verdicts and settlements of these cases are now a part of our corporate and popular cultures. News of these sizable judgments no longer shocks us, and companies large and small, foreign and domestic, take measures to avoid this kind of liability. We all attend training programs on sexual harassment and discrimination laws, and even the most jaded among us recognize the need and value of this kind of training. We also recognize how important it is that corporate policies prohibit discrimination, and that companies take all reasonable steps to eliminate discrimination and harassment. Human Resources Additionally, human resources directors are taken more seriously - and their judgments are more carefully considered - than they have ever been in the past. Their access to the highest levels of senior management is now commonplace, while in the past it was relatively rare. All this can be attributed to the growing recognition that bias in employment practices is not only dangerous from a liability standpoint, but also deprives employers of the best performance that it can expect from its workforce. The Coca-Cola settlement arose from allegations of classwide discrimination in a mainstream, traditional workforce. Even so, in the current era of global commerce and electronic communications, both the state of the law and the way that businesses run have evolved to a considerable degree. As a result, the stakes may be higher than ever. Consider the following, true-life examples: A U.S.-based employee of an English company logs on to his employer's job posting Intranet site. The site posts a London-based job opportunity and declares a preference for female employees under the age of 30. Those preferences, though lawful in England, cause great concern and dissension among the company's U.S.-based work force. As a result, the company discontinues the discriminatory employment practices worldwide. A European company doing business in the U.S. has an executive succession plan. That plan makes clear that employees who are over 35 will not be considered for growth opportunities in the company. Again, the practice is lawful in the home country, but the European parent takes note of the policy's evident conflict with U.S. law, and worries about whether it can lead to legal liability or even a public relations problem here. As a result, the company changes its succession planning policy worldwide to eliminate consideration of age or other factors prohibited by U.S. law. A female employee working for a U.S. company is denied a job assignment in Brazil. Her employer states that, by virtue of her gender, she would not be taken seriously by male customers and contacts, and is therefore unqualified to hold the job. The employee brings a lawsuit here, alleging that the denial violates U.S. law, even though the job is based overseas. The court agrees, finding that preconceived discriminatory attitudes, even if tolerated overseas, have no place in a U.S. company. One thing is certain: Employment practices that are perfectly lawful overseas, but which are nevertheless inconsistent with U.S. employment practices law (E.E.O. law), may form the basis for liability in the United States. In Pisacane v. Enichem America Inc., 1996 WL391865 (S.D.N.Y. 1996), U.S. District Judge John F. Keenan permitted discovery concerning age-based employment decisions made by the defendant overseas, "where such treatment is presumptively legal." The court stated that plaintiff might reasonably "have the jury draw an inference that Defendants maintained the same policy against the older executives" in the U.S., where the treatment is prohibited by the Age Discrimination in Employment Act. If the defendant takes account of age in its overseas employment practices, then, the argument goes, it is a safe bet to assume that it also does so here. Employers must also take notice that American citizens who are employed by U.S. companies are protected by U.S. E.E.O. laws wherever they work, worldwide. Those laws have extraterritorial application to the operations of U.S. owned or controlled companies, with respect to U.S. citizens who work anywhere in the world. In contrast, the courts recognize that discrimination occurring overseas against U.S. citizens carried out by foreign corporations is not prohibited by U.S. law. (See, e.g., Denty v. Smith Kline Beecham, 109 F3d 147 [3d Cir. 1997], which holds that U.S. law did not prohibit alleged discrimination in employment in an overseas job assignment where the employer was the English parent of his U.S. employer). It is also well understood that U.S. E.E.O. law prohibits retaliation against individuals who are the subject of alleged discriminatory conduct or who participate in any employee's assertion of rights under the statutes. The prohibition against retaliation extends to overseas conduct. Retaliating against an employee who complains about an overseas employment practice in the good faith belief that it violates U.S. law would also likely be unlawful. Conclusion There are, in sum, several lessons to be learned from the Coca-Cola record-breaking settlement. First, the stakes are higher than ever for major employers. While the laws enforcing equal employment opportunity have been with us for some time, all employers must vigilantly ensure their enforcement. Companies should consider implementation of mediation programs and other comprehensive, proactive policies to bring to the surface smoldering claims of unfair treatment, which may give rise to discrimination cases. However, it is now also clear that the risk is not confined to traditional, smokestack industries, nor is the risk limited to domestic operations. The law now permits the possibility of liability for overseas conduct, and employers must therefore monitor domestic and overseas employment practices in assessing their potential exposure. Further, while race discrimination was at the core of the Coca-Cola case, it is not hard to imagine a claim of sexual harassment or even a failure to accommodate disabilities as forming the basis for a lawsuit focusing on business practices outside the United States. Considerations of u.s. legal or cultural hegemony aside, companies must monitor their business practices worldwide with an eye to potential legal and public relations disasters. Confining your search to u.s. practices may no longer be enough. (New York Law Journal, November 30, 2000) CRDA: Employment Suit Against Connell Foley Unearths Tax Credits Issues ----------------------------------------------------------------------- Allegations that the state Casino Reinvestment Development Authority has illegally given casinos tens of millions of dollars in tax credits in return for their contributions for public projects have been unearthed in a most unlikely venue - a suit by a lawyer against his former firm. Theodore Geiser first made the allegations in 1997 and 1998, when he was CRDA's outside counsel. At that time, Geiser says, he told his partners at Roseland's Connell, Foley & Geiser that he believed the agency's tax-credit policy had been violating the law for years. He says he also told CRDA and state officials of his views, though current and former officials deny it. Edward Deutsch, the managing partner with Morristown's McElroy, Deutsch & Mulvaney, made similar charges in the spring of 1998. He drafted a class- action complaint on behalf of the state's elderly and disabled, for whom taxes on casino revenues are to benefit. Deutsch sent his complaint to Peter Verniero, then the state attorney general, and subsequently met with Verniero and Jeffrey Miller, the head of litigation for the attorney general's Division of Law. Later, at Verniero's request, McElroy and an associate who worked on the draft met with other outside counsel for CRDA at Connell Foley to discuss the disputed tax-credit policy. Deutsch never got a plaintiff and never filed his suit, though he maintains that a suit remains possible. He says he believes CRDA had been functioning illegally at the expense of the elderly and disabled. He says CRDA also acted at the expense of taxpayers because funds from the general treasury have been used to make up the shortfall in the Casino Revenue Fund for CRDA projects. "It's still a viable cause of action," says Deutsch. "Up to now, nobody has ever given me a credible and valid explanation, or a coherent reason, as to how they could do what they were doing." In August 1999, the state Supreme Court rejected a challenge brought by casino mogul Donald Trump and groups of elderly people over CRDA's funding of projects not directly benefiting the elderly or disabled. Trump was fighting CRDA's plan to spend $55 million to help pay for a tunnel in Atlantic City that would make it easier for gamblers to drive across town to casinos at the city's marina district that compete with Trump's casinos on the Boardwalk. But while the high court ruled, 5 to 2, that CRDA was not restricted to projects benefiting the elderly, it did not address the tax- credit policy attacked in 1998 by Geiser and Deutsch. Law Partner as Whistle-blower Geiser, who left the firm in late December 1999, is now in litigation with his old partners. He alleges that he was pushed out in part in retaliation for blowing the whistle on a client, CRDA. His allegations against his old client are in his suit, Geiser v. Connell Foley, MON-L-2277-00, filed last May. His attorney, Linda Kenney of Red Bank, included Deutsch's draft complaint as an exhibit to bolster Geiser's whistle-blower claim. Geiser's suit followed a second, unrelated dispute in late 1999 with his partners. He left abruptly at the end of that year, and the split with his firm of 40 years was bitter. The firm immediately dropped his name, becoming Connell Foley. In his suit against Connell Foley and its executive committee, Geiser charges that he was constructively discharged in violation of the state Law Against Discrimination and retaliated against in violation of the Conscientious Employee Protection Act. CRDA Executive Director James Kennedy, Connell Foley lawyers who still represent CRDA and other lawyers familiar with the casino laws under Title 5 scoff at the charges of illegality. They say the agency's tax-credit policy has been used since shortly after CRDA was created by the Legislature in 1984 and is allowed under all the applicable amendments to the Casino Control Act. "We absolutely believe that CRDA has the right and duty to do what it has been doing since 1984," says Connell Foley managing partner John Murray, CRDA's general counsel. Yet, shortly after Geiser and Deutsch challenged CRDA's tax-credit policies in the spring of 1998, the agency quietly dropped the disputed practice. Kennedy acknowledges that the policy was changed, but says it was a business decision, not in response to questions raised by Geiser or Deutsch. Says Kennedy, "We had discussions about it (in mid-1998), and we did change our policy. It was aggravating, and we took the path of least resistance. We were comfortable with it. ... It went back to 1984, through three governors, four or five attorneys general, and three (CRDA) general counsels. Ted Geiser himself signed off on it." He adds that CRDA is still offering incentives for casino donations to public projects, but not through the tax-credit policy. Connell Foley's Murray adds, "Our partners met with Ed Deutsch when this was raised, and we discussed it. Deutsch did not file his suit, so perhaps we convinced him he was wrong." Casinos must pay an 8 percent tax on their gross revenues under the original 1976 Casino Control Act. But under amendments adopted in 1984, which created CRDA, casinos also must make additional contributions of 2.5 percent. The 1984 statutes give casinos the option of buying CRDA bonds or directly investing in redevelopment projects approved by the agency, in Atlantic City and across the state. But Geiser and Deutsch focus on a third option under the law, N.J.S.A. 5:12- 144.1(a)(2). That provision says casinos can deposit money into the Casino Revenue Fund as partial payment of their 2.5 percent obligation, known as the investment alternative tax. Tax credits are allowed under the first two options - buying CRDA bonds or investing in redevelopment projects. Deutsch says the credit is based on a 2: 1 ratio; when a casino invests 1.25 percent of its gross in bonds or a redevelopment project, it receives a 2.5 percent tax credit to offset its 2.5 percent alternative tax obligation. However, if a casino elects option three and makes a donation to the Casino Revenue Fund for an eligible project, as opposed to directly redeveloping it, the tax credit is supposed to be dollar-for-dollar, according to Geiser and Deutsch, who cite N.J.S.A. 5:12-175, -176 and -177. But, they add, since at least 1988, CRDA has been giving the casinos a tax credit of up to $1.50 for every dollar donated. Wrote Deutsch in his draft complaint: "CRDA's donation tax credit policy is without any legal authority, is wholly outside the scope of the power vested in CRDA by the Legislature, and is utterly incompatible with the fiduciary responsibility of the state to collect tax revenues from the casino industry to subsidize essential services for the needy elderly and disabled." His draft, though, was written before the Supreme Court ruled in 1999 that CRDA projects are not limited to the elderly and disabled. Deutsch estimated that the loss to the Casino Revenue Fund is many millions. CRDA's Kennedy agrees that that was the practice. "We negotiated many deals over the years," says Kennedy, adding, "For every $1 million, they'd get $250, 000, maybe up to $500,000" in additional credit. Kennedy's predecessor, Nicholas Amato, also confirms that the longstanding practice was that when casinos elect to donate cash or property to the fund, " They can get up to $1.50 for every $1." Michael Cole, a former general counsel to CRDA who was first assistant attorney general when the CRDA legislation was adopted, says Deutsch and Geiser are wrong on the law. Cole, who in 1986 became chief counsel to Gov. Thomas Kean, says the statutes give CRDA wide discretion on tax credits or any form of incentive. He says the agency is charged with approving moneymaking projects for casino investment and with finding public projects that may not return a profit to the casinos. These include urban hospitals, youth centers and supermarkets. "CRDA is allowed to offer incentives to the licensees to make those donations to such public projects, to make up for the fact that the law says casinos are entitled to get back both their principal and a reasonable return on their redevelopment investments," says Cole, managing partner of Teaneck's DeCotiis, FitzPatrick, Gluck, Hayden & Cole. Under the changed policy, Kennedy says, a casino that invests in a project is entitled to the interest income that accrues over the life of the project. "Now, instead of getting that interest over time, we discount it and give it out to them in a lump sum," Kennedy says. He also says the net result is the same, but it eliminates haggling over legal issues. "Why even have that conversation" when CRDA can avoid it by changing its tax-credit scheme, Kennedy says. But in his complaint, Deutsch says that any return of interest income to the casinos, particularly the one-third that casinos have traditionally received back from their investments through CRDA, is also illegal, having no statutory authority behind it. Battle Within Firm Geiser's complaint and Connell Foley's answer, filed in August by Michael Griffinger of Newark's Gibbons, Del Deo, Dolan, Griffinger & Vecchione, flesh out the eruption within the firm triggered by Geiser's attack on CRDA. The papers from both sides show that Geiser's actions caused a firestorm in May 1998, including calls to Geiser at his home while, he says, he was recuperating from a car accident. Within a few days there were memos back and forth, internal partner meetings, a hand-delivered letter, a hand-written response faxed in by Geiser, and a lunch between Geiser and three other partners near Geiser's home. Geiser claims he was pressured to drop his position on CRDA, and was told to destroy all his documents on the subject, all of which is denied by the partners through Griffinger's answer. Geiser says two partners accused him of actually writing the Deutsch draft sent to Verniero. Geiser says the firm was so worried it would lose CRDA's $1.3 million in annual billings that partner Mark Fleder called Geiser's fiancie, Katherine Marra, and tried to coerce her into getting Geiser to drop his stance. Geiser's exhibits in his employment case include a series of notes purportedly taken by Marra during her phone call with Fleder, in which she wrote about the partners' belief in a link between Geiser and the Deutsch draft. The notes also touch on purported calls from the governor's office about the CRDA controversy. Again, Griffinger says in his papers that none of Geiser's claims has merit and that no one pressured Geiser or Marra. Griffinger says the partners deny accusing Geiser of authoring Deutsch's draft complaint. For his part, Deutsch says the draft complaint is his. He says he became interested in the topic because he had been in unrelated litigation with another lawyer who had sued the CRDA and because of his friendship with Geiser. He says he did not file the complaint because he was subsequently conflicted out because the firm had a casino client. Like other partners older than 70, Geiser had withdrawn as an equity partner under the firm's new partnership agreement. He was receiving $300,000 in compensation for 1998. After the unrelated dispute in late 1999 over the handling of a case, Geiser was offered an agreement for 2000, at $200,000. Geiser, now 75, claims that the lower compensation was also retaliation. He bolted from the firm at year's end. The firm disputes that Geiser is an "employee" under the laws he cites. Griffinger says in court papers that Geiser's effort to "transform his professional dispute with his former colleagues into a far-reaching discrimination and whistle-blower lawsuit (is) ... wrong -- even frivolous -- as a matter of both law and fact." Meanwhile, discovery is moving forward. On Tuesday, Gibbons, Del Deo associate Donald Beshada was in McElroy, Deutsch's office seeking the firm's documents on Deutsch's 1998 draft complaint. Griffinger have deposed Geiser, and plaintiffs' lawyer Kenney and her partner, Nancy Martin, are set to depose Connell Foley partners Kevin Coakley, Fleder and Richard Catenacci on December 12. And Kenney has made it clear that she intends to push the CRDA controversy in the litigation, telling Monmouth County Assignment Judge Lawrence Lawson in October that she may call as witnesses state officials, including CRDA staffers and Gov. Christine Todd Whitman's former chief of staff, Judy Shaw. (New Jersey Law Journal, December 11, 2000) DT INDUSTRIES: Evaluating Possible Defenses for Securities Suits ---------------------------------------------------------------- DT Industries Inc. reveals in its SEC filing that following the Company announcements regarding the restatements of previously reported financial statements, the Company, its Kalish subsidiary and certain of their officers have been named as defendants in at least five complaints in purported class action lawsuits as of November 23, 2000. The complaints received by the Company allege that, among other things, as a result of accounting irregularities, the Company's previously issued financial statements were materially false and misleading and thus constituted violations of federal securities laws by the Company and certain officers. The actions allege that the defendants violated Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder (the "Securities Actions"). The Securities Actions complaints seek damages in unspecified amounts. These Securities Actions purport to be brought on behalf of purchasers of the Company's Common Stock during various periods, all of which fall between September 29, 1997 and August 23, 2000. The Company believes that additional purported class action lawsuits similar to those described above may be filed. The Company is currently evaluating these claims and possible defenses thereto and intends to defend these suits vigorously. While it is not feasible to predict or determine the final outcome of the Securities Actions or similar proceedings, or to estimate the amounts or potential range of loss with respect to these matters, management believes the Company and its officers and directors have adequate liability insurance to cover the liabilities, costs and expenses arising out of the Securities Actions, although there can be no assurance that the insurance proceeds will be adequate to cover any such losses. EDUCATION DEPT: Black Employees Win $ 4 Million In Settlement ------------------------------------------------------------- Black employees denied promotions in the Education Department won $ 4 million from the government to settle a 9-year-old federal discrimination case, the workers' lawyers said. About 1,100 black upper-level employees filed the class-action suit in 1991, saying vague job postings and arbitrary decisions shut them out of top-level promotions in the 3,600-person department headquarters. The agreement, approved by a federal judge, also calls for the Education Department to grant 34 promotions and make policy changes that include extending how long jobs are posted and writing clear, specific job descriptions. The plaintiffs suggested that the department used vague descriptions to prevent unwanted applicants from arguing that they met specific job requirements. Harry Lee, an attorney for the workers, called the settlement appropriate compensation for a "racial glass ceiling." It will garner plaintiffs as much as $ 12,000 each, based on a formula that includes length of service. Education Department officials said this was the first case against the department under a 1991 law that allows federal and private workers to be compensated for discrimination. In the agreement, the department neither admitted nor denied wrongdoing. "The department felt it was in everyone's best interest to resolve this issue," said Claudia Withers, the Education Department's deputy general counsel. The agreement can't be broken by a new administration, and the court will spend the next four years monitoring the department for unfair practices. Bias against federal employees is "an epidemic," said Avis Sanders of the Washington Lawyers Committee for Civil Rights and Urban Affairs. Black employees stand to get $ 14 million from the Federal Deposit Insurance Corp. And a record $ 508 million settlement was awarded in March in a 23-year- old lawsuit filed by 1,100 women who said the Voice of America and the now-defunct U.S. Information Agency had refused to hire them because of their gender. The Education Department employees, whose salaries ranged from about $ 40,000 to $ 110,000, applied for jobs as chiefs and deputies of several department-run programs. The nine-year battle was often strained, attorneys said, as the workers and the department fought over statistics on promotions. Lee said they found no difference between the black workers and colleagues of other races who won promotions: "They had the same education, the same experience. You just saw blacks stop while other races continued." (St. Louis Post-Dispatch, December 12, 2000) FREE-LANCE COPYRIGHTS: Free-Lancers Fight To Retain Rights Over Work -------------------------------------------------------------------- In an offhand way, free-lance writers have always considered their work to be a kind of public service, given that often the pay is just a few hundred dollars. But suddenly the lowly free-lancer is strong, or at least wagging the dog (and the law) a bit. Now that their work is so easily republished and disseminated as megabytes, free-lancers have started going to court to take bigger bites out of online publishers they say use their work without permission. A cascade of legal challenges, settlements and agreements concerning free-lancers and copyrights continued this past summer and fall. A lot of eyes, ears and point-and-click attention are focused on whether the U.S. Supreme Court will hear one such case this term. The Court's decision in a case brought by free-lancers against several big electronic database owners, or a decision not to hear it, likely will set some basic copyright ground rules in what is now a vortex of new ground and old rules. Tasini v. The New York Times, 206 F.3d 161 (2d Cir. 1999). Is the Web Mightier? The named plaintiff, Jonathan Tasini, is president of the 5,000-member National Writers Union (an affiliate of the United Auto Workers). He complains that The New York Times and electronic databases do not have the right to republish his work electronically without his permission. The defendants claim such use is a legitimate revision of the original single issue of the periodical. The Copyright Act of 1976 says that the publisher can reproduce and redistribute the individual's work as part of "the original collective work; any revision of that collective work; or any later collective work in the same series." 17 U.S.C. @ 201(c). But as online databases and the huge maw of the Web gobble up as much published work as possible, questions arise about whether online versions of the creative works constitute legitimate revision or are derivative. Tasini lost his copyright claim at trial. But the 2nd U.S. Circuit Court of Appeals at New York City reversed the decision, ruling that a publisher cannot grant rights to a so-called aggregator such as Nexis to redistribute an article without the author's permission. The appeals court determined that when an individual issue of the newspaper is transferred to an online database it is "stripped, electronically, into separate files representing individual articles." The court noted that formatting decisions, photographs, tables and charts, and obituaries are left out, as is the article's placement in the page layout. Though Tasini has kicked around in the courts since 1991, the issue came home to many more writers in July when some challenged the presence of their work on Contentville.com, a new project of former American Lawyer publisher Steve Brill. The Web site sells, among other things, downloads of individual magazine articles, speeches, dissertations, and all manner of other documents. In quick response to the swirling controversy, Contentville entered a detailed agreement with the writers' union in early August. It covers all free-lancers--NWU members or not--and will pay them royalties. For Contentville, the writing was on the wall. The agreement came just days after a $ 7.5 million settlement in a case brought by free-lance writers against the online document delivery service UnCover. Ryan v. CARL Corp., No. C97-3873 FMS (N.D. Cal. 1999). And within a few weeks of the UnCover settlement and Contentville agreement, similar suits were filed in San Francisco, New York City and Wilmington, Del., as class actions. The San Francisco suit recently was withdrawn and refiled in New York City, along with a request that the court join it with the one already there. And in November, the Judicial Panel on Multidistrict Litigation was to consider consolidation of the three cases. Posner v. Gale Group Inc., No. 00-CIV-7376, and Authors Guild v. Dialog, No. 00-CIV-6049 (both S.D. N.Y.). Laney v. Dow Jones, No. 00-769-RRM, (D. Del. 2000). Publishers say it is impractical to try to track down all free-lancers, or their heirs, from work over many years to hammer out individual republishing agreements they believe they already have under copyright law. The result, publishers say, might be the erasure of history--deletion of countless articles, many no longer in print, from electronic databases. "It would be impossible to go back and negotiate with every free-lancer as a practical matter because you can't find all of them," says Bruce Keller of New York City, who represents the defendants in Tasini. "And as a business matter, if Tasini stands, the free-lancers will be negotiating with all the leverage they want, and prices will be astronomical rather than true value." Tasini's lawyer, Emily Bass of New York City, would take it even a step further. She believes the online aggregators should pay free-lancers whether or not the articles are sold. "Simply by virtue of inclusion in the database and making it available, Contentville and others are deriving value from the article," Bass says. "The database producer should be accountable to the author for some compensation." While the agreement between the National Writers Union and Contentville doesn't go that far, it is the first of its kind and has been praised by many. Writers can deal directly with Contentville or register with NWU's Publications Rights Clearinghouse, which handles royalty claims and payments of 30 percent of the download fee, including retroactive ones for articles already sold. Authors also can ask that their work be taken off the site. In the shakeout since the flap over Contentville, the Web site has struck formal agreements with some magazines and dropped others from its listings. "We had some that went away, and some now are more comfortable with staying or signing on," says Stuart Jordan, Contentville's senior vice president for customer services and operations. "We've had a couple of thousand total [content providers] in play over this, and by the time it's done I expect we'll have a net gain." Never before has the lowly free-lancer seemed so strong. But it may prove a Pyrrhic victory, as publishers now are likely to be more specific and demanding about republishing rights in what, except for the most elite writers, has always been a buyer's market. The Boston Globe, which is owned by the New York Times Co., began requiring free-lancers to waive any right to sue for copyright infringement of earlier articles and to give up all republishing rights for future ones "in any media now known or hereafter developed." Earlier this year, a group of free-lancers sued the newspaper over the policy, alleging unfair practices. Marx v. Globe Newspaper Co., No. SUCV-2000-2579 (Suffolk County Superior Court, Boston). "The online distributors of documents ought to be on pretty clear notice that they can't willy-nilly continue to deliver these articles without addressing prior permission from the authors," says John Shuff, a San Francisco lawyer who represented free-lance writers in their suit and successful settlement with UnCover. "It's a logistical problem if you want to distribute quickly in the Internet age." Writers Are Not Alone The same questions and issues pertain to free-lance photographers and graphic artists. In October, a three-judge panel of the 11th U.S. Circuit Court of Appeals at Atlanta heard arguments in the case of a free-lancer whose photographs for National Geographic Magazine over the years were included in a 1997 CD-ROM that compiled 108 years of the magazine. Jerry Greenberg complains that the CD-ROM set, which includes a separately copyrighted search engine as an index, comprises "a new derivative work" that violates his copyright. Greenberg v. National Geographic Society, No. 00-10510-C. A District Court judge in Florida had ruled that National Geographic did not infringe on Greenberg's copyright. In effect, the courts are wrestling in part with the question of whether copyright law covers methods and media not contemplated in the legislation. A California District Court has created a new rule concerning Web-based infringement claims. That suit was filed by a photographer whose photos were vacuumed off his Web site by another site that incorporated the images into its own Web page, which sells software. The court ruled that ordinarily this would not constitute fair use, but "the character of defendant's use and lack of market harm established such fair use in view of the established importance of search engines and the transformative nature of using reduced versions of the images." It is now on appeal to the 9th Circuit at San Francisco. Kelly v. Arriba Soft Corp., No. 00-55521. Many intellectual property lawyers believe current laws are sufficient and question the California District Court's ruling. "That's the surest way to get into trouble, writing special rules for the Internet at the trial level," says Robert Clarida, a New York City lawyer who worked on an amicus brief asking the appeals court to overturn the ruling. (ABA Journal, December, 2000) HOLOCAUST VICTIMS: Fed Judge Dismisses Lawsuits against German Insurers ----------------------------------------------------------------------- A federal judge has dismissed two class-action lawsuits alleging that more than a dozen German insurance companies failed to compensate people who endured slave and forced labor under the Nazi regime during World War II. The dismissal of the lawsuits, which were filed in federal court in Manhattan, came as part of an agreement reached in July to allow payments to the laborers. U.S. District Judge Michael B. Mukasey dismissed the lawsuits last Friday December 8. The orders were made public Monday. Under the July agreement in Berlin, Germany signed off on a $ 4.6 billion foundation to compensate the laborers. Representatives of the United States, Russia, Israel, Poland, the Czech Republic, Belarus, Ukraine, and the Jewish Claims Conference, as well as lawyers for the victims, signed documents along with German officials to establish the compensation fund. More than 1 million former laborers worldwide, mainly central and eastern Europeans, are expected to be eligible for payment. The fund also will compensate people subjected to Nazi medical experiments, as well as people with other Holocaust-related claims. Officials said they expect the foundation, funded in equal parts by German industry and the German government, to start making payouts this year. Before the payouts can begin, however, the court cases in the United States have to be dismissed. (The Record (Bergen County, NJ), December 12, 2000) INMATES LITIGATION: Women's Allegations Conflict Earlier Statements ------------------------------------------------------------------- A female inmate who initially said she was not sexually assaulted when taken hostage during an uprising at the St. Martin Parish jail is now changing her story in a new lawsuit against local authorities. Jessica Harmon of Apple Creek, Ohio, is among eight inmates who were held hostage when a group of immigrant detainees took over the jail Dec. 13, 1999. Those inmates filed a lawsuit this month claiming the sheriff and warden ignored warning signs about a possible uprising and failed to take precautions to prevent it. The inmates want $75,000 each for physical and emotional stress caused by the six-day standoff, which ended peacefully. They also asked for the suit to be granted class-action status so it could include all of the 100 or so inmates in the jail at the time of the incident. The lawsuit says five female inmates, including Harmon, were held at knife point and sexually assaulted. But Harmon, in a story published Jan. 16 in The Daily Advertiser, said she was not sexually assaulted during the jail uprising. She said the tension of the hostage crisis and the confinement to one small room made it impossible for a sexual assault to take place. Harmon's attorney, Joslyn Alex, has not returned multiple calls by the Daily Advertiser on the matter. Harmon, who has since been released from jail and was contacted at her home in Ohio, said her attorney advised her not to speak with reporters. Last January, Harmon said she was questioned by authorities shortly after the uprising about an alleged sexual assault by inmate Roberto Villar. Villar was one of seven inmates promised deportation to Cuba, but he was removed from that group just before departure and kept here. Prosecutors later said Villar was detained because he faced murder charges in Cameron Parish. He has since been convicted and is serving a 55-year sentence in the Louisiana State Penitentiary at Angola. (The Associated Press State & Local Wire, December 12, 2000) MAJOR LEAGUE: Fights off Antitrust Suit; It Isn't the Single Big League ----------------------------------------------------------------------- Major League Soccer managed to escape an antitrust lawsuit filed by its players by convincing jurors of one simple fact: In spite of its name, it isn't really the big leagues for soccer players. Unlike the National Football League, National Basketball Association, National Hockey League and Major League Baseball, which attract most or all of the athletes seeking the highest level of competition, MLS must compete with leagues around the world for the top players. And because of that, soccer players have options that their brethren in other sports don't. ''We clearly believe, and understand, and live through every day the fact that we are competing in an international player market,'' MLS commissioner Don Garber said Monday after the league's court victory. The class-action antitrust lawsuit filed in federal court claimed that MLS owners conspired with the U.S. Soccer Federation to eliminate competition for premier soccer players. But after about a day of deliberation, the jury found that plenty of competition existed in Europe, in Latin America, and in minor and indoor leagues in the United States. ''We couldn't have told the players, 'Take it or leave it,' because they had other places to go,'' said Michael Cardozo, a lawyer for MLS. Because the jury agreed with the owners that the market was not limited to Division I soccer in this country, it did not have to decide whether MLS worked to limit competition in the United States. Even so, the jury appeared ready to agree with owners on that point as well. ''It was our feeling that if these two leagues had been in place, both would be bankrupt,'' juror Tina Hart told the Associated Press. ''There isn't enough demand for it.'' The players will appeal the verdict, their lawyer Jeffrey Kessler said. Other, minor issues will be worked out between the parties in the next week. Jurors told the AP that they were impressed by the testimony of former deputy commissioner Sunil Gulati, who compiled a chart noting that MLS players had come from and gone to professional leagues in dozens of other countries. But the players argued that only 20 percent of MLS players had international options. Others were turned away because of visa and work-permit requirements or other limits on the use of foreign players. ''All we want is an agreement between labor and management,'' said Garth Lagerway, the Miami Fusion goalkeeper and player representative. ''All that's happened in the history of this league is the league telling us what we had to accept.'' Garber said the league spent more than dlrs 10 million fighting the lawsuit money that could have been better spent promoting soccer. Players were supported in part by the NFL Players Association. ''We do believe that our players were misled by their representatives in pursuing something that was not in the best interests of the sport,'' Garber said. ''We also believe that the resources will be much better allocated to growing the sport of soccer in this country.'' MLS owners claimed that they have lost dlrs 250 million since 1995, even without competition. According to antitrust laws, any damages would have been tripled and then applied to other players in the class, which could have put it into the tens of millions of dollars. (AP Worldstream, December 12, 2000) MONTY GROUP: NY Ap Ct Dismisses All But One Claim Re Insurance Sales -------------------------------------------------------------------- Since late 1995 a number of purported class actions have been commenced in various state and federal courts against Mony Group alleging that the company engaged in deceptive sales practices in connection with the sale of whole and universal life insurance policies from the early 1980s through the mid 1990s. Although the claims asserted in each case are not identical, they seek substantially the same relief under essentially the same theories of recovery (i.e., breach of contract, fraud, negligent misrepresentation, negligent supervision and training, breach of fiduciary duty, unjust enrichment and violation of state insurance and/or deceptive business practice laws). Plaintiffs in these cases seek primarily equitable relief (e.g., reformation, specific performance, mandatory injunctive relief prohibiting us from canceling policies for failure to make required premium payments, imposition of a constructive trust and creation of a claims resolution facility to adjudicate any individual issues remaining after resolution of all class-wide issues) as opposed to compensatory damages, although they also seek compensatory damages in unspecified amounts. The Company has answered the complaints in each action (except for one being voluntarily held in abeyance). The company has denied any wrongdoing and have asserted numerous affirmative defenses. On June 7, 1996, the New York State Supreme Court certified one of those cases, Goshen v. The Mutual Life Insurance Company of New York and MONY Life Insurance Company of America, the first of the class actions filed, as a nationwide class consisting of all persons or entities who have, or at the time of the policy's termination had, an ownership interest in a whole or universal life insurance policy issued by us and sold on an alleged "vanishing premium" basis during the period January 1, 1982 to December 31, 1995. On March 27, 1997, MONY filed a motion to dismiss or, alternatively, for summary judgment on all counts of the complaint. All of the other putative class actions have been consolidated and transferred by the Judicial Panel on Multidistrict Litigation to the United States District Court for the District of Massachusetts and/or are being held in abeyance pending the outcome of the Goshen case. On October 21, 1997, the New York State Supreme Court granted the company's motion for summary judgment and dismissed all claims filed in the Goshen case against it. On December 20, 1999, the New York State Court of Appeals affirmed the dismissal of all but one of the claims in the Goshen case (a claim under New York's General Business Law), which has been remanded back to the New York State Supreme Court for further proceedings consistent with the opinion. The company intends to defend ourselves vigorously against the sole remaining claim. MONY GROUP: Insurer Sued in NY Re Demutualization; Not Yet Time to Move ----------------------------------------------------------------------- On November 16, 1999, The MONY Group Inc. and MONY Life Insurance Company were served with a complaint in an action entitled Calvin Chatlos, M.D., and Alvin H. Clement, On Behalf of Themselves And All Others Similarly Situated v. The MONY Life Insurance Company, The MONY Group Inc., and Neil D. Levin, Superintendent, New York Department of Insurance, filed in the United States District Court for the Southern District of New York. The action purports to be brought as a class action on behalf of all individuals who had an ownership interest in one or more in-force life insurance policies issued by MONY Life Insurance Company as of November 16, 1998. The complaint alleges that (i) the New York Superintendent of Insurance, Neil D. Levin, violated Section 7312 of the New York Insurance Law by approving the plan of demutualization, which plaintiffs claim was not fair and adequate, primarily because it allegedly failed to provide for sufficient assets for the mechanism established under the plan to preserve reasonable policyholder dividend expectations of the closed block, and (ii) MONY Group violated Section 7312 by failing to develop and submit to the Superintendent a plan of demutualization that was fair and adequate. The plaintiffs seek equitable relief in the form of an order vacating and/or modifying the Superintendent's order approving the plan of demutualization and/or directing the Superintendent to order MONY to increase the assets in the closed block, as well as unspecified monetary damages, attorneys' fees and other relief. In order to challenge successfully the New York Superintendent's approval of the plan, plaintiffs would have to sustain the burden of showing that such approval was arbitrary and capricious or an abuse of discretion, made in violation of lawful procedures, affected by an error of law or not supported by substantial evidence. In addition, Section 7312 provides that MONY Group may ask the court to require the challenging party to give security for the reasonable expenses, including attorneys' fees, which may be incurred by us or the Superintendent or for which MONY Group may become liable, to which security we shall have recourse in such amount as the court shall determine upon the termination of the action. MONY Group's time to answer or move to dismiss the complaint has not yet occurred. MTBE LITIGATION: Hyde Park Residents and Well Owners Outraged at Leak --------------------------------------------------------------------- One Sunday afternoon in mid-October, Daniel Whalen was helping a neighbor saw a limb off a tree when the neighbor said something disturbing: state environmental officials had told him to stop drinking water from his well, and to stop cooking and showering with it, too. Alarmed, Mr. Whalen called the state's Department of Environmental Conservation. He discovered that his own well, as well as several others in the area, was contaminated with methyl tertiary butyl ether, or M.T.B.E., a gasoline additive that is a possible cause of cancer and other health problems. The source appeared to be old leaks from underground storage tanks at four gas stations just up the hill, on Route 9G, state officials said. Two months later, the number of wells identified as being contaminated in Mr. Whalen's working-class neighborhood, which is known as Greenbush, has grown to 123 from a handful. That makes this one of the largest contaminations of its kind in the state, according to Walter Hang, the president of Toxics Targeting, an Ithaca company that has analyzed government data on similar spills. The state agency has installed carbon filters in all the homes where water tested above allowable levels for M.T.B.E., and has provided fresh drinking water from a truck to anyone else in the neighborhood who wants it. About 200 people have been using the water, including some of those who have had filters installed, said Joe Coppola, a technician for Verizon who helped to organize the neighborhood after he heard about the problem in October. But many residents have grown angry at the agency's failure to act sooner. Most found out about the contamination through newspaper articles or from neighborhood gossip in October or November, though the agency became aware of it in January. In addition, there had been about a dozen earlier incidents of M.T.B.E. contamination in the neighborhood during the last 15 years, said Kevin Hale, an engineering geologist for the agency. "To know that I've had a river of M.T.B.E. flowing under my house for a decade is absurd," Mr. Coppola said. Levels of contamination vary from the single digits per billion parts of water to 940 per billion, state officials said. It is difficult to say what the effects on health would be at those levels, said Claire Pospisil, a spokeswoman for the State Department of Health. The state standard for safe drinking water was recently changed from 50 parts per billion to 10 parts per billion. In addition to homes and a handful of small retail businesses, the affected area contains a Roman Catholic elementary and middle school with 300 students. The school has been supplied with its own water truck, and a filtration system is being installed, said Jennifer Meicht, a spokeswoman for the conservation department. Methyl tertiary butyl ether has been added to gasoline in many states since the 1970's to increase the octane rating and make the fuel burn more cleanly. But it is being phased out in New York State because of its health effects and its tendency to contaminate water, and will not be allowed after 2004. Unlike other components of gasoline, M.T.B.E. is water soluble and spreads quickly underground. On Wednesday evening, roughly 200 Hyde Park residents attended a meeting convened by state officials in a middle school auditorium. They listened patiently for about an hour as engineers pointed to maps showing the locations of the gas stations and the affected homes. But after an official from the State Health Department began to explain that M.T.B.E. has caused cancer and other illnesses in laboratory animals, Mr. Coppola stood up and said, "Basically what you're telling us is that we're lab animals." The crowd cheered. "Enough is enough!" another man shouted. Assemblyman Joel Miller, who attended the meeting, and Hyde Park's town supervisor, Yancy McArthur, endorsed the residents' demand that their homes be linked to a water main owned by the town of Poughkeepsie. It is not clear how long linking would take or how much it would cost. Marc Moran, the regional director for the conservation agency, said the agency would have notified residents sooner if it had been aware of the extent of the contamination. The agency first heard of the problem in January, after a leak from underground tanks was reported at a Cenco gas station on Route 9G, Mr. Moran said. The owners of the gas station were ordered to remove a pile of contaminated soil and to perform tests to see if wells had been contaminated. They were slow to provide information, and finally the agency was forced to step in, he added. The owners of the Cenco station declined to comment. But at the meeting Wednesday, they distributed a leaflet that said a scientist they hired had determined that residual petroleum at the site had leaked before they had begun operations there. There have been more than 1,500 spills in New York State resulting in water or soil contamination with M.T.B.E., according to Ms. Meicht. The largest concentration of spills has been on Long Island. Several well owners in other parts of the state filed a suit against the gasoline industry in State Supreme Court in January, and that suit has since been consolidated with a national class action on behalf of well owners, said Lewis J. Saul, one of the lawyers handling the case. Mr. Saul attended last week's evening meeting in Hyde Park, and has held discussions with residents, he said. The residents in Hyde Park were particularly concerned about evidence of earlier spills, which suggested that they had been exposed to the additive for many years. Christine M. Molloy, who lives in Greenbush with her husband and three children, said her water began to smell like gasoline in May of 1998. She called the conservation agency, which sent engineers who confirmed that there was M.T.B.E. in the Molloys' water and installed a filtration system in the family's basement. In 1985, state officials found the additive near the home of a neighborhood woman at the extraordinary level of 100,000 parts per billion, they said. The woman, Mary Curcio, has moved, and could not be reached for comment. To several local people, the episode is a threat to property values as well as to their health. "We just bought our house, paid over $100,000 for it," said John O'Connell, a groundskeeper for the Hyde Park school district who lives on West Dorsey Lane with his wife and four children. "Now it's not worth spit because of the M.T.B.E. in the well." (The New York Times, December 12, 2000) PASMINCO: Sydney Class Action Solicitors Ordered To Pay Legal Costs ------------------------------------------------------------------- Sydney solicitors who launched a class action in an obviously "quite hopeless" noxious fumes case against Pasminco were ordered to pay the mining giant's legal costs. Justice Kevin Lindgren said the solicitors, Coleman & Greig, irresponsibly launched Federal Court action, reckless as to whether it had any prospects of success. But he noted solicitors remained free to undertake risky litigation, saying the circumstances in this case were extraordinary and unlikely to recur. A Coleman & Greig solicitor later said the costs could amount to tens of thousands of dollars and the firm may consider appealing. The Federal Court action against the zinc and lead producer claimed a number of people suffered in their health from noxious emissions from Pasminco's plants at Cockle Creek in New South Wales and at Port Pirie in South Australia. Since Justice Lindgren dismissed the claim in May because it was beyond the jurisdiction of the Federal Court, another class case has been launched in the Victoria Supreme Court on the grounds of negligence and nuisance. The Federal Court case was based on the Trade Practices Act and a claim that the noxious emissions were "goods" manufactured by Pasminco, supplied to the people who injured their health due to emissions defects. When he threw out the case, Justice Lindgren concluded the claims were "doomed to fail"," quite hopeless" and "clearly untenable". He noted the applicants may well have health problems and be entitled to recover damages, but said the solicitors brought the case in the wrong court relying on "untenable causes of action" under the Trade Practices Act. Pasminco had asked the judge to order the solicitors pay their costs, as opposed to the people they had represented. Justice Lindgren said the solicitors had not filed any affidavit evidence saying they had believed the Federal Court claim had any chance of success or that they acted on the advice of a barrister. "If they had responsibly considered the matter, they would have appreciated that the federal claims had no prospects of success at all." (AAP NEWSFEED, December 12, 2000) PRUDENTIAL, CLARICA: 83-Year-Old Cashed out Life Insurance Policy ----------------------------------------------------------------- After a lot of thought and debate within her family, Rose Lieberman, 83, has just cashed out a life insurance policy that she bought 15 years ago. It was one of the many policies sold in the 1980s for which the premiums or death benefit could change if dividend payments happened to fall. Dividends did fall when interest rates went down and taxes on insurers went up. So she was told the premiums would go up, the death benefit would go down, and she faced the possibility of further changes every five years. "I didn't expect any increases," she said. Lieberman shared her story in the hope that the telling would benefit others shopping for insurance, or considering their options with old policies they might have. The agent who sold her the $50,000 policy - part permanent insurance with some cash value after 10 years and part term insurance - shared her surprise at the size of premium changes, from about $1,400 a year originally to about $2,200 in the latest of two increases. Another policy he also sold her - a simple Term 100 policy with no cash value - is still costing her about $1,140 a year, payable to age 95. On the agent's advice, Lieberman protested. She realized after reading the contract carefully, though, that the wording permitted the company to make changes every five years. The policy had been issued by Prudential Life Assurance Co. of England (Canada), whose operations were bought in 1995 by the company now called Clarica Life Insurance Co. Clarica has successfully fought off a class-action suit over policies Prudential sold, but is reviewing individual complaints. It came back with two new offers for Lieberman. If she would give up about $4,700 of her current $16,000 in cash value, she could lock in the original $50,000 death benefit and fix the premium at $2, 046 a year for life. Or, if she wanted to hold her premiums at $1,620 and preserve her cash value to give herself options later, she could accept a reduction in death benefit to $46,200. There could be changes at subsequent five-year reviews. There were discussions back and forth, and some confusion about offers made orally. In the end, Lieberman rejected both offers presented to her on paper. 'If the death benefit doesn't mean anything, take cash value' She cancelled the insurance policy and asked for her $16,000 in cash value, part of which will be taxed away. She also will get back $2,046 in premium paid in October. The deciding factor? Her daughters had said they would rather see her spend the money on taxi fares and a little fun than see her deprive herself to leave them money. Cliff Oliver, a former insurance company actuary who now sells insurance to high-income individuals, said it's hard to argue with taking the cash if there is no insurance need. "I think it's pretty good value what Clarica was offering," he said. "But if the death benefit doesn't mean anything, take the cash value and enjoy it." He noted, however, that his advice to others who might have a need to leave money to heirs or dependants would vary with their age and health. Someone Lieberman's age could not beat Clarica's offer of continued coverage by taking the cash, investing it, and shopping for top-up insurance coverage. "I think you have to look forward and calculate what you would have to put into the policy to get pure insurance coverage," Oliver said. A $35,000 Term-to-100 policy for an 83-year-old woman in good health now costs at least $4,419 a year, which is double what Lieberman would have paid to Clarica. Without insurance, it would take several years to accumulate $50, 000 in tax-paid capital. Say Lieberman had $15,000 to invest now, plus $2,046 a year. If she earned a return after taxes of 4 per cent a year, it would take about 11 years. A younger person who has a lifetime insurance need and is unhappy with an old insurance policy that keeps going up in price might have more choices. Oliver noted that someone who can pass the physical examination to get other insurance might well find that there are cheaper options for coverage with guaranteed values. (The Toronto Star, December 12, 2000) SOUTHERN CO: Customers Say Wholesale CA Electricity Prices Are Inflated ----------------------------------------------------------------------- On November 27, 2000 and November 29, 2000, customers of San Diego Gas & Electric Company filed lawsuits in the Superior Court for the County of San Diego. Plaintiffs in each lawsuit seek class action status and allege that certain owners of electric generation facilities in California, including Southern, engaged in various unlawful and anticompetitive acts that served to manipulate and inflate the wholesale prices of electricity in California. While one such lawsuit names Southern as a defendant, it appears that the allegations, as they may relate to subsidiaries of Southern, are directed at the business operations of wholly-owned subsidiaries of Southern Energy. One lawsuit alleges that as a result of the defendants' conduct, customers paid approximately $4 billion more for electricity than they otherwise would have, and seeks an award of treble damages, as well as other injunctive and equitable relief. The other lawsuit alleges similar conduct but does not state any specific monetary damages and seeks an award of treble damages, as well as injunctive and other relief. The final outcome of these lawsuits cannot now be determined. STROMBOE: Texas Appeals Court Affirms Class in Defective Software Case ---------------------------------------------------------------------- A Texas trial judge did not abuse his discretion when he certified a class of some 20,000 plaintiffs who purchased and used allegedly defective dental office management software, the Texas Court of Appeals, Third District, ruled, rejecting the defendants' argument that individual issues will predominate over common questions of law and fact. Henry Schein Inc. et al. v. Stromboe et al., No. 03-99-00766-CV (Tex. App., 3d Dist., Sept. 14, 2000). The five named plaintiffs in this case alleged that defendants Henry Schein Inc., Easy Dental Systems Inc. and Dentisoft Inc. provided them with defective software, falsely claimed that users would receive free lifetime technical support, and forced them to pay for unsolicited software upgrades. The plaintiffs sought class certification, contending that the number of potential plaintiffs and the relatively small amount of each claim made individual suits impractical, and arguing that common questions predominated over individual issues. The trial judge agreed, and certified the class under Rule 42(b) of the Texas Rules of Civil Procedure. On appeal, the defendants raised five points of alleged error: -- Common issues do not predominate over individual issues; -- The trial court failed to conduct a proper "conflict of law" analysis; -- The claims of the named plaintiffs are not typical of those of the class members; -- The class representatives will not adequately represent the interests of the class; and -- Certification was improper because the plaintiffs' claims are primarily for monetary damages, not injunctive relief. "Taken together, all of appellees' complaints center around the defendants' common course of conduct in designing and marketing its computer software," the appeals panel wrote in rejecting the defendants' first point. "Consequently, the focus of the trial court's inquiry will be on the conduct of the defendants , not on the conduct of the individual class members." The defendants argued that certification should be denied under Southwestern Refining Co. Inc. v. Bernal , 22 S.W.3d 425, 43 Tex. Sup. J. 706, 715 (Tex., 2000), in which the Texas Supreme Court reiterated the requirements for class action certification in Texas and condemned the practice of "certify now and worry later." In this case, said the appeals panel, the trial judge diligently analyzed the issues involved in certification, heard extensive argument and considered an "immense amount of evidence." The panel also noted that Bernal involved personal injury claims stemming from a refinery tank fire, with numerous individual issues of exposure, causation, and damages. By contrast, it said, this case involves questions that, when answered for one plaintiff, will be answered for all. The panel next upheld the trial judge's decision to apply Texas law to all class members' claims. Under the "most significant relationship" test set forth in the Restatement (Second) of Conflict of Laws (1971), it said, Texas clearly has the closest relationship to the claims in this case, since the licensing agreements specified that Texas law would govern any disputes, and the programs were designed, developed, manufactured and shipped from Texas. The panel found no evidence that the named plaintiffs would be inadequate class representatives, or that their claims would not be typical of those of the class. Finally, the panel said the plaintiffs had already conceded that certification of a mandatory class is improper under Rule 42(b)(1)(A) of the Texas Rules of Civil Procedure; the trial court's order certified the class under Rule 42(b)(4), which governs opt-out classes. (Software Law Bulletin, October 2000) TOYS"R"US: Net Files Subpoenaed In NJ Investigation Of Privacy Practices ------------------------------------------------------------------------ Records from Toys "R" Us Inc.'s Internet division have been subpoenaed in an investigation of its privacy practices, a spokeswoman for the toy retailer said. The inquiry by New Jersey's Division of Consumer Affairs, overseen by the state attorney general's office, stems from lawsuits that accuse toysrus.com of illegally sharing personal information about its Internet customers with market researchers, said spokeswoman Jeanne Meyer. The company has turned over "thousands of documents related to our privacy policies," she said. Mark Herr, director of the Division of Consumer Affairs, refused to confirm or deny an investigation into Ft. Lee-based toysrus.com, but said the division is examining how Internet retailers use "cookies," the small text files that record information about an Internet user's browsing habits when they visit a Web site. "As we invite our citizens to bank online, shop online, invest online, we also have to ensure that our privacy is protected online," Herr said. "We have to ensure that they are protected from e-profiling and e-stalking." About 12 lawsuits seeking class-action status allege that Toys "R" Us allows market researchers access to consumer data obtained from its Web site in violation of its own privacy policy. (Chicago Tribune, December 12, 2000) VARIAN MEDICAL: ISOs File Antitrust Complaints over Replacement Parts ---------------------------------------------------------------------- Varian Medical Systems Inc is a party to three related federal actions involving claims by independent service organizations ("ISOs") that our policies and business practices relating to replacement parts violate the antitrust laws (the "ISOs Litigation"). ISOs purchase replacement parts from Varian Medical and compete with the company in servicing the linear accelerators that Varian Medical manufactures. In response to several threats of litigation regarding the legality of the company's parts policy, Varian Medical filed a declaratory judgment action in the U. S. District Court for the Northern District of California in 1996 asking for a determination that Varian Medical's new policies are legal and enforceable and damages against two of the ISOs for misappropriation of the company's trade secrets, unfair competition, copyright infringement and related claims. Later, four defendants filed separate claims in other jurisdictions raising issues allegedly related to those in the declaratory relief action and seeking injunctive relief and damages against us for $10 million for each plaintiff. Varian Medical defeated the defendants' motion for a preliminary injunction in U. S. District Court in Texas about our policies. The ISOs defendants amended the complaint to include class action allegations, alleged a variety of other anti-competitive business practices and filed a motion for class certification, which the U. S. District Court in Texas heard in July 1999. No decision, however, has been entered. The parties have agreed to consolidate Varian Medical's claims from the Northern District of California to the action in the U.S. District Court in Texas. ********* 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 * * *