/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010105.MBX C L A S S A C T I O N R E P O R T E R Friday, January 5, 2001, Vol. 3, No. 4 Headlines 21ST CENTURY: Quisenberry & Kabateck Sues Northridge Earthquake Insurer BANK OF AMERICA: Payouts Being Made to NationsBank Customers CAREERENGINE NETWORK: Subsid. Faces CA Complaint over Bond Tax Exemption CREDIT CARDS: Judge Dismisses Bait-and-Switch Lawsuit EXXON CHEMICAL: Judge Steps Down From Two Lawsuits Over Major Fires FORD MOTOR: Looking to Settle Explorer SUVs Rollover Suits HMOs: Lawyers Add New Complaints to TX Medicaid Lawsuit MICROSOFT CORP: New Employment Racial Bias Lawsuit Has Been Filed MOTOROLA INC: Testimony on Proportional Trading Model Rejected in IL MTBE CONTAMINATION: Financial Settlement In Gas Station Leak Now Public NANOPHASE TECHNOLOGIES: Stull, Stull Announces on Securities Suit in IL NETWORK ASSOCIATES: Security Software Company Names New Chief Executive PAC BELL, SBC: DSL Woes Give Rise to Suits; CA Customers Suffer Slowdown PHOENIX INTERNATIONAL: Agrees to Settle Securities Suit in Florida QWEST COMMUNICATIONS: Agrees to Settle AZ Lawsuit over Phone Line Delay RELIANT ENERGY: SEC Filing Reminds of CA Electricity Antitrust Lawsuits TOBACCO LITIGATION: First Medical Monitoring Suit to Take Place in VA UNITED AIRLINES: 7th Cir Rejects Bias Claim Past EEOC Deadline ********* 21ST CENTURY: Quisenberry & Kabateck Sues Northridge Earthquake Insurer ----------------------------------------------------------------------- A class action lawsuit was filed on Jan. 2 against 21st Century Insurance Co. on behalf of policyholders who filed timely property damage claims stemming from the 1994 Northridge earthquake but whose claims were mishandled, said plaintiffs' attorney Brian Kabateck, partner in the Los Angeles law firm of Quisenberry & Kabateck. (Stephanie Baruch vs. 21st Century Insurance Company, et al., Los Angeles Superior Court, BC 242674). The complaint charges that 21st Century Insurance (formerly 20th Century Insurance) took part in unfair and fraudulent business practices to minimize the amount of benefits it had to pay to insureds who incurred property damage during and after the Jan. 17, 1994, Northridge earthquake. More than 4,000 21st Century Insurance policyholders may be part of the class. "The lawsuit is alleging that 21st Century deliberately lowballed policyholders on the estimated damage from the earthquake or tried to attribute the damage to pre-existing conditions of the property," said Kabateck, who has represented hundreds of victims against their insurance companies. "The insurance company also is alleged to have used unlicensed, uncertified or unqualified contractors, engineers and testing companies to assess and estimate damage and losses. Mistakes were made. When policyholders found more damage and contacted 21st Century to file additional claims, they were told the statute of limitations for filing had expired." 21st Century, the complaint alleges, tried everything in its power to discourage and delay policyholders from filing additional claims, even though it was within their right to do so. "The practice was pervasive throughout the company," said Kabateck. "We plan to show that there was a pattern of conduct designed to defraud policyholders. Unless these unscrupulous business practices are stopped, 21st Century will continue to deceive their policyholders." Under a new law that went into effect on Jan. 1, 2001, policyholders have a right to sue their insurance companies to force them to reopen previously filed insurance claims relating to the Northridge earthquake. "This case is different," explained Kabateck. "In addition to having all 21st Century earthquake claims reopened and reviewed, we're seeking to halt the allegedly unethical business practices by 21st Century that created the insurance mess to begin with. Otherwise, when the next big disaster hits, policyholders will be faced with the same set of problems." Contact: Quisenberry & Kabateck, Los Angeles LaShawn King, 310/785-7966 lking@qklaw.com or Rumbaugh Public Relations, Thousand Oaks, Calif. Diane Rumbaugh, 805/493-2877 rumbaugh@earthlink.net BANK OF AMERICA: Payouts Being Made to NationsBank Customers ------------------------------------------------------------ Bank of America will pay about $ 26-million to 7,200 NationsBank customers who wrongly thought they invested in federally insured securities. Three years and five months after NationsBank agreed to pay $ 30-million to settle a landmark class-action case filed by its customers, the checks finally are being cut. U.S. District Judge Steven Merryday in Tampa has signed off on a plan to distribute about $ 26-million to some 7,200 past and present customers of the bank, which since has been renamed Bank of America. Customers lost from a few dollars to thousands of dollars by investing in securities they erroneously thought were federally insured. Though a settlement was reached in 1997, lawyers and fund administrators took much longer than anticipated to decide how much money individual investors were due. Merryday received the proposed payout list in September. "It took a long time, but sometimes justice takes longer than one would want," said Jonathan Alpert, a Tampa lawyer who led the class-action suit against NationsBank. "It was a very complicated swindle by the bank. It was a complicated settlement process." Bank of America, without acknowledging wrongdoing, set aside the money in 1998 in a fund it could not touch. "This has been anticipated for some time," bank spokeswoman Ann McNeish said. Originally, attorneys expected the money to be distributed by late 1999. McNeish said she could not address reasons for the delay. But Alpert and fund administrators said they were trying to include as many claimants as possible and that calculating payouts was an arduous process. In an order dated Dec. 28, Merryday directed the Garden City Group, the New York group administering the fund, to distribute the money within 14 days. Duped mutual fund customers are being paid dollar for dollar for their losses, reimbursed as if they had invested as they thought they had: in a "safe" one-year CD paying 5 percent. Investors in individual stocks and bonds, who the court thinks should have had a better idea of the risk, will get back about 50 percent of their loss. Most losses were for less than $ 20,000. But a few claimants were heavy investors, such as Julia G. Urena of Madeira Beach, who lost $ 240,643. Claims of less than $ 3 will not be distributed. The allegations against the bank originated in Tampa in 1994 when NationsBank broker David Cray told the St. Petersburg Times that his company was using misleading sales practices. Cray lost his job after the story was published and filed suit againstNationsBank. The story prompted NationsBank customer Leilani Demint to file a class-action suit. Investigations followed by Florida, Texas, the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the National Association of Securities Dealers and the U.S. Attorney's Office. Other banks across the country were investigated for similar practices. To settle the last of the regulatory investigations, Bank of America in November agreed to pay a civil fine of $ 6.75-million to the U.S. Attorney's office and set aside $ 11.5-million for investor losses in two government securities. (St. Petersburg Times, January 04, 2001) CAREERENGINE NETWORK: Subsid. Faces CA Complaint over Bond Tax Exemption ------------------------------------------------------------------------ Careerengine Network Inc. reveals in its SEC report that, in November 2000 one of Careerengine’s subsidiaries was served with a summons and complaint in connection with an action commenced in October 2000, by the Housing Authority of the County of Riverside, California against multiple defendants. This action was filed in the Superior Court of California County of Riverside and is currently pending. The plaintiffs issued certain bonds, the interest on which was to be treated as tax-exempt. The Internal Revenue Service later determined that the interest on these bonds was not tax-exempt. The plaintiffs alleged in connection with the issuance and underwriting of the bonds, various defendants negligently and fraudulently misrepresented to plaintiffs that the interest on the bonds would be tax-exempt. Plaintiffs are seeking damages as a result of such misrepresentation in the amount of $1,100,000, which damages plaintiffs have requested be trebled as permitted by statute. Plaintiffs are also seeking punitive damages in an unspecified amount. CREDIT CARDS: Judge Dismisses Bait-and-Switch Lawsuit ----------------------------------------------------- In a major victory for banks, a federal judge has ruled that credit-card holders cannot sue under the Truth in Lending Act over an alleged "bait and switch" in which they say they were promised a card with no annual fee only to learn six months later that a fee was being imposed. In his seven-page opinion in Rossman v. Fleet Bank, U.S. District Judge Bruce W. Kauffman found that the TILA has a narrow scope and requires only that banks disclose all of the terms that will apply to credit-card holders on the day they receive the card. "If as alleged, Fleet lured consumers into opening credit card accounts with relatively favorable terms while intending to switch those terms shortly thereafter, then Fleet unquestioningly engaged in wrongdoing. But wrongdoing alone does not automatically trigger application of the TILA's provisions," Kauffman wrote. Kauffman found that Fleet's disclosures in the solicitations it sent to consumers in late 1999 were "accurate with respect to the terms offered at that time; the fact that Fleet allegedly intended to change those terms in the near future did not render the disclosures inaccurate for purposes of the TILA." Plaintiffs' attorney Michael D. Donovan of Donovan Miller was dismayed and said he and the other lawyers on his team are considering an appeal. "This decision interprets the Truth in Lending Act to mean that it's OK to outright lie ... If TILA means anything, it means that you can't lie when you send out the initial solicitation," Donovan said. In the suit, lead plaintiff Paula Rossman claims she responded to a Fleet solicitation that pitched a credit card with no annual fee but that Fleet added a $ 35 annual fee just six months later. (A second class action suit is pending against Fleet, brought by consumers who say the company promised a low interest rate but raised it soon after. No rulings have been issued in that case.) Fleet's explanation for the annual fee was that the Federal Reserve Board had recently raised interest rates. But the suit alleges that Fleet planned all along to impose a fee if interest rates rose. But Fleet's lawyers, Alan S. Kaplinsky and Burt M. Rublin of Ballard Spahr Andrews & Ingersoll, argued that the plaintiffs were trying to stretch TILA to fit an ordinary fraud case so they could bring a class action in federal court. Courts have routinely rejected such TILA claims, they said, and have strictly construed the federal law to apply only where the allegedly false statements were false at the time they were made. In Fleet's motion to dismiss the federal claim, Rublin and Kaplinsky cited a decision from the 7th Circuit Court of Appeals that said TILA "is not a general prohibition of fraud in consumer transactions or even in consumer credit transactions." Even if Fleet had engaged in a "bait and switch" scheme to hide its true intention of imposing an annual fee, they said, such a claim might properly be brought as a fraud claim or as a violation of consumer protection law, but not under TILA. In a footnote, the defense team insisted that the plaintiffs' motive for adding the TILA claim was to get into federal court and to get fees for the lawyers. "Plaintiff is undoubtedly attempting to contrive a TILA claim here because TILA provides for the recovery of attorneys' fees and also because she believes that it will be less difficult to obtain certification of a nationwide class under TILA than under her state law claims," Rublin and Kaplinsky wrote. "The gravamen of plaintiff's complaint is fraud, and her effort to dress up the fraud claims in TILA garb should be rejected," they wrote. In defending the TILA claim, Fleet also offered a more general defense for its actions, noting that consumers were clearly advised that the terms of a credit card can change at any time.The solicitation materials stated: "We reserve the right to change the benefit features associated with your Card at any time." And when the card arrived in the mail, the agreement that came with it was even more explicit, saying: "We have the right to change any of the terms of this Agreement at any time."But a national team of plaintiffs' lawyers Michael Donovan and David A. Searles of Donovan Miller; Andrew S. Kierstead of Huron Zieve & Kierstead in Portland, Ore.; Timothy E. Eble of Ness Motley Loadholt Richardson & Poole in Mount Pleasant, S.C.; and John H. Bright of Keller Rorhback in Seattle pointed to language in TILA and its regulations that, they said, allows a claim over such a bait and switch.One regulation, they said, specifically requires banks to disclose any fee that "may be imposed." But Judge Kauffman rejected the argument that the term "may be imposed" should be read to include a fee that "might be imposed in the future." Turning to the dictionary, Kauffman said: "Although the term 'may' can be used to connote possibility, the term can also be used to connote permission." Kauffman opted for the latter, quoting and emphasizing a portion of the "official interpretations" of the regulation that say the bank's disclosures "should reflect the credit terms to which the parties are bound at the time of giving the disclosures." (The Legal Intelligencer, January 4, 2001) EXXON CHEMICAL: Judge Steps Down From Two Lawsuits Over Major Fires ------------------------------------------------------------------- U.S. District Judge Frank Polozola stepped down Tuesday from two lawsuits stemming from major fires at Baton Rouge Exxon facilities. The move comes just two weeks after Polozola declared that settlement efforts in the lawsuits, which encompass hundreds of plaintiffs had failed and put the cases on track for trial. The two fires, one in 1993 at the company's chemical plant and one in 1994 at the refinery, resulted in three deaths and numerous injuries. Polozola did not give reasons for the recusal in the two-sentence order issued Tuesday afternoon. The recusal is the latest in a string of cases Polozola has reassigned to other judges or stepped down from. In recent months, the chief judge recused himself from one of the criminal trials stemming from a sprawling investigation of former Gov. Edwin Edwards as well as several complex civil cases. On Dec. 13, Polozola issued an order saying he would not accept new criminal cases until further notice. Polozola ordered Lawrence Talamo, the federal court clerk in Baton Rouge, to delay reassigning the case to one of the three other judges in the district. Instead, Polozola wrote, he will attempt to find an available judge in another district that can preside over the case. The new judge assigned to the Exxon cases will work with Magistrate Stephen C. Riedlinger, who is handling pretrial preparations. Polozola previously ordered pretrial preparations in the cases stopped while settlement negotiations took place. The lawsuits were filed in the wake of two fires at the Exxon plants in Baton Rouge. The first fire, on Aug. 2, 1993, killed three workers at the Exxon Chemical Co. Americas plant north of the city. The fire began about 4 a.m. when an "elbow" pipe that was part of an asphalt processing unit split. The fire burned out of control for nearly three hours. About 400 people immediately filed suit against Exxon. The second fire, on Aug. 8, 1994, destroyed a coker facility at the Exxon Co. USA refinery. Several contract workers were injured. Polozola had ordered attorneys for Exxon and those injured in the fires to begin settlement discussions Aug. 21. Once Riedlinger takes over the case and a new district judge is assigned, he will set a conference with the lawyers to work on a pretrial schedule. That schedule likely will include deadlines for exchanging documents and witness lists. Such a schedule does not preclude lawyers from settling the case. Last summer, Polozola and state District Judge Mike Caldwell issued Exxon a legal setback. Exxon sought to hold Foster Wheeler Co. liable for the elbow pipe that split and caused the 1993 fire. Exxon claimed Foster Wheeler made an inadequate product that resulted in the fire. Foster Wheeler claimed the statute of limitations had run out, meaning Exxon had no legal right to sue over the part. Polozola and Caldwell ruled the statute of limitations to sue over the faulty part had expired, leaving Foster Wheeler without any legal liability in the case. Polozola also ordered Exxon, Foster Wheeler and the plaintiffs to evenly split the costs of a mediator. The mediator's bill has not been submitted. (The Advocate (Baton Rouge, LA.), January 3, 2001) FORD MOTOR: Looking to Settle Explorer SUVs Rollover Suits ---------------------------------------------------------- According to the Wall Street Journal, Thursday, Ford Motor Co [F] is offering generous settlements to victims of injuries and deaths from rollovers of its Explorer SUVs and their families in a bid to settle all pending lawsuits. The WSJ report says that Ford settled four suits on Wednesday in Miami and is close to settling one more. Ford is also trying hard to settle a high-profile lawsuit filed by a Texas woman against the company and tire company Bridgestone/Firestone Inc. The company badly wants to settle the suits because of the scheduled launch of a new Explorer in February, the report says. Krusel denied the settlement program was related to the release of the new Explorer. "Certainly the launch is important but settling of the lawsuits has nothing to do with the launch." Ford is also in talks to settle a consolidated lawsuit in Indianapolis involving 180 individual claims, the Wall Street Journal report says. HMOs: Lawyers Add New Complaints to TX Medicaid Lawsuit ------------------------------------------------------- Lawyers accusing Texas of failing to provide adequate health care for children enrolled in the state's Medicaid program have added two more complaints to the class-action lawsuit. In the complaints filed Wednesday in U.S. District Court in Tyler, plaintiffs claimed the state has not enrolled enough dentists in the Medicaid program and that ill children are not treated in a reasonable amount of time as federal law requires. The Texas Attorney General's office had not seen the filing and had no immediate comment, said spokeswoman Heather Browne. The state is appealing an August order by Judge William Wayne Justice that said Texas does not adequately provide dental care, regular checkups, transportation to doctors or information about what services are available to children in Medicaid, despite a 1996 agreement in which the state promised to make major improvements. Justice will decide if lawyer Susan Zinn's newest complaints can be added to that original lawsuit. No hearing date has immediately been set. "Some parents are having to take their children 150 miles to find a dentist who takes Medicaid," said Ed Cloutman, another attorney for the plaintiffs. There are 1.5 million children enrolled in the state's Medicaid program. An additional 200,000 children have been enrolled in the state's Children's Health Insurance Program. However, some 600,000 of Texas' 1.4 million uninsured children are eligible for but not enrolled in Medicaid. (The Associated Press State & Local Wire, January 3, 2001) MICROSOFT CORP: New Employment Racial Bias Lawsuit Has Been Filed ----------------------------------------------------------------- Seven former and current employees of the Microsoft Corporation filed a lawsuit on January 4 contending that the company had engaged in racial discrimination in its employment practices, and seeking certification as a class action on behalf of all former and current black Microsoft employees. The suit, filed in federal district court here, builds on a discrimination suit brought in June by Rahn D. Jackson, a former account executive for Microsoft. Mr. Jackson's complaint was refiled to include the six other plaiontiffs. Mr. Jackson said at a news conference that he had raised his concerns with Microsoft before filing his suit, but that he received little response. "We really didn't want to have to be here today," he said. The plaintiffs are four former employees from Microsoft's office in the District of Columbia and two former and one current employee at its headquarters in Redmond, Wash. The case is scheduled to be heard by Judge Thomas Penfield Jackson, who presided over the government's antitrust case against Microsoft and ordered the company to be split into two parts. Microsoft, which is appealing, has argued that Judge Jackson committed substantive errors in the antitrust case. Deborah Willingham, vice president for human resources at Microsoft, said the company was "100 percent committed to diversity." She declined to comment on the specific complaint because she had not reviewed it. Willie E. Gary, a lawyer for the plaintiffs, said at the news conference that Microsoft discriminated against black employees in evaluations, compensation, promotions and termination. "There are glass ceilings and glass walls in place for African- Americans at Microsoft," he said. Mr. Gary, who won a bias lawsuit against the Walt Disney Company last year, also represents four plaintiffs in a pending discrimination suit against the Coca-Cola Company. Mr. Gary presented employment figures that he said supported the complaint. In 1999, 2.6 percent of the company's employees were black, Mr. Gary said, and of the company's managers, just 1.6 percent were black. Mr. Gary said that he gathered the figures by speaking to Microsoft employees and from internal company documents. Ms. Willingham said that "Microsoft has a zero-tolerance policy toward discrimination in the workplace." She added that, "We take any allegations of discrimination very seriously, and immediately investigate any concern that is raised." A company spokeswoman said that 2.7 percent of Microsoft's domestic work force of 27,249 was black and that in the last three years, there had been an 81 percent increase in the number of black employees. The percentage of all minority employees at the company has risen from 16.8 percent in 1997 to about 22 percent of the domestic work force today, she said. This is not the only lawsuit contending racial bias at Microsoft. In October, Monique Donaldson, a former program manager for Microsoft, filed a lawsuit against the company claiming racial and gender bias; that lawsuit is pending in federal district court in Seattle. And Peter Browne, who had been Microsoft's highest-ranking black executive before leaving the company in September, filed a discrimination lawsuit shortly after his departure. (The New York Times, January 4, 2001) MOTOROLA INC: Testimony on Proportional Trading Model Rejected in IL -------------------------------------------------------------------- In response to a motion in limine filed by Motorola Inc., the Northern District of Illinois has precluded the testimony of Dr. Gregg A. Jarrell regarding the "proportional trading model" used in securities class action to determine aggregate damages. The court concluded the model does not meet the reliability standards articulated by the U.S. Supreme Court in Daubert. Kaufman et al. v. Motorola Inc. et al., No. 95-1069 (N.D. Ill., Sept. 21, 2000). In an attempt to determine damages for the class-action plaintiffs, Dr. Jarrell's method multiplied the alleged per share price differential by the aggregate number of shares that were bought during the purported fraud. To do so, Jarrell started with the number of shares purchased during the class period, or after the date when Motorola should have revealed the "truth" about its inventories. However, a model is required to estimate the figure because the actual number of shares cannot be computed empirically. This is due to the fact that, even though the number of shares purchased during the class period can be ascertained, a number of those purchases were made by brokers for short sales and the like. Both sides in the dispute agreed that in determining the number of "damages shares," the calculation must eliminate those shares not purchased for actual investment. The court noted that under Daubert v. Merrell Dow Pharmaceuticals , 509 U.S. 579 (1993), it has a gatekeeper function and must access the reliability of any expert testimony offered under Fed. R. Civ. P. 702. District courts are to consider four factors: -- whether the theory or technique can be and has been tested; -- whether the technique or theory has been subject to peer review and publication; -- the known or potential rate of error; and -- the "general acceptance" of the theory. "The proportional trading model does not meet any of the Daubert standards," said District Judge Robert W. Gettleman, who added that it appears to be a theory developed for securities litigation. The court also noted that professional economists have never accepted the model. Even Dr. Jarrell admitted that the model has never been tested against reality and said there is no way to test the reliability of the theory. "Although it may be correct to conclude that some type of model is needed in order to compute aggregate damages, this does not mean that absent such a computation any alleged securities law violation would go unremedied," said the court. Only actual damages can be awarded to shareholders under the antifraud provisions of federal securities law and an adequate remedy may be fashioned by having the jury determine a per share damage loss and requiring the filing of claims by each shareholder, the court concluded. (Securities Litigation & Regulation Reporter, November 8, 2000) MTBE CONTAMINATION: Financial Settlement In Gas Station Leak Now Public ----------------------------------------------------------------------- A financial settlement between Conoco Inc. and New Hanover County residents who lived next to a leaking gas station finally has become public. But one Wrightsboro resident whose family was awarded $600,000 for the contamination says people shouldn't think he is fortunate to receive a windfall. Buddy Sellers says no amount of money can compensate the family for more than four years of drinking groundwater polluted with the additive MTBE and cancer-causing benzene. "What worries me is what the doctor said about it not leaving your body," Sellers said of the pollutants. "I wish it had never happened." Sellers and his family were part of a $36 million settlement between Conoco and 179 Wrightsboro mobile home park residents affected by the leak. The September 1997 out-of-court settlement had been sealed, but it was made public for the first time in November. U.S. District Judge W. Earl Britt released the settlement in response to a July ruling by the 4th U.S. Circuit Court of Appeals that he had failed to follow the proper procedures for sealing it. The contamination prevented residents at the Carrol C Mobile Home Park, where Sellers' family lived, from drinking water from their taps. Details of the settlement may be one of few benchmarks for people determining how much a company should pay when it is found liable for fraud and negligence in covering up such leaks. In the $36 million settlement, the plaintiffs' attorneys received $11.25 million; individual amounts ranged from about $22,000 to $320,000. The average adult plaintiff received roughly $118,000, while the average minor won about $ 178,000. The amounts were based on factors such as age, gender and length of exposure. Many residents worried the pollutants were making them sick. Sellers quit his trucking job three months ago, unable to muster the energy to continue. Sellers also suffers from panic attacks and is considering going on disability. "I just don't have no more durability," Sellers said at the mobile home park where he still lives. He's worried about the health of his two children. His son, now 20, has struggled to recover from short-term memory loss and episodes where his hands would turn a purplish blue. Residents of the Carrol C and Wind Sail mobile home parks sued Conoco in 1995 for the alleged contamination. A jury found the oil company liable in a federal trial, but the two sides reached a settlement before jurors set damages. Britt sealed the settlement. But the Morning Star of Wilmington revealed the settlement amount after two people familiar with the deal divulged the $36 million figure under the condition that they remain anonymous. Britt found the Morning Star and a reporter in contempt of court after she looked at a copy of the sealed agreement given to her by a federal court clerk. He ordered the newspaper to pay roughly $600,000 and, later on, directed a second reporter to reveal the unnamed sources in the article. The 4th Circuit reversed Britt's actions. Conoco attorneys argued that the company had paid a premium to keep the deal secret and, with the cooperation of the court, sought some compensation for the information leaks. The court kept $1 million while Conoco attorneys questioned the parties involved in the deal. The company never determined who the sources were, and Judge Britt decided to release the remaining $1 million when making the court documents public. Jonathan Sasser, a Raleigh attorney retained by Conoco, said the company has no plans to appeal. "There just needed to be some resolution of this thing finally," he said. "And we're satisfied with Judge Britt's opinions." Sellers sank most of his settlement money into a new home and care for his children, he said. But he's back in the family's Carrol C unit for now while he and his wife work out a divorce. Two groundwater treatment devices continue to operate near the mobile home park and state officials say pollution levels are improving. Conoco also has paid to have New Hanover County drinking water lines extended to the two mobile home parks. (The Associated Press State & Local Wire, January 4, 2001) NANOPHASE TECHNOLOGIES: Stull, Stull Announces on Securities Suit in IL ----------------------------------------------------------------------- The following is an announcement by the law firm of Stull, Stull and Brody: United States District Court for the Northern District of Illinois Eastern Division In re: Nanophase Technologies No. 98 C 3450 Corporation Securities Litigation This Document Relates To: All Actions Except 98 C 7447 Judge David H. Coar Magistrate Judge Martin C. Ashman Summary Notice of Class Action, Proposed Settlement and Hearing Thereon To: All Persons and Entities Who Purchased the Common Stock of Nanophase Technologies Corporation From November 26, 1997 Through and Including January 8, 1998 ("The Class") YOU ARE HEREBY NOTIFIED that a hearing shall be held before the Honorable David H. Coar, United States District Judge, on March 27, 2001, at 9:30 a.m. in Courtroom 1419 of the United States District Court for the Northern District of Illinois, 219 South Dearborn Street, Chicago, Illinois 60604, to determine whether an order should be entered (i) finally approving the proposed settlement of the claims asserted by Plaintiffs in this Action against Defendants Nanophase Technologies Corporation, Leonard A. Batterson, Robert W. Cross, Dennis J. Nowak, Steven Lazarus, Robert W. Shaw and Richard W. Siegel, Donaldson, Lufkin & Jenrette Securities Corp., Furman Selz LLC and CIBC Oppenheimer Corp. on the terms set forth in the Stipulation of Settlement dated November 14 , 2000 (the "Settlement"); (ii) dismissing this Action with prejudice; and (iii) awarding counsel fees and reimbursement of expenses to counsel for Plaintiffs and the Class. If you are a member of the Class and have not yet received the "Notice of Class Action, Proposed Settlement and Hearing Thereon," which more completely describes the terms of the proposed Settlement and your rights thereunder, you should obtain a copy by contacting: Claims Administrator In Re Nanophase Securities Litigation c/o David Berdon & Co. LLP P.O. Box 4171 Grand Central Station New York, NY 10163 Telephone: (800) 766-3330 Fax: (516) 931-0810 Website: www.dberdon.com/claims PLEASE DO NOT CONTACT THE COURT OR THE CLERK'S OFFICE FOR INFORMATION Dated: January 4, 2001 Clerk of the Court United States District Court Northern District of Illinois Contact: Stull, Stull and Brody, New York Edwin J. Mills, Esq., 212/687-7230 NETWORK ASSOCIATES: Security Software Company Names New Chief Executive ----------------------------------------------------------------------- In a bid to restore investor confidence following the abrupt resignation of three top executives recently, Network Associates Inc. named a 22-year IBM veteran, George Samenuk, as president and chief executive officer Wednesday. Samenuk, who left International Business Machines Corp. last year to briefly serve as president and CEO of Tradeout, an online exchange for surplus business products, said he had accepted the post at the Santa Clara maker of security software because "it has the best-of-breed products in the industry" and is on sound financial footing. "Everyone is going toward Internet availability and security," Samenuk said. "They have to do that for obvious reasons." Samenuk steps into the top job at Network Associates at a difficult time for the maker of McAfee antivirus software. When the company announced the departures of Chairman and CEO Bill Larson and two of his lieutenants on Dec. 26, it also forecast a major shortfall in its fourth-quarter revenue and said it expected a net loss for the quarter of $ 130 million to $ 140 million rather than a profit. The news, which was released after the market closed, caused the company's shares to plunge 62 percent in trading the next day and triggered the filing of four lawsuits claiming the company deceived investors. As previousely reported in the CAR, Network Associates is already battling several class-action suits that were filed in 1999, when the company said it would restate earnings for 1997 and 1998 after the Securities and Exchange Commission challenged its method of accounting for charges related to acquisitions. During the conference call when Larson announced his resignation, he blamed the company's problems on a slowing world economy and the deteriorating financial condition of its distributors. As a result, he said, Network Associates would alter its method of accounting for sales and only book revenue for products that had been sold by distributors to end users. "We strongly suspect that the explanation by the company, which we find is highly unusual, is a cover-up for channel stuffing," said Richard Heimann, a San Francisco attorney who is representing thousands of Network Associates shareholders in a federal class-action suit that accuses Larson and others of having "engaged in a scheme to improperly and fraudulently manage the reporting of the company's quarterly and year-end financial results" through April 6, 1999. "Channel stuffing" refers to the practice of selling more products to distributors than are warranted by customer demand in order to beef up quarterly financial results. Such financial juggling will not be possible under the Network Associates' new accounting method. Heimann said his firm is considering asking the judge to broaden the scope of the suit to include the more recent events. "We are particularly interested in the revenue recognition, sales and marketing practices of the company at this point," he said. Neither Network Associates nor Samenuk would comment on pending lawsuits. In an interview, Samenuk emphasized the positive: Network Associates' $ 650 million in cash and its "blue-chip customers." But some analysts said Samenuk must work to win back credibility for the company with Wall Street. "Network Associates has a bad history from the Street's perspective of channel stuffing," said Richard Williams, an analyst at Jeffries & Co. "I don't know if that is fair or fully deserved, but it has to be dealt with." The company said it made the decision to change accounting practices in November, when it undertook a search for new executive management. Around the same time, John Thompson, vice chairman of executive search firm Heidrich & Struggles, contacted Samenuk and asked him to meet with Larson and other members of the board of directors. A founding executive and former general manager of IBM's Global Services division, Samenuk's last post at Big Blue was general manager of Canada, Latin America and the United States. Before that he served was president and general manager of the ASEAN/South Asia region. Samenuk, who will also serve on Network Associates' board of directors, said he will seek to expand the current five-member board, which has been criticized for weak leadership. Some board members have also been named in shareholder lawsuits alleging insider trading. Williams said Samenuk had a "good opportunity" to turn the company around. "We think he has the potential to be a constructive agent for change," he said. (San Jose Mercury News, January 4, 2001) PAC BELL, SBC: DSL Woes Give Rise to Suits; CA Customers Suffer Slowdown ------------------------------------------------------------------------ The Bay Area's DSL headaches continue, and this time around, hundreds of Earthlink customers have found that their connections to the Internet have slowed to a crawl. About 400 to 800 customers, including many from the East Bay, who receive DSL services from Earthlink Inc. have had to endure a series of severe slowdowns in their DSL product. The glitches began to sprout in late November and have plagued Earthlink's DSL subscribers in parts of Northern California ever since. It's possible thousands of customers have been affected at one time or another during the past several weeks. Atlanta-based Earthlink hopes to have service restored within a day or two, said Mike Lunsford, executive vice president-broadband service with Earthlink. "It's a funky problem that we have our hands around, and the problem is in its death throes," Lunsford said. "We almost have it whipped." Some Earthlink customers have reported severe slowdowns in receiving files from the Web, as well as e-mail services. The connection speeds have begun to flounder so badly that consumers say their DSL service is slower than conventional dial-up computer modems. "This is a bad incident." Lunsford said. "We will find a way to reimburse all of the customers who have been affected." When it operates properly, DSL is a technology that can connect people to the Internet at fast speeds, but its roll-out has been hounded by fumbles on a number of fronts. Pacific Bell, the principal provider of DSL service in the Bay Area, has suffered numerous difficulties in its delivery and maintenance of the product. The problems, from time to time, have included connection slowdowns and e-mail failures. Numerous subscribers have griped about not being able to reach customer service, and others have had to wait weeks or even months for an installation. The telephone giant's DSL woes in California have resulted in the filing of three lawsuits against Pacific Bell and parent SBC Communications Inc. At least one suit seeks class-action status for subscribers. But the latest problem can't be blamed on Pacific Bell or SBC, even though Pac Bell supplies crucial elements of the DSL service to Earthlink. "This is entirely on Earthlink's shoulders," Lunsford said. The problem originated in equipment located in Oakland. A group of components and software that connects Earthlink's DSL facilities with Pac Bell's DSL system didn't operate properly, causing the severe slowdowns. Earthlink has 139,000 DSL subscribers nationwide. Difficulties such as those endured by Pac Bell and Earthlink could damage the reputation of DSL as a technology. "DSL has been giving itself a black eye for months," said Tim Bajarin, principal analyst with Creative Strategies, a Silicon Valley market researcher. "DSL represents an alternative for broadband. But there are other alternatives, such as wireless broadband and cable modems. Bajarin added, "It doesn't help that these things are happening at a time when many companies want to expand delivery of DSL services." (Contra Costa Times, January 4, 2001) PHOENIX INTERNATIONAL: Agrees to Settle Securities Suit in Florida ------------------------------------------------------------------ As previously reported in the CAR, on November 23, 1999, a lawsuit was filed in the District Court for the Middle District of Florida as a purported class action initiated by George Taylor, a former Phoenix employee. Initially, Phoenix and our chief executive officer were named as defendants. The lawsuit alleges, among other things, that Phoenix and our chief executive officer improperly recognized revenues, overstated revenues and failed to disclose that our revenues were allegedly in decline, all of which allegedly caused our stock price to be higher than it otherwise would have been during the class period. The lawsuit alleges that these purported actions violate Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On May 5, 2000, the plaintiffs filed an Amended Complaint which, among other things, (1) adds four additional investors as named plaintiffs and proposed class representatives; (2) expands the purported class period to the period from May 5, 1997 to April 15, 1999; and (3) adds Phoenix's president as an additional named defendant. Phoenix and the other two defendants filed Motions to Dismiss, which were denied by the Court without opinion in August 2000. The parties are beginning to conduct discovery. Phoenix's insurance carriers have denied coverage for the claims in this lawsuit. Update On October 24, 2000, Phoenix entered into an agreement in principle to settle the consolidated securities class action litigation with a settlement class comprising shareholders who acquired Phoenix common stock during the period between May 5, 1997 and August 22, 2000. The settlement is subject to certain customary conditions, notice to the proposed settlement class, confirmatory discovery and preliminary and final court approval. QWEST COMMUNICATIONS: Agrees to Settle AZ Lawsuit over Phone Line Delay ----------------------------------------------------------------------- Qwest Communications International Inc. has agreed to settle its service lawsuit with an estimated 300,000 Arizonans who suffered delays in getting phone lines, providing them with a total of $22 million in credits or refunds. The settlement of the class-action lawsuit against the Denver-based phone company, formerly U S West, comes on the heels of similar agreements in Colorado, New Mexico and Utah. All four agreements are still subject to final court approval. The Arizona settlement will go before a Maricopa County judge April 23. Arizona business and residential customers would be eligible for credits or refunds ranging from a few dollars to nearly $1,500, depending on the length of installation delay, according to settlement notices sent to eligible claimants. The company decided to settle the cases to put the matter to rest, said Qwest spokesman Matt Barkett, who added it decided not to risk larger court awards. The original lawsuit was filed against U S West in Denver in 1997. It alleges that it diverted company resources from local phone service to new cable and wireless ventures, harming customers. The phone company has been fined millions of dollars by regulators in Arizona and other states for failing to meet service-quality standards, including those pertaining to installation delays. Qwest, which acquired U S West in a merger in July, disputes those allegations and has denied any wrongdoing as part of the settlement, Barkett said. Eligible for credits under the proposal are customers who placed orders for new or additional phone lines between Jan. 1, 1993, and Nov. 20, 2000, but suffered delays "due to a lack of US West facilities." Current Qwest customers would get credits on their phone bills, while former customers would get refund checks. The amounts of the credits or refunds vary depending on the type of line and the length of delay from the first date service was promised, Barkett said. A local consumer advocate said the settlement is good for consumers but doesn't guarantee better service. "You take a look at (Qwest's) cash flow, and $22 million is a drop in the bucket," said Al Sterman, vice president of the Arizona Consumers Council, a nonprofit consumer advocacy group. Sterman said the phone company must add staff to keep up with rapid growth in Arizona. Barkett said Qwest is working hard to improve service across its 14-state territory. (The Associated Press State & Local Wire, January 4, 2001) RELIANT ENERGY: SEC Filing Reminds of CA Electricity Antitrust Lawsuits ----------------------------------------------------------------------- Reliant Resources Inc. reveals in its report to the SEC that Reliant Energy has been named as one of a number of defendants in a class action lawsuit filed against a number of companies that own generation plants in California and other unnamed sellers of electricity in California markets. Under the terms of the master separation agreement, Reliant Resources has agreed to indemnify Reliant Energy for any damages arising under this lawsuit and may elect to defend this suit at our own expense. Our domestic trading and marketing subsidiary has been named as one of multiple defendants in another class action lawsuit against marketers and other unnamed sellers of electricity in California markets. Both of these lawsuits were filed in the Superior Court of the State of California, San Diego County in November 2000 and allege violations by the defendants of state antitrust laws and state laws against unfair and unlawful business practices. The first lawsuit alleges aggregate damages of over $4 billion. The second lawsuit alleges damages in excess of $1 billion. In addition to injunctive relief, the plaintiffs in these lawsuits seek treble the amount of damages alleged, restitution of alleged overpayments, disgorgement of alleged unlawful profits for sales of electricity during all or portions of 2000, costs of suit and attorneys' fees. A petition to remove each case to Federal District Court in San Diego was filed in December 2000. These lawsuits have only recently been filed. Therefore, the ultimate outcome of the lawsuits cannot be predicted with any degree of certainty at this time. However, we do not believe, based on our analysis to date of the claims asserted in these suits and the underlying facts, that the resolution of these suits will have a material adverse effect on our financial condition, results of operations or cash flows. TOBACCO LITIGATION: First Medical Monitoring Suit to Take Place in VA --------------------------------------------------------------------- Tobacco companies have been forced to spend hundreds of millions of dollars on the medical bills of dead or dying smokers. They have had to spend more on ad campaigns to discourage young people from smoking. Now six West Virginians will decide whether the industry should spend as much as $500 million on medical tests for healthy people who, despite the warnings, decided to keep smoking. Jury selection started Thursday in Ohio County Circuit Court for a precedent-setting case that is expected to span 14 weeks and include nearly 50 witnesses. Opening statements are likely to begin Tuesday, Jan. 9. It is the first time a class-action medical monitoring lawsuit against a tobacco company has made it to trial in the United States. Thirteen other cases have been filed around the country since 1996, says North Carolina attorney Jeff Furr, who represents R.J. Reynolds. Ten of the 13 were denied class-action status and dismissed. One, in Nevada, is still under review by the courts. A Louisiana case has been granted class-action status, but it is not expected to go to trial until next summer. "This is an extremely unique case - to have uninjured plaintiffs who have knowingly and voluntarily exposed themselves to the most widely known risk in our society, and who are not sick," Furr says. Smokers want to continue exposing themselves to a known danger but still be assured of health exams. "They want to have it both ways," he says. Lawyers representing more than 250,000 West Virginians covered by the lawsuit say five cigarette manufacturers and two distributors should provide free periodic medical tests for smokers who are currently healthy but at risk of contracting various cancers and lung or heart diseases. "West Virginians are entitled to obtain monitoring as a result of their exposure to a very toxic group of substances," argues Charleston attorney Scott Segal. Four manufacturers that collectively have 96 percent of the U.S. market share are named as defendants in the West Virginia case: Philip Morris Inc. of New York; Brown & Williamson Tobacco Corp. of Louisville, Ky.; R.J. Reynolds Tobacco Co. of Winston-Salem, N.C.; and Lorillard Tobacco Co. of New York. Also targeted are industry turncoat Liggett & Myers Tobacco Co. of Mebane, N.C., whose top executive is expected to be a key witness for the smokers, and two West Virginia distribution companies, McClure Company Inc. and Anchor Tobacco Co. The lawsuit would benefit people who, since 1995, have smoked the equivalent of a pack a day for five years but do not currently have a cigarette-related illness. The smokers want a court-supervised and industry-funded medical board to be created so they can receive free tests to detect any illnesses they are likely to develop. Furr says that could cost the tobacco industry as much as $500 million. Medical monitoring claims have primarily evolved from cases where people were unknowingly exposed to an invisible health hazard. Furr contends that shouldn't apply to tobacco, which has had warning labels for decades. Through some 15 witnesses, however, the smokers will argue that tobacco manufacturers were negligent in disclosing the extent of the health risks associated with smoking. They also maintain that warning labels are inadequate. The smokers say cigarettes have a design defect, and that manufacturers have failed to incorporate changes that would make their products safer. Cigarettes, they argue, are "less safe than the ordinary consumer would expect them to be," with risks that far outweigh any benefits. Smokers do not have to prove they were addicted because the judges have ruled that the law requires only proof of significant exposure. Circuit judges Arthur Recht and Tod Kaufman expect to spend almost six hours listening to opening statements once a jury and four alternates are seated. Two judges are hearing the case because of the protracted length of the trial and the volume of work; both are also experienced in mass litigation. The smokers hope to bolster their case with the videotaped testimony of Bennett S. LeBow, chief executive officer of Liggett & Myers' parent company, Brooke Group. Liggett has tried unsuccessfully to extract itself from the lawsuit, and its competitors have joined the battle, with Furr arguing LeBow's testimony is intended simply "to poison the jury against the other defendants." LeBow, a Miami financier who bought Liggett in 1986, became the first top tobacco executive to admit smoking was addictive in 1997 and has since continued to break ranks with the industry. Liggett, which has only 1.2 percent of the U.S. market, has settled many lawsuits by states seeking reimbursement for smoking-related health costs. LeBow has testified about the dangers of smoking at other trials, and the company has disclosed thousands of secret industry documents. "There's no real dispute between Liggett and the plaintiffs," Furr contends. "Liggett is a defendant in form only. Essentially, Liggett is not going to defend the case. Whatever the jury does is fine with them." Liggett lawyer Julie Fischer disputes that assertion but fears that evidence against the other tobacco companies could overwhelm any good conduct her company has demonstrated. Whatever the outcome of the case, Furr says it could have significant ramifications for the state, where medical monitoring was only recognized in 1999. "There is only one published decision in West Virginia," he says, "so in many ways, the parties in the trial court are making new laws." (The Associated Press State & Local Wire, January 4, 2001) UNITED AIRLINES: 7th Cir Rejects Bias Claim Past EEOC Deadline -------------------------------------------------------------- Saying a flight attendant waited too long to complain that she was a victim of discrimination, a federal appeals court has declined to clear the way for the woman to pursue her lawsuit against her former employer. In that suit, Bettina S. Sharp claimed her pregnancy lay behind United Airlines Inc.'s refusal to reinstate her to her job on the same terms as other attendants who were fired for failing to comply with United's weight restrictions. Sharp argued that she was unlawfully singled out from former co-workers who were allowed to return to work while pursuing a class-action lawsuit challenging United's discontinued policy of setting differing weight requirements for male and female flight attendants. United's insistence that she agree not to participate in any litigation against the airline as a condition of reinstatement constituted discrimination based on pregnancy, Sharp claimed. But the 7th U.S. Circuit Court of Appeals on Tuesday did not reach the merits of Sharp's claim. The court concluded that Sharp missed the deadline for filing a charge of discrimination with the Equal Employment Opportunity Commission. Quoting 42 U.S.C. sec2000e-5(e)(1), the court said Sharp was required to bring a charge within 300 days of the alleged unlawful employment action." But Sharp did not turn to the EEOC until June 1998, about 22 months after she learned that United would not renew a reinstatement offer that would have allowed her to participate in the class-action suit, according to the appeals court. The court affirmed a decision by U.S. District Judge Elaine E. Bucklo to grant summary judgment in favor of United. Judge Kenneth F. Ripple wrote the opinion for a three-member panel of the 7th Circuit. Joining the opinion were Judges Diane P. Wood and Terence T. Evans. Bettina S. Sharp v. United Airlines Inc., No. 00-1875. In a separate per curiam opinion in the same case, the panel discharged a rule to show cause issued after United's counsel, Seyfarth Shaw, omitted information from a disclosure statement filed with the appeals court. When asked to identify any law firm whose lawyers had appeared or were expected to appear for United, Seyfarth Shaw failed to note that Mayer, Brown & Platt had previously represented the airline in a motion to dismiss Sharp's complaint. The 7th Circuit panel accepted Seyfarth Shaw's word that it had inadvertently omitted the information from the statement. But while saying that the mistake was obviously an oversight," the panel emphasized that disclosure requirements are important to the expeditious and fair adjudication of cases filed in this court." The judges of the court rely on the representations of counsel in determining whether any judge or staff member is ineligible to participate in the case," the panel said. Misstatements, even when discovered by the court in the early stages of the adjudication of the case, can cause significant delays and the waste of already stretched judicial resources." The panel noted that lawyers who appear before the 7th Circuit have the means to keep track of proceedings in their cases. Modern technology affords the practicing bar significant tools to record the history of a case and to retrieve expeditiously that history when it is needed in order to comply with requirements such as those contained in Circuit Rule 3," the panel said. We have every confidence that, in the future, counsel will afford themselves of the advantages of this technology to ensure that a repetition does not occur and, indeed, we commend such a practice to the rest of the practicing bar." Sharp worked as a flight attendant for United from July 1990 until she was fired in October 1993 for exceeding the airline's weight restrictions. Sharp and other female attendants brought a class-action suit in the Northern District of California alleging that United discriminated against them from 1989 to 1994 by requiring them to be thinner than their male counterparts. Last summer, a divided panel of the San Francisco-based 9th U.S. Circuit Court of Appeals ruled in favor of the flight attendants. United is seeking review before the U.S. Supreme Court. In February 1995, United offered to reinstate Sharp and 13 other class members in the California litigation with no loss of seniority. United's offer did not require the women to waive any potential claims they might have against the airline stemming from their firing. Although Sharp initially declined to return to work because she was in the second trimester of a high-risk pregnancy, she later asked United to renew its offer. United rejected that request in August 1996 after noting that Sharp had missed a 30-day deadline to accept the reinstatement offer. But after Sharp lobbied various United officials to renew the offer, the airline in February 1998 said she could have her job back if she signed a general release and waived participation in any litigation against United. Sharp rejected the revised offer and filed a charge with the EEOC alleging that United had discriminated against her on the basis of pregnancy. Sharp claimed flight attendants who were not pregnant were treated more favorably because they were not required to waive their right to take part in the class-action suit. Bucklo granted summary judgment in favor of United after finding that Sharp had not shown that her pregnancy -- rather than her rejection of the original reinstatement offer -- was the reason United refused to rehire her. The 7th Circuit panel said it did not need to address that issue because Sharp's suit was time-barred. Although United refused to renew its original offer in August 1996, Sharp did not file her discrimination charge with the EEOC until June 1998, the panel said. The panel rejected Sharp's argument that various legal theories saved her suit from the 300-day deadline. Citing Lever v. Northwestern University, 979 F.2d 552 (7th Cir. 1992), the panel said the doctrine of equitable estoppel does not apply merely because an employer provides an avenue (or avenues) for review of adverse employment actions, without more." Equitable tolling also does not help Sharp because she knew in August 1996 that United was not going to renew the original reinstatement offer and therefore had the information she needed to bring a discrimination charge, the panel said. And the panel said Sharp had not offered evidence of a continuing violation of her rights that might extend the statute of limitations. Quoting Lever, the panel said United's refusal to renew its original reinstatement offer could not constitute a continuing course of pregnancy discrimination because a refusal to undo a discriminatory decision is not a fresh act of discrimination." (Chicago Daily Law Bulletin, January 3, 2001) ********* 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 * * *