/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010123.MBX C L A S S A C T I O N R E P O R T E R Tuesday, January 23, 2001, Vol. 3, No. 16 Headlines AETNA: $82.5M Settlement of Securities Suit Okayed; Atty Fees Equal 30% BENGALS: Season Ticket Buyers Seek To Extend Payment Deadline in Ap Ct EPISCOPAL HOSPITAL: Superior Ct Affirms Corporate-Negligence Verdict EXXON CORP: Station Owners' $ 1B Suit Begins Second South Florida Trial FLORIDA: Carriers of Workers’ Compensation Insurance Sue for Refunds FLORIDA: Ct Rules for Refunds for Services to Disabled Children FLORIDA: Medicaid Providers Seek Reimbursement of Differential FLORIDA: PMATF Suit in Discovery Process; Liability Could Total $116.8M FLORIDA: Property Owners Allege Potential Flooding Due to Construction FLORIDA: Taxpayer Wins Appeal Re Interest on Corporate Income Tax FORD MOTOR: Lawsuit Accuses of Withholding Safety Data for Explorer HARTSFIELD RUNWAY: Fulton Residents Wage Suit to Halt Construction HMOs: Judge to Mull Deal to Reinstate Benefits to Low-Income Coloradans OHIO: Ap Ct Reinstates Class Status of Medicaid Rules Case; Ohio Appeals OHIO: Sp Ct Finds School Funding System Unconstitutional; State Appeals PILGRIMS PRIDE: Conference with DOL on Pay Re Chicken Plant Set in April PILGRIMS PRIDE: Trial on Former Employees’ Suit for Pay Set in Feb. 2001 PRUDENTIAL INSURANCE: Bogus Policies Subject of $1B Palm Beach Lawsuit TOBACCO LITIGATION: Appeals Ct. Hears Arguments On Black Smokers' Suit TOBACCO LITIGATION: Judge Declares Mistrial In Medical Monitoring Case TOBACCO LITIGATION: Ohio Judge Will Hear Arguments on Nicotine Addiction U-M: Professor Says Minorities Would Struggle Without Affirmative Action * Group Actions in the U.K.; Atty. at Cohen, Milstein Working on Case * LA Seeks Damn to Oyster Bed Lawsuits Fueled By Freshwater Projects ********* AETNA: $82.5M Settlement of Securities Suit Okayed; Atty Fees Equal 30% ----------------------------------------------------------------------- In re Aetna Securities Litig., PICS Case No. 01-0015 (E.D. Pa. Jan. 8, 2001) Padova, J. (29 pages). The proposed $ 82.5 million settlement of plaintiffs' federal securities class action suit was fair, and plaintiffs' counsel was entitled to attorneys' fees equaling 30 percent of the settlement. Motion for approval of settlement and plan of allocation granted; motion for approval of application for attorneys' fees and reimbursement of expenses granted. Plaintiffs brought a class action suit against defendant alleging violations of federal securities law in connection with defendant's merger with U.S. Healthcare. The parties settled the case just before trial for $ 82.5 million. Plaintiffs filed a motion for approval of the settlement and plan of allocation and a motion for approval of their application for attorneys' fees and reimbursement of expenses. The district court granted both motions. It determined that notice of the proposed settlement was adequate to satisfy the demands of due process and the federal rules. The court also determined that the terms of the proposed settlement was fair, adequate and reasonable in light of the factors set forth in In re Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283 (3d Cir. 1998). The court found that the complex nature of the evidence combined with the lengthy duration of the litigation weighed strongly in favor of settlement. The court also found significant the fact that the parties reached settlement with the benefit of a full investigation of plaintiff's claims and allegations. Moreover, the settlement eliminated the risk of the court's changing the starting date for the class period, as well as the substantial risk plaintiffs' faced in proving the merits of their claims and establishing the amount and causation of their damages. The $ 82.5 million settlement figure was reasonable, the court determined, in light of the risks the parties would face if the case went to trial and the fact that it represented approximately 10 percent of the best possible recovery. Next, the court approved plaintiff's request for $ 1.5 million in expenses and $ 24.3 million in attorneys' fees. Plaintiffs' claim for an attorneys' fee in the amount of 30 percent of the net settlement figure was warranted in this case, the court concluded. It noted that attorneys' fee awards of 30 percent of the settlement are common in securities fraud cases. The court also observed that other factors, such as the complexity and duration of the litigation and the quality of representation, weighed in favor of such an award. Cross-checking this award with the lodestar method also confirmed its appropriateness, the court concluded. (Pennsylvania Law Weekly, January 22, 2001) BENGALS: Season Ticket Buyers Seek To Extend Payment Deadline in Ap Ct ---------------------------------------------------------------------- Disgruntled fans who have filed a class-action lawsuit against the Bengals over their season ticket seat locations in Paul Brown Stadium have asked an appeals court to stop the team from enforcing a Jan. 31 payment deadline. The Bengals have told fans that if they don't pay 20 percent of their 2001 season ticket costs by the deadline they could lose their seats. Attorneys argue that in doing so the Bengals have violated a Dec. 14 injunction that they say prohibits the team from enforcing the deadline or having contact with season ticket holders until the case is resolved. "The Bengals appear to be deliberately violating the court order," said the request, which was filed last Friday January 19. "Further, the Bengals have insisted on enforcing deadlines which violate the status quo." Team president Mike Brown declined to comment. "I don't have anything to say on this," Brown said. The court has said the Bengals should not change seating assignments until after the lawsuit is settled. Fans filed the suit in September in Hamilton County Common Pleas Court, alleging their assigned seats at the stadium were not equal to the seats they paid for. The lawsuit asks for unspecified damages and refunds or reassignment of seat locations. The team has said a class-action lawsuit is not appropriate, and that the issue ought to be settled individually by arbitration. The Common Pleas Court ruled that the class-action suit could go forward. The Bengals appealed that decision to the 1st Ohio District Court of Appeals, where a decision is pending. (The Associated Press State & Local Wire, January 22, 2001) EPISCOPAL HOSPITAL: Superior Ct Affirms Corporate-Negligence Verdict -------------------------------------------------------------------- The Superior Court has affirmed a Philadelphia Court of Common Pleas jury's $ 339,000 award, finding that the plaintiffs proved their corporate-negligence claim against a hospital for providing inadequate treatment to a woman with pregnancy induced hypertension. In Whittington v. Episcopal Hospital a memorandum opinion the three-judge panel said the two experts presented by the plaintiffs clearly established that Episcopal Hospital deviated from the standard of care, causing Claudette Milton's death.Superior Court Judges Stephen McEwen and James Cavanaugh and the late Judge Vincent Cirillo sat on the panel. The plaintiffs in Whittington v. Episcopal Hospital alleged Episcopal breached its duty under Thompson v. Nason Hospital to oversee the patient care provided by everyone who practiced medicine "within the hospital's walls." Milton, a 26-year-old pregnant woman, was under the prenatal care of Dr. Carol Allen and the resident and nursing staff at Episcopal. When Milton went to see Allen on Dec. 15, 1993, she had high blood pressure and excess protein in her urine. Allen sent Milton to Episcopal for a non-stress test and a biophysical profile. After a work-up at Episcopal, Milton was diagnosed with preeclampsia, or pregnancy-induced hypertension. Allen sent Milton home with a prescription for iron supplements but nothing to treat the PIH. No one at the hospital warned Milton about the risks of PIH. On Dec. 22, Milton went to Allen complaining of irregular contractions. She still had high blood pressure, and her urine test again showed elevated protein. Allen told Milton to go home and return to the hospital for a labor induction the next day. Despite Milton's elevated blood level and dipstick results, "which should have mandated the immediate initiation of labor induction," the court said, Milton was not admitted and the staff did not question Allen's instructions to wait until Dec. 23 to induce labor. Again the staff sent Milton home without advising her of the dangers of PIH. The next day Milton was admitted into the hospital for labor induction at 7:30 a.m. According to hospital records, she was kept in the hospital waiting room until 9 p.m., "instead of being admitted immediately to the labor and delivery room as provided for by Episcopal's policy," the court said. In addition, while a hospital resident noted at admittance that Milton had a family history of PIH and that she was complaining of a headache, no labs were ordered while she was in the hospital on that day, said the court. At 9 p.m., Milton, with a clearly elevated blood pressure, was transferred to labor and delivery for induction. "Once in labor and delivery, the resident physician and nursing assessments showed consistently elevated blood pressure throughout the night but blood pressure lowering drugs, essential for her condition, were not ordered until approximately 7 a.m. the next morning," the court said. Milton did not receive the drugs until 8:40 a.m. By then, her condition had already deteriorated. At about 11:30 a.m., Milton was rushed to the operating room where she underwent an emergency C-section. Further, the opinion said, "despite her obese condition and her severe preeclampsia, Episcopal's obstetrical physicians and nurses did not order the necessary deep vein thrombosis prophylaxis ... The omission resulted in the formation of blood clots in [Milton's] lungs and onset of pulmonary edema, a complication of severe preeclampsia accompanied by the filling of the lungs with fluid." Milton was put on a ventilator to assist her with breathing. Her condition briefly improved and then deteriorated again."Throughout her stay in the ICU, [Milton's] endotracheal tube was consistently malpositioned," the court said. "Moreover, [Milton] was not diagnosed with multiple pulmonary emboli, and Episcopal's residents and nurses again failed to timely order the appropriate deep vein thrombosis prophylaxis." Milton eventually developed Adult Respiratory Distress Syndrome and died on Jan. 4. After an eight-day trial, a jury awarded the plaintiffs $ 1.1 million, with $ 200,000 going toward the wrongful-death action and $ 900,000 going toward the survival action. The jury held the hospital 15 percent directly liable under the corporate-liability theory. The hospital filed a motion for JNOV, claiming the finding of corporate liability was not warranted under the law or the evidence. The trial court denied the motion, and the defendant appealed. Corporate-Negligence Test The core of Episcopal's argument was that the plaintiffs did not establish a prima facie case of corporate negligence, so it was therefore entitled to a JNOV. Under Thompson, the seminal corporate-negligence case, a hospital is liable if it fails to "uphold the proper standard of care owed to the patient, which is to ensure the patient's safety and well-being while at the hospital." The Thompson court articulated four non-delegable duties, which the hospital owes directly to a patient: * The duty to use reasonable care and maintenance of safe and adequate facilities and equipment. * The duty to select and retain only competent physicians. * The duty to oversee all persons who practice medicine within its wall as to patient care. * The duty to formulate, adopt and enforce adequate rules and policies to ensure quality care for patients. "To establish a claim for corporate negligence against a hospital, a plaintiff must show that the hospital had actual or constructive knowledge of the defect or procedures that created the harm [and that] the hospital's negligence was a substantial factor in causing the harm to the injured party," the Thomson court said. The court started its analysis of the Whittington case with the testimony of Dr. Paul D. Gatewood, who said that allowing a patient to be discharged without being completely evaluated "falls below the accepted standards of nursing care as from an obstetrical point of view." Gatewood also said that if Milton had been induced when she first went to the hospital, "in all probability ... this patient would have had a successful delivery, and would be alive today. "As for Milton's treatment on Dec. 22, Gatewood said "she needed to be admitted, stabilized, immediately induced or [given] a C-section, if induction was not possible, to get the baby out and to stop the process of preeclampsia." If that had been done, Gatewood said, "in all probability, the fulminate aspect of the toxemia would not have occurred so rapidly." Gatewood said the standard of care did not improve during Milton's continued care at Episcopal, summing up his opinion of her delivery with the statement: "this is the worst case scenario one could put yourself into. And it did not have to happen."The plaintiffs also presented the testimony of a pulmonary specialist, Gary H. Miller, M.D., who opined that a deep vein thrombosis would have significantly induced the risk of harm. The court said the experts' testimony satisfied two of the factors for proving corporate negligence. "It is clear that Dr. Gatewood, independently and in conjunction with Dr. Miller, testified to a reasonable degree of medical certainty that Episcopal committed numerous and recurring deviations from the standard of care and that these deviations were a substantial cause of [Milton's] death," the opinion said. Turning to the final factor, concerning notice, the court said Episcopal did not offer any reason why constructive notice should not have been imposed. The court cited Welsh v. Bulger, a 1997 state Supreme Court decision, in which the justices found a prima facie case of corporate negligence had been established because the plaintiff's expert testified that a hospital's nurses must have known there was a problem with a patient but did nothing about it. "As in Welsh, appellant here is also liable since it must have known what was going on but failed to act. Further, constructive notice must be imposed when the failure to receive actual notice is caused by the absence of supervision," the opinion said. "Had Episcopal undertaken adequate monitoring, it would have discovered that [Milton] had received and was continuing to receive medical treatment that was clearly deficient before and after her delivery. We are compelled to find constructive notice under these circumstances." The court said that because the plaintiffs made out a prima facie case of corporate negligence, the trial court was right to allow the matter to go to a jury. The court also rejected the defendant's claim that the plaintiff's expert was not qualified to testify as a corporate-liability expert because he did not have a special degree or special training in hospital administrationGatewood was qualified because he has been board-certified in obstetrics and gynecology since 1976, he is an attending obstetrician/gynecologist in three major hospitals, he holds an academic appointment at Northeastern Ohio College of Medicine and he has a history of treating high-risk patients, including those with PIH. Tracy Blitz Newman contributed to this report. (The Legal Intelligencer, January 22, 2001) EXXON CORP: Station Owners' $ 1B Suit Begins Second South Florida Trial ----------------------------------------------------------------------- After a 10-year wait and one hung jury, 10,000 gas station owners from 36 states will get a second chance to argue that Exxon Mobil Corp. owes them $ 1 billion plus interest for failing to give them a promised discount on gas. Opening statements in the class-action suit have begun in U.S. District Judge Alan Golds courtroom in Miami. The trial is expected to last four to six weeks. This is the second time a jury is hearing the case. The first trial ended with a deadlocked jury in September 1999. The case began in 1991, when 11 Florida station owners filed suit against Exxon for breach of contract, claiming that the company reneged on a promise to charge them less for gas if they participated in a customer discount-for-cash program launched in 1982. Exxon, which merged with Mobil last year, maintains it did deliver the discounts to the dealers. The program allowed customers paying cash to save a few pennies on each gallon of gas. It was intended to help Exxon compete more effectively against smaller rivals, who were able to charge less because they accepted cash only and didnt incur credit card processing costs. Dealers were paying Exxon a 3 percent fee on all credit card sales. But if they agreed to participate in the cash-discount program, Exxon said it would reduce its wholesale price by 1.7 cent per gallon, theoretically enabling the stations to charge a lower pump price. But the dealers claim they never received the discount. Those lost pennies added up. At a 1999 hearing, the plaintiffs lead attorney Eugene Stearns, of Miami-based Stearns Weaver Miller Weissler Alhadeff & Sitterson, told Judge Gold that Exxon saved $ 130 million a year by not delivering the discount. He said Exxon owed the average dealer about $ 125,000. Because the stakes are so high, the opposing lawyers have buried Gold in motions. Theyve fought bitterly over everything from jury selection questions to whether the plaintiffs could replace their expert witness, and even how the plaintiffs have numbered their exhibits. Exxon Mobil charged that the plaintiffs changed their case in violation of a court order. Meanwhile, the plaintiffs accused the oil company of grossly overestimating the time required for the trial so as to skew the make-up of the jury pool -- away from students and small business owners and toward retirees and corporate employees -- to seat a more pro-business jury. They say the trial will take no more than four weeks, in contrast to the defendants estimate of six weeks. The lawyers are expected to dazzle the jurors with high-tech video presentations and a blizzard of charts. The plaintiffs will field a new, star expert witness: William Nordhaus, a Yale University economics professor and former member of President Carters Council of Economic Advisors. Both sides will have to confine their arguments to the courtroom. Gold issued a gag order several months ago, barring lawyers from making comments that could prejudice the jury. Besides Stearns, the plaintiff legal team includes Sidney Pertnoy, of the Miami firm Pertnoy Solowsky & Allen, who filed the original suit in 1991, and McLean, Va., solo practitioner Gerald Bowen. Larry Stewart, of the Miami firm Stewart Tilghman Fox & Bianchi, is representing Exxon Mobil. The program allowed customers paying cash to save a few pennies on each gallon of gas. It was intended to help Exxon compete more effectively against smaller rivals, who were able to charge less because they accepted cash only and didnt incur credit card processing costs. Dealers were paying Exxon a 3 percent fee on all credit card sales. But if they agreed to participate in the cash-discount program, Exxon said it would reduce its wholesale price by 1.7 cent per gallon, theoretically enabling the stations to charge a lower pump price. But the dealers claim they never received the discount. Those lost pennies added up. At a 1999 hearing, the plaintiffs lead attorney Eugene Stearns, of Miami-based Stearns Weaver Miller Weissler Alhadeff & Sitterson, told Judge Gold that Exxon saved $ 130 million a year by not delivering the discount. He said Exxon owed the average dealer about $ 125,000. Because the stakes are so high, the opposing lawyers have buried Gold in motions. They've fought bitterly over everything from jury selection questions to whether the plaintiffs could replace their expert witness, and even how the plaintiffs have numbered their exhibits. Exxon Mobil charged that the plaintiffs changed their case in violation of a court order. Meanwhile, the plaintiffs accused the oil company of grossly overestimating the time required for the trial so as to skew the make-up of the jury pool -- away from students and small business owners and toward retirees and corporate employees -- to seat a more pro-business jury. They say the trial will take no more than four weeks, in contrast to the defendants estimate of six weeks. The lawyers are expected to dazzle the jurors with high-tech video presentations and a blizzard of charts. The plaintiffs will field a new, star expert witness: William Nordhaus, a Yale University economics professor and former member of President Carters Council of Economic Advisors. Both sides will have to confine their arguments to the courtroom. Gold issued a gag order several months ago, barring lawyers from making comments that could prejudice the jury. Besides Stearns, the plaintiff legal team includes Sidney Pertnoy, of the Miami firm Pertnoy Solowsky & Allen, who filed the original suit in 1991, and McLean, Va., solo practitioner Gerald Bowen. Larry Stewart, of the Miami firm Stewart Tilghman Fox & Bianchi, is representing Exxon Mobil. (Broward Daily Business Review, January 22, 2001) FLORIDA: Carriers of Workers’ Compensation Insurance Sue for Refunds -------------------------------------------------------------------- Pursuant to Section 440.51, F.S., the Department of Labor and Employment Security, collects assessments on "net premiums collected" and "net premiums written" from carriers of workers' compensation insurance and by self-insurers in the State. Claimants allege that there is no statutory definition of "net premiums" and the Department does not currently have a rule providing guidance as to how "net premiums" are calculated. Claimants allege that industry standards would allow them to deduct various costs of doing business in calculating "net premiums." The litigation arose from the Department's denial of claims for refunds totaling approximately $27 million. In addition, at least 20 other carriers have filed similar claims for refund which, in the aggregate, total more than $39 million. The Department cannot anticipate how many additional claims will be filed. The Department has answered the complaint and discovery is in progress. FLORIDA: Ct Rules for Refunds for Services to Disabled Children --------------------------------------------------------------- This was a class action suit on behalf of clients of residential placement for the developmentally disabled seeking refunds for services where children are entitled to free education under the Education for Handicapped Act. The District Court ruled in favor of the plaintiffs and ordered repayment of the maintenance fees. The Department of Health and Rehabilitative Services repaid the $217,694 in maintenance fees paid by the parents; however, amounts due to various third parties estimated up to $42 million have not been paid since the affected parties have not been identified. FLORIDA: Medicaid Providers Seek Reimbursement of Differential -------------------------------------------------------------- In a case against the Agency for Healthcare Administration seeking retroactive and prospective relief on behalf of a class of Medicaid providers (doctors) demanding reimbursement of differential between Medicare and Medicaid rates for dual-enrolled eligibles, Plaintiffs' motion for summary judgment is under advisement by the court. If the Plaintiffs prevail, the State's potential liability could be up to $270 million. FLORIDA: PMATF Suit in Discovery Process; Liability Could Total $116.8M ----------------------------------------------------------------------- A class action suit, among other similar suits, wherein the plaintiffs challenge the constitutionality of the Public Medical Assistance Trust Fund (PMATF) annual assessment on net operating revenue of free-standing out-patient facilities offering sophisticated radiology services is now in the discovery process. If the State is unsuccessful the potential refund liability for all such suits could total approximately $116.8 million. FLORIDA: Property Owners Allege Potential Flooding Due to Construction ---------------------------------------------------------------------- Where the plaintiff claims that the Florida Department of Transportation has been responsible for construction of roads and attendant drainage facilities in Hillsborough County and, as a result of its construction, has caused the Plaintiffs' property to become subject to flooding, thereby amount to an uncompensated taking the Court granted the State's Motion for More Definite Statement as to certain portions of the Plaintiffs complaint. An amended complaint was filed, and trial is scheduled to begin this summer. If the State is unsuccessful, potential losses could exceed $10 million. FLORIDA: Taxpayer Wins Appeal Re Interest on Corporate Income Tax ----------------------------------------------------------------- In a taxpayer challenge of the imposition of interest on additional amounts of corporate income tax due as a result of Federal audit adjustments reported to Florida, the taxpayer contended that interest should be accrued from the date the Federal audit adjustments were due to be reported to Florida. An Order was issued adopting the position asserted by the Department of Revenue; however, the taxpayer filed and won on appeal. Potential refunds or lost revenue are estimated to be approximately $12 to $20 million per year. FORD MOTOR: Lawsuit Accuses of Withholding Safety Data for Explorer ------------------------------------------------------------------- A Mayville man is alleging that the resale value of his Ford Explorer was reduced significantly when Ford misrepresented the Explorer's safety record, including the vehicle's propensity to roll over, according to a lawsuit filed in Dane County Circuit Court. The suit, filed by Madison attorney William Dixon on behalf of Gary Metke, claims that the Explorer's safety issues were known to the automaker years before publicity about deaths and accidents involving Explorers equipped with Firestone tires surfaced this summer. The suit seeks class action status on behalf of other Explorer owners. According to the suit, Ford learned during the Explorer's design stage in the late 1980s that the sport utility vehicle failed five of 12 steering maneuvers meant to gauge the vehicle's rollover risk, making it no safer than the Bronco II it was slated to replace. The Explorer's high center of gravity and short, narrow wheelbase contribute to its tendency to roll over despite being operated in normal traffic and driving conditions, the suit said. Deaths and serious injuries that resulted from crashes involving Explorers generated a great deal of negative publicity last summer and drove down the vehicle's value, the suit said. "We hope a Wisconsin jury will find that Ford knew of the Explorer's defects and hid them. If a jury finds that, we have no doubt that we can prove the Explorer is worth thousands of dollars less today than before August 2000 when all these covered-up defects became known," Dixon said. Dixon said he did not know specifically how much less Metke's 1998 Explorer is now worth as a result of the publicity. Similar suits have been filed in Illinois and Florida, Dixon said. A Ford spokeswoman said that the company has not formally responded to any of the diminished value suits but maintained that the Explorer has "an exceptional safety record." "Federal data show that the Explorer was involved in 17% to 19% fewer fatal accidents than the average competitive SUV from 1991 to 2000," said Susan Krusel, a Ford spokeswoman. Although many factors can affect a vehicle's resale value, Krusel said, sales are the best indicator of consumer acceptance, and Explorer sales have remained strong since the Firestone news broke this summer, she said. (The Milwaukee Journal Sentinel Copyright 2001, January 20, 2001) HARTSFIELD RUNWAY: Fulton Residents Wage Suit to Halt Construction ------------------------------------------------------------------ Some south Fulton County residents are plotting an 11th-hour strategy to stall construction of a new runway at Hartsfield Atlanta International Airport, already the world's busiest passenger airport. Armed with results from a new study that found the 9,000-foot fifth runway would add noise, ground-level traffic and pollution, members of a Fulton airport advisory committee vow to use the information to try to scuttle the Federal Aviation Administration's environmental assessment. James Fason of the county's environmental and community development department, said the group is considering a class-action lawsuit. Fason said the county's 18-month study predicts traffic jams caused by construction and increased noise once the runway is open, lowering property values. The report also suggests the noise pollution would be disproportionately felt in minority communities, creating environmental justice arguments that could be considered by the FAA. Work on the runway is supposed to begin in a few weeks, soon after the FAA holds a public hearing on its draft Environmental Impact Statement Jan. 30 in College Park. Hartsfield officials say they need the new runway to cut down on delays at the airport, which already has approval to build a 6,000-foot commuter runway but wants to expand it to handle regular traffic. The airport is owned by the city of Atlanta, which negotiated concessions to officials from College Park and Clayton County because it needed land there for the expansion. Fulton officials do not have similar leverage. At the meeting Saturday, Fulton commissioners talked about suing for damages if the runway is built. "I think, at some time, when they see the enormous impact on the quality of life and on the tax base, I think they'll begin to consider that," said south Fulton Commissioner Bill Edwards. Some people in the crowd of about 250 complained the advisory committee is taking a stand against the runway construction while simultaneously working to get compensation for the negative impact on property values they expect from the planes that use the new runway. "It sounds like you're saying, 'We don't want a fifth runway, but if the money's right, we'll accept it'," said Benny Crane. Hartsfield is often cited by businesses relocating to metro Atlanta as one of the area's top attractions, and supporters of the fifth runway point to its importance as the region's economic engine. But the sentiment at the community center was that south Fulton isn't getting much of a lift from Hartsfield. "If this is such a great economic generator, then you have the funds to buy the property from the people you want to build on top of," said committee member Rex Renfrow. (The Associated Press, January 21, 2001) HMOs: Judge to Mull Deal to Reinstate Benefits to Low-Income Coloradans ----------------------------------------------------------------------- A federal judge will consider a settlement of a class-action lawsuit that would spend $17.2 million to reinstate benefits to 40,000 low-income Coloradans whose Medicaid coverage was mistakenly cut off. The hearing on the lawsuit against the state is set for Feb. 8. The mistake in Medicaid benefits occurred after welfare reforms kicked in. Most recipients who moved from welfare to work or school were supposed to keep their health-care coverage. State officials have blamed computer problems for the mistakes between July 1997 to last August. They say other states had the same problems. Some states, though, quickly reinstated Medicaid benefits, but Colorado has not. The computers were reprogrammed in August. "It did take too long for us to act, there is no question about that," said Marilyn Golden, acting executive director of the Colorado Health Care Policy and Financing Department, which distributes Medicaid. The federal-state program provides health care for poor and disabled residents. "We have a problem that we have to remedy, and we are doing it with all due haste," golden said. That wasn't fast enough for Aloha Tatum, whose Medicaid benefits were mistakenly stopped in August 1999, 10 days before her daughter was born. She was dropped earlier from welfare when her pregnancy left her too ill to work. Tatum said when hospital computers showed she had no health insurance, her baby, who was premature, was released from the hospital. Since then, she frequently hasn't received the monthly cards verifying Medicaid coverage and continues to get hospital bills that should have been covered by Medicaid. "I just don't want them to treat anybody else like this," Tatum said. "I want the state to get their facts straight and check through all the options before they just say 'No' and cut somebody off Medicaid. She is one of four plaintiffs in the class-action lawsuit against the state. Lawyers who filed the lawsuit said they heard other stories similar to Tatum's. "People were getting cut off Medicaid for even the most minor of infractions," said Tracy Ashmore, a lawyer with the Perkins Coie firm. "Many times, there weren't any infractions." When Ashmore and lawyers from other firms notified the state in 1999 that they intended to sue on behalf of the Medicaid recipients, Colorado officials immediately acknowledged their mistakes and started negotiating a settlement. Of the 40,000 people who lost health care, 16,558 gradually regained their benefits on their own, mainly by participating in other government programs that screen children for Medicaid eligibility. The state will reinstate benefits to the remaining 23,442 residents. (The Associated Press, January 21, 2001) OHIO: Ap Ct Reinstates Class Status of Medicaid Rules Case; Ohio Appeals ------------------------------------------------------------------------ Litigation pending in the Ohio Court of Claims contests the Ohio Department of Job and Family Services (OJFS), formerly the Department of Human Services, prior Medicaid financial eligibility rules for married couples when one spouse is living in a nursing facility and the other resides in the community. ODHS promulgated new eligibility rules effective January 1, 1996. ODHS appealed an order of the federal court directing it to provide notice to persons potentially affected by the former rules from 1990 through 1995, and the Court of Appeals rules in favor of ODHS; plaintiff's petition for certiorari was not granted by the U.S. Supreme Court. As the Court of Claims case, it is not possible to state the period (beyond the current Fiscal Year) during which necessary additional Medicaid expenditures would have to be made. Plaintiffs have estimated total additional Medicaid expenditures at $600,000,000 for the retroactive period and, based on current law, it is estimated that the State's share of those additional expenditures would be approximately $240,000,000. In April 1999, the Court of Claims decertified the action there as a class action, but on appeal, in April 2000, the Ohio Court of Appeals reversed the Court of Claims grant of the motion to decertify. The State is seeking to appeal this decision, and it filed a notice of appeal and memorandum seeking jurisdiction in the Ohio Supreme Court on May 15, 2000. OHIO: Sp Ct Finds School Funding System Unconstitutional; State Appeals ----------------------------------------------------------------------- The State is party to certain litigation questioning the constitutionality of the State's system of school funding. The Ohio Supreme Court concluded in 1997 that major aspects of the system are unconstitutional. It ordered the State to provide for and fund sufficiently a system complying with the Ohio Constitution, staying its order to permit time for responsive corrective actions by the General Assembly. The Court has indicated that property taxes may still play a role in, but "can no longer be the primary means" of, school funding. The Court remanded the case to the trial court to hear evidence and render an opinion on the constitutionality of the enacted legislation which opinion could then be appealed directly to the Ohio Supreme Court. A hearing in the trial court was subsequently held on the constitutionality of the legislation enacted since 1992 to enhance school funding consistent with the Supreme Court decision. In February 1999, the trial court ruled that the State continues to be not in compliance with the constitutional requirements, and ordered the State "forthwith to provide for and fund a system of funding public elementary and secondary education in compliance with the Ohio Constitution and the 1997 directive of the Ohio Supreme Court." The court also ordered the State Board of Education and the State Superintendent of Public Instruction to prepare and submit to the General Assembly proposals for compliance with the trial court orders and the Supreme Court directive. The State has filed with the Ohio Supreme Court a notice of appeal of the trial court's decision. The trial court has granted the State's request for a stay, pending appeal, of implementation of its order (except that portion calling for State agency proposals). It is not possible at this time to state what the results of any appeal might be, or, should plaintiffs prevail on appeal, the effect on the State's present school funding system. PILGRIMS PRIDE: Conference with DOL on Pay Re Chicken Plant Set in April ------------------------------------------------------------------------ On February 9, 2000, the U.S. Department of Labor ("DOL") began a nationwide audit of wage and hour practices in the chicken industry. The DOL has audited 51 chicken plants, three of which are owned by the Company. The DOL audit examined pay practices relating to both processing plant and catching crew employees and includes practices which are the subject of Anderson v. Pilgrim's Pride discussed above. The Company expects to have a closing conference with the DOL before April of 2001. PILGRIMS PRIDE: Trial on Former Employees’ Suit for Pay Set in Feb. 2001 ------------------------------------------------------------------------ In January of 1998, seventeen current and/or former employees of the Company filed the case of "Octavius Anderson, et al. v. Pilgrim's Pride Corporation" in the United States District Court for the Eastern District of Texas, Lufkin Division claiming the Company violated requirements of the Fair Labor Standards Act. The suit alleges the Company failed to pay employees for all hours worked. The suit generally alleges that (i) employees should be paid for time spent to put on, take off, and clean certain personal gear at the beginning and end of their shifts and breaks and (ii) the use of a master time card or production "line" time fails to pay employees for all time actually worked. Plaintiffs seek to recover unpaid wages plus liquidated damages and legal fees. Approximately 1,700 consents to join as plaintiffs have been filed with the court by current and/or former employees. It is anticipated that a trial date will be set in February of 2001. The Company believes it has substantial defenses to the claims made and intends to vigorously defend the case. The Company does not expect this matter, individually or collectively, to have a material impact on its financial position or liquidity. Substantially similar suits have been filed against four other integrated chicken companies, including WLR Foods, Inc. PRUDENTIAL INSURANCE: Bogus Policies Subject of $1B Palm Beach Lawsuit ---------------------------------------------------------------------- In a $1 billion lawsuit, 15 Palm Beach County residents are aiming to prove that Prudential Insurance sold bogus policies. Hearing on pretrial motions would be conducted before County Circuit Judge Peter Blanc, and jury selection has been set for Feb. 1. The trial is expected to last at least 10 weeks. The residents decided to file their own lawsuit after deciding a national class-action suit would not provide sufficient damages, said David Sheller, the plaintiffs' attorney. ''It was a lousy settlement,'' he said. ''The average settlement was anywhere from $40 to a few hundred bucks.'' Prudential settled the national suit in 1997, agreeing to pay customers $2.4 billion, roughly $220 for each of the 10.7 million policies it sold from 1982 through 1995. Attorneys for the 15 plaintiffs said Prudential agents, among other questionable tactics, falsely promised customers that policies would be paid for in a few years. In reality, contracts required policy holders to pay premiums for life or risk having the policies lapse, the lawsuit claimed. Prudential Life Insurance Co. of America, based in Newark, N.J., has denied the charges in court filings. Laurita Warner, a company spokeswoman, said the insurance giant acknowledged it used questionable sales tactics until 1995 but has since made sure that customers know what they are paying for and what the payment plans are. Prudential agreed to pay Florida a $15 million fine in February 1997 to settle charges that its agents deceived 128,000 customers. (AP Online, January 22, 2001) TOBACCO LITIGATION: Appeals Ct. Hears Arguments On Black Smokers' Suit ---------------------------------------------------------------------- A panel of federal appeals court judges must decide whether the tobacco industry targeted blacks with advertising for menthol cigarettes, or whether black smokers just prefer the allegedly more dangerous type of cigarettes. The three-judge panel was asked to reinstate a class-action civil-rights lawsuit filed against the tobacco industry by black smokers. The lawsuit was tossed out by a federal judge in September 1999. "Out of the population, African Americans are less than 10 percent," lawyer William R. Adams Jr. told the three judges of the 3rd U.S. Circuit Court of Appeals. "Yet 75 percent smoke the most harmful tobacco product. Seventy-five percent of African-Americans smoke menthol." The lawsuit was filed on behalf of the Rev. Jesse Brown, a Philadelphia Lutheran pastor and head of the National Association of African-Americans for Positive Imagery. Adams said one-third of menthol cigarettes are bought by black consumers, and the suit contends that menthol cigarettes are more dangerous than unmentholated brands because they create additional toxic substances when burned. Some government studies have also suggested that smokers are more likely to smoke menthol cigarettes longer and inhale more deeply because of menthol's soothing effect. "It's just marketing," said Jeffrey G. Weil, a lawyer for Philip Morris Inc. and 11 other tobacco companies or industry groups named in the suit. "We also market certain types of music and certain types of clothing to certain segments of the population." Weil also said there was no evidence that the tobacco companies were motivated by a "racial animus" in marketing menthol products in black neighborhoods. "The plaintiffs are trying to federalize what is really a garden-variety (injury) claim," Weil added. The judges discussed the issue for almost an hour with attorneys but did not indicate when they might rule. "Was there any preference (for menthol cigarettes) in African-American communities prior to the initiation of this advertising campaign?" asked Judge Jane R. Roth. "I have a very basic question about how encouraging the sale, or even the preference, for a legal product is intentional discrimination on the grounds of race," Judge Maryanne Trump Barry said. "If you do it with a product that is not harmful, yes," Adams said. "But this product is more dangerous." Judge Milton I. Shadur, a federal judge from Chicago, said he was troubled by the fact that the number of black menthol smokers was so far in excess of the representation in the general smoking population. Many anti-tobacco lawsuits are filed under product-liability or personal-injury laws, but the black smokers' lawsuit cited federal civil-rights laws. The suit said the alleged tobacco industry campaign had resulted in blacks being 30 percent more likely than whites to die of smoking-related illnesses. U.S. District Judge John R. Padova said the suit "would require a radical departure from the jurisprudence of (federal civil-rights laws), a departure this court is not prepared to make." He also ruled that federal civil rights laws do not bar tobacco product manufacturers from targeting a specific group of potential consumers - in this case blacks - in their advertising and marketing campaigns. (The Associated Press, January 20, 2001) TOBACCO LITIGATION: Judge Declares Mistrial In Medical Monitoring Case ---------------------------------------------------------------------- A circuit judge on Monday ordered a mistrial in a class-action case seeking to force tobacco companies to pay for regular medical tests on healthy smokers. Ohio County Circuit Judge Arthur Recht took written arguments from lawyers over the weekend and ordered a mistrial at the start of the day Monday. Recht retained the case's class action status for a future trial and said the issue of addiction to smoking also could be discussed in a future trial. Recht had previously ruled that addiction could not be a part of the trial and had halted proceedings when a plaintiff's witness made a veiled and apparently inadvertent reference to addiction to cigarettes. Nearly every witness in the lawsuit against five tobacco companies had struggled with that restriction in the first two weeks of the trial, knowing a few words might be enough to destroy a case that took several years to build. Recht said his options were to declare a mistrial or strip the case of its class-action status - reducing it to the two named plaintiffs instead of the 250,000 represented in the lawsuit. The medical monitoring lawsuit, which seeks annual, industry-funded diagnostic tests for smokers in the class, is the first of its kind against a tobacco company to go to trial in the United States. The class includes people who have smoked the equivalent of a pack a day for five years, but who do not have any tobacco-related illness. The lawsuit, which targets R.J. Reynolds, Philip Morris, Brown & Williamson, Liggett and Lorillard, contends early detection of lung and pulmonary disease could prolong or save smokers' lives. But the tobacco industry says the types of tests sought by the smokers are experimental and unproven in changing the outcome for anyone who becomes sick. Their argument was that quitting is the only solution - an argument to which the smokers' lawyers had to respond. In at least a dozen other cases around the country, judges have denied class-action status in medical monitoring lawsuits against tobacco companies. One other, in Louisiana, is expected to go to trial later this year. Recht had banned words like habit and nicotine, as well as any other euphemism for addiction from the trial. The smokers accepted that condition in exchange for class-action status. The judge had ruled that addiction was not an issue because medical monitoring in a civil case requires only "proof of significant exposure." Addiction also would compromise the cohesiveness of the class in this lawsuit because it raises issues about individual behaviors and people's reasons for smoking. On Monday Recht said, "With the ability of some hindsight, there is no question that issues relating to nicotiene, nicotine delivery, addiction, habit and the ability to quit smoking all are and should be an integral part of this case. "If we continued on with addiction out of this case, we're just burying our heads in the sand. No wonder every witness said it, because they believe it." Recht said, however, it would not be fair to tobacco companies to include addiction in this trial because they had not prepared the defend that issue. Recht suggested that in restructuring their case for a future trial, the smokers' attorneys might want to focus on product design and liability. It could be argued that addiction is caused by negligence on the part of the manufacturers, he said. Smokers then could avoid the argument that individual behavior is part of addiction. "If addiction is part of the case, it's part of the design of the product," Recht said. If you're arguing that case, whether a person is or isn't addicted is not really the issue, he said. He retained the class because, he said, "I believe this class should continue to be certified. On balance, the addiction issue alone is not enough to destroy class cohesion." (The Associated Press State & Local Wire, January 22, 2001) TOBACCO LITIGATION: Ohio Judge Will Hear Arguments on Nicotine Addiction ------------------------------------------------------------------------ Whether a landmark medical monitoring lawsuit by healthy West Virginia smokers will be retried as a class-action case boils down to one question: Is nicotine addiction unique to every smoker or a universal problem with a product design that is beyond a smoker's control? Ohio Circuit Judge Arthur Recht, who declared a mistrial Monday in the precedent-setting lawsuit, will hear arguments on that issue Feb. 19, when attorneys for five tobacco companies and some 250,000 West Virginia smokers return to court. R.J. Reynolds lawyer Jeff Furr vowed to renew his fight that it should not be a class action, arguing that individual behavior and reasons for smoking destroy the unity required in class-action litigation. "We need to develop that issue further for the court," he said. "I promise we will be making that argument." Recht declared the mistrial after a witness made a veiled and apparently inadvertent reference to addiction, an issue the smokers had said would not be part of their case for annual, industry-funded medical tests. The smokers had pledged to remove all references to nicotine, nicotine delivery, habit, the inability to quit and any other euphemism for addiction in exchange for class-action status. However, every witness had struggled with the limitation, including addiction expert Jack Henningfield, a consultant with Pinney Associates of Bethesda, Md. "If we continued on with addiction out of this case, we're just burying our heads in the sand," Recht said. "No wonder every witness said it: They believe it. "To tell Dr. Henningfield he can't talk about addiction is like telling Michael Jordan not to talk about basketball." The lawsuit currently covers West Virginians who have smoked the equivalent of a pack a day for five years since 1995, but who do not currently have a tobacco-related illness. They want a court-supervised medical board created to administer free annual diagnostic tests for lung cancer and emphysema. West Virginia's case is the first of its kind to make it to trial in the United States. In at least a dozen other cases around the country, judges have denied class-action status in medical monitoring lawsuits against tobacco companies. One other, in Louisiana, is expected to go to trial later this year. The West Virginia smokers say early detection could save or prolong lives. The tobacco industry, however, argues the tests the smokers want are experimental and so far unproven in changing the outcome for anyone who becomes sick. Lawyers for R.J. Reynolds, Philip Morris, Lorillard, Liggett and Brown & Williamson also argue the only way to lower the risk of disease is to quit smoking. Both sides agreed that Recht had no choice but to declare a mistrial once addiction entered the case. The defendants had, from opening statements on, avoided the subject and were suddenly forced to defend an issue they had not been expecting. "A mistrial was an absolutely necessary step to take," Furr said. "The court had to put the parties back on equal footing." Adding addiction back into the mix, however, will create more work for the tobacco companies because they will likely introduce evidence and witnesses they did not plan to use in the first trial. For the smokers, however, the judge's ruling was a victory. It essentially restores parts of the case they had included before class certification. "It will make it much easier to try the case. It will be much more succinct," Charleston attorney Scott Segal said. By directly addressing addiction, the case also will be easier for jurors to understand. "It's really streamlining our case," he said. Recht conceded the trial has been an education for him. He initially ruled that addiction was not an issue because medical monitoring requires only "proof of significant exposure" to a hazardous substance. "With the ability of some hindsight, there is no question that issues relating to nicotine, nicotine delivery, addiction, habit and the ability to quit smoking all are and should be an integral part of this case," he said. In restructuring their case for a future trial, the smokers' attorneys might want to focus on product design and liability, Recht suggested. It could be argued that addiction is caused by the manufacturers' negligence. "If addiction is part of the case, it's part of the design of the product," he said. "Whether a person is or is not addicted is not really the issue." Recht said he wants to retry the case soon. "The only new thing is the addiction issue is out of the closet and into the courtroom," he said. "I'm much more comfortable with the posture of this case now. Everything was not really being discussed and now it will. And that's good." (The Associated Press State & Local Wire, January 22, 2001) U-M: Professor Says Minorities Would Struggle Without Affirmative Action ------------------------------------------------------------------------ A professor testified in federal court that minority students would have a much tougher time getting accepted to the highly ranked University of Michigan law school without its affirmative action policy. Alternately, white students would get only a slight advantage if the policy were erased, testified Michigan education professor Stephen Raudenbush last Friday January 19, the fourth day of testimony in the trial. U.S. District Judge Bernard Friedman is presiding over the class-action case, brought by a white woman and the conservative Washington D.C. law firm, Center for Individual Rights. The 1997 suit aims to end the law school's policy of adding weight to minority applications with a case that could have ripple effects for affirmative action policies across the country. Raudenbush testified that with a race-blind admissions policy, the probability of a minority applicant getting admitted to the law school last year would drop from 35 percent to 10 percent. Likewise, the chance of a white student getting accepted would have raised from 40 percent to 44 percent, reported the Detroit Free Press Saturday. Raudenbush said he analyzed law school admissions data from 1995 to 2000. University officials argue that race is only one factor the school considers in admissions. But Barbara Grutter, of Plymouth Township, claimed in her suit that she was denied admission because less-qualified minorities get preferential treatment. Kirk Kolbo, a lawyer for Grutter, said Raudenbush's figures prove that race is the deciding factor in Michigan's law school admissions. Raudenbush also testified against earlier testimony by Kinley Larntz, a witness for Grutter. Larntz had testified that according to his study, minority applicants were given an "incredibly large" boost. In 1995, blacks had a 93 percent chance of getting admitted to the law school compared to a 7 percent chance for whites, he said. But Raudenbush said that Larntz's analysis was flawed, because it is impossible to determine how much weight race is given in admissions. Race may tip the balance, Raudenbush said, but it's impossible to tell by how much. The trial is expected to last three weeks. (The Associated Press, January 20, 2001) * Group Actions in the U.K.; Atty. at Cohen, Milstein Working on Case --------------------------------------------------------------------- Class actions by shareholders are relatively rare in the UK, but firms of lawyers have long been providing a means of redress for other groups of individuals against corporations. Class Law, a London firm of solicitors specialising in group actions, started life almost three years ago with a successful class action which stopped Royal Life and Sun Alliance, the insurance companies, merging their funds. Since then the firm has taken on the RAC, acting for thousands of overseas members who claim they were kept in the dark about its plans for demutualisation. The overseas members of the RAC Club, in Pall Mall, London, claim that, had they known about the club's plans, they would have changed their membership status to become entitled to a windfall. The case is still rumbling on and is heading for the House of Lords in the next couple of months. Class Law is also representing more than a million policyholders of Prudential in what has become the largest class action against a company in UK legal history. The policyholders are trying to sue the Pru for Pounds 8 billion worth of orphan assets which the insurance company wants to divide between shareholders. The policyholders claim that the money, or at least some of it, is rightfully theirs as orphan assets are, by definition, surplus funds from with-profits funds whose ownership is not clear. An earlier case of shareholder mass action followed the collapse of Barlow Clowes, which lured thousands of elderly investors with the promise of "safe" gilt-edged investments. Action groups campaigned vociferously until the Government agreed to pay compensation. Robert Maxwell's plundering of the Mirror Group Newspapers pension funds triggered similar action. The 1990s also saw the rise of crusaders such as Gary Klesch, who championed the case of bondholders who lost out in the Barings collapse. US shareholders in a class of their own (by Adam Jones) Investors have learnt the fine art of flexing their muscles in the courtrooms of America. Is shareholder activism in the US a means of controlling reckless boardrooms or simply a lucrative bandwagon that keeps on rolling for litigious investors and opportunistic lawyers? There is evidence to support both interpretations. One of the biggest tools for agitation in the US is the class action lawsuit. Company X's stock falls after a profits warning, just days after some of its executives dumped their shareholdings - somewhere there is a lawyer pricking up his ears. By rounding up shareholders who have lost money from a suspicious fall in a company's share price, lawyers can share in any eventual payout. Typically, they do not get a regular fee, staking everything on a victory. Mark Willis, a class action attorney at Cohen, Milstein, Hausfeld & Toll, in Washington DC, is working on one lawsuit that epitomises the type of events that prompt shareholder action in the US. The case involves a manufacturer of computer networking products. The firm reported stellar sales growth but then the expansion mysteriously slowed. Willis's clients allege that the company's executives ignored the root of the problems - deteriorating demand, disarray in its sales team - and artificially inflated reported sales to maintain the illusion that all was well. When the true condition of the company emerged, the shares plummeted. Class action suits tend to be about accounting fraud or insider dealing. Companies that have had to restate their results are particularly attractive targets for shareholder activists; hundreds have had to do so in the past few years. High-tech companies are particularly vulnerable. The SEC investigation into the way investment banks allocated shares in hot flotations during the Nasdaq boom has led to shareholder lawsuits against VA Linux Systems, which was one of the hottest stocks in Wall Street history before it crashed back to reality. The digital age has made it easier for lawyers to corral angry investors, too. Notices of class actions can be found on services such as Yahoo! and specialist websites such as classaction.com list the latest campaigns. Classaction.com features an essay on "using the Web to enforce your shareholder rights". Disgruntled consumers, employees or investors can post their gripes online and see if anyone else has had a similar experience. Willis says that it is even possible for UK investors to join class action suits if they bought shares in a US company, as long as they hear about the litigation in time. At a stretch, there could even be a case for UK investors joining US lawsuits against British companies if they have a listing in the US and London. At its worst, American grassroots activism can lead to speculative litigation that can tie up innocent boards in endless legal exchanges. Many class action claims are not upheld. PSINet, another tech company with a battered stock price, recently persuaded a judge in Virginia to throw out a number of class action suits. The judge warned that if the plaintiffs tried to come back with the same allegations - a "fishing expedition", she termed it - then they could be penalised themselves. Even so, many in high places believe that the benefits of class action litigation outweigh the costs. Arthur Levitt, the head of the Securities and Exchange Commission, who will step down next month, recently said that shareholder class action suits are "a vital element in the protection of shareholder interests" and should not be subject to further restrictions. There have been fears that President- elect Bush will restrict class action lawsuits in the same way that he capped jury awards in civil cases in Texas as a probusiness Governor. The US legal system has not always benefited big shareholders. Before 1995 the first investor to file a lawsuit against any US company generally won the most damages. This led to the corporate equivalent of ambulance chasing, with law firms filing pre-emptive lawsuits on behalf of small-time investors with relatively little exposure. Yet because the small-time investors got to the courthouse first, they received more damages than investors with far greater exposure. The law was changed in 1995 after overwhelming criticism from investors, who argued that the system as it stood benefited only predatory law firms. Now, when a company suffers an accounting fraud, all investors can file lawsuits within a given deadline, and a judge decides which one will take the lead and collect the most damages. Ann Yerger, director of research at the Council of Institutional Investors, which represents 110 US pension funds, says: "Our members have gotten involved (in litigation) whenever there has been a case of significant accounting fraud." Institutional shareholders sued Cendant, the franchising group and owner of Britain's NCP car parks. Cendant admitted in 1998 it would have to restate its profits because of accounting irregularities. The admission caused its share price to dive and a class action suit resulted in a record $2.83 billion damages award at the end of 1999. The shareholders also went after Ernst & Young, the accountant that audited Cendant. The accountants were forced to cough up another $335 million, beefing up the overall settlement value to more than $3 billion. For their troubles, the two firms of lawyers took about 8 per cent of the damages - $262 million - despite a challenge from one of their pension fund clients, which felt the sum should have been capped at $186 million. Some individual investors are big enough to crusade alone. Their actions are often a throwback to the heyday of "greenmail", the practice of being beastly to executives until they pay you to go away. Sometimes, however, it appears that they are battling on behalf of the little guy, too. Carl Icahn was a thorn in the side of RJR Nabisco, prompting it to restructure after a long campaign in which he argued that tobacco litigation was choking the company's food arm. RJR Nabisco eventually sold its food businesses to Philip Morris, leaving the tobacco arm to go it alone as RJ Reynolds. Kirk Kerkorian, the octogenarian investor, is another who relishes a fight. His latest crusade is against DaimlerChrysler, where he is the biggest US shareholder. Kerkorian pounced after Jurgen Schrempp, chairman of DaimlerChrysler, foolishly admitted that he had misled people into thinking that the union of Daimler-Benz and Chrysler would be a merger of equals. Kerkorian filed an $8 billion lawsuit, saying that he would never have agreed to the deal if he had known it was a German takeover - not without a suitable premium anyway. With so much ammunition at the disposal of disgruntled investors, it makes sense to keep your shareholders onside in America. US Law Firm Eyes Investors' Claims A firm of US lawyers that specialises in class actions against big corporations is preparing to help to seek compensation for British investors. Cohen, Milstein, Hausfeld & Toll, of New York, has held talks with Pensions and Investment Research Consultants (Pirc) about establishing a presence in the City. The law firm was seeking UK investors who have bought shares in US companies and may be entitled to compensation, so that it could register their claims in the US courts. However, the firm has now decided to set up a network of partnerships to deal solely with UK investor compensation cases, in expectation of an increase in the number of class actions in the UK. Cohen, Milstein is already working with Mishcon de Reya, the City law firm, and Leigh Day Associates, a specialist in consumer-related class actions in Britain. (The Times of London, January 20, 2001) * LA Seeks Damn to Oyster Bed Lawsuits Fueled By Freshwater Projects -------------------------------------------------------------------- "Damned if you do, damned if you don't" is the opening sentence in an article on The Courier, Houma on lawsuits involving oyster beds. That's the position the state of Louisiana is in when it comes to oyster leases in the Breton Sound and Barataria Basin areas, the article says. This is based on a recent court judgment awarding $48 million to give oystermen whose oyster beds were ruined when the state flooded the area with fresh water in an attempt to thwart coastal erosion. If the same logic is applied to a class action suit of 125 claimants, the state could pay more than $ 700 million, the article goes on. To help offset the possibility of more lawsuits fueled by future freshwater diversion projects, the state Legislature came up with a three-pronged plan for leasing state properties to oystermen, The Courier, Houma reports. Leaseholders can relocate those leases impacted, accept a one-time payment and give up the leased beds or exchange them for other grounds. This plan is voluntary, however, with oystermen calling the shots, the report goes on. But there is another option - for leaseholders to sign a hold-harmless clause, essentially saying oystermen will not hold the state responsible for damages to a lease resulting from a freshwater diversion or coastal restoration project, the report says. The problem is that this clause, which has been attached to leases in the past three years, may not be legal or protect the state. So considering all this, the state is declining to renew leases on affected lands. That's understandable considering the steep monetary slap the state's facing from its earlier faux pas, but may open up another lane of litigation because it reportedly flies in the face of leasing options created by the industry and the state, The Courier, Houma says. According to the article, the state erred years ago in not regulating how oil exploration was conducted, and that, along with the digging of navigation canals and implementation of control measures on the Mississippi River all helped lead to the present coastal erosion and saltwater intrusion problems. The state's decade-old flooding of the Plaquemines and St. Bernard parishes oyster grounds was also damaging. Nevertheless, it deserves some credit for trying to address the problem. The real question is whether the seafood industry - particularly oystermen - should be able to dictate the extent of efforts to save the state's coastline, particularly when it involves the use of state property, The Courier says. Mike Voisin, chairman of the Louisiana Oyster Taskforce, says he supports saving the coast, but not necessarily at the expense of the oyster industry. According to the Department of Wildlife and Fisheries, the oyster industry impacts the state economy by $266 million, adds the Courier report. According to The Courier, Houma, Voisin's stand is a shortsighted position. We can take steps to help save our coastline - and therefore try to save our communities in those areas - and injure (not destroy) the oyster industry. Or, we can leave oystermen alone and continue watching our coastline being eaten away until were farming oysters in downtown Belle Chase in 30 or 40 years, the Courier article says. The Courier concludes that the obvious choice is for our coastal communities to be saved - more than just our oystermen depend on them. (The Courier, Houma, La., January 17, 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 * * *