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/raid1/www/Hosts/bankrupt/CAR_Public/010126.MBX C L A S S A C T I O N R E P O R T E R Friday, January 26, 2001, Vol. 3, No. 19 Headlines AA 1420: Air Crash Plaintiff Denied Prejudgment Interest On $11M Award ALABAMA: Lawsuit Seeks Tax Refund on Catalytic Converters for Cars AREBA FOOTBALL: Players and League Settle Antitrust Suit AT&T: Lovell & Stewart Announces Securities Lawsuit AUTO FINANCING: Ct Orders Whistleblower's Lips Zipped in FL against Ford BRIDGESTONE CORP: Monroe Pension Fund and Colorado Investor File Suits COCA-COLA: Hires Rights Lawyer Deval Patrick Top Counsel COUNTRY COS.: Insurance Agents Will Share $ 7 Million In Settlement HCA: Enters $745M Settlement with DOJ over Healthcare Business Practices HOLOCAUST VICTIMS: Polish Senate Debates Law On Returning Property HOLOCAUST VICTIMS: Slave Labor Fund Says U.S. Court Holding Up Payments INDIAN TRUSTS: Some Native Americans Fear Move Could Delay Payment INTRENET, INC: Schiffrin & Barroway Announces on Securities Suit in Ohio LEHMAN BROS: Pays School Districts and Municipalities; Faces New Suit LOUISIANA: Fearful of Another Oyster Suit Due to Freshwater Project PARK DISTRICT: IL App. Ct. Affirms Dismissal of Museum Tax Levy Case PAYDAY LENDERS: Target Consumers By Teaming Up With Banks, AP Says PRE-PAID LEGAL: Dreier Baritz Expands Period for Securities Suit in OK PRE-PAID LEGAL: Milberg Weiss Expands Period for Securities Suit in OK PRE-PAID LEGAL: Wolf Haldenstein Commences Securities Fraud Suit inn OK SCHOOL UNIFORM: 5th Cir allows policy; ACLU Warns of Lawsuit in PA STATE TRAINING: State Challenges Attorney Fees for D.C. Youth Law Center TOBACCO LITIGATION: Juror Threatened to Kill; Discord Forces Mistrial U-M: Test Firm Executive Says Law School Test Favors Wealthy White Males ********* AA 1420: Air Crash Plaintiff Denied Prejudgment Interest On $11M Award ---------------------------------------------------------------------- A plaintiff awarded $11 million in the first trial of an air crash case after an International Air Transport Association agreement lifted the Warsaw Convention damages limitation is not entitled to prejudgment interest, an Arkansas federal court judge has ruled. Maddox v. American Airlines Inc., No. 400-CV-00135 (E.D. Ark., Sept. 25, 2000). American Airlines Flight 1420 skidded off the runway during an attempt to land at Little Rock National Airport during a thunderstorm on June 1, 1999. The failed landing ended with the jet crashing into a steel walkway. The plane broke apart and burst into flames. Of the 132 persons on board, the pilot and 10 passengers were killed. The case has been previously reported in the CAR. Kristin Maddox, severely injured in the crash, filed suit in U.S. District Court for the Eastern District of Arkansas alleging that the flight crew knowingly flew the plane under dangerous circumstances and should not have attempted the landing. The airline did not dispute liability. Under the International Air Transport Association Intercarrier Agreement, signatory airlines no longer invoke any limitation of liability for compensatory damages. Plaintiffs do not have to establish willful misconduct on the part of an airline to avoid the $75,000 per-passenger limitation. There is strict liability up to and including 100,000 "Special Drawing Rights." This is a term used by the International Monetary Fund, which publishes exchange rates for conversion of SDRs into the currency of almost every country in the world. SDR 100,000 currently equals approximately $134,000. If a passenger is injured during the course of international transportation, the carrier is liable up to this amount without the plaintiff proving liability. No defense is allowed by the carrier. In the event the damage to a passenger exceeds 100,000 SDR, the burden of proof is shifted and the carrier must establish that it used "all necessary measures" to avoid the accident. American waived this defense; Maddox was awarded $11.015 million. The plaintiff then moved to amend the judgment to add prejudgment interest. U.S. District Judge Henry Woods noted that Oklahoma law governed the case since Maddox was a resident of that state. Arkansas choice-of-law rules require the application of another state's law only if the relevant law is substantive rather than procedural. In Oklahoma, the state construes its prejudgment interest statute as procedural, and the state supreme court has held that while interest may be added to a personal injury judgment, such interest is not is an element of damages in such cases. The judge did reduce the judgment by the $134,453 in Warsaw Convention damages already paid to Maddox by American Airlines. The plaintiff sustained permanent damage to her vocal chords; permanent scarring and disfigurement to both of her arms and hands; and the loss of a fingertip on her right hand. The joints in her hands and wrists are damaged; she currently suffers a 50 to 60 percent loss of use in her right hand and a 20 percent loss of use in her left hand. Maddox has permanent damage to her pulmonary system from the inhalation of heat and toxic gases, which destroyed the lining of her bronchial system. Her physicians testified that she will fight lung infections for an average of 24 weeks a year for the rest of her life, and that the condition will worsen and shorten her life span. Maddox also suffers from post-traumatic stress disorder, having been the last person to escape the burning wreckage. She was saved by a friend who died in the fire; another friend lay beside her for several days in the hospital before dying from burns. (Aviation Litigation Reporter, December 12, 2000) ALABAMA: Lawsuit Seeks Tax Refund on Catalytic Converters for Cars ------------------------------------------------------------------ Alabamians who have purchased catalytic converters for their cars since 1995 have a stake in a lawsuit that could take $30 million out of school tax revenue and refund it to consumers. A group of lawyers is pursuing a class-action lawsuit against the state, contending the state Revenue Department wrongfully collected sales taxes on pollution control parts sold for vehicles in the state. "There is $19,000 being collected daily from the people on this illegal tax," attorney Charles Thompson of Birmingham said. State Revenue Department attorney Susan Kennedy said the amount involved for each consumer is tiny, but a ruling against the state could result in a multimillion dollar legal fee for the winning attorneys. "It's a lawyers' suit," she said. In December 1998, Thompson, Stephen Griffis of Hoover and James Anderson of Montgomery sued the state, citing laws the Legislature passed in 1974 and 1982 to help big corporations by exempting the purchase of pollution control equipment from the state sales tax. The attorneys contended the tax breaks also applied to the little guy by covering pollution control equipment purchased for cars. Circuit Judge Gene Reese agreed and scheduled a trial for February on how to remedy the situation, Anderson said. Thompson estimated that $30 million could be involved if the judge were to order refunds on purchases back to 1995. On Wednesday, attorneys for the Alabama Education Association, the University of Alabama, and Auburn University asked Reese for permission to intervene in the case because sales tax collections are used to support public schools and colleges. Also, Revenue Department attorneys argued the case should be thrown out because no state officials were named as defendants in the suit and because the plaintiffs didn't seek refunds through the Revenue Department before going to court. Reese did not rule immediately on either request. Since the case began, the Revenue Department has distributed a pamphlet to automobile dealerships saying that catalytic converters are exempt from sales taxes. But Anderson contended the taxes are still being collected from customers because the state's tax forms give auto shops no way to exempt pollution control equipment when reporting their sales to the Revenue Department. (The Associated Press State & Local Wire, January 25, 2001) AREBA FOOTBALL: Players and League Settle Antitrust Suit -------------------------------------------------------- The Arena Football League ("AFL") and its players are delighted to announce that they have agreed to settle the antitrust suit pending against the AFL and its teams in federal court in Newark. Under this settlement, the AFL and its players have improved, among other things, free agency, minimum salaries, league-wide guaranteed player compensation, the salary cap exceptions for "Franchise Players", and salary protection for players who are injured. The AFL owners will operate under a hard salary cap that provides the AFL with labor peace and cost certainty through at least the 2005 AFL season. This settlement is subject to approval by the federal court. C. David Baker, Commissioner of the AFL, stated: "This agreement paves the way for labor peace for at least the next five years. It tells our fans, sponsors and investors that we have stability and a framework to allow us to continue to grow the great game of Arena Football." The litigation that resulted in the settlement was supported by the Arena Football League Players Association ("AFLPA"), the National Football League Players Association and the United Food & Commercial Workers International Union, AFL-CIO. James Guidry, Jr., President of the AFLPA, said in a statement: "We are delighted with the settlement. It's a great deal and will make a big difference to players. It will increase competition for players and help them in many other ways, but at the same time bring stability to the AFL so that it can continue to be the fastest-growing and most exciting indoor sport in the world." As part of the settlement, the AFL owners have agreed to settle all claims that are currently pending before the National Labor Relations Board. The Arena Football League Players Organizing Committee ("AFLPOC") has also agreed to the withdrawal of its recognition by the AFL teams, and all parties have agreed that the AFL players should now decide whether they want to have a collective bargaining representative, and if so which organization should be that representative. Frank Murtha, Executive Director of the AFLPOC, stated: "The AFLPOC has concluded that it is in the best interests of the players that all pending litigation be settled whereby the players will be given an opportunity to express their views about this agreement to the court and decide their future representative in a manner determined by the NLRB." The AFL has the right to terminate the settlement if a union is not in place by the end of the 2001 AFL season. AT&T: Lovell & Stewart Announces Securities Lawsuit --------------------------------------------------- The law firm of Lovell & Stewart, LLP (www.lovellstewart.com) filed a class action lawsuit, Robert J. Rodriguex v. AT&T Corp., on behalf of investors who purchased AT&T Wireless Group tracking stock between May 2 and May 15, 2000. The suit makes allegations that AT&T, specified officers, and specified underwriters violated the federal securities laws by failing to disclose material facts to investors in AT&T Wireless Group tracking stock during the Class Period. All investors who made purchases of AT&T Wireless Group tracking stock between May 2 and May 15, 2000 should be aware that their purchases are not included in any other class action lawsuit of which Lovell & Stewart is aware but such purchases are included in the Rodriguez v. AT&T Corp. class action filed by Lovell & Stewart. Therefore, persons who made purchases between May 2 and May 15, 2000 are eligible to serve as representative parties in that action. Contact: Lovell & Stewart, LLP, New York Christopher Lovell/Gary S. Jacobson/Christopher J. Gray 212/608-1900 sklovell@aol.com AUTO FINANCING: Ct Orders Whistleblower's Lips Zipped in FL against Ford ------------------------------------------------------------------------ Former 20-year car salesman and whistleblower David Stivers of Loxahatchee probably knows more about the dark side of auto leasing and financing than any insider. And after 11 years of sharing his expertise from the witness stand against the auto industry for consumers and lawyers seeking class actions nationwide, the 4th District Court of Appeal in December ruled his lips should remain zipped in Florida against Ford Motor Credit Co. The decision, the first of its kind in Florida, creates a significant exception to the states 1990 Litigation in the Sunshine Act. The law states any confidentiality agreement preventing disclosure of a public hazard, such as a manufacturing defect in tires, may not be enforced. But the statute is vague. It refers to a public hazard as not only a product, but a condition, person or procedure that has caused or is likely to cause injury. So the 4th District stated that whistleblowers such as Stivers may not publicly discuss his allegations of economic fraud against Ford Motor Credit because fraud does not constitute a hazard. The decision, Stivers lawyers fear, may force future litigants to remain silent about economic fraud allegations after they settle their lawsuits. Stivers in 1992 filed suit in Palm Beach Circuit Court against Ford Motor Credit, the former Barnett Bank, and two car dealerships, Holman Enterprises Inc. in Pompano Beach and Cuillo Enterprises Inc. in West Palm Beach. Stivers, who worked as a salesman for both dealers, claimed he was blackballed by the auto industry because he blew the whistle on alleged deceptive leasing and financing practices. But a three-judge DCA panel decided that Stivers, 47, is bound by a gag order he signed as part of the 1996 settlement of his original whistleblower suit. In reaching its decision that affirmed Palm Beach Circuit Judge Peter D. Blancs January 2000 order on Ford Motor Credits 1997 suit against Stivers, Judge Robert M. Gross wrote that a public hazard connotes a tangible danger to public health or safety. Economic fraud does not, he added. We are very surprised at this decision; if this is how you can buy a persons silence, its too bad, said Rebecca Covey, a solo practitioner in Fort Lauderdale who represented Stivers during his four-year legal battle. On Jan. 11, Stivers appellate attorney, Diane H. Tutt, and her associate, Sharon C. Degnan of Fort Lauderdale, requested a rehearing by the full 4th DCA. Ford Motor Credit in 1997 sued Stivers in Palm Beach Circuit Court to enforce the gag order after Stivers, who now has his own consulting firm, was listed as an expert witness against Ford Motor Credit in a Florida suit, says company attorney Robert K. Tucker of the Miami office of Hinshaw & Culbertson. Tucker says the DCA ruling is unique and deals only with Stivers narrow situation and shouldnt dilute the Sunshine in Litigation Act. According to trial court records, Stivers said he asked Florida Attorney General Bob Butterworth to investigate deceptive credit practices of the auto industry. Those practices included switching purchasers to a lease, secretly raising the price of vehicles by thousands, laundering defective cars and trucks across state lines and marking up interest rates and giving dealerships kickbacks. Butterworth and Stivers appeared in 1995 on the television news program, Prime Time Live and then before a joint session of lawmakers in Tallahassee, showing the Prime Time tape. The same year, the Legislature approved tough new vehicle leasing and financing disclosure laws. I saw it as a moral imperative, says Stivers, reflecting on his first legal encounter with Ford Motor Credit. I didnt think I was signing away my ability to talk about many of the things that occurred. What if I�m asked to testify about a safety problem that has caused or is likely to cause physical injury to someone? Stivers asked. Adds his trial attorney, Covey: The line between economic fraud and personal injury can be very gray; one can lead to the other. (Broward Daily Business Review, January 25, 2001) BRIDGESTONE CORP: Monroe Pension Fund and Colorado Investor File Suits ---------------------------------------------------------------------- A $110 million Michigan pension fund and a Colorado woman have filed shareholder lawsuits against Bridgestone Corp., accusing the Japanese company of covering up defects in its tires to keep its stock price and earnings inflated. The suits, filed this month in U.S. District Court in Nashville, seek class-action status for all stockholders who lost money because of fallout from the massive tire recall by Bridgestone Corp.'s Nashville-based subsidiary, Bridgestone/Firestone Inc. The first lawsuit was filed Jan. 3 by the pension fund for the city of Monroe, Mich. The second suit was filed Monday on behalf of Patricia Ziemer, a Colorado woman who owned one share of stock in the company. Both lawsuits make similar claims, saying shareholders lost millions because stocks have plunged 50 percent in recent months, "wiping out half the company's market value." According to the lawsuits, Bridgestone Corp. has 861 million shares of common stock outstanding, and 10 million American Depository Receipts, which each represent 10 shares of common stock. The lawsuits say company officials "schemed and pursued a common course of conduct and course of business that operated as a fraud or deceit on the purchasers of Bridgestone common stock and ADR." In August, Bridgestone/Firestone recalled 6.5 million tires amid accusations of design and manufacturing defects that caused blowouts and tread separations leading to thousands of crashes and hundreds of deaths. Since then, U.S.-traded stock of Bridgestone has fallen to below $ 100 a share from roughly $ 250. Bridgestone/Firestone and Ford Motor Co. already are defendants in hundreds of lawsuits filed across the nation over deaths and injuries from crashes involving Firestone tires installed on Ford Explorers. The two Nashville filings are believed to be the first shareholder lawsuits against the tire maker. Bridgestone/Firestone has conceded that poor tire design and manufacturing at its plant in Decatur, Ill., were partially responsible for defects, but the tire maker also blames Ford for errors in the design of the Explorer sport utility vehicles. Bridgestone/Firestone set aside $ 750 million to cover the cost of the tire recall and potential legal liabilities, a move it said was not an admission of legal responsibility. Bridgestone slashed its group profit forecast for the fiscal year through December 2000 to 13 billion yen ($ 111.4 million) from 67 billion yen ($ 574.1 million). The company will announce earnings for the period in February. Bridgestone/Firestone is expected to post a loss of $ 500 million in 2000, its first loss in eight years. (St. Louis Post-Dispatch, January 25, 2001) COCA-COLA: Hires Rights Lawyer Deval Patrick Top Counsel -------------------------------------------------------- Coca-Cola has hired Deval Patrick, who once served as the nation's top civil rights enforcer, to lead its worldwide legal operations. As general counsel, Patrick becomes the first African-American to head the Atlanta-based beverage giant's legal department in its 115-year history. He replaces Joseph Gladden, who is retiring in April. The hiring of Patrick, currently general counsel at Texaco, comes in the wake of Coke's record $ 192.5 million settlement of a class-action racial discrimination suit by African-American employees. The settlement was modeled after a similar one at Texaco in 1997. Patrick, in fact, headed an independent task force that oversees implementation of the Texaco settlement before he joined the oil and gas company's legal team. Coke's settlement also calls for an outside task force to oversee company efforts to improve diversity. "This is a coup for the Coca-Cola Co.," Cyrus Mehri, plaintiffs' attorney in both discrimination suits, said. "Deval is a gem. He is a unique person in the entire country. He is just as skilled in the corporate boardroom as he is in enforcing civil rights laws and working with hate-crime victims." Harvard-educated Patrick, 44, served as assistant attorney general of the U. S. Justice Department's Civil Rights Division from 1994 to 1997. Gladden, 58, has had a 25-year association with Coke and is a member of top management's powerful six-person executive committee. When Gladden retires at the company's April 18 annual meeting, Patrick will replace him on the executive committee, boosting its African-American representation from one member to two. The other is Carl Ware, executive vice president for global public affairs. Analyst Andrew Conway of Morgan Stanley Dean Witter said Patrick's hiring indicates that Coke Chairman Doug Daft is "recasting the top management team. ... I think he wants to put in a seasoned general counsel who has had experience administering and monitoring complex discrimination settlements like Texaco." Daft described Patrick's appointment as a "critical step in strengthening Coca-Cola's world-class management team." The company has about 140 lawyers on staff, not counting those hired from the outside. Some company observers wondered whether Gladden, who is well-respected in the beverage industry, may have paid a price for the highly publicized and sometimes bitter legal and public relations battle that surrounded the discrimination suit. An initial agreement to settle the case was reached last June --- 14 months after the lawsuit was filed and long after some company observers had expected. But Coca-Cola spokesman Ben Deutsch said Gladden made a commitment to Daft about a year ago to continue leading the company's legal operation while it was dealing with at least two major issues --- the discrimination suit and a massive reorganization involving 5,000 job cuts. "Having done that, Joe is retiring and he wants to take some time off and not do a thing," Deutsch said. "Joe has led with distinction through both good and challenging times," Daft said in a statement. "The progress we've made in fundamentally changing our company could not have been done without Joe." Gladden worked on Coke litigation for 10 years at King & Spalding before joining the company's legal department in 1985. He will continue to serve on the boards of two of Coke's biggest bottlers. "Joe Gladden is a gentleman and an excellent lawyer," said John Sicher, editor and publisher of Beverage Digest. "But based on Deval Patrick's experience and background, he brings not only good lawyering but also several added dimensions to the Coca-Cola Co. He worked for a superb corporate law firm, a multinational corporation and his experience with the Justice Department and the NAACP are important ingredients in his background." (The Atlanta Journal and Constitution, January 25, 2001) COUNTRY COS.: Insurance Agents Will Share $ 7 Million In Settlement ------------------------------------------------------------------- After almost 20 years of litigation, a suit by Country Cos. Insurance agents over loss of commissions has been settled for $ 7 million. Some 2,000 agents and former agents of Country Cos., of Bloomington, Ill., will share the class-action settlement. The agreement was filed in circuit court in Belleville in November. But an accounting firm hired to contact the agents and handle paperwork is still seeking missing agents, many of whom changed addresses in two decades. The suit contended that during a company expansion, commissions were taken from agents' accounts and given to others in violation of their contract. The settlement calls for compensation for each such transfer, based on a schedule that provides a set amount for each type of policy. Joseph Slimack, now with a different agency in Fairview Heights, was one of the original 13 Country Cos. agents who filed the suit in 1981. "A lot of us stayed in the business," he said. "We are happy it has finally been brought to a conclusion." Circuit Judge Michael O'Malley also expressed relief, although he still must decide how much the plaintiff's lawyers will get in fees and expenses. They have asked for $ 1.95 million. The case has gone through at least two judges. When Circuit Judge William B. Starnes retired, O'Malley took over. Lawyer Sam Pessin of Belleville filed the original suit in 1981. He retired last year and turned the case over to a partner, Robert E. Wells Jr., and others. Fees and expenses will be in addition to the $ 7 million the agents are to receive. O'Malley said he hoped to wrap things up in 60 to 90 days. Amounts received by each agent will vary. Wells said agents eligible for a portion of the settlement are being mailed an official notice and claim form. (St. Louis Post-Dispatch (Reporter Robert Goodrich), January 25, 2001) HCA: Enters $745M Settlement with DOJ over Healthcare Business Practices ------------------------------------------------------------------------ HCA-The Healthcare Co., former conformed name Columbia HCA Healthcare Corp., reveals in its SEC filing that the company has been the subject of several federal investigations into some of its business practices, as well as governmental investigations by various states. On December 14, 2000, HCA entered into a civil settlement agreement with the Civil Division of the Department of Justice and a plea agreement with the Criminal Division of the Department of Justice. The agreements resolve, subject to court approval, all federal criminal issues outstanding against the cmppany and federal civil claims by or on behalf of the government against HCA relating to DRG coding, outpatient laboratory billing and home health issues. In addition, representatives of state attorneys general have agreed to recommend to state officials that the company be released from criminal and civil liability related to the matters covered by the settlement and plea agreements. The civil settlement agreement provides that HCA will pay the government approximately $745 million with respect to the issues covered by the civil settlement agreement, with interest accruing from May 18, 2000 to the payment date at a rate of 6.5%. The civil issues that are not included as part of the civil settlement agreement are claims related to cost reports and physician relations issues. The plea agreement provides that HCA will pay the government approximately $95 million. The payments will be made upon receipt of court approval of the agreements which is expected to occur in the first quarter of 2001. In connection with these agreements, the company recorded a pre-tax charge of $745 million during the second quarter of 2000 and will record a charge of $95 million in the fourth quarter of 2000. HOLOCAUST VICTIMS: Polish Senate Debates Law On Returning Property ------------------------------------------------------------------ Poland's Senate on Thursday debated amendments that could broaden eligibility for payments under a long-delayed bill to compensate Poles whose property was seized by the communist regime between 1944 and 1962. A version approved Jan. 11 in parliament's lower house, the Sejm, drew objections from some claimants because it would limit compensation to former property owners or heirs who retained Polish citizenship as of Dec. 31, 1999. Critics say that would leave out claims by Polish emigres, including many Jews who fled communist-era prosecution. A Senate committee has proposed restoring the government's original version, which did not include the citizenship requirement. ''The basis for restitution should be equality before law,'' Krzysztof Laszkiewicz, a deputy treasury minister, told the Senate. ''All who were Polish citizens at the time they lost their property should be eligible.'' Debate continued Thursday evening, and a vote wasn't expected until Friday. Any changes would have to be approved by the Sejm before the bill goes to President Aleksander Kwasniewski for his signature. The government-backed bill also has come under fire from ex-communist legislators who say Poland can't afford the billions of dollars it would cost. The proposal allows for the return of 50 percent of any property seized from Polish citizens or its equivalent value in state-backed bonds either to the original owners or direct heirs. It has been mired in 1 1/2 years of disagreement over how to limit the government's financial liability while easing international pressure on Poland finally to compensate people whose property was seized. Poland hopes the measure will lift the threat of class-action lawsuits by Jewish groups in the United States seeking the return of private property. While a 1997 law governs return of communal Jewish property, this is the first that in any way addresses the return of businesses, homes and other property that belonged to individual Jews. The government estimates that some 170,000 eligible claims will cost about 43 billion zlotys (dlrs 10 billion). (AP Worldstream, January 25, 2001) HOLOCAUST VICTIMS: Slave Labor Fund Says U.S. Court Holding Up Payments ----------------------------------------------------------------------- The chairman of Germany's fund to compensate Nazi-era slave laborers said Thursday he's disappointed payments to victims will be delayed because a U.S. court failed to dismiss the last of the class-action lawsuits that had prompted German companies to address the long-forgotten issue. Dieter Kastrup, head of the board set up to administer the planned 10 billion mark (dlrs 4.7 billion) fund, said the court decision meant the German parliament could likely vote to release funds only in March. Fund president Michael Jansen said he hoped payments could begin ''a few days'' later. Hopes that lawmakers could consider the matter as early as next month were dashed Wednesday, when a federal judge in New York said she needed more time to decide whether to dismiss a class-action lawsuit against German banks. ''In the current situation, parliament is not in a position to do this,'' Kastrup said at a news conference during two days of meetings by the fund's board. ''We're very disappointed with developments.'' He said he hoped District Court Judge Shirley Wohl Kram would reject the suit in the next 10 days. The delay is another setback for efforts to compensate the estimated 1 million surviving victims of Nazi Germany's slave and forced labor programs, most of them non-Jews from central and eastern Europe used to keep industry running during World War II. The fund also will compensate people subjected to Nazi medical experiments and some other Holocaust-related claims. Fund officials, who had originally aimed to begin payments last year, say about 10 percent of those entitled to compensation die annually. Jansen said they have already received about 650,000 applications. German officials insist that payments can only begin once the last class action suits are dismissed and parliament declares it is satisfied that companies won't face further similar claims. But Kram said she also wanted to be sure the funds would be distributed fairly and that any victims who are not part of the lawsuit would still be able to seek legal justice. Kastrup said the judge also expressed doubts that German companies would make good on their pledge to raise half of the fund. Industry could help sway Kram by transferring now the 3.6 billion marks (dlrs 1.7 billion) they have collected so far, he said. Wolfgang Gibowski, spokesman for the initiative collecting corporate donations, said Kastrup had made an ''interesting suggestion,'' but cautioned that the initiative had promised not to transfer the funds until the parliament ruling. ''The money will be there when it is due, and I hope Judge Kram will also hear this, he said. It was also unclear whether a handful of other Holocaust-related lawsuits filed in the United States by individuals could lead parliament to hesitate. Other U.S. class-action suits were dismissed late last year. ''It's a difficult question which parliament will have to keep in mind,'' Kastrup said. ''I have no recommendation to make.'' (AP Worldstream, January 25, 2001) INDIAN TRUSTS: Some Native Americans Fear Move Could Delay Payment ------------------------------------------------------------------ Native Americans who are suing the federal government over mismanagement of as much as $ 10 billion in Indian trust accounts contended that a last-minute order by Bruce Babbitt, the outgoing interior secretary, to conduct a statistical sampling of the trusts to determine how much Indians are owed was a ruse to avoid full recompense. In one of his final acts before leaving office, Babbitt said that trust account records are in such disarray that a statistical sampling is the most cost-effective way to calculate how much the government owes account holders. A special trustee charged with overseeing the trusts has estimated the sampling could cost as much as $ 70 million. However, Eloise Cobell, the lead plaintiff in a class action lawsuit aimed at forcing the government to clean up the mismanaged trusts, said the Interior and Justice departments intend to use Babbitt's order to "bootstrap" their appeal of a 1999 federal court decision that ordered a full accounting of the trusts. "This is another desperate effort to distract the courts and Congress from their utter inability to complete a full and accurate accounting, as required by law," Cobell said. "I certainly hope the Bush administration can get control of the Justice Department, obey the law and the federal judge's orders and start to restore some integrity to this disgrace." Dennis Gingold, an attorney for the Indians, said the Interior Department has notified the U.S. Court of Appeals that the statistical sampling was ordered to put the department in compliance with the federal court's order "when, in fact, it is in violation of the court's order." U.S. District Judge Royce C. Lamberth had ordered the Interior and Treasury departments to overhaul the trust fund and find out how much account holders were owed. He said a century of mismanagement and shoddy record-keeping has left 300,000 Indians with no idea of how much they are owed in royalties from oil drilling, grazing and logging on Indian-owned lands. Each year, about $ 500 million in royalties is channeled into the trust accounts. They are passed down through generations, and many impoverished Indians rely on them to pay for food and everyday needs. While plaintiffs in the lawsuit contend that a minimum of $ 10 billion is owed, Interior officials have said the total is probably less, but at least in the hundreds of millions. Lamberth said the accounts had been so badly mismanaged that the system represented "fiscal and governmental irresponsibility in its purest form." At one point in the lawsuit, he held Babbitt and Treasury Secretary Robert E. Rubin in contempt of court for failing to produce records as ordered by the judge. Gingold said the proposed sampling would be a waste of money because account records are so unreliable that a sampling could not produce accurate information. Instead, Gingold proposed the creation of an "economic model" of the account system, using hundreds of variables that would include original data such as oil well production and grazing records instead of only records from sample accounts. Gingold said such an accounting could be done for about $ 2 million instead of $ 70 million because the data is readily available. Last year, the Interior Department held 80 public hearings around the country to hear testimony about the sampling plan, which was designed to study the records of about 350 accounts and make projections for compensation from those records. A majority of account holders who commented said the government should research each account separately to determine just compensation. Kevin Gover, former assistant secretary for Indian affairs, estimated such an undertaking would require doubling the Bureau of Indian Affairs's annual $ 2 billion budget for an undetermined number of years. During a six-week trial in 1999, government officials conceded that the records are in a shambles and that they are unable to provide an accounting. Congress approved $ 27.6 million in emergency funds to help fix the problems and urged the government to settle the lawsuit by using statistical sampling to determine fair compensation. (The Washington Post, January 25, 2001) INTRENET, INC: Schiffrin & Barroway Announces on Securities Suit in Ohio ------------------------------------------------------------------------The following statement was issued on January 25, 2001 by the law firm of Schiffrin & Barroway, LLP: Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Southern District of Ohio, Western Division, on behalf of all purchasers of the common stock of Intrenet, Inc. (Nasdaq: INET, INETE) from February 19, 1999 through October 13, 2000, inclusive (the "Class Period"). The complaint charges Intrenet and certain of its officers and directors with issuing false and misleading statements concerning the Company's business and financial condition. Specifically, the complaint alleges that Intrenet's statements concerning its 1998 and 1999 financial results were materially false and misleading since the Company's reported financial results were based upon improper accounting practices in violation of Generally Accepted Accounting Principles. Contact: Marc A. Topaz, Esq. or Robert B. Weiser, Esq., of Schiffrin & Barroway, 888-299-7706, or 610-667-7706 or info@sbclasslaw.com LEHMAN BROS: Pays School Districts and Municipalities; Faces New Suit --------------------------------------------------------------------- Accordingly to AP Online report, in a class-action lawsuit filed Jan. 19 in Blair County, attorneys for 50 school districts and municipalities that lost $69.5 million through risky investments assert that national investment bank Lehman Bros. Inc. helped John Gardner Black by knowingly or recklessly selling risky mortgage-backed securities in the mid-1990s even though they were illegal. Black was convicted of persuading the districts in Pennsylvania and Harford County, Md., to invest school construction money into the risky securities. He is serving 41 months in a federal prison, the report says. The lawsuit, which represents one side of a legal argument, claims Lehman closed transactions that cost the school districts tens of millions of dollars. A partial list of the securities included in the lawsuit shows the Lehman transactions lost $1.1 million to $3.9 million, some in less than a year. David Gradwohl, one of the attorneys for the schools, said the districts would try to get Lehman to pay their lingering losses, now at $20 million which are expected to fall as money comes in from other settlements. ''Lehman certainly can afford to pay a few million to settle,'' Gradwohl said. There has been a series of suits and settlements related to the federal government's 1997 investigation of Black's investment companies based in Tyrone, about 100 miles east of Pittsburgh. (AP Online, January 25, 2001) New Suit Filed Despite Payment To Schools According to Pittsburgh Post-Gazette, although attorneys are about to settle one lawsuit that will return money to shortchanged Pennsylvania school districts, they have just opened another lawsuit that could prove much larger. On Feb. 2, attorneys will gather in Blair County Common Pleas Judge Hiram Carpenter III's courtroom to approve a $ 600,000 payment from securities broker Hefren-Tillotson Inc. of Pittsburgh, a payment that the firm will make without admitting guilt in the Black imbroglio that lost an estimated $ 69.5 million in clients' money, the report says. That looked like about the last new cash to flow into the Black settlement fund, but a class-action lawsuit filed in Blair County Friday brings New York investment banker Lehman Bros. Inc. into the fray, charging that the company helped the collapse by selling securities that Lehman representatives knew were riskier than law allowed school districts to buy, the Pittsburgh Post-Gazette report adds. Lehman closed transactions that cost Black clients about $ 60 million, Gradwohl charges in the lawsuit, filed on behalf of Daniel Boone Area School District in Berks County, as leader of the class action. "Lehman certainly can afford to pay a few million to settle," he said. By 1997, when federal auditors caught up with him, Black's Devon Capital Management Inc. and Financial Management Sciences Inc. had lost millions of dollars to risky investments, then had tried to cover the losses by luring in more investments. His companies, based in Tyrone, Blair County, collapsed. Public schools and local governments lost money. Black, once a respected financial manager, is serving a 41-month federal prison sentence. State law restricts school funds to button-down investments such as Treasury bills and insured savings accounts. The lawsuit says that Black, facing competitive pressure to cut his management costs, looked to increase revenues by sinking clients' money into riskier, potentially higher-return investments than the law allowed, but never telling school district business managers or government regulators. The complaint charges that Lehman knew it was wrong but sold the securities through representative Lisa Vioni, also named in the lawsuit, and stayed mum. The complaint says Vioni "knew or recklessly disregarded the truth." "There was a dispute over it internally at Lehman, from what we can tell ... and Vioni prevailed," Gradwohl said. The lawsuit says attorneys never linked Lehman to wrongdoing until last January, when they got statements witnesses gave to federal investigators. That was 27 months after federal auditors uncovered Black's crumbling investments and set in motion an all-fronts fight by clients to get their money back. Before the court takes up the Lehman complaint, though, it will close the Hefren-Tillotson lawsuit, approving a payout that pales against the single largest settlement in the Black case, the December 1999 agreement by Keystone Financial Inc. of Harrisburg -- now part of Buffalo, N.Y.-based M&T Bank Inc. -- to pay $ 51 million to settle claims that it mishandled money. The money will be pooled with funds held under Financial Management's bankruptcy, with some payout to school districts expected by July. Lawyers, in turn, will get 25 percent of the settlement, $ 150,000. For South Butler County School District, for instance, which estimated it had lost $ 7.6 million in the Black collapse, the Hefren-Tillotson settlement will add to a payback that has covered about 85 percent of its losses, district spokesman Todd O'Shell said on January 24. (Pittsburgh Post-Gazette, January 25, 2001) LOUISIANA: Fearful of Another Oyster Suit Due to Freshwater Project ------------------------------------------------------------------- Already facing a potential $1 billion pay off from a court judgment in favor of oyster fishermen, the state could be liable for another huge settlement from other oyster grounds, a Foster administration official said. A Plaquemines Parish jury recently awarded fishermen $48 million in a class action suit claiming damage from the state's freshwater diversion project in Breton Sound. Silty river water diverted into marshes is a major way to restore the fragile coast that is disappearing, victim of too much salt water that kills vegetation holding the marsh together. Over the short haul, however, the diversion has damaged the oyster crop. Natural Resources secretary Jack Caldwell said Wednesday his attorneys read the ruling as saying all fishermen with leases in the area are to be paid $ 21,000 per acre for their leases, which could total $1 billion. The state is appealing on several fronts, including a specific request that the higher courts take into account that many of the state leases to the fishermen have language that holds the state harmless from litigation. The lower court judge refused to rule on the hold harmless clause, Caldwell told the House Natural Resources Committee. Later this year the state will open another diversion project in the Barataria Bay area, which will impact oyster leases of state owned land. The Barataria Bay leases have been given options to relocate their leases or transfer to other leases, Caldwell said. Or, they can sue. If they sue, the state is looking at another class action, he said, and perhaps, another big court judgment. Oyster industry representatives complained to the committee because the state has refused to renew a number of oyster leases that have expired. Mike Voisin, of the state oyster task force, said the refusal is a "knee jerk reaction" to the jury's decision in the Plaquemines suit. "They are not going to resolve the suit by not renewing oyster leases," he said. Rep. William Daniel, D-Baton Rouge, said the state is doing no more than trying to protect its interest. "When you touch a stove and it burns you, you don't want to touch it again," Daniel said. Both sides made good points, committee members agreed. From the industry: -- Louisiana's oyster industry is the national leader with more than 250 millions of raw product harvested each year and an economic impact of $260 million a year. Short term, the river water damages the farmer, the crop and the economy. From state agencies: -- The levee system that dates to almost 100 years ago has prevented natural diversion, the occasional flooding that freshened the marsh. The state has lost 1,500 square miles of coast since the levee system was built. Without diversion projects, the loss will continue until there are no oyster grounds. (The Associated Press State & Local Wire, January 25, 2001) PARK DISTRICT: IL App. Ct. Affirms Dismissal of Museum Tax Levy Case -------------------------------------------------------------------- The Illinois Appellate Court, 1st District, 5th Division, has affirmed a ruling by Judge Sidney Jones III. The Appellate Court ruled that Trial court correctly rejected plaintiff's challenge to use of funds that park district collected under museum tax levy because plaintiff failed to bring tax protest in timely manner, thus violating doctrine of laches. From 1977 until the present, the Oak Lawn Park District has imposed a tax that is included in property tax bills sent to plaintiff William J. Sullivan -- and all other taxpayers in the district -- in the amount of .03 percent of the assessed valuation of the property. The authority on which the district relied for this tax is the Park District Aquarium and Museum Act, which provides that taxes may be imposed by the directors of any society organized for the construction or maintenance and operation of an aquarium or museum. Any funds collected pursuant to the levy must be kept separate from the general operating funds of the district or village. The plaintiff testified that around 1980, he began to suspect that the funds being collected under the park district levy were being used improperly in that they were being spent for purposes other than those for which the statute provides. He said he began to question the validity of the tax at park district meetings and was always assured that the tax was validly imposed and that the district needed the money to buy a museum building. At the time the plaintiff raised these issues, he held various village positions and at one time was president of the Oak Lawn Historical Society, which the village hired to do some work for the park district. The historical society prepared a feasibility study on the possible use of schools as museums. The plaintiff testified that he was not paid by the park district, although the majority of the society's funds came from the district and the society paid the plaintiff a salary. He also admitted that that he received funds from the park district's museum fund and that he agreed to assist the district with its museum plans. The plaintiff sued the park district in 1994, alleging that no museum was created pursuant to the statute and that the funds for the levy were being spent improperly. He also sought class certification. The defendants filed a motion to dismiss, alleging that they had a museum and that the plaintiff's claims were barred by the voluntary payment doctrine." The trial judge denied the motion for class certification, reasoning that the plaintiff had waited too long to file suit. The judge ruled that the claim was barred by the doctrine of laches and that the plaintiff therefore was an inadequate individual to represent the class. The defendants then moved for summary judgment, contending that the doctrines of voluntary payment and laches barred the plaintiff's claim. The trial judge agreed and entered summary judgment, saying that the plaintiff failed to protest when he paid his property taxes. The appeals court affirmed. The court agreed that the voluntary payment doctrine barred the plaintiff's claim. Under that doctrine, money voluntarily paid under a claim of right to the payment and with knowledge of the facts by the person making the payment cannot be recovered by the payor solely because the claim was illegal, the appeals court said. The defendants argued that if the plaintiff had wanted to challenge the tax, he should have paid it under protest and filed an objection in court. In this case, the appeals court said, the plaintiff did not file a written objection of any sort. Because the voluntary payment doctrine is to apply to all real estate tax objections save for a few well-established exceptions, because plaintiff has failed to demonstrate that he should fit under one of those exceptions which enable a party to receive equitable relief and because he failed to comply with the protest requirement, we affirm the trial court's order," the court said. William J. Sullivan v. Board of Commissioners of Oak Lawn Park District, et al., No. 1-99-3744. Justice Alan J. Greiman wrote the court's opinion with Justices Patrick J. Quinn and Ellis Reid concurring. Released Jan. 19, 2001. (Chicago Daily Law Bulletin, January 24, 2001) PAYDAY LENDERS: Target Consumers By Teaming Up With Banks, AP Says ------------------------------------------------------------------ With her next paycheck still two weeks away, Leticia Ortega was running short on cash and running out of options. Ortega, a cashier in a San Antonio computer store, didn't have the money to pay overdue electric and phone bills, and she was worried her service might be cut off - until she spotted a solution while thumbing through the weekly Thrifty Nickel. She found National Money Service Inc., which offered her a $300 loan over the phone at $90 interest for two weeks. But Ortega had trouble pulling together the money to retire the debt, so every two weeks for nearly a year, she says, National Money took $90 from her bank account as interest and rolled over the loan. In all, she says she paid $1,800 - an annual interest rate of nearly 800 percent - and still owed every penny of her original loan. "If I had the money to pay, I would've paid it," Ortega said. "But I never had it." When Ortega finally filed a complaint with the state, she found that Texas has a usury law restricting lending charges. But National Money and other so-called "payday lenders" have found a route around consumer protection measures. The lenders are forging alliances with tiny national banks to take advantage of a federal law granting banks the right to "export" high interest rates. Customers walk into a payday loan store and walk out with high-interest money borrowed, at least on paper, from a faraway bank. National Money, whose lawyer did not return repeated phone calls, does business with County Bank of Rehoboth Beach, Del. Dollar Financial Group has teamed up with Eagle National Bank in Upper Darby, Pa., and Ace Cash Express with Goleta National Bank of Goleta, Calif. Pawnship chain Cash America International is also in the game through a venture with First National Bank in Brookings, S.D. Payday lending through banks riles consumer advocates, who disparage it as legal loan-sharking. And it frustrates some state regulators who say if the practice known as "charter-renting" continues, they may be powerless to rein in payday lending. "Quite frankly, these figures would make (legendary Chicago mob boss) Sam Giancana blush," said J. Philip Goddard, deputy director of the Indiana Department of Financial Institutions. "I don't think people in the racketeering business would, in good faith, make loans at these rates." The critics also say the arrangements are often a legal sham because some payday firms immediately buy the loans back from their partners. "The practice of renting a charter merely to collect a fee to allow a high-cost payday lender to circumvent state law is inappropriate," FDIC Chairman Donna Tannoue said in a speech last June. "It may be legal, but I don't like it." Payday industry executives point out that the National Bank Act clearly gives banks the right to charge interest rates allowed in the state where a bank is based, even when a consumer lives in another state. That power is the basis for the modern credit-card business. But federal lawmakers, who were trying to encourage interstate competition to benefit consumers, didn't intend to create an avenue for abusive payday lending, regulators say. "I don't think anybody ever envisioned that...we'd be seeing this type of activity - with consumers not understanding when they walk into their local (payday) storefront, that they're not doing business with their local storefront," said Leslie Pettijohn, Texas' consumer credit commissioner. Advocates have long complained about practices they consider predatory. But some payday customers say the lenders' new partnerships with banks have made the situation worse. "I was stupid and I kind of set myself up, but I do feel like a victim," says Jennafer Long, an aviation electronics technician at Jacksonville Naval Air Station in Florida. Last May Long and her husband, Jeromie Skinner, each borrowed $500 at an Ace outlet in Orange Park, Fla. to pay household bills. It wasn't until the couple went to renew their loans two weeks later that they realized the difficulty of paying them off, Long said. Each paid $100, but just $25 went toward the principal. Long responded by filing a class-action lawsuit accusing Ace of violating Florida's usury law. "It's a flytrap and you get in and there's no way to get out of it," she said. Payday lenders and their partner banks defend themselves by saying they provide a valuable service to people temporarily short of cash. They say their average customer has a full-time job and a household income of about $33,000 a year, and just needs temporary help. "You can come in on your lunch hour to one of our stores and in a matter of 20 minutes, you can apply for a loan with Goleta, get a decision back from the bank and get access to those funds," said Eric Norrington, vice president of Ace, an Irving, Texas firm with 1,200 check-cashing stores in 33 states. "That's really what Americans want is convenience, and that's why this product is so successful." Interest on the loans - typically around $15 per $100, but sometimes up to $ 30, payable every two weeks - are necessary to make a profit, lenders say. Operating storefronts and evaluating loan applications costs money, and many borrowers end up defaulting on their payments. For consumers, they say, the key is using the loans as they're intended. "It can really help you if you use it as a quick, short-term loan you can pay back in your next pay period, and that's what it's for," said Murray Gorson, president of Eagle National Bank, a two-branch institution that makes loans through 250 Dollar Financial stores in 13 states. The number of outlets nationwide whose primary service is payday loans has risen from fewer than 500 in 1995 to about 7,000 today, according to Stephens Inc., which tracks the industry. Those storefronts loaned an estimated $9 billion last year. A would-be borrower contacts a lender, who quickly checks that he has a regular job and a checking account. If so, he walks out with the two-week loan, usually between $100 and $500. When the loan period is up, the consumer must pay off principal and interest. If he doesn't have the full amount, he can pay only the interest. Two weeks later, the principal and interest again come due. Payday-bank partnerships have faced legal challenges. Josh Phanco, a Fresno, Calif., payday customer, brought a class-action suit against Dollar Financial and Eagle National, accusing them of systematic "subterfuge for no other purpose than to cover their usury and to frustrate other laws...designed to protect valuable consumers." Dollar and Eagle agreed last October to pay up to $5.5 million in compensation - much of it in the form of discount coupons for future transactions - but they didn't admit wrongdoing. As part of the agreement, all parties agreed not to discuss the case. Some payday lenders say they've taken steps to ensure that consumers aren't trapped under loans they can't repay. Both Eagle and Goleta now limit lenders to three renewals after the initial loan period, executives say. Industry critics, however, say lenders can easily sidestep their own rules by labeling rollovers as "new" loans. "There's so many ways to get around this," said Jean Ann Fox, director of consumer protection for the Consumer Federation of America. Billy Webster, president of the Community Financial Services Association, a payday industry group, says his members have adopted a code of conduct limiting rollovers to no more than four. CFSA also agreed last fall to require banks, rather than the payday chains, to set lending criteria and to approve and fund each loan. "Responsible industry self-regulation is critical to the development of any regulated business," said Webster, chief executive at Advance America, a 1,300-store payday chain based in Spartanburg, S.C. But some large payday lenders, notably Ace and Dollar Financial, have since withdrawn from the industry group. Meanwhile, criticism of the partnerships between banks and payday firms led the Office of the Comptroller of the Currency and the Office of Thrift Supervision to issue new guidelines designed to ensure that banks do "not engage in abusive practices that would increase the compliance, legal, and reputation risks associated with payday lending and could harm the bank's customers," according to a letter to bankers. Some state regulators say the new federal intervention could provide a solution, while others are less optimistic. "I mean, who's in charge of these (lenders)?" asked Mary Louise Preis, Maryland's commissioner of financial regulation. "If (federal regulators) are going to be in charge of them, then the OCC and the OTS have a lot of work to do." Consumers advocates, meanwhile, say the new guidelines are only a small step, albeit one in the right direction. "I think clearly, federal regulators have to go farther," said Rob Schneider, senior staff attorney for Consumers Union in Texas. "When it comes to payday loans, there's just no ignoring the abuses." (The Associated Press, January 25, 2001) PRE-PAID LEGAL: Dreier Baritz Expands Period for Securities Suit in OK ---------------------------------------------------------------------- Dreier Baritz & Federman announced that it filed a second class action in the United States District Court for the Eastern District of Oklahoma on behalf of purchasers of Pre-Paid Legal Services, Inc. (NYSE: PPD) common stock between the period April 19, 1999 and January 16, 2001 (the "Class Period"). The Complaint charges Pre-Paid Legal Services, Inc. and certain of its officers and directors with violations of the Securities Exchange Act of 1934. If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from January 22, 2001. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff's counsel, William B. Federman at wfederman@aol.com or call (405) 235-1560. Contact: William B. Federman of Dreier Baritz & Federman, 405-235-1560, or wfederman@aol.com PRE-PAID LEGAL: Milberg Weiss Expands Period for Securities Suit in OK ---------------------------------------------------------------------- Milberg Weiss (http://www.milberg.com/prepaid/)announced on January 25 that a class action has been commenced in the United States District Court for the Eastern District of Oklahoma on behalf of purchasers of Pre-Paid Legal Services, Inc. ("Pre-Paid") (NYSE: PPD) common stock during the period between April 19, 1999 and January 16, 2001 (the "Class Period"). The complaint charges Pre-Paid and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Pre-Paid underwrites and markets legal service plans which provide for or reimburse a portion of legal fees incurred by members in connection with specified matters. The Company's legal expense plans provide for or reimburse a portion of the legal fees associated with a variety of legal services in a manner similar to medical reimbursement plans. Pre-Paid utilized a multi-level marketing system to sell its policies. The complaint alleges that during the Class Period, Pre-Paid continually announced favorable earnings and growth in the number of "associates" who sold its policies, when, in fact, many of its associates were no longer generating new business and were not repaying advances from the Company and the Company's earnings were manipulated and overstated by improperly capitalizing commission expenses and failing to write off uncollectible advances. As a result, Pre-Paid's stock traded at inflated levels during the Class Period, increasing to as high as $48.75 per share. Then on 1/17/01, The Wall Street Journal published a story on Pre-Paid's accounting which began to expose the scheme. Upon these disclosures, Pre-Paid stock dropped to $20 per share. Contact: William Lerach or Darren Robbins, both of Milberg Weiss Bershad Hynes & Lerach LLP, 800-449-4900, wsl@milberg.com PRE-PAID LEGAL: Wolf Haldenstein Commences Securities Fraud Suit inn OK ----------------------------------------------------------------------- The law firms of Wolf Haldenstein Adler Freeman & Herz LLP and Lytle Soule & Curlee are commencing a class action lawsuit in the United States District Court for the Western District of Oklahoma on behalf of all persons or entities who purchased or otherwise acquired the securities of Pre-Paid Legal Services, Inc. (NYSE:PPD) between February 10, 1999 and January 16, 2001, inclusive (the "Class Period"). The complaint charges that from at least as early as April 1999, the Company improperly classified commission expenses as assets in violation of accepted accounting practices. On January 17, 2001, following a long period of misleading statements and omissions, the fraudulent nature of the Company's accounting practices were disclosed fully to investors in an article published in the Wall Street Journal. According to the article and at least two experts in the field of financial accounting, the Company improperly records commissions expenses to its sales associates as assets and allegedly capitalizes them over three-year periods. Under standard accounting principals, however, the Company should immediately recognize the commission payments to its associates as "expenses," not assets, thereby lowering its reported net income. The result of this concerted accounting rouse was to inflate the Company's reported earnings during the Class Period. Contact: Wolf Haldenstein Adler Freeman & Herz LLP, New York Michael Miske, George Peters, Fred Taylor Isquith, Esq., or Gregory M. Nespole, Esq. (800) 575-0735 e-mail: classmember@whafh.com or gnespole@aol.com web site: www.whafh.com SCHOOL UNIFORM: 5th Cir allows policy; ACLU Warns of Lawsuit in PA ------------------------------------------------------------------ The growing movement toward public-school uniforms has scored an important victory with a federal appeals court ruling that allows school boards to require uniforms if educators believe they improve discipline and learning. "It is not the job of federal courts to determine the most effective way to educate our nation's youth," the 5th U.S. Circuit Court of Appeals said in rebuffing claims by 39 parents that the policy did not reduce disciplinary problems or increase test scores, as the school board has contended. The New Orleans-based court rejected arguments that uniforms do not improve the teaching environment, are too expensive, stifle expression, and violate religious rights. The 3-0 decision Tuesday approved a countywide 34-school program in the northwest Louisiana county of Bossier Parish, where 18,600 students from kindergarten through high school must wear white golf shirts or button-down dress shirts with slacks, skirts, walking shorts or "skorts." Schools may choose navy blue or khaki for the pants and skirts and are permitted to allow a shirt with the school color. "It's been a long fight," school Superintendent Kenneth N. Kruithot said in an interview, pleased at the support for a mandatory policy with no provision to opt out. "We're pleased they saw our point and that we want to provide the best environment for youngsters to get an education." "Before we did this, we had all kinds of problems, fights and kids that were stealing other kids blue jeans, for instance. We've not had that since. There seems to be a different demeanor, a calmness, for kids in uniform and they start their day without a confrontation at home about what they want to wear," Mr. Kruithot said. "We're not going to roll over and play dead," said lead plaintiff Diana Canady, a computer programmer and mother of three teen-agers who she says have been excellent scholars without the benefit of uniforms. "It's forcing mass conformity on these children and teaching them that's a good thing, and I don't think it is," Mrs. Canady said, complaining that some schools go far beyond the rules and govern the color of socks, hairbands and belts. Unlike the Louisiana system, high schools are usually not included in school-uniform policies. Edwin Darden, senior staff attorney for the National School Boards Association in Alexandria, was excited that the court stated so strongly the role for school boards. "This is consistent with how courts have looked at school boards' power on other questions to make sure the education environment is sound. It's the natural next step," Mr. Darden said. One passage in particular made a point of great interest to educators: "School boards, not federal courts, have the authority to decide what constitutes appropriate behavior and dress in public schools," the federal panel said. "Uniforms are gaining some favor among public schools, particularly in light of all that has happened in the last several years, such as the shootings at Columbine, bomb threats, controversy over zero-tolerance policies," Mr. Darden said. "School officials ask, 'What else can we do to make sure children are orderly and safe?' " The ruling marks the highest court action on an issue that until now generally has been resolved by making a program voluntary or allowing exceptions. In 1995, a Maricopa County judge upheld a one-school program in Phoenix. The American Civil Liberties Union has warned it may sue when Philadelphia implements countywide uniform requirement this fall. In 1996, the ACLU settled a lawsuit out of court with Long Beach, Calif., the district credited for originating the public-school uniform trend. That settlement allows parents to opt out of the uniform policy. "Once you have an opt-out provisions, and it's enforced, it takes away the coercion, and there's not much of a legal leg to stand on," ACLU Foundation President Nadine Strossen said at the time. A recent survey by the Education Commission on the States shows two dozen states have laws allowing local school boards to encourage or require the wearing of uniforms at public schools. A significant percentage of schools in Miami, Chicago and New York have policies on uniforms, but they vary from one school to the next within the same school district. As of 1997, federal statistics show 3 percent of public schools used uniforms. They were found more often at schools where more than 75 percent of students receive free or reduced-price lunches, or with minority enrollments higher than 50 percent. Many programs provide new or donated used uniforms to children who can't afford them. The federal appeals court on January 24 said cost is not much of a factor because the uniforms used in the Louisiana program cost no more than other suitable school clothes. (The Washington Times, January 25, 2001) STATE TRAINING: State Challenges Attorney Fees for D.C. Youth Law Center ------------------------------------------------------------------------ The state is fighting the $468,900 in attorney fees sought by a Washington, D.C., group that sued to force changes at the State Training School. The Youth Law Center says its class-action lawsuit against the state led to changes in use-of-force policies at the school and so it is entitled to have the state pay the fees. The Youth Law Center filed its lawsuit nearly a year ago against Corrections Secretary Jeff Bloomberg and State Training School Superintendent Owen Spurrell. The case initially involved six juveniles but was expanded into a class action lawsuit representing all the young inmates of the training school and juvenile prison. The case ended with a negotiated settlement approved by a federal judge. Three Youth Law Center lawyers who handled the case billed at rates ranging from $160 to $340 an hour, far more than local lawyers would have charged, the state contends. Lawyers for the state say the opposing lawyers charged too much and that the agreement ratifies policy and practice already in place. "There was nothing uniquely complicated about this case," James McMahon, a lawyer for the state, said in a filed affidavit. "I think there are many lawyers throughout the state of South Dakota that could have represented the plaintiffs in this action as well as the plaintiffs did." Youth Law Center President Mark Soler said state prison officials could have avoided any major expense by making changes right away. "The number of changes that were made in regards to restraints and isolation could have been made immediately when the case was filed, but they were only agreed to when we were on the verge of trial," Soler said. Soler said the case was settled quickly because of the specialized experience of the lawyers in his office in cases involving prison conditions. U.S. District Judge Lawrence Piersol approved a settlement that increased mental-health treatment and educational programs at the State Training School, placed restrictions on the use of restraints and solitary confinement and required staff training. The state is asking Piersol to deny the Youth Law Center's fee request. If fees are awarded, it asks that the amount be reduced. (The Associated Press State & Local Wire, January 25, 2001) TOBACCO LITIGATION: Juror Threatened to Kill; Discord Forces Mistrial --------------------------------------------------------------------- A judge declared a mistrial Thursday in a high-stakes tobacco trial after being warned that deliberations were so strained that one juror had threatened to kill another. "I have an obligation to jurors to protect them," U.S. District Judge Jack Weinstein told lawyers. The last of three notes sent to Weinstein on the fifth day of deliberations read, "Juror has made threat against other juror to kill" if they have to be "here much longer." The two-month trial pitted a trust representing blue-collar workers - many of them with lung cancer - and their heirs against R.J. Reynolds Tobacco Holdings Inc., Philip Morris Cos., Brown & Williamson Tobacco Corp., and other cigarette makers. The trust accused the companies of conspiring to mislead workers about a "lethal synergy" of cigarette smoke and asbestos. The trust has paid $1.4 billion in claims from a bankrupt, one-time asbestos maker, Johns-Manville Corp, as part of earlier settlement. The plaintiffs argue that tobacco companies should be forced to "pay its fair share" - up to $135 million - of the liability. The plaintiffs had predicted a verdict in their favor would improve chances for a far-reaching settlement of similar lawsuits brought by insurers and other third parties who want the tobacco industry to share the cost of treating patients with cigarette-related illnesses. The defense said the case has no legal basis, noting that federal courts have ruled that third-party plaintiffs are too remote to seek damages. In closing arguments last week, trust attorney Ed Westbrook said internal memos and testimony by industry insiders had proven the defendants knew for decades that asbestos workers who smoked were five times more likely to get lung disease than the average smoker. The evidence also showed manufacturers conspired to hide the findings from the workers, he said. "We're never going to know the full story, because the full story has been destroyed," Westbrook said. "But what we do know tells a very, very sad story." Defense attorney David Bernick argued that the trust was plagued by mismanagement and dwindling funds - not fraud by the tobacco industry. "We never misled the trust," he said. "The trust knew all along about tobacco and synergy. ... They're asking the defendant to help them out with their problem." During seven weeks of testimony, the jury also heard from several industry executives and researchers, including whistleblower Jeffrey Wigand, whose story inspired the movie "The Insider." Wigand testified that while head of research at Brown & Williamson in the early 1990s, company lawyers censored any internal document that contradicted the industry's public "mantra" that cigarettes had not been proven to cause cancer. Nicholas Brookes, chairman and chief executive officer of Brown & Williamson, denied accusations that his company targeted asbestos workers with cigarette advertising. (The Associated Press, January 25, 2001) U-M: Test Firm Executive Says Law School Test Favors Wealthy White Males ------------------------------------------------------------------------ The standardized test for law school admissions favors white male students, according to testimony Wednesday in a trial on the constitutionality of University of Michigan Law School's admissions policy. Jay Rosner, an executive for a test-preparation firm and a witness for a group of minorities in the case, said that the questions are flawed and the method used to pick them is biased against minorities. The questions are pretested so the test-maker can predict the percentage of students who will answer correctly. The chosen questions favor whites over blacks, men over women and wealthy over poor students. They are not changed so as to avoid major disparities in average scores from year to year, Rosner said. That explains test-score gaps between white and minority students and shows the need for affirmative action to offset bias, Rosner said. The plaintiff in the federal class-action lawsuit contends U-M discriminates against whites in favor of less-qualified minority students. Minority defendants who intervened in the case claim that race preference in admissions is necessary to offset societal bias. An attorney for the plaintiff said that Rosner's testimony called into question the school's reliance on tests, but didn't prove a need for considering an applicants race. (The Detroit News, January 25, 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. 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