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/raid1/www/Hosts/bankrupt/CAR_Public/010306.MBX C L A S S A C T I O N R E P O R T E R Tuesday, March 6, 2001, Vol. 3, No. 45 Headlines ACTION PERFORMANCE: Hearing for Dismissal of Securities Suit Set for Apr CORLEY: 2600 Magazine Challenges NY Fed Judge's Ruling Re Films on DVDs FIRST UNION: Paul Grobman Announces on Fd Lawsuit over Home Equity Loans HIP IMPLANT: Sulzer Medica Updates on Inter-Op Acetabular Shell Recall i2 TECHNOLOGIES: Charles J. Piven Announces Securities Lawsuit i2 TECHNOLOGIES: Milberg Weiss Announces Securities Lawsuit in Texas IVES HEALTH: Regulators Suspend Trade for Information Re HIV Treatment MISSISSIPPI: Some Black Lawmakers Oppose College Desegregation Deal MOBIL OIL: Avoids Certification In TX Suit Filed By Injured Employees NAPSTER INC: Filters Free Music from System to Avoid Total Shutdown NESTLE SA: Rival Concerned about Ralston Deal; FTC Seeks Information NORTEL NETWORKS: Cauley Geller Extends Securities Suit in New York NORTEL NETWORKS: Zwerling, Schachter Files Securities Suit in New York NX NETWORKS: SEC Requests for Documents Re Quarter Ended June 30, 2000 PRESIDENTIAL ELECTION: Indiana Pushes for Changes Following FL Problems QLT, INC: Cauley Geller Files Securities Lawsuit in New York UNITED AIRLINES: Flight Attendants' Bias Case Survives Sp. Ct. Review VERIZON COMMUNICATIONS: Lowey Dannenberg Files Securities Lawsuit in NY VESTA INSURANCE: May Face Problem Re Insurance for Securities Suit ********* ACTION PERFORMANCE: Hearing for Dismissal of Securities Suit Set for Apr ------------------------------------------------------------------------ As previously reported in the CAR, on November 30, 1999, a class action lawsuit was filed against the company in the United States District Court for the District of Arizona, case No. CIV'99 2106 PHXROS. Fred W. Wagenhals and Tod J. Wagenhals, directors and officers of our company, and Christopher S. Besing, a former director and officer of our company, also were named as defendants. The lawsuit alleges that the company and the other defendants violated the Securities Exchange Act of 1934 by (a) making allegedly false statements about the state of our business and shipment of certain products to a customer, or (b) participating in a fraudulent scheme that was intended to inflate the price of our common stock. The alleged class of plaintiffs consists of all persons who purchased our publicly traded securities between July 27, 1999 and December 16, 1999. The plaintiffs are requesting an unspecified amount of monetary damages. Update The Company filed a motion to dismiss this lawsuit, which is scheduled to be heard by the court during April 2001. We intend to vigorously defend this lawsuit. CORLEY: 2600 Magazine Challenges NY Fed Judge's Ruling Re Films on DVDs ----------------------------------------------------------------------- A New York federal judge's ruling that prohibited 2600 Magazine from publishing truthful material about a computer program that can decrypt digital versatile discs -- or even linking to such material -- violates the First Amendment and grants copyright holders too much power, the magazine argues in its opening brief to the Second Circuit. Universal City Studios Inc. v. Corley et al., No. 00-9185, opening brief filed (2d Cir., Jan. 19, 2001). The plaintiffs are numerous movie studios who distribute their films on digital versatile discs, better known as DVDs. To protect the DVDs from illicit copying, the plaintiffs developed an encryption program -- Content Scramble System -- that permits movies to be played only on DVD players and DVD computer drives equipped with licensed technology that prevents copying. A Norwegian teenager developed a program called DeCSS that circumvents CSS and allows DVDs to be played on unlicensed machines as well as to be copied. The teenager placed DeCSS on his Web site, from which it was copied to hundreds of other Internet sites , including sites owned by the defendants in this case. The movie industry filed suit in U.S. District Court for the Southern District of New York under the Digital Millennium Copyright Act, 17 U.S.C. @ 1201, seeking to stop the defendants from posting DeCSS on the Internet or linking to sites that contained DeCSS. The plaintiffs invoked Section 1201(a)(2) of the DMCA, which prohibits "trafficking" in technology that can be used to circumvent copy protection measures. Following a bench trial, U.S. District Judge Lewis A. Kaplan upheld the constitutionality of the DMCA and concluded that DeCSS violated the law. He rejected the defendants' contention that DeCSS should be allowed because individuals could use it to make "fair use" of copyrighted materials under the Copyright Act. Congress already considered the tension between the DMCA and fair use principles, and, after balancing a range of competing interests, purposefully chose not to include fair use as a statutory defense to an action under Section 1201(a), he said. He also concluded that the defendants violate the "trafficking" provision by linking to sites that either contain DeCSS or provide further links to the program. Judge Kaplan agreed that the First Amendment must be considered in evaluating restrictions on computer programs, but said in this case, Congress was concerned with the functionality of software, not with the ideas expressed in the program code. The DMCA's "incidental" restrictions on protected expression are no broader than what is necessary to accomplish Congress' goals of preventing infringement and promoting the availability of content in digital form, he concluded. An appeal brief filed by defendant 2600 Enterprises Inc., publisher of 2600 Magazine, argued that Judge Kaplan made several legal errors in his ruling that: -- The press can be enjoined from publishing truthful material, or even linking to such material, because unrelated third parties might someday use that material to violate the law; -- " F unctional" expression (the DeCSS program) is entitled to less First Amendment protection than nonfunctional expression; and -- Section 1201 trumps the right of fair use by prohibiting publication of technologies that allow fair-use access to digital works. "The upshot of these holdings is that the offense of 'providing' technologies or instructions that could be used to assist in copyright infringement is treated much more stringently than copyright infringement itself," said the brief, which was submitted by the Electronic Frontier Foundation on behalf of "This upside-down structure reaches far beyond the bounds of copyright law, threatening liability for members of the media, scientific speakers and fair users, all of whom have traditionally enjoyed broad First Amendment protection for their speech." According to 2600, the DMCA specifically states that it does not affect the "rights, remedies, limitations, or defenses to copyright infringement, including fair use," and that it does not "diminish any rights of free speech or the press." 2600 argues that Judge Kaplan allowed his distaste for a particular speaker in this case 2600 -- to affect his judgment of that entity's right to speak. In doing so, 2600 argues, the judge "did great violence to both copyright law and the First Amendment." A reasonable interpretation of the DMCA, 2600 argues, would allow it to "remain a powerful tool to prevent copyright infringement, while also preserving freedom of expression in the digital age." 2600 is represented by Martin Garbus and Edward Hernstadt of Frankfurt, Garbus, Kurnit, Klein & Selz in New York and by Cindy Cohn, Lee Tien and Robin D. Gross of the Electronic Frontier Foundation in San Francisco. (Intellectual Property Litigation Reporter, February 2, 2001) FIRST UNION: Paul Grobman Announces on Fd Lawsuit over Home Equity Loans ------------------------------------------------------------------------ First Union Corporation and its affiliate First Union Home Equity Corp. have been accused in a civil class action lawsuit of misleading consumers and engaging in improper collection practices in connection with home equity loans. The suit, filed in federal district court in Newark, New Jersey, contends that First Union, based in Charlotte, North Carolina routinely failed to provide billing statements to borrowers in violation of the federal Truth-in-Lending Act, concealed interest charges, and attempted to pass along attorneys fees, late fees and collection costs which could not be charged under state law. The Complaint, which seeks class-action status on behalf of a Sea Girt, New Jersey couple and other similarly affected individuals, also claims that First Union knowingly commenced foreclosure proceedings against borrowers without any legal or factual basis for doing so. The suit on behalf of the class plaintiff alleges that First Union failed to provide billing statements to plaintiffs for a period of over twenty months, yet charged late fees for the period in which plaintiffs were not being billed. First Union also sought the payment from plaintiffs of what was termed "unaccrued interest," despite the fact that defendants had never revealed the existence of such interest to plaintiffs in monthly billing statements or otherwise. According to the Complaint, when plaintiffs sought to rectify the situation, First Union failed to respond to their inquiries as required by federal law, and instead sought to foreclose on plaintiffs' home and demanded attorneys fees and costs which could not be charged. Contact: Law Office of Paul Grobman, New York Paul Grobman, 212/983-5880 Neal A. DeYoung, 212/490-9550 HIP IMPLANT: Sulzer Medica Updates on Inter-Op Acetabular Shell Recall ---------------------------------------------------------------------- On December 8, 2000 Sulzer Orthopedics initiated the voluntary recall of certain lots of the shells immediately after the Company discovered an unacceptable level of residue of a mineral oil-based lubricant on the surface of some shells. Sulzer Orthopedics had determined that this residue may prevent the implant from properly bonding with the bone, causing the shells to loosen. The recall primarily concerns the US market of Sulzer Orthopedics. A number of lawsuits and class actions have been filed against Sulzer Orthopedics. The Company will defend itself against the certification of class action suits to address patients affected on an individual basis. Sulzer Orthopedics has apologized for any effect the recall may have on patients and their families. The Company has taken full responsibility and addresses each patient's needs and concerns on an individual basis, including reimbursement for expenses not covered by insurance or Medicare, such as lost wages and expenses related to surgery, and compensation for the patient's pain and suffering. Currently, three months after the official announcement of the recall, Sulzer Orthopedics is aware of 573 patients who have undergone revision surgery. The symptoms leading to revision surgery typically present within three months of surgery, sometimes extending up to six months. Because the company initiated the recall three months ago, the company believes that the frequency of revision surgery will begin to decrease in the near future. Due to the random nature of the problem, however, Sulzer Medica is not yet in a position to provide a final figure for the number of patients who eventually might need revision surgery. Surgeon advisers do not recommend that patients undergo removal of the Inter-Op unless they exhibit symptoms of loosening. Sulzer Medica (NYSE: SM) regularly provides updates on the Inter-Op recall on its website www.sulzermedica.com . As expected, the recall has slightly affected the growth of hip sales in the US in the first two months of 2001. Nevertheless, overall sales of joint prostheses are above the prior year. The company believes that its product liability insurance is adequate to cover the cost associated with the revision surgeries and the associated claims to date. Non-insured losses associated with the recall to date are more than offset by an exceptional item of USD 32 million from a litigation settlement. Sulzer Orthopedics will defend itself against the certification of class action suits. The company is convinced that patients are better served on a case-by-case basis as every patient who needs a revision is affected differently by the recall. Sulzer Orthopedics is also convinced that claims for punitive damages brought forward by some plaintiff attorneys will not be awarded because the company has acted responsibly and immediately once it learned about its manufacturing problem. Headquartered in Winterthur, Switzerland, Sulzer Medica develops, manufactures and markets implantable medical devices and biological products for cardiovascular and orthopedic markets worldwide. The Company's product offering includes joint prostheses, spinal implants, dental implants, trauma surgery products, heart valves, and vascular grafts (NYSE: SM; Swiss Stock Exchange: SMEN). i2 TECHNOLOGIES: Charles J. Piven Announces Securities Lawsuit -------------------------------------------------------------- Law Offices Of Charles J. Piven, P.A. announced on March 5 that a private securities action requesting class action status has been initiated on behalf of purchasers of the following securities during the following period: i2 TECHNOLOGIES, INC. (NASDAQ: ITWO) All persons or entities who purchased the common stock of i2 Technologies during the period January 9, 2001 through and including February 26, 2001. No class has yet been certified in the above action. Until a class is certified, you are not represented by counsel unless you retain one. If you purchased the stock listed above during the class period, you have certain rights. To be a member of the class you need not take any action at this time, and you may retain counsel of your choice. Contact: Law Offices Of Charles J. Piven, P.A., Baltimore Charles J. Piven, 410/332-0030 pivenlaw@erols.com i2 TECHNOLOGIES: Milberg Weiss Announces Securities Lawsuit in Texas -------------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on March 2, 2001, on behalf of purchasers of the securities of i2 Technologies, Inc. (NASDAQ: ITWO) between January 9, 2001 and February 26, 2001, inclusive. A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/itwo/ The action is pending in the United States District Court, Northern District of Texas, Dallas Division, located at 1100 Commerce Street, Dallas, Texas 75242, against defendants i2, Sanjiv Sidhu and William M. Beecher. The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between January 9, 2001 and February 26, 2001, thereby artificially inflating the price of i2 securities. Specifically, the Complaint alleges that during the Class Period, unbeknownst to investors, Nike, Inc. ("Nike"), one of i2's significant customers, was experiencing problems with its implementation of i2's software, which necessarily put i2's relationship with Nike at material risk. Nevertheless, defendants issued a series of materially false and misleading statements which failed to disclose, among other things, that the Company was experiencing software implementation difficulties with Nike and that these problems were material and severe and were damaging the Company's relationship with Nike. On February 26, 2001, after the close of the market, Nike issued a press release revising its third quarter and fiscal 2001 earnings because of, among other things, "complications arising from the impact of implementing [its] new demand and supply planning systems" which were developed by i2. i2 shareholders, upon hearing that Nike blamed its problems on i2 and i2's software, immediately caused the Company's stock price to collapse. By the end of the day, i2's stock closed at$27.56, down 22% from the previous day's close of $35.50. Prior to the disclosure of the adverse facts, certain i2 insiders sold, in aggregate, more than $97 million of their personally-held i2 stock. Contact: Milberg Weiss Bershad Hynes & Lerach LLP, New York Steven G. Schulman or Samuel H. Rudman, 800/320-5081 IVES HEALTH: Regulators Suspend Trade for Information Re HIV Treatment ---------------------------------------------------------------------- Federal securities regulators on Monday suspended trading in Ives Health Co. Inc. (IVEH.OB) through March 16, questioning the accuracy of claims the firm has made about an HIV treatment, Reuters news says. According to the report, the Securities and Exchange Commission said in a statement that it issued the suspension because of ``questions regarding the accuracy of public statements by Ives Health to investors concerning, among other things, a product being marketed by Ives Health for treatment of human immunodeficiency virus.'' Ives Health, based in Claremore, Okla., closed at 25 cents on Friday on the OTC bulletin board, the report adds. The company has a line of homeopathic medicines and other natural remedies to treat acne, coughs, headaches and sore throat, it said in a recent statement. It also owns T-Factor, ``an all-natural remedy that has been proven to increase T-Cell counts in HIV patients,'' according to a Feb. 27 statement. (Reuters) MISSISSIPPI: Some Black Lawmakers Oppose College Desegregation Deal ------------------------------------------------------------------- Some black legislators say a proposed settlement of Mississippi's 26-year-old higher education desegregation case is unfair to the state's three historically black colleges. In a Feb. 14 letter to Higher Education Commissioner Tom Layzell, state Sen. Willie Simmons, D-Cleveland, criticized a settlement formula used to split $105 million in endowment funds that would go to the historically black schools. It includes $70 million in public funds and $35 million in private money. Under the proposed settlement, Jackson State University would receive $45.6 million, or 43.4 percent, while Alcorn State and Mississippi Valley State would each receive shares of $29.7 million, or 28.3 percent. "The proposed settlement will further discriminate against two of the historically black universities on the basis of rural vs. urban," Simmons said in the letter. Jackson State is located near downtown Jackson while Alcorn State, in Lorman, and Mississippi Valley State, at Itta Bena, are located rural areas. Rep. Jim Evans, D-Jackson, said it is wrong to require the three historically black universities to have certain percentages of white enrollments. "It's a blueprint to close Valley State and Alcorn," Evans said. U.S. Rep. Bennie Thompson, D-Miss., a lead plaintiff in the case, has said the settlement includes a goal for enrollment of non-black students at the three universities. Thompson and Attorney General Mike have insisted there is no monetary penalty associated with failure to reach that goal. Those associated with the settlement talks said the percentage of non-black students - somewhere around 12 percent - would determine how much autonomy the schools would have in spending endowment funds. Mississippi Valley and Alcorn enrollment hovers around the 3,000 mark. Jackson State has about 6,500 students currently enrolled. The settlement includes funds from state appropriations, long-term construction bonds and private dollars. The late Jake Ayers of Glen Allen filed the lawsuit in 1975, claiming the state's three historically black colleges were underfunded in comparison to five historically white schools. The U.S. Supreme Court agreed and ordered the state to remedy the situation. Since the remedial order was issued in 1995, the state has spent about $83 million on improvements to the three schools. Plaintiffs and the state College Board hope to get the settlement proposal to U.S. District Judge Neal Biggers Jr. soon, Moore said. Then, it would be presented to the 2001 Legislature for funding. The dollar figure on the settlement is more than $500 million over the next 17 years. The proposal has been criticized by Alvin Chambliss, now a Texas Southern University law professor and former lead attorney for the plaintiffs. Chambliss said it will hurt black institutions by lowering black enrollments and would leave the 64,000-student higher education system essentially unchanged. In a Feb. 15 letter to Thompson, Chambliss said, "I urge you not to sign this settlement agreement because it is not in the best interest of the class of black citizens." With the settlement, "the dual higher education system is substantially intact," Chambliss wrote in the letter obtained by The Clarion-Ledger newspaper of Jackson. "Fewer black students go to college and fewer complete the undergraduate programs if they do begin." (The Associated Press State & Local Wire, March 5, 2001) MOBIL OIL: Avoids Certification In TX Suit Filed By Injured Employees --------------------------------------------------------------------- The lack of economy in dispute resolution made the vehicle of a class action inappropriate in a suit by injured employees of Mobil Oil Corp. (Patterson, et al. v. Mobil Oil Corp., et al., No. 00-40086 (5th Cir. 2/5/01).) Ozan Patterson and John Ballenger were certified as class representatives in an action brought by employees of Mobil. The complaint alleged Mobil secured workers' compensation insurance or reinsurance from its wholly owned subsidiaries from 1965 through 1993. The representatives contended Mobil's conduct failed to properly qualify Mobil as a subscriber to the Texas workers' compensation system. The suit asserted Mobil's alleged conduct violated the RICO Act. Judge Joe J. Fisher, now deceased, of the U.S. District Court, Eastern District of Texas, certified a bifurcated class under Fed. R. Civ. P. 23(b)(3). One class consisted of employees injured between 1963 and 1981. Another class consisted of employees injured between 1982 and 1993. Shortly thereafter, Judge Fisher recused himself sua sponte without offering any explanation. Mobil appealed the class action certification to the 5th U.S. Circuit Court of Appeals. The 5th Circuit stated the basic problem was that each injured worker "would have to make an individual showing that she could have and would have sued Mobil, but did not do so because the asserted false statements led her to believe her suit to be barred by the workers' compensation regime." The Court of Appeals recognized there was an issue common to all class members - "the question of whether or not Mobil was a valid subscriber to the workers' compensation system." However, that issue did not predominate over the question of whether or not each member of the class suffered a RICO injury. Relying on Bolin v. Sears Roebuck & Co., 231 F. 3d 970 (5th Cir. 2000), the court vacated the class certification because the predominance requirement of Rule 23(b)(3) could not be met. "An effort to decide only the question of whether Mobil was effectively insured under the Texas compensation scheme would be no more than the trial of an abstraction - for which sub-classing and bifurcation is no cure," the court stated. The 5th Circuit remanded the case for further proceedings consistent with its opinion. Opinion by: Circuit Judge Patrick Errol Higginbotham. (Civil RICO Report, February 28, 2001) NESTLE SA: Rival Concerned about Ralston Deal; FTC Seeks Information -------------------------------------------------------------------- Antitrust enforcers at the U.S. Federal Trade Commission (FTC) have sought more information on Nestle SA's (NESZn.S) plan to become the world's biggest pet care company by purchasing Ralston Purina Co. (RAL.N). A spokesman for St. Louis-based Ralston Purina said Monday that the FTC on Friday had given the companies a ``second request'' for information that extends the deadline for approving the transaction. The request means the agency wants to take a closer look a the deal, which brings together such household names as Ralston's Dog and Cat Chow and Nestle's Friskies cat food and Mighty Dog brands, before deciding whether to approve it. Ralston spokesman Keith Schopp played down the significance of the request. ``These requests are typical for transactions of this nature,'' Schopp said. ``The parties still expect to close (the deal) before Dec. 31 and are on schedule.'' Vevey, Switzerland-based Nestle said on Jan. 16 it was acquiring Ralston Purina in a $10 billion deal. At least one rival pet food maker has met with the FTC recently to air concerns about the size and might of a combined Nestle and Ralston Purina. Fears have been expressed that Nestle could use its considerable leverage with supermarket chains to bid up the ''slotting'' fees that manufacturers pay for space on store shelves, according to an industry source. The Nestle-Purina combination could also raise antitrust concerns in the United States because the combined companies would control nearly 70 percent of the dry cat food market. The deal is subject to approval by the FTC's competition bureau. Chief competitors in the United States are H.J. Heinz Co. (HNZ.N), Procter & Gamble (PG.N) and privately held Mars Inc. It's not clear that the FTC will share the reservations about slotting fees. In a report released Feb. 20, agency staff said there's not enough research to determine whether slotting fees are becoming a problem. FTC staff recommended against issuing any guidelines on the practice until more is known about the effects of slotting. Once Nestle and Ralston have submitted all the required information, the FTC has another 30 days to decide whether to oppose the merger, unless the companies agree to voluntarily extend the deadline imposed by federal law. Reuters) NAPSTER INC: Filters Free Music from System to Avoid Total Shutdown ------------------------------------------------------------------- According to the San Francisco Chronicle, embattled Napster Inc. has begun blocking free music files to tens of millions of people who swap copyright songs over the Internet in an attempt to avoid total shutdown by a federal judge. The process has begun to filter some music out of its huge song-swapping system, wiping out popular hits from the artists Metallica and Dr. Dre, who complained that their music was being traded illegally online. The report says that Napster took the measure hoping to avoid a judge's harsher order that would essentially bring an end to the popular network. (San Francisco Chronicle, March 5, 2001) NORTEL NETWORKS: Cauley Geller Extends Securities Suit in New York ------------------------------------------------------------------ The Law Firm of Cauley Geller Bowman & Coates, LLP announced March 2 that a class action has been filed in the United States District Court for the Eastern District of New York on behalf of purchasers of the securities of Nortel Networks Corp. (NYSE: NT; Toronto). The class period is being expanded to include purchases made between November 1, 2000 and February 15, 2001, inclusive (the "Class Period"). The action, Case No. 01 CV 1033, was filed against defendants Nortel, John Andrew Roth (CEO, President and Director), William F. Conner (President of Nortel's E-Business Solutions), Chahram Bolouri (President of Nortel's Global Operations), and Frank Dunn (Chief Financial Officer). The complaint charges that defendant violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentation to the market between January 18, 2001 and February 15, 2001 concerning the demand for its products. Specifically, the complaint alleges that defendants issued a press release on January 18, 2001, (after the close of the securities markets) announcing record operating results for the year 2000, and especially strong fourth quarter of 2000 performance. In the press release, defendants represented that Nortel's "global reach and industry leading portfolio" would allow it to "continue to outpace the market and gain profitable market share" even in the face of the "tightening of capital within the telecom sector." The announcement sent its stock price soaring 10% in one day. The complaint will allege that the statement was materially false and misleading when made because the Company had no basis for reassuring the market that demand for its products would remain robust, given the economic slowdown that was impacting companies in general and the telecommunications sector -- upon which Nortel relies -- in particular. On February 15, 2001, less than a month after issuing its market moving representations, Nortel issued a press release announcing that it was drastically lowering its guidance for Nortel's 2001 fiscal year because of decreased demand for its products due, in large part, to spending cuts by telecommunications companies. Following the announcement, Nortel's stock price plunged by 34% in one day, from $29.75 per share to $19.50 per share (erasing $ 33 billion of Nortel's market capitalization). Prior to the disclosure of the true state of its business, individual defendants Bolouri and Conner collectively sold over $7 million of their personally held Nortel stock. Contact: media, Sue Null, or Charlie Gastineau, both of Cauley Geller Bowman & Coates, LLP, 888-551-9944 NORTEL NETWORKS: Zwerling, Schachter Files Securities Suit in New York ---------------------------------------------------------------------- Zwerling, Schachter & Zwerling, LLP announced on March 2 that a class action lawsuit was filed in the United States District Court for the Eastern District of New York, on behalf of all persons who purchased or otherwise acquired Nortel Networks Corporation ("Nortel" or the "Company") (NYSE: NT) stock between November 1, 2000 and February 15, 2001, inclusive (the "Class Period"). The complaint charges Nortel and certain of its directors and officers with violations of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that during the Class Period, the defendants engaged in a course of conduct to mislead the public about Nortel's operating condition and performance by issuing materially false statements regarding demand for the Company's services and products and expectations for the Company's performance in 2001. The complaint alleges that defendants' statements were materially false and misleading when made because Nortel was experiencing a severe business downturn for its telecommunications products and that growth in orders for Nortel's services was declining. The complaint alleges that defendants' misrepresentations artificially inflated Nortel's stock price during the Class Period. The complaint also alleges that during the Class Period, certain individual defendants sold approximately $7 million of their stock. On February 15, 2001, Nortel issued news release, announcing that it was drastically lowering its revenue and earnings growth expectations for 2001 "to 15 percent and 10 percent, respectively," because of, among other things, decreased spending by its customers. The Company's announcement sent Nortel's stock price plunging approximately 33 percent in a single day, from $29.75 to $ 20.00, erasing more than $29 billion from its market capitalization. Contact: Ben Sharav, Esq. of Zwerling, Schachter & Zwerling, LLP, 800-721-3900, or zlaw96@ix.netcom.com NX NETWORKS: SEC Requests for Documents Re Quarter Ended June 30, 2000 ---------------------------------------------------------------------- As previously reported, in November 2000, the company was served with complaints in purported class action proceedings captioned TRACY REESE AND CHRISTINE JOYCE V. BRYAN HOLLEY, STEVEN T. FRANCESCO AND NX NETWORKS, INC., Civil Action No. 00-CV-11850-JLT, and MARC JACOBSEN V. BRYAN HOLLEY, STEVEN T. FRANCESCO AND NX NETWORKS, INC., Civil Action No. 00-CV-11999-JLT. Each complaint was originally filed September 2000 in the United States District Court for the District of Massachusetts. The complaints allege violation of the federal securities laws in connection with statements and disclosures made by the named defendants between December 8, 1999 and April 24, 2000. The complaints seek unspecified damages. In November 2000, the company was served with a complaint in a purported class action proceeding captioned ROY WERBOWSKI V. NX NETWORKS, INC., STEVEN FRANCESCO AND PETER KENDRICK, Civil Case No. 00-1967-A. The complaint was originally filed in November 2000 in the United States District Court, Eastern District of Virginia. The complaint alleges that between July 27 and November 2, 2000 we breached securities laws in connection with the circumstances that led us to restate our financial statements for the quarter ended June 30, 2000. The complaint seeks unspecified damages. We believe we have meritorious defenses in this litigation, and we intend to vigorously defend ourselves. The company has been advised that the plaintiffs are planning to consolidate their claims into a single complaint and a single action. Pending this event, the company has not filed responses with the courts addressing the substantive allegations of the complaints. Update On November 8, 2000, the Enforcement Division of the SEC requested NX Networks to voluntarily provide documents related to the restatement of our financial statements for the quarter ended June 30, 2000. The SEC request advised the company that the fact the SEC has made a request should not be taken as an indication that the SEC believes there has been a violation of law. NX says it responded to the SEC request on November 20, 2000 and has not been subsequently contacted. PRESIDENTIAL ELECTION: Indiana Pushes for Changes Following FL Problems ----------------------------------------------------------------------- Indiana was never really considered in play during the past presidential race, and nobody questioned whether George W. Bush had actually won the state on Election Night. But the bitterly contested results in Florida that left a winner in doubt for more than a month and a nation deeply divided still have Indiana lawmakers and election officials trying to patch up perceived voting system flaws here. Gov. Frank O'Bannon and Secretary of State Sue Anne Gilroy recently announced creation of a Task Force on Election Integrity to investigate the accuracy of elections and consider changes that could include new voting systems and expanded polling hours. "In Indiana, we have a chance to do it right, to put together a team effort that will result in reliable and efficient elections, where the votes are counted accurately and fairly each and every time," Gilroy said. Lawmakers are not waiting on recommendations from the 16-member panel to press ahead, however. The General Assembly is considering several measures this session designed to improve and update the system. Indiana counties now use a variety of voting methods, including optic scanners that read marks on paper ballots, electronic voting machines, punch-card ballots and old-fashioned mechanical lever voting machines that are long out of production. A class-action lawsuit filed in late January has forced Indiana further into the fray over punch-card voting systems such as those that led to Florida's presidential recount. The lawsuit, filed by Indianapolis attorney Bill Groth on behalf of two voters, seeks to force Indiana to ban and replace all punch-card systems, which are currently used in 35 Indiana counties, in time for the May 2002 primary elections. While the Indiana Constitution requires "fair and equal" elections, Groth said there is nothing "equal" about a voting system proven to have a higher error rate in recording votes than other types of equipment. Gilroy has spoken in favor of legislation that would provide low-interest loans and grants to counties to help pay for upgraded voting systems. But one bill, which would decertify punch-card voting machines in 2004, would cost an estimated $8 million to $16 million depending on the kind of systems the counties adopt. State Rep. B. Patrick Bauer, chairman of the budget-writing House Ways and Means Committee, included in his budget bill $5 million in grants that counties could match to upgrade their systems. But he has cautioned against spending more because of the state's current budget woes. Revenues are far below projections for this year and the state's spendable surplus has dwindled over the past few years. Gilroy said she agrees with the goal of the class-action lawsuit. In fact, she said bulky lever machines used in some counties can also be inaccurate and they also need to be replaced. But the cost of replacing both types of voting systems has been estimated at $30 million. The Senate is considering a bill that would establish a statewide voter registry - a computerized link between county clerks and the state to guard against fraud and clean up voting records. That project could cost as much as $6 million. The cheapest alternative would be a $1.5 million proposal to compile a single state database by collecting registration information from all 92 counties. Whether any of the bills will be enacted into law this session is uncertain. "I think time has a way of eroding passion," Democratic Rep. Mark Kruzan of Bloomington, the majority floor leader in the House, said before the legislative session began in January. "The election has been settled, and Indiana didn't have the kinds of problems Florida had." (The Associated Press State & Local Wire, March 5, 2001) QLT, INC: Cauley Geller Files Securities Lawsuit in New York ------------------------------------------------------------The Law Firm of Cauley Geller Bowman & Coates, LLP announced on March 2 that it has filed a class action in the United States District Court for the Southern District of New York on behalf of all individuals and institutional investors that purchased the common stock of QLT, Inc. ("QLT" or the "Company") (Nasdaq:QLTI) between August 1, 2000 and December 14, 2000, inclusive (the "Class Period"). The complaint charges that the Company and certain of its officers and directors violated the federal securities laws by providing materially false and misleading information about the Company's financial condition and operations, and as a result of these false and misleading statements the Company's stock traded at artificially inflated prices during the class period. Specifically, throughout the Class Period, defendants repeatedly issued statements indicating continued strong demand for its top-selling drug, Visudyne. The complaint alleges that on December 14, 2000, defendants shocked the market by announcing that their sales expectations for Visudyne would not be met because demand had slowed after retinal physicians began experiencing difficulties in securing reimbursement for the drug from insurance carriers and governmental agencies, both in the United States and in Europe. In response to this announcement, the Company's common stock fell approximately 31% from its closing price on the previous day. Contact: Cauley Geller Bowman & Coates, LLP Media: Sue Null or Charlie Gastineau, 888/551-9944 info@classlawyer.com www.classlawyer.com UNITED AIRLINES: Flight Attendants' Bias Case Survives Sp. Ct. Review --------------------------------------------------------------------- The U.S. Supreme Court said it will not review a case challenging the right of female flight attendants to make discrimination claims based on sex and age when many of the same issues were covered by a previous class-action case. The court's action, made without comment, is a victory for the women in their case against United Airlines. The women sued in 1992 over United's policy requiring flight attendants to meet weight restrictions set according to sex and height. They claimed the policy treated men and women flight attendants differently, in violation of the 1964 Civil Rights Act, and that the policy especially discriminated against older women. The federal court eventually threw out the case on grounds that the weight limits were the subject of a class-action case resolved in 1979, and dismissed the age discrimination claim on other grounds. The issue for the Supreme Court was whether that federal court reached the correct decisions, or whether a federal appeals court got it right when it reinstated the case last year. Lawyers for United claim the same issue cannot be settled twice, and that the 1979 settlement is the final word. The flight attendants claim that the interests of some flight attendants were not adequately represented in the earlier case, and that changes at United in the intervening years made a second suit necessary. The court in the 1979 case found that United had enforced its weight limits unfairly, but that the limits themselves were not discriminatory. The judgment applied to present and future female attendants. Both sides then agreed to let the split decision stand without appeals and the airline agreed to make enforcement of the weight limit less subjective the following year. The airline also increased weight limits for both men and women on a sliding scale as they age. It was those revised limits that the second group of flight attendants challenged in a 1992 case filed in San Francisco. United scrapped its weight program in 1994, but the case continued anyway. Last year a divided panel of the 9th U.S. Circuit Court of Appeals reversed the lower court and then went on to rule in favor of the women on their sex discrimination claims. The appeals judges sent the age discrimination portion of the case back to the lower court. United's appeal to the Supreme Court focuses on what the airline calls a lingering question about the rights of disgruntled participants in a class-action claim. Federal rules sometimes prevent class members from opting out of the group claim in favor of pursuing separate, individual claims. That was the case in the first United class-action. The second group of flight attendants claim that the no-exit rules exacerbated unfair elements of the first ruling and contributed to the need to file the later suit. VERIZON COMMUNICATIONS: Lowey Dannenberg Files Securities Lawsuit in NY----------------------------------------------------------------------- Lowey Dannenberg Bemporad & Selinger, P.C. (www.ldbs.com), has filed a class action complaint against Verizon Communications, Inc. (NYSE; "VZ") on behalf of purchasers of 12-7/8% Senior Notes due 2010 (the "Notes") of NorthPoint Communications Group, Inc. (NASDAQ; "NPNTQ") during the period November 14, 2000 until November 29, 2000 (the "Class Period"). The action is pending in the United States District Court for the Southern District of New York under the caption Faulkner v. Verizon Communications, Inc., 01 Civ. 1846 (WCC). The complaint charges Verizon with making false and misleading statements which inflated the market price of the Notes during the Class Period, in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission. Verizon repeatedly represented that its merger with NorthPoint, which would combine the two companies' digital subscriber line businesses, was expected to close by mid-2001, and confirmed its obligation to provide $350 million in interim financing before completion of the merger. As a result of Verizon's representations, the Notes, which prior to the announcement of the merger had traded at a significant discount to their $1,000 face value, soared to a price equal to, and even above, their face amount or "par value," because the merger with Verizon constituted a "change of control," as defined in the indenture governing the Notes, which triggered an obligation to repurchase the Notes at a price of 101% of their face amount. Unbeknownst to the Note investors and to NorthPoint, Verizon had soured on the deal and, instead of using reasonable efforts to complete the Merger, was exploring ways to justify terminating the deal and avoid a $200 million financing commitment as of January 1, 2001. On November 29, 2000, Verizon announced that it was unilaterally terminating the merger agreement and the related funding agreement, based upon a purported "material adverse effect" on NorthPoint's business. Verizon sought to justify its position based upon NorthPoint's revised third-quarter 2000 results, announced nine days earlier. However, the stated reason was merely a pretext for Verizon to avoid its financing obligations, as Verizon was aware of NorthPoint's revised third-quarter results as of the beginning of the Class Period, and nonetheless publicly reaffirmed the merger and Verizon's funding commitment. As a result of the termination of the merger and Verizon's refusal to comply with its funding obligations, the price of the Notes has plunged by more than 90%. Not only did Verizon's misconduct end the anticipated change of control which induced investors to purchase the Notes at near par value in the first place, but it also dealt a crippling blow to NorthPoint's financial viability by refusing to provide the necessary interim financing, thereby driving NorthPoint into bankruptcy. Contact: Lowey Dannenberg Bemporad & Selinger, P.C., White Plains David C. Harrison, Esq., 877/777-3581 ldbs@westnet.com VESTA INSURANCE: May Face Problem Re Insurance for Securities Suit ------------------------------------------------------------------ The company is currently defending a class action lawsuit alleging, among other things, violations of the federal securities laws. As of December 31, 2000, this class action was still in its preliminary stages. However, the company anticipates that the damages or settlement costs incurred in disposition of this proceeding could be substantial. Although the company has procured a multi-tiered package of directors and officers liability insurance to cover such damages or settlement costs, the issuer of the primary $25 million policy, the Cincinnati Insurance Company, has attempted to rescind its policy. Vesta cannot guarantee that insurance coverage will ultimately be available for any damages or settlements costs incurred. If the damages or settlement costs incurred in connection with this class action are ultimately determined to not be covered by the company�s directors' and officers' insurance policies for any reason, the company may incur a significant loss during the period in which such determination is made. ********* 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 * * *