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/raid1/www/Hosts/bankrupt/CAR_Public/010504.MBX C L A S S A C T I O N R E P O R T E R Friday, May 4, 2001, Vol. 3, No. 88 Headlines BROWARD COUNTY: Jury Reviews Charges Of Neglect, Abuse In Foster Care CALIFORNIA POWER: Generators Under Fire; Penalties and Agreement Debated CHARLES SCHWAB: CA Fed Judge Remands Dispute over e-Trading Commissions CVS PHARMACY: MA Sp Ct Upholds Cert in Case over Customer Privacy DAIMLERCHRYLSER AG: Twiggs, Abrams Files NC Suit over Recycled Lemons DAIMLERCHRYSLER AG: Accused of Concealing Safety Defects in N.C. Suit DIGIMARC CORP: Sirota & Sirota and Lovell & Stewart File Securities Suit HOOVER CAPITAL: Money manager Charged of Stealing from Clients INMATES LITIGATION: $150M Suit Accuses Ontario Psychiatric Facility IOMEGA CORP: Shareholders Grill Executives of Utah-Based Data Storage Co NATIONAL LIFE: Contests Suits over Conversion to Mutual Holding Company NATIONAL LIFE: Expects No Material Effect of Settled Suits re Policies NGK METALS: 'Informal Interviews' In Class Action Limited ONTARIO ENVIRONMENT: Admits Error in Math on Safety Level of Nickel RITE AID: Fd Judge Refuses to Disqualify Himself Or Lead Defense Lawyers SEARS ROEBUCK: Class Action Over Tire-Balancing Services Is Certified VANISHING PREMIUMS: MassMutual Sues Atty. Handling Opt-outs for TV Ads. VENTRO CORP: Wolf Haldenstein Commences Debt Instruments Class Action ********* BROWARD COUNTY: Jury Reviews Charges Of Neglect, Abuse In Foster Care --------------------------------------------------------------------- For the second time in three years, a grand jury is considering charges of abuse and neglect in Broward County's foster care system. A team of lawyers who settled a federal lawsuit against the Department of Children & Families last year say their evidence indicates the system has deteriorated. "We're extremely concerned that Broward County's foster care system may even be getting worse," said Howard Talenfeld, a Fort Lauderdale lawyer and board member of the Youth Law Center, which filed the suit. The problems persist despite pledges of improvement by the governor and Florida's child-welfare chief. The county's child-welfare system, designed to provide havens to about 1,500 children who have been abused or neglected by their families, came under grand jury scrutiny three years ago. In a November 1998 report, the grand jury found Broward's foster children in danger and the problems "so pervasive that they threaten to collapse the entire system." Children were being sexually assaulted by other children in crowded foster homes. On any given day, as many as 100 foster children had run away and were missing. A critical shortage of foster homes forced some children to sleep on couches or spend the night in a caseworker's office. A month before the report came out, Talenfeld and the Youth Law Center filed its class-action suit on behalf of all the county's foster children. In a settlement last May, the lawyers agreed to drop the suit in return for the state adopting a series of reforms. Almost a year later, the attorneys say they see virtually no progress. "Nothing has changed in any substantial way to make the system better," said Michael Dale, a Nova Southeastern University law professor who is working on the case. "There is an extraordinary lack of capacity in the agency to look after these children." The lawyers are considering reopening the case and asking a judge to force the state to make improvements, Dale said. "We really, really hope we don't have to go back to court," said Children & Families spokeswoman LaNedra Carroll. "We really think things are getting better." Agency Secretary Kathleen Kearney, who as a former Broward juvenile court judge was one of the system's biggest critics, promised to make changes after she was appointed by Gov. Jeb Bush in December 1998. Her first month on the job, Kearney announced an emergency plan for Broward that included tracking incidents of abuse and neglect in foster care and creating a system to identify and search for runaways. Kearney could not be reached for comment Wednesday. "They have plan after plan after plan," Dale said. "They don't act on them, and what they have doesn't always make sense." Bush, appearing personally at a hearing on the federal lawsuit in 1999, told a judge he was "committed to transforming our child welfare system." "The governor is still committed to improving the foster care system," said Bush spokeswoman Lisa Gates. "It is our understanding that DCF is continuing to perform under the settlement agreement to improve foster care." In the past three years, the county has gone through five administrators at DCF. Carroll could not provide statistics to show improvements in Broward. Kearney recently brought in a new management team after Phyllis Scott resigned to spend more time with her family. The new team is sifting through records to cull an accurate picture of the state of foster care in the county, Carroll said. Talenfeld, who has been monitoring the system as part of the settlement, said foster children continue to suffer sexual abuse and physical harm. Almost 100 children have run away and are missing, he said. "They can't find them," Dale said. "They don't know where they are." While the state has made strides in reducing crowding in foster homes, some Broward shelters are rundown and over capacity, with children sleeping on couches, Dale said. A grand jury began meeting last month to examine the system, said prosecutor John Countryman. The 1998 grand jury requested a follow-up to review progress. But jurors also will hear about continuing problems, such as abuse, Countryman said. Talenfeld already appeared before the grand jury, and Dale was scheduled to testify on May 3. "One of the allegations is nobody is safe in Broward County (foster care)," Countryman said. "Some of those concerns will be addressed. We're covering a lot of things." The jury is scheduled to meet through October but could extend the session. "I think it might take a long time," Countryman said. (Sun-Sentinel (Fort Lauderdale, FL), May 3, 2001) CALIFORNIA POWER: Generators Under Fire; Penalties and Agreement Debated ------------------------------------------------------------------------ Power generators vilified by California lawmakers and regulators want to end the raft of pending lawsuits and investigations accusing them of creating and profiting from the state's energy crisis. ''You don't need to threaten people with putting them in jail in order to get them to negotiate,'' said Jan Smutny-Jones, executive director of the Independent Energy Producers, which represents the independent generators, on Wednesday. Duke Energy released details of its offer to Gov. Gray Davis to cut its energy charges retroactively and into the future in exchange for ''prompt suspension of State investigations, lowering of rhetoric and stay of State litigation.'' Its proposal listed an alphabet soup of investigations by Attorney General Bill Lockyer, the Public Utilities Commission, Energy Oversight Board, state auditor, Independent System Operator, Federal Energy Regulatory Commission, private class-action and antitrust lawsuits, and claims by investor-owned utilities. The disclosure came two days after Williams Cos. agreed to refund $8 million to settle a federal investigation into alleged improper charges for electricity. It came the same day Lt. Gov. Cruz Bustamante filed suit against five generators. Bustamante is sponsoring legislation that would allow corporate officers to be jailed and part of a company's assets seized if the company was convicted of price gouging. ''FERC, the investigation by the attorney general, the work of other investigatory groups, outside litigation all of that combined is bringing pressure on the industry and we're starting to see cracks in that veneer,'' said state Sen. Joe Dunn, D-Garden Grove, chair of the Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market. Independent energy analyst David Huard, a partner at Manatt, Phelps & Phillips in Los Angeles, said generators must face the possibility of criminal as well as civil penalties. ''It's a very expensive and damaging process. It's going to take a toll,'' Huard said. ''The fact that they're facing this on so many levels has got to be putting pressure on them.'' Legislators and legal experts questioned whether any state agreement could end all the suits and investigations pending against Duke. However, Duke presented six options, including a ''prepackaged'' suit and settlement by the attorney general that would include a simultaneous settlement of other class-action suits. The attorney general's settlement could be broad enough to preclude antitrust actions; Davis could use his emergency powers to bar other suits; or the Legislature settle claims, Duke suggested. ''If we could get beyond the lawsuits and the accusations we are prepared to invest in considerably more generating facilities in the state,'' said Duke spokeswoman Cathy Roche. ''We also need assurance that we're not going to continue to be subjected to accusations that quite honestly have no substance behind them. ... As long as you have this type of litigation and threats to take over the assets of the companies it's very difficult to commit to adding new plants.'' Smutny-Jones and former FERC attorney Stephen Angle, whose firm represents generators including Duke on non-California issues, said criminal charges had little chance for what they call predictable free-market behavior by generators taking advantage of California's electricity shortage. Davis aides said they immediately gave Duke's office to Lockyer's office and never negotiated with Duke. Lockyer spokeswoman Sandra Michioku declined comment on the offer, and said the attorney general's investigation is pursuing its investigation. (AP Online, May 3, 2001) CHARLES SCHWAB: CA Fed Judge Remands Dispute over e-Trading Commissions ----------------------------------------------------------------------- A federal judge in Los Angeles has remanded a dispute over Charles Schwab & Co.'s e-trading practices to California state court. The judge concluded that the Securities Litigation Uniform Standards Act of 1998 does not apply to claims regarding a broker's commission rates or the efficacy of its Web-based trading system. Shaw v. Charles Schwab & Co., No. 00-12349 (C.D. Cal., Jan. 23, 2001). "The legislative history does not indicate that Congress was especially worried about brokerage companies that have purposefully availed themselves of business opportunities in jurisdictions with onerous laws," Central District Judge Carlos R. Moreno wrote. Plaintiffs represent a proposed class of investors who used Charles Schwab's Web site to buy and sell stocks, options and other securities. They allege that: -- Despite claiming to charge a commission of $29.95 for the first 1,000 shares bought and $.03 for any additional shares, Charles Schwab charged $.03 for all shares resulting in a $.05 overcharge per transaction; -- The broker automatically entered short-sell positions in plaintiffs' accounts rather than immediately selling their stock as requested; -- The defendant automatically split single transactions without prior approval resulting in excessive transaction fees; -- The broker maintained its trading price records so as to incorrectly price call options; and -- Defendant erroneously calculated accounts' option requirements. After removing the case to federal court, Charles Schwab moved for dismissal. The plaintiffs asked the court to remand the proceedings to the state level. The court addressed whether the Securities Litigation Uniform Standards Act was intended to preempt state-law claims such as these. It noted that under the statute, a removing party must show: (1) the class action is covered under the legislation; (2) the complaint is based on state-law claims; (3) there has been a purchase of sale of a "covered security"; and (4) the alleged misfeasance was committed "in connection with" the purchase of sale of the security. Only the last requirement was disputed by the parties. Citing Superintendent of Insurance v. Bankers Life and Casualty Co., 404 U.S. 6 (1971), the court said the U.S. Supreme Court has held that Section 10(b) of the Exchange Act should be read flexibly. Misrepresenting the risks associated with the purchase of securities or their value satisfies the "in connection with" requirement, the court said. However, the act's legislative history shows that its purpose is to protect the interests of shareholders and employees of public companies from meritless "strike" suits, the court added. Judge Moreno found that a "wholesale adoption" of Section 10(b)'s "in connection with" requirement was unwarranted. "The Plaintiffs do not allege that Defendant's fraud induced them to invest in particular securities. Rather, the plaintiffs contend that defendant's fraud induced them to select defendant as their broker rather than some other brokerage firm. It would appear that plaintiff's suit lies more in the realm of consumer protection that securities litigation," the court concluded. The plaintiffs are represented by Kevin J. Yourman and Behram V. Parekh of Weiss & Yourman in Los Angeles. Charles Schwab is represented by George M. Garvey, Malcolm A. Heinicke and Carolyn Hoecker Luedtke of Munger, Tolles & Olson in Los Angeles. (E-Trading Legal Alert, March 2, 2001) CVS PHARMACY: MA Sp Ct Upholds Cert in Case over Customer Privacy ----------------------------------------------------------------- The Massachusetts Supreme Judicial Court, in a unanimous decision, affirmed on May 1 a ruling by Judge Raymond J. Brassard of the Superior Court granting class action status to a case brought by pharmaceutical customers of CVS Pharmacy against the pharmacy chain, a direct mail marketing firm and four pharmaceutical manufacturers. The suit alleged breach of privacy and other claims arising out of a marketing scheme by CVS and the pharmaceutical manufacturers. In the Superior Court, Judge Brassard granted the plaintiffs' motion for class certification, allowing the case to proceed as a class action. Three of the pharmaceutical manufacturers appealed the decision, arguing that the case should not have been granted class action status. In a 20-page opinion, authored by Justice Francis X. Spina, the SJC affirmed Judge Brassard's ruling. The marketing scheme targeted by the suit involved letters sent by CVS to pharmaceutical customers who had particular medical conditions based on their pharmaceutical histories. The mailings, which were funded by the pharmaceutical manufacturers, were directed at promoting sales of products manufactured by those companies and sold through CVS. The pharmaceutical companies also provided CVS with the criteria from which the recipients for each mailing were selected. The plaintiffs in the suit allege that their confidential medical information was improperly disclosed and misappropriated for commercial gain by CVS, the pharmaceutical companies and the direct mail marketing company. In the opinion, Justice Spina described the case as "a classic illustration" of a consumer class action suit. The plaintiffs in the case are represented by the firms of Gilman and Pastor, LLP of Saugus, Massachusetts and Finkelstein and Krinsk of San Diego, California. Contact: David Pastor of Gilman and Pastor, LLP, 781-231-7850, Dpastor692@aol.com; or Jeffrey Krinsk of Finkelstein and Krinsk, 877-493-5366, Fk@class-action-law.com DAIMLERCHRYLSER AG: Twiggs, Abrams Files NC Suit over Recycled Lemons --------------------------------------------------------------------- Raleigh, N.C.'s Twiggs, Abrams, Strickland & Rabenau has filed a class action against DaimlerChrysler Corp. in a state court in Raleigh charging the auto company with deceptive trade practices in the reselling of reacquired Chrysler vehicles. The lawsuit claims that Chrysler is not disclosing to the new buyers that they are buying recycled lemons, said plaintiffs' attorney Douglas Abrams of Twiggs, Abrams. The other plaintiffs' attorneys representing the class are Howard Twiggs of Twiggs, Abrams, H. Clifford Kirkhart of Cary, N.C., and Richard H. Middleton Jr. of the Savannah, Ga., office of Suggs, Kelly & Middleton and Kenneth Suggs and Brad Simpson of the Columbia, S.C., office. The size of the putative class has not yet been determined, Mr. Abrams said, but Chrysler has released records indicating "that over a four year period, 45,000 lemons were resold." Chrysler has not yet filed a response, he added. Williams v. DaimlerChrysler Corp., No. 01CVS3390 (Wake Co., N.C., Super. Ct). (The National Law Journal, April 30, 2001) DAIMLERCHRYSLER AG: Accused of Concealing Safety Defects in N.C. Suit --------------------------------------------------------------------- DaimlerChrysler AG faces a growing list of lawsuits over vans, trucks and sport utility vehicles made since 1984 without a device preventing the vehicles from shifting out of park until the brake pedal is depressed. Four North Carolina residents this week filed a lawsuit in Rowan County, N.C., Superior Court against DaimlerChrysler Corp. alleging negligence, fraudulent concealment of alleged safety defects and unfair trade practices. The plaintiffs claim DaimlerChrysler compromised safety by manufacturing the vehicles without the so-called brake shift interlock system, which they claim was an industry standard used in almost all vehicles, including the Ford Windstar, since the early 1990s. The lawsuit seeks class-action status on behalf of thousands of North Carolina owners of the company's vehicles and makes claims similar to other lawsuits filed recently in at least six other states. Plaintiffs in the North Carolina lawsuit hope to represent owners of Chrysler Town and Country, Dodge Caravan and Plymouth Voyager minivans manufactured for the model years 1984 through 2000; Dodge Ram and Dakota pickups built from 1990 through 2000; and all Dodge Durango sport-utility vehicles built since 1995. Jim Seifter, an Atlanta lawyer representing claims against DaimlerChrysler by plaintiffs in Georgia, said he also represents plaintiffs from Guilford County, N.C., and from South Carolina, Iowa, Nebraska and West Virginia. He has also talked with attorneys representing disgruntled DaimlerChrysler vehicle owners in New York, New Jersey and Pennsylvania. Plaintiffs in several of the cases seek a court order requiring the vehicles to be retrofitted and also seek damages of up to $75,000 per class member. A DaimlerChrysler spokeswoman would not comment on the lawsuits' allegations, saying the company has not been served with many of them. But spokeswoman Elaine Lutz said none of the cases alleges injuries. "We've seen these types of suits before," she said. "These are simply lawyer-driven suits in search of generating large fees." Brake shift interlock mechanisms are not required by the National Highway Traffic Safety Administration, although DaimlerChrysler integrated the feature into its vehicles with new-model years beginning in the mid-1990s, she said. "That was based on market conditions at the time, not because NHTSA regulates it," Lutz said. "It's something like many other features we've added." Lutz wouldn't comment on whether the company is considering measures to address safety concerns over vehicles without the device. (The Detroit News, May 3, 2001) DIGIMARC CORP: Sirota & Sirota and Lovell & Stewart File Securities Suit ------------------------------------------------------------------------ The law firms of Sirota & Sirota, LLP ((212) 425-9055 or www.sirotalaw.com) and Lovell & Stewart, LLP ((212) 608-1900 or www.lovellstewart.com) filed a class action lawsuit on May 3, 2001 on behalf of all persons and entities who purchased, converted, exchanged or otherwise acquired the common stock of Digimarc Corporation (NasdaqNM:DMRC) between December 1, 1999 and March 12, 2001 inclusive. The lawsuit asserts claims under Sections 11, 12 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder and seeks to recover damages. Any member of the class may move the Court to be named lead plaintiff. If you wish to serve as lead plaintiff, you must move the Court no later than July 2, 2001. The action, Morris Kassin v. Digimarc Corp., et al., is pending in the U.S. District Court for the Southern District of New York (500 Pearl Street, New York, New York), Docket No. 01- CV-3792 (JGK) and has been assigned to the Hon. John G. Koeltl, U.S. District Judge. The complaint alleges that Digimarc Corporation, Bruce Davis, Digimarc's President and Chief Executive Officer, Geoffrey Rhoads, its founder and Chief Technology officer, E. K. Ranjit, its Chief Financial Officer and Secretary, Philip J. Monego, Sr., its Chairman, and Brian J. Grossi and John Taysom, two of its directors, violated the federal securities laws by issuing and selling Digimarc common stock pursuant to the December 2, 1999 IPO without disclosing to investors that one of the lead underwriters in the offering had solicited and received excessive and undisclosed commissions from certain investors. In exchange for the excessive commissions, the complaint alleges, lead underwriter BancBoston Robertson Stephens, Inc. allocated Digimarc shares to customers at the IPO price of $20.00 per share. To receive the allocations (i.e., the ability to purchase shares) at$20.00, defendant BancBoston Robertson Stephens's brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices as the price of Digimarc stock rocketed upward (a practice known on Wall Street as "laddering") was intended to (and did) drive Digimarc's share price up to artificially high levels. This artificial price inflation, the complaint alleges, enabled both the underwriters and their customers to reap enormous profits by buying Digimarc stock at the $20.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $88.00 during its first day of trading. Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, BancBoston Robertson Stephens required its customers to "kick back" some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact based on how much profit each investor had made from his or her IPO stock allocation. The complaint further alleges that defendants violated the Securities Act of 1933 because the Prospectus distributed to investors and the Registration Statement filed with the SEC in order to gain regulatory approval for the Digimarc offering contained material misstatements regarding the commissions that the underwriters would derive from the IPO transaction and failed to disclose the additional commissions and "laddering" scheme discussed above. Contact: Lovell & Stewart, LLP, New York Christopher Lovell Victor E. Stewart Christopher J. Gray 212/608-1900 sklovell@aol.com or Sirota & Sirota, LLP, New York Howard B. Sirota Saul Roffe 212/425-9055 info@sirotalaw.com HOOVER CAPITAL: Money manager Charged of Stealing from Clients -------------------------------------------------------------- The Securities and Exchange Commission said it has charged former Boston-based money manager Stevin R. Hoover and his firm, Hoover Capital Management Inc., with stealing more than $475,000 from clients. In a civil fraud action filed in U.S. District Court in Boston, the SEC alleged that Hoover and his firm misappropriated the money through forged checks, unauthorized transfers and overbilling of management fees. Hoover operated his firm in Boston from 1995 to 1999, when the alleged fraud occurred. In 1998, 1999 and 2000, Worth magazine featured Hoover in its annual article describing selected money managers' stock picks. (The Atlanta Journal and Constitution, May 3, 2001) INMATES LITIGATION: $150M Suit Accuses Ontario Psychiatric Facility-------------------------------------------------------------------Criminally insane men at an Ontario psychiatric facility were stripped naked and kept together in a tiny room -- their only food a liquid they drew through straws inserted through holes in the wall, alleges a proposed $150-million class-action lawsuit. A second inmate at Penetanguishene Mental Health Centre, Oak Ridge division, was added to the unproven claim filed in Superior Court which alleges patients were used as "human guinea pigs" in CIA-type mind-control programs from 1965-1979. Justice Peter Cumming authorized inmate Danny Joanisse to join with fellow patient Vance Egglestone to represent the proposed class action, which could include up to 2,000 men. In an amended claim, they're suing facility psychiatrists Dr. Gary Maier and Dr. Elliott Barker, and the province. A hearing seeking class-action certification will begin Nov. 21. The lawsuit claims inmates were given "mind-altering" drugs and subjected to psychological and physical torture in an effort to reconstruct their personalities. Instead, they say experiments weren't based on proven science, and the province turned a blind eye. "We're alleging there were a series of mind-control experiments conducted at the Oak Ridge facility," said Egglestone and Joanisse's lawyer, Joel Rochon. "The allegation is these mind-control programs mirrored the types initiated by the CIA during the Cold War. It's frightening to think these sorts of experiments were allegedly permitted to take place in a country such as Canada." (The Ottawa Sun, May 3, 2001) IOMEGA CORP: Shareholders Grill Executives of Utah-Based Data Storage Co ------------------------------------------------------------------------ Shareholders didn't take it easy on executives from Iomega Corp. at the company's annual meeting Wednesday. Iomega chairman David Dunn, president and CEO Bruce Albertson and other executives of the Roy-based producer of data storage hardware and software were grilled by shareholders on a number of subjects. Albertson, in a phone interview later in the day, said he thinks shareholders' concerns are fair, but it seems to him the underlying concern is Iomega's stagnant stock price, which has traded, for the most part, between $ 3 and $ 4 per share for months. "If our stock was trading at $ 5, $ 6, $ 7 a share or more, no one would ask those questions," he said. "I think those questions come out of the stock not moving." Iomega (NYSE: IOM) closed down 4 cents per share at $ 3.31 on Wednesday, despite the fact that the company showed a profit of more than $ 169 million in 2000 -- the first profitable year Iomega had reported since 1997 -- and a strong price to earnings ratio of 7.2. He's been told some analysts are waiting for a turnaround in Iomega's revenue, which was $ 1.3 billion in 2000 -- down from $ 1.5 billion in 1999 and $ 1.7 billion in 1998 and 1997. "I had an analyst tell me about a month ago, 'When you show us top-line growth, we're going to recommend the stock.' And I said, 'By the time we show you top-line growth, everybody and his grandmother will know to buy the stock,'" Albertson said. That is an attitude Albertson said is changing among analysts. Iomega's percentage of institutional ownership -- shares purchased by mutual fund operators, as well as other large investors -- is more than 23 percent, more than four times what it was little more than a year ago. "The institutions -- the smart-money, the big-money guys -- understand it," he said. "They're buying into it while it's low." Dunn, who was publicly criticized recently by an industry analyst, responded to questions regarding charges that he and Iomega's board of directors handcuff their CEO and hamper the trading of company stock by failing to provide adequate guidance on earnings expectations. The analyst also criticized Dunn, who has been an Iomega director since 1980, for the recent sale of 623,000 shares of his personal holdings of company stock. Dunn refused to say why he made the stock sale, but pointed out that he still personally holds some 24 million Iomega shares, and that the sale represented approximately 5 percent of his Iomega holdings. He said charges that his personal stock sale was contrary to corporate well being were "absolute nonsense." As for the board's refusal to provide greater mid-reporting-period guidance to individual investors and analysts, Dunn pleaded guilty as charged, saying that the board intended to promise only exactly those financial results it could deliver. Albertson said on the record that he did not feel handcuffed by Dunn or the board, but if he did, it would not likely be public knowledge. "If I really felt handcuffed, I would tell my chairman," he said. "And that's where it would end. My style is that if I had that issue, I would tell David and the board, myself -- and probably would leave it there." Albertson also fielded questions regarding the pending settlement of a class-action lawsuit against Iomega. The suit charged that some of Iomega's Zip drives and disks contained design or manufacturing defects that led to a persistent clicking noise and the ultimate failure of the products. The settlement, while not acknowledging any merit in the charges, calls for rebates of $ 5 to $ 40 on future purchases of Iomega products to some 28 million potential class members. Albertson said the company continues to strongly deny any problem with Zip products, but the amount of staff time and corporate resources needed to continue to defend the suit prompted the company to settle. The marketing of Iomega's recently expanded line of products was another subject of concern for some shareholders present. Iomega's executive vice president of marketing and product management, Doug Collier, said the company is seeking to leverage the company's flagship product line, Zip drives and disks. He said Zip products have been well marketed to "early adopters," consumers who tend to stay on or near the cutting edge of new technology. However, Collier said the company needs to more effectively market to broader groups of customers. "The whole secret of marketing on Zip, is to get a targeted message and deliver it to targeted audiences," Collier said. "Because what we're not going to do is spend tens of millions of dollars on doing these broad national campaigns, that you really don't have an opportunity to deliver a direct message through." Iomega is putting its products in new retail markets where a broader base of computer users can be found, like Wal-Mart and Kmart stores. "I think it's safe to say that, in general, the Wal-Mart audience would not be the classified as the earliest-adopting part of the population, but they deal with computers," Collier said. "Sixty percent of U.S. households have computers, so computer owners are shopping Wal-Mart. By having our products there at affordable price points, we can start penetrating that market a little more effectively." (Standard-Examiner, May 3, 2001) NATIONAL LIFE: Contests Suits over Conversion to Mutual Holding Company ----------------------------------------------------------------------- In late 1999, two lawsuits were filed against National Life and the State of Vermont in Vermont related to National Life's conversion to a mutual holding company structure. National Life and the State of Vermont specifically deny any wrongdoing and intend to defend these cases vigorously. In the opinion of National Life's management, based on advice from legal counsel, the ultimate resolution of these lawsuits will not have a material effect on National Life's financial position. However, liabilities related to these lawsuits could be established in the near term if estimates of the ultimate resolution of these proceedings are revised. NATIONAL LIFE: Expects No Material Effect of Settled Suits re Policies ---------------------------------------------------------------------- During 1997, several class action lawsuits were filed against National Life in various states related to the sale of life insurance policies during the 1980's and 1990's. National Life specifically denied any wrongdoing. National Life agreed to a settlement of these class action lawsuits in June 1998. This agreement was subsequently approved by the court in October 1998. The settlement provides class members with various policy enhancement options and new product purchase discounts. Class members may instead pursue alternative dispute resolution according to predetermined guidelines. Qualifying members may also opt out of the class action and pursue litigation separately against National Life. Most of the alternative dispute resolution cases were settled by December 31, 1999. Management believes that while the ultimate cost of this litigation (including those opting out of the class action) is still uncertain, it is unlikely, after considering existing provisions, to have a material adverse effect on National Life's financial position. NGK METALS: 'Informal Interviews' In Class Action Limited --------------------------------------------------------- Ethics rules prohibit a defense lawyer from conducting "informal interviews" with potential witnesses in a personal-injury action, when the witnesses are also putative plaintiffs in a proposed class action suit involving the same alleged tortious conduct, without first getting the consent of the class action lawyer, a federal judge has ruled. In his nine-page opinion in Dondore v. NGK Metals Corp., U.S. District Judge Harvey Bartle III found that Rule 4.2 of the Pennsylvania Rules of Professional Conduct extends to all members of a class action -- even before the class is certified. Until the issue of class certification is decided, Judge Bartle said, the lawyers must be restrained in their communications with the putative class members. Judge Bartle is presiding over two individual personal-injury suits brought by Berks County, Pa., residents who claim they suffer from "chronic beryllium disease" as a result of living near a beryllium metal manufacturing facility in the Reading area. (The National Law Journal, April 30, 2001) ONTARIO ENVIRONMENT: Admits Error in Math on Safety Level of Nickel ------------------------------------------------------------------- In a stunning admission of error, the Ontario environment ministry is redoing the math on the safety of the level it's established for nickel exposure in Port Colborne. An embarrassed ministry official said that a calculation error has been discovered in one of the tests it did before deciding that the city's 19,000 residents can safely be exposed to 10,000 parts per million of nickel compounds in soil. "We're hoping we're seen as objective and we're seen as credible, and that's a challenge when this mistake is made," admitted Jim Smith, director of the ministry's standards development branch. The test calculates the nickel's bio-availability - whether it could be absorbed by a person who ingests it. "I'm not too impressed," Mayor Vance Badawey commented after being informed of the error. The calculation of the so-called "intervention level" is part of a 300-page report the ministry released March 30, which was the basis of an order that nickel giant Inco Ltd. clean up 16 properties in the highly contaminated Rodney St. neighbourhood next to its 90-year-old refinery. Smith would not say how long it will take to revise the report, but a frustrated Badawey said he was told it could take six months. "That's not acceptable," Badawey said, noting the city has been working with the ministry and Inco on a remediation plan for more than a year. "We would expect to have those results in hand within weeks, not months." The error does not affect the prospects of the 16 homeowners who are the subject of the order. Inco announced at its annual general meeting last week that it would voluntarily clean up the properties, despite reservations about the conclusions of parts of the report. Now, said lawyer Eric Gillespie, acting on behalf of a group of city residents in a class action suit, more properties may be included in the order. "If it turns out that the errors in the calculation lower the exposure level from 10,000 (ppm) to 7,000 or 5,000, there are definitely other properties that would be included." The public comment period on the order ended Sunday. Criticisms in the four responses that were received will be evaluated as part of the revision of the study, Smith said. Inco raised some questions about methodology, said Alan Stubbs, the company's vice-president of government and public affairs. Stubbs said Inco will wait to see the revised study before elaborating on its concerns. Dr. Mark Richardson, an Ottawa risk assessment expert, sent the ministry a seven-page report criticizing the study and its conclusion that 10,000 ppm is a reasonable guideline. He points out an error in the method used to calculate bio-availability and a "critical flaw" in the methodology used to simulate gastric solubility. (The Toronto Star, May 3, 2001) RITE AID: Fd Judge Refuses to Disqualify Himself Or Lead Defense Lawyers ------------------------------------------------------------------------ A federal judge has refused to disqualify either himself or the lead defense lawyers in a class action against Rite Aid Corp., rejecting the claims of former CEO Martin Grass, who said the judge and his former lawyers held ex parte meetings in which they engineered a settlement that leaves him out in the cold with no insurance coverage. U.S. District Judge Stewart Daizell found that neither he nor attorney Alan J. Davis of Ballard Spahr Andrews & Ingersoll did anything unethical by meeting with plaintiffs' lawyers and negotiating the $ 200 million settlement -- even though none of the other defendants was invited. In re Rite Aid, MDL-1360. (The National Law Journal, April 30, 2001) SEARS ROEBUCK: Class Action Over Tire-Balancing Services Is Certified --------------------------------------------------------------------- A judge in Madison County has certified a nationwide class action lawsuit against Sears Roebuck & Co. on behalf of certain customers who purchased tire-balancing services. The suit alleges that Sears charged customers for AccuBalance balancing services from May 1989 to April 1994 but, in many instances, did not perform the service. An estimated 7 million to 30 million customers paid $ 12.50 per tire for the services. Circuit Judge Andy Matoesian certified the class on Thursday and scheduled a hearing on May 29 to determine how best to notify class members. (St. Louis Post-Dispatch, May 3, 2001) VANISHING PREMIUMS: MassMutual Sues Atty. Handling Opt-outs for TV Ads. ----------------------------------------------------------------------- Massachusetts Mutual Life Insurance Co. is alleging defamation by Morris Bart, a Louisiana trial attorney specializing in personal injury. Massachusetts Mutual Life Insurance Co. v. Morris Bart, No. 1:01cv1356 (S.D. Fla. April 4, 2001). According to the complaint, Mr. Bart's firm, New Orleans' Morris Bart, broadcast television ads claiming that for those who had purchased MassMutual life insurance policies "there are deadlines rapidly approaching and you may be entitled to money damages" and that also "you may be entitled to a cash award." The complaint alleges that the statements interfered with insurance company business and prejudiced its contractual relationships. Mr. Bart says that he stands behind his ads and that the firm is investigating whether there were any staff misstatements to callers. The underlying litigation involved the sale of so-called "vanishing premium" policies; Mr. Bart's firm is handling hundreds of plaintiffs who opted out of class actions. MassMutual is represented by John Meagher and Jeffrey M. Landau of Miami's Shutts & Bowen. Mr. Bart is represented by James L. Robertson of Jackson, Miss.' Wise Carter Child & Caraway. (The National Law Journal, April 30, 2001) VENTRO CORP: Wolf Haldenstein Commences Debt Instruments Class Action --------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP announces that it filed a class action lawsuit in the United States District Court for the Northern District of California on behalf of all purchasers of Ventro Corporation ("VENTRO" or the "Company") (Nasdaq: VNTR) publicly traded debt instruments during the period between March 29, 2000 and December 6, 2000, inclusive (the "Class Period") against Ventro, certain of its officers and directors, and certain of its underwriters. The case name and index number are Sunshine Wire and Cable Defined Benefit Pension Plan Trust DTD 01/01/92 v. Ventro (01-1713 BZ), and is before Magistrate Judge Bernard Zimmerman. A copy of the complaint filed in this action is available from the Court, or can be viewed on the Wolf Haldenstein Adler Freeman & Herz LLP website at http://www.whafh.com. The complaint alleges that the defendants violated federal securities laws by issuing inaccurate and misleading materials, including a Registration Statement and Prospectus, for its offering of convertible subordinated notes. Ventro Corporation is a builder and operator of business-to-business e-commerce marketplace companies. The complaint alleges that during the Class Period, it was evident to defendants that Ventro did not possess the technology to successfully compete as a marketplace. Defendants knew this would severely impair Ventro's future revenue growth but wanted to raise additional money through debt offerings before the bottom fell out of Ventro's stock price. Thus, defendants continued to make positive but false statements about Ventro's business and future revenues while issuing $250 million worth of convertible subordinated notes. The complaint further alleges that on December 6, 2000, Ventro announced a restructuring in which it closed down two out of three of its main B2B marketplaces. In early 2001, it was revealed that defendants had realized by December 1999 that Ventro's business model of independent marketplaces didn't make sense and that even Ventro's partners were not satisfied with Ventro's technology for operating the marketplaces. By this time, Ventro's stock and debt instruments had declined precipitously, inflicting billions of dollars of damage on plaintiff and the Class. Contact: Gregory M. Nespole, Esq., George Peters, Michael Miske, Fred Taylor Isquith, Esq., all of Wolf Haldenstein Adler Freeman & Herz LLP, 800-575-0735, classmember@whafh.com ********* 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. 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