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/raid1/www/Hosts/bankrupt/CAR_Public/010927.mbx C L A S S A C T I O N R E P O R T E R Thursday, September 27, 2001, Vol. 3, No. 189 Headlines ALLIANCE PHARMACEUTICAL: MBI Acquisition Spurs Securities Suits in NY BORDERS GROUP: Class Certification Hearing Set For March 2002 BROCADE COMMUNICATIONS: Will Vigorously Oppose S.D. NY Securities Suit CISCO SYSTEMS: Sued For Securities Act Violations in Various CA Courts CONCUR TECHNOLOGIES: Bernstein Liebhard Lodges Securities Suit in NY DT INDUSTRIES: Securities Suits Drag On, Discovery Not Yet Conducted E-LOAN INC.: Wolf Haldenstein Initiates Securities Suit in S.D. NY LIONBRIDGE TECHNOLOGIES: Bernstein Liebhard Files Suit in S.D. NY LIQUID AUDIO: Bernstein Liebhard Initiates Securities Suit in S.D. NY LOS ANGELES: School District Denied Control Over Special Education MATRIXONE INC.: Bernstein Liebhard Commences S.D. NY Securities Suit MORGAN COUNTY: Department Of Corrections Settles Jail Overcrowding Suit NETSILICON INC.: Company Says NY Securities Suits "Part Of Trend" ONYX SOFTWARE: Berman De Valerio Lodges Securities Suit in W.D. WA PALM INC.: Faces Consumer Suit Over Handheld Products in California PEROT SYSTEMS: Bernstein Liebhard Initiates Securities Suit in S.D.NY PRODIGY COMMUNICATIONS: Stockholders File Suit To Block SBC Merger RHYTHMS NETCONNECTIONS: Bernstein Liebhard Files NY Securities Suit SCIQUEST.COM: Wolf Haldenstein Initiates Securities Suit in S.D. NY SIMON WORLDWIDE: Consumer Suits Could Materially Affect Business TALARIAN CORPORATION: Wolf Haldenstein Files Securities Suit in S.D. NY ********* ALLIANCE PHARMACEUTICAL: MBI Acquisition Spurs Securities Suits in NY --------------------------------------------------------------------- Alliance Pharmaceutical Corporation faces a securities class action suit filed in the United States District Court for the Southern District of New York. The suit, which was filed in February 2001, related to its acquisition of Molecular Bio-Systems, Inc (MBI). Two former shareholders of MBI filed the suit on behalf of themselves and others against Alliance and certain of its officers. On March 1, 2001 and March 19, 2001, two additional similar lawsuits were filed by other former shareholders of MBI. The lawsuits allege that the Company's registration statement filed in connection with the acquisition of MBI contains misrepresentations and omissions of material facts in violation of certain Federal securities laws. In May 2001, the actions were consolidated. In July 2001, the plaintiffs filed a consolidated amended complaint and, in August 2001, the Company filed a motion to dismiss. In August 2001 another purported class action alleging substantially identical allegations was filed in the U.S. District Court for the Southern District of California. However, the Company understands that plaintiffs intend to dismiss this lawsuit in light of the consolidated action in the New York court. The Company has denied the allegations in the suits and will vigorously oppose them. However, the Company cannot give any assurances that it will ultimately prevail or that the outcome will not have a material adverse effect on it's future operations. BORDERS GROUP: Class Certification Hearing Set For March 2002 ------------------------------------------------------------- The Superior Court of California for the County of San Francisco set a hearing for class certification on March 15,2002 for the lawsuit filed against retailer Borders Group, Inc. Two former Borders employees filed the suit, individually and on behalf of all current and former employees who worked as assistant managers in Borders stores in the state of California between April 10, 1996, and the present. The action alleges that the individual plaintiffs and the purported class members worked hours for which they were entitled to receive, but did not receive, overtime compensation under California law. The suit further asserts that they were classified as "exempt" store management employees but were forced to work more than 50% of their time in non-exempt tasks. The Amended Complaint, which names two additional plaintiffs, alleges violations of the California Labor Code and the California Business and Professions Code. The Company intends to vigorously defend the action, including contesting the certification of the action as a class action. Borders Group, Inc. sells books, videos and compact discs through their retail stores and website. BROCADE COMMUNICATIONS: Will Vigorously Oppose S.D. NY Securities Suit ---------------------------------------------------------------------- Brocade Communications intends to vigorously defend itself against the securities class action suit filed in the United States District Court for the Southern District of New York. Several stockholders filed the suit on behalf of purchasers of common stock between May 24, 1999 and July 17, 2001, relating to the Company's May 24,1999 initial public offering. The suit names as defendants, the Company, three of its officers and directors and the following underwriters of the Company's initial public offering: (1) Morgan Stanley & Co., Inc., (2) BT Alex Brown, Inc., and (3) Dain Rauscher, Inc. The suit alleges violations of Section 10(b) of the Securities Act of 1934 (and Rule 10b-5 promulgated thereunder) against all defendants and violations of Section 20(a) of the Securities Act of 1934 against the Company and its officers. Specifically, the complaint alleges that defendants violated the federal securities laws by issuing and selling Brocade common stock in the May 24, 1999 IPO without disclosing to investors that some of the underwriters in the offering had solicited and received excessive and undisclosed commissions from certain investors. The Company believes that it has meritorious defenses to this lawsuit and will defend itself vigorously. Brocade Communications Systems makes Fibre Channel switches and related software for connecting corporate storage systems and servers, turning them into storage area networks hat enable network users to share the same storage devices. CISCO SYSTEMS: Sued For Securities Act Violations in Various CA Courts ---------------------------------------------------------------------- Cisco Systems, Inc. faces multiple securities class action suits filed in California state and federal courts. The suits commenced April 20, 2001 in the United States District Court for the Northern District of California. The suits were filed against the Company and certain of its officers and directors on behalf of purchasers of the Company's publicly traded securities between August 10, 1999 and April 16, 2001. The suits assert causes of action under Section 10(b), and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Securities Exchange Act of 1934. The suit specifically alleges that the Company issued false and misleading statements in relation to their securities in the stated period. Several shareholder derivative suits were also filed in the Superior Court of California, County of Santa Clara starting in April 23, 2001. At least two purported derivative suits have also been filed in the United States District Court for the Northern District of California, and another has been filed in the Superior Court of California, County of San Mateo. The complaints in the various derivative actions include claims for: (1) breach of fiduciary duty, (2) waste of corporate assets, (3) mismanagement, (4) unjust enrichment and (5) violations of the California Corporations Code. The Company vehemently denies the allegations and has stated its intent to vigorously defend against these actions. CONCUR TECHNOLOGIES: Bernstein Liebhard Lodges Securities Suit in NY -------------------------------------------------------------------- Bernstein Liebhard and Lifshitz, LLP commenced a securities class action lawsuit on behalf all persons who acquired Concur Technologies, Inc. (NASDAQ: CNQR) securities between December 16, 1998 and December 6, 2000. The case is pending in the United States District Court for the Southern District of New York located at 500 Pearl Street, New York, New York 10004. Named as defendants in the complaint are Concur and the following: (1) S. Steven Singh, (2) Sterling R. Wilson, (3) Michael W. Hilton, (4) BancBoston Robertson Stephens, Inc., (5) Hambrecht & Quist LLC, and (6) Piper Jaffray Inc. The complaint charges defendants with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus that contained materially false and misleading information and failed to disclose material information. The Prospectus was issued in connection with Concur's initial public offering of 3,100,000 shares of common stock at $12.50 per share that was completed on or about December 16, 1998. The complaint alleges that the Prospectus was false and misleading because it failed to disclose: (i) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of restricted Concur shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase Concur shares in the after-market at pre-determined prices. For more details, contact Ms. Linda Flood, Director of Shareholder Relations by Mail: 10 East 40th Street, New York, New York 10016 by Phone: (800) 217-1522 or 212-779-1414 by E-mail: CNQR@bernlieb.com or visit the firm's Website: www.bernlieb.com DT INDUSTRIES: Securities Suits Drag On, Discovery Not Yet Conducted -------------------------------------------------------------------- DT Industries asked the United States District Court for the Western District of Missouri to dismiss the consolidated securities class action against them and subsidiary Kalish, Inc. Five suits were filed last year, alleging federal securities violations. These suits were later consolidated and an amended complaint was filed adding another subsidiary, Sencorp Systems, Inc. and additional officers and directors as defendants. The Consolidated Amended Complaint asserts causes of action under Section 10(b), and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Securities Exchange Act of 1934. The suit specifically alleges, among other things, that accounting irregularities caused the Company's previously issued financial statements to be materially false and misleading. The Consolidated Amended Complaint also seeks damages in an unspecified amount and purports to be brought on behalf of purchasers of the Company's common stock during various periods, all of which fall between September 29, 1997 and August 23, 2000. Discovery has not yet commenced in the action. In a disclosure to the Securities and Exchange Commission, the Company denied all allegations of wrongdoing and stated its intent to vigorously defend itself against the suit. E-LOAN INC.: Wolf Haldenstein Initiates Securities Suit in S.D. NY ------------------------------------------------------------------ Wolf Haldenstein Adler Freeman & Herz LLP commenced a class action lawsuit in the United States District Court for the Southern District of New York on behalf of purchasers of E-LOAN, Inc. (NASDAQ: EELN) securities between June 28, 1999 and December 6, 2000, inclusive. The suit names as defendants, E-LOAN, certain of its officers and directors, and its underwriters. The complaint alleges that defendants violated the federal securities laws by issuing and selling E-LOAN common stock pursuant to the June 28, 1999 IPO without disclosing to investors that some of the underwriters in the offering, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors. Specifically, the complaint alleges that in exchange for the excessive commissions, defendants allocated E-LOAN shares to customers at the IPO price. To receive the allocations at the IPO price, the underwriters' brokerage customers allegedly 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 E-LOAN stock rocketed upward was intended to drive E-LOAN's share price up to artificially high levels. This artificial price inflation enabled both the underwriters and their customers to reap enormous profits by buying stock at the IPO price and then selling it later for a profit at inflated aftermarket prices. For more information, contact Fred Taylor Isquith, Thomas Burt, Gustavo Bruckner, Michael Miske or George Peters by Mail: 270 Madison Avenue, New York, New York 10016 by Phone: (800) 575-0735 by E-mail: classmember@whafh.com or visit the firm's Website: www.whafh.com. E- mail should refer to E-LOAN. LIONBRIDGE TECHNOLOGIES: Bernstein Liebhard Files Suit in S.D. NY ----------------------------------------------------------------- Bernstein Liebhard and Lifshitz, LLP commenced a securities class action lawsuit on behalf all persons who acquired Lionbridge Technologies, Inc. (NASDAQ: LIOX) securities between August 20, 1999 and December 6, 2000. The case is pending in the United States District Court for the Southern District of New York located at 500 Pearl Street, New York, New York 10004. Named as defendants in the complaint are Lionbridge and: (1) Rory J. Cowan, (2) Stephen J. Lifshatz, (3) Guy L. de Chazal, (4) Marcia J. Hopper, (5) Stephen M. Jenks, (6) Paul Kavanagh, (7) Claude P. Sheer, (8) Prudential Securities Incorporated, (9) U.S. Bancorp Piper Jaffray Inc., and (10) Adams, Harkness & Hill, Inc. The complaint charges defendants with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus that contained materially false and misleading information and failed to disclose material information. The Prospectus was issued in connection with Lionbridge's initial public offering of 3,500,000 shares of common stock at $10.00 per share that was completed on or about August 20, 1999. The complaint alleges that the Prospectus was false and misleading because it failed to disclose: (i) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of restricted Lionbridge shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase Lionbridge shares in the after-market at pre-determined prices. For details, contact Ms. Linda Flood, Director of Shareholder Relations by Mail: 10 East 40th Street, New York, New York 10016 by Phone: (800) 217-1522 or 212-779-1414 by E-mail: LIOX@bernlieb.com or visit the firm's Website: www.bernlieb.com LIQUID AUDIO: Bernstein Liebhard Initiates Securities Suit in S.D. NY --------------------------------------------------------------------- Bernstein Liebhard and Lifshitz, LLP commenced a securities class action lawsuit on behalf all persons who acquired Liquid Audio, Inc. (NASDAQ: LQID) securities between July 8, 1999 and December 6, 2000. The case is pending in the United States District Court for the Southern District of New York. Named as defendants in the complaint are Liquid Audio and: (1) Gerald W. Kearby, (2) Gary J. Iwatani, (3) Philip R. Wiser, (4) Ann Winbald, (5) Silvia Kessel, (6) Sanford R. Climan, (7) Eric Robison, (8) Lehman Brothers Inc., (9) BancBoston Robertson Stephens Inc., and (10) U.S. Bancorp Piper Jaffray Inc. The complaint charges defendants with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus that contained materially false and misleading information and failed to disclose material information. The Prospectus was issued in connection with Liquid Audio's initial public offering of 4,200,000 shares of common stock at $15.00 per share that was completed on or about July 8, 1999. The complaint alleges that the Prospectus was false and misleading because it failed to disclose: (i) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of restricted Liquid Audio shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase Liquid Audio shares in the after-market at pre-determined prices. For further details, contact Ms. Linda Flood by Mail: 10 East 40th Street, New York, New York 10016 by Phone: (800) 217-1522 or 212-779- 1414 by E-mail: LQID@bernlieb.com or visit the firm's Website: www.bernlieb.com LOS ANGELES: School District Denied Control Over Special Education ------------------------------------------------------------------ U.S. District Judge Ronald S.W. Lew recently ruled against the Los Angeles Unified School District, denying its motions that would have given the nation's second-largest school district greater control over its special education programs, according to a recent Associated Press report. The district had requested a modification of a 1996 consent decree intended to improve conditions for roughly 83,000 special education students, who represent about 12% of its total student population. The consent decree is an outgrowth from a class-action lawsuit, managed by American Civil Liberties Union attorneys, in which the district admitted to violating the rights of disabled students. The district then agreed to overhaul the special education system to better integrate special education students into classrooms and provide them better access to learning tools. The district filed its motions in response to a complaint to court- appointed administrators, filed by the ACLU on behalf of special education students. The complaint accused the school district of reneging on the consent decree by failing to provide required speech and language services to students and for using staff who were not fully trained. The district responded with motions seeking modifications to the consent decree: elimination of the two court-appointed administrators and return of power from parents' committees to district officials. District officials also wanted the state Department of Education to join the lawsuit and was seeking a stay of further implementation of the consent decree. Speaking about Judge Lew's ruling against all these motions, Ben Wizner, a spokesman for the ACLU of Southern California, said, "What the judge made clear is that this consent decree is binding and the district has to live up to its obligations." The district said in a statement, "We believe we made it clear in our filing that the current management structure does not work and fails to lead us to compliance with our legal obligations." "We hope the plaintiffs will work with us to improve the structure and enhance the quality of special and general education for the students in the district." The judge's ruling means that both parties will have to work out their differences within the framework of the consent decree, said Mark Rosenbaum, legal director for the civil rights group. MATRIXONE INC.: Bernstein Liebhard Commences S.D. NY Securities Suit -------------------------------------------------------------------- Bernstein Liebhard and Lifshitz, LLP filed a securities class action lawsuit on behalf all persons who acquired MatrixOne, Inc. (NASDAQ: MONE) securities between February 29, 2000 and December 6, 2000. The case is pending in the United States District Court for the Southern District of New York located at 500 Pearl Street, New York, New York 10004. Named as defendants in the complaint are MatrixOne and: (1) Mark F. O'Connell, (2) Maurice L. Castonguay, (3) Goldman, Sachs & Co., (4) Dain Rauscher Incorporated, (5) Soundview Technology Group, Inc., and (6) U.S. Bancorp Piper Jaffray Inc. The complaint charges defendants with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus that contained materially false and misleading information and failed to disclose material information. The Prospectus was issued in connection with MatrixOne's initial public offering of 5,000,000 shares of common stock at $25.00 per share that was completed on or about February 29, 2000. The complaint alleges that the Prospectus was false and misleading because it failed to disclose: (i) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of restricted MatrixOne shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase MatrixOne shares in the after-market at pre-determined prices. For more details, contact Ms. Linda Flood, Director of Shareholder Relations by Mail: 10 East 40th Street, New York, New York 10016 by Phone: (800) 217-1522 or 212-779-1414 by E-mail: MONE@bernlieb.com or visit the firm's Website: www.bernlieb.com MORGAN COUNTY: Department Of Corrections Settles Jail Overcrowding Suit ----------------------------------------------------------------------- U.S. District Court Judge U.W. Clemon approved a settlement between lawyers for the county and representatives of Morgan County inmates who filed a class action suit against the State Department of Corrections (DOC) over deplorable jail conditions. The consent decree signed by both parties compelled the county: (1) to improve the existing jail and build a new one by 2005, (2) to provide proper uniforms, sleeping areas and personal hygiene items for the inmates. (3) to provide professional health and dental care, (4) to allow inmates to have visitation privileges three times a month and outdoors recreation three times each week, (5) to keep the jail clean daily and thoroughly clean it once a month, (2) to establish a task force to develop alternatives such as a community corrections program to control the jail population. The task force will include the sheriff, district attorney, county attorney, a criminal defense attorney, a representative from the probation department and two citizens. The commission appointed Hartselle City Administrator Ferrell Vest, Richard Borie and Brent Burney on Monday to serve on the task force. Lawyers for the inmates will visit the jail quarterly initially and after about a year, they will have unannounced visits twice a year. Clemon also issued a permanent injunction against the State Department of Corrections to keep inmates moving out of the jail to prevent overcrowding. The DOC is supposed to take inmates to a prison after a judge gives him a sentence but in Morgan County and across Alabama, DOC has left its inmates in county jails and forced counties to pay to house and guard them. Montgomery attorney Al Butler, who represents DOC, asked Clemon to dismiss the state from the lawsuit because it moved its prisoners from the jail here as well as from others across the state. Butler said a class-action suit for all counties pending in Montgomery will compel the state to keep state prisoners from piling up in county jails. Attorney George Royer, who represents Morgan County, asked Clemon not to dismiss the state from the litigation because there's a chance overcrowding could resurface, considering the state's reputation for not moving its prisoners. If the jail became overcrowded again, Royer said, it could adversely affect the county's portion of the settlement. Tamara Serwer, an attorney with the Southern Center for Human Rights, who represents the inmates, echoed Royer's statement. After hearing from all sides, Clemon rendered the favorable ruling for the Morgan County Inmates. NETSILICON INC.: Company Says NY Securities Suits "Part Of Trend" ----------------------------------------------------------------- Netsilicon, Inc. will vigorously oppose several securities suits filed in the United States District Court for the Southern District of New York, relating to the Company's initial public offering (IPO). In a disclosure to the Securities and Exchange Commission, the Company stated its intention, saying that unfavorable resolution in the case could materially affect the Company's business operations. One suit was filed by Ellis Investments, Ltd. and a second, nearly identical complaint was filed by Michael Rasner in the same Court in August 2001. The suits name as defendants: (1) NETsilicon, Inc., (2) Cornelius Peterson VIII, NETsilicon executive officer, (3) Daniel J. Sullivan, NETsilicon executive officer, (4) Osicom Technologies, Inc., the Company's sole shareholder prior to its initial public offering, (5) CIBC World Markets Corp., and (6) U.S. Bancorp Piper Jaffray Inc The complaints in these actions are allegedly brought on behalf of purchasers of the Company's common stock during the period from September 15, 1999 to December 6, 2000. The complaint charges defendants with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint alleges that the Prospectus was false and misleading because it failed to disclose: (1) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of NETsilicon shares in the IPO in exchange for exorbitant and undisclosed commissions; and (2) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase NETsilicon shares in the aftermarket at pre-determined prices. The Company believes that the suits are part of the current trend to sue companies relating to the underwriting of their initial public offerings. Furthermore, the Company expressed confidence that it will prevail in the suits as they believe that they have meritorious defenses to the allegations. NETsilicon, Inc. is a developer of microprocessors and software that connect electronic devices through local area networks and the Internet. ONYX SOFTWARE: Berman De Valerio Lodges Securities Suit in W.D. WA ------------------------------------------------------------------ Berman De Valerio Pease Tabacco Burt & Pucillo commenced a securities class action against Onyx Software Corporation (NASDAQ:ONXS) in federal court, saying the company misled investors about its financial results. The lawsuit was filed September 24, 2001 in the U.S. District Court for the Western District of Washington. It seeks damages for violations of federal securities laws on behalf of all investors who bought Onyx shares between January 30, 2001 and July 24, 2001, including those who participated in the company's February 2001 stock offering. According to the complaint, Onyx filed false and misleading financial results for the fourth quarter and year-end 2000 and used those false numbers in documents filed with the Securities and Exchange Commission in relation to its February 2001 stock offering. The lawsuit maintains that the deception allowed Onyx to issue 2,500,000 shares of stock at an inflated price of $13.50 per share. Investors learned about the misstatements and omissions on July 24, 2001, when Onyx announced that it had discovered an unauthorized side- letter to a $500,000 licensing deal that jeopardized associated revenues recorded in the fourth quarter of 2000. On August 10, the company revealed more bad news, admitting to two unauthorized side agreements and three other suspect transactions that would wipe out a total of $2.2 million in previously recorded fourth quarter revenue. As a result, Onyx said it would issue a restatement for fiscal 2000 in which its net loss for the year would double, from $2.5 million to $4.7 million. After the news came to light, Onyx stock fell as low as $3.42 a share, down from a Class Period high of $16.50 a share. For more information, contact Steven Morris or Mike Lange by Mail: One Liberty Square, Boston, MA 02109 by Phone: (800) 516-9926 or by E-mail: law@bermanesq.com PALM INC.: Faces Consumer Suit Over Handheld Products in California ------------------------------------------------------------------- Palm, Inc. faces a consumer class action suit filed in California Superior Court, San Francisco County relating to their popular handheld products. The suit was filed on August 7, 2001 on behalf of purchasers of Palm III, Palm IIIc, Palm V and Palm VX handhelds against Palm and 3Com Corporation. The suit was later amended and was served on the Company in August 2001. The Amended Complaint alleges that certain Palm handhelds may cause damage to PC motherboards by permitting an electrical charge, or "floating voltage," from either the handheld or the cradle to be introduced into the PC via the serial and/or the USB port on the PC. Allegedly this damage is the result of a design defect in one or more of the following: HoySync software, handheld, cradle and/or the connection cable. No answer has yet been filed and no trial date has been set. In connection with the Company's separation from 3Com, the Company will indemnify and hold 3Com harmless for any damages or losses that may arise out of this lawsuit. PEROT SYSTEMS: Bernstein Liebhard Initiates Securities Suit in S.D.NY --------------------------------------------------------------------- Bernstein Liebhard and Lifshitz, LLP commenced a securities class action lawsuit on behalf all persons who acquired Perot Systems, Inc. (NYSE: PER) securities between February 2, 1999 and December 6, 2000. The case is pending in the United States District Court for the Southern District of New York located at 500 Pearl Street, New York, New York 10004. Named as defendants in the complaint are Perot Systems and: (1) Ross Perot, (2) Terry Ashwill, (3) Morgan Stanley Dean Witter Inc., (4) Merrill Lynch, Pierce, Fenner & Smith Inc., (5) Warburg Dillon Read, LLC, and (6) Bear, Stearns & Co., Inc. The complaint charges defendants with violations of the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus that contained materially false and misleading information and failed to disclose material information. The Prospectus was issued in connection with Perot Systems's initial public offering of 6.5 million shares of common stock at $16.00 per share that was completed on or about February 1, 2000. The complaint alleges that the Prospectus was false and misleading because it failed to disclose: (i) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of restricted Perot Systems shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase Perot Systems shares in the after- market at pre-determined prices. For further information, contact Ms. Linda Flood, Director of Shareholder Relations by Mail: 10 East 40th Street, New York, New York 10016 by Phone: (800) 217-1522 or 212-779-1414 by E-mail: PER@bernlieb.com or visit the firm's Website: www.bernlieb.com PRODIGY COMMUNICATIONS: Stockholders File Suit To Block SBC Merger ------------------------------------------------------------------ Stockholders of Prodigy Communications Corporation (NasdaqNM:PRGY) sued the Internet service provider to block a proposed merger with SBC Communications Inc. (NYSE:SBC) Plaintiffs called the deal "self dealing" and filed ten class action suits last Monday in the Delaware Court of Chancery. Shareholders alleged that SBC, through its 42 percent stake in Prodigy, had ``clear and material conflicts of interest and is acting to better its own interests at the expense of Prodigy's public shareholders.'' They further assert that SBC timed the proposal to ".capture for itself Prodigy's future potential without paying an adequate or fair price to the company's public shareholders.'' Named as defendants in the suit are Prodigy, its directors, and SBC. SBC said on Friday, after the market closed, that in early October it would make a tender offer of $384 million, or $5.45 for each of the outstanding 70.5 million Prodigy shares. SBC, which through its subsidiaries provides wireline and wireless telecommunications, said its offer was a 54 percent premium over Prodigy's $3.54 closing price on Friday. On Tuesday, the stock closed at $5.49 a share. SBC has reiterated that the offer price ".is very fair" and expects that shareholders will recognize the value of the offer and sell their shares to them. SBC spokesman Selim Bingol said that the company had not yet seen the lawsuits and therefore could not comment on them. In addition to opposing the merger, Prodigy holders have asked the court to rescind it if it is consummated or award the plaintiffs unspecified damages. RHYTHMS NETCONNECTIONS: Bernstein Liebhard Files NY Securities Suit ------------------------------------------------------------------- Bernstein Liebhard and Lifshitz, LLP commenced a securities class action lawsuit on behalf all persons who acquired Rhythms NetConnections, Inc. (NASDAQ: RTHM) securities between April 6,, 1999 and July 5, 2001. The case is pending in the United States District Court for the Southern District of New York. Named as defendants in the complaint are Rhythms NetConnections and: (1) Catherine M. Hapka, (2) Scott C. Chandler, (3) Kevin R. Compton, (4) Keith B. Geeslin, (5) Ken L. Harrison, (6) Susan Mayer, (7) William R. Stensrud, (8) John L. Walecka, (9) Edward J. Zander, (10) Merrill Lynch Pierce Fenner & Smith, Incorporated, (11) Salomon Smith Barney Inc., (12) Hambrecht & Quist LLC and (13) Thomas Weisel Partners LLC. The complaint charges defendants with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus that contained materially false and misleading information and failed to disclose material information. The Prospectus was issued in connection with Rhythms NetConnections's initial public offering of 9,375,000 shares of common stock at $21.00 per share that was completed on or about April 6, 1999. The complaint alleges that the Prospectus was false and misleading because it failed to disclose: (i) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of restricted Rhythms NetConnections shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase Rhythms NetConnections shares in the after-market at pre-determined prices. For further details, contact Ms. Linda Flood by Mail: 10 East 40th Street, New York, New York 10016 by Phone: (800) 217-1522 or 212-779- 1414 by E-mail: RTHM@bernlieb.com or visit the firm's Website: www.bernlieb.com SCIQUEST.COM: Wolf Haldenstein Initiates Securities Suit in S.D. NY ------------------------------------------------------------------- On September 10, 2001, Wolf Haldenstein Adler Freeman & Herz LLP commenced a class action lawsuit in the United States District Court for the Southern District of New York, on behalf of purchasers of SciQuest.com, Inc. [NASDAQ: SQST] securities between November 19, 1999 and December 6, 2000, inclusive. The suit was filed against defendants SciQuest.com, certain of its officers and directors, and its underwriters. The complaint alleges that defendants violated the federal securities laws by issuing and selling SciQuest.com common stock pursuant to the November 19, 1999 IPO without disclosing to investors that some of the underwriters in the offering, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors. Specifically, the complaint alleges that in exchange for the excessive commissions, defendants allocated SciQuest.com shares to customers at the IPO price. To receive the allocations at the IPO price, the underwriters' 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 SciQuest.com stock rocketed upward was intended to drive SciQuest.com's share price up to artificially high levels. This artificial price inflation enabled both the underwriters and their customers to reap enormous profits by buying stock at the IPO price and then selling it later for a profit at inflated aftermarket prices. For further information, contact Fred Taylor Isquith, Thomas Burt, Gustavo Bruckner, Michael Miske or George Peters by Mail: 270 Madison Avenue, New York, New York 10016 by Phone: (800) 575-0735 by E-mail: classmember@whafh.com or visit the firm's Website: www.whafh.com. E- mail should refer to SciQuest.com. SIMON WORLDWIDE: Consumer Suits Could Materially Affect Business ---------------------------------------------------------------- Marketing and promotions firm Simon Worldwide, Inc. revealed that adverse resolution in multiple consumer class action suits against them could greatly affect their business operations. The Company and subsidiary Simon Marketing, Inc. faces numerous consumer suits filed in the following courts: (1) the Circuit Court of Cook County, Illinois, (2) the Circuit Court of the 11th Judicial Circuit, Miami-Dade County, Florida, (3) the Superior Court of Los Angeles County, (4) the Superior Court of San Diego County, (5) the Court of Common Pleas of Lancaster County, Pennsylvania, (6) the Circuit Court of Tennessee for the 30th Judicial District at Memphis, (7) the United States District Courts for the Northern District of Illinois, and (8) the United States District Court for the District of New Jersey. The suits arose from the alleged fraudulent actions of Jerome Jacobson, a Simon security employee, relating to games administered by the Company for fast food giant McDonald's. Federal agents arrested Jacobson in August for allegedly obtaining high-value prizes in the fast food chain's promotional contests and developed a system for cashing them in. The complaints allege that the Company engaged in: (i) unfair competition, (ii) consumer fraud, (iii) false advertising, (iv) unfair and deceptive business practices, and (v) unjust enrichment. The actions are in their earliest states and the Company expects that they will be named as a defendant or co-defendant in additional actions which may be filed alleging similar claims. The Company said it will vigorously defend against the allegations of the complaints in a disclosure to the Securities and Exchange Commission. Simon Worldwide, Inc. provided promotional materials for McDonald's and cigarette company Philip Morris. Both companies have since terminated their relationships with the Simon Worldwide. TALARIAN CORPORATION: Wolf Haldenstein Files Securities Suit in S.D. NY ----------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP commenced a class action lawsuit in the United States District Court for the Southern District of New York, on behalf of purchasers of Talarian Corp. (NASDAQ: TALR) securities between July 20, 2000 and December 6, 2000, inclusive. The suit was filed against defendants Talarian, certain of its officers and directors, and its underwriters. The complaint alleges that defendants violated the federal securities laws by issuing and selling Talarian common stock pursuant to the July 20, 2000 IPO without disclosing to investors that some of the underwriters in the offering, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors. Specifically, the complaint alleges that in exchange for the excessive commissions, defendants allocated Talarian shares to customers at the IPO price. To receive the allocations at the IPO price, the underwriters' 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 Talarian stock rocketed upward was intended to drive Talarian's share price up to artificially high levels. This artificial price inflation enabled both the underwriters and their customers to reap enormous profits by buying stock at the IPO price and then selling it later for a profit at inflated aftermarket prices. For further details, contact Fred Taylor Isquith, Thomas Burt, Gustavo Bruckner, Michael Miske or George Peters by Mail: 270 Madison Avenue, New York, New York 10016 by Phone: (800) 575-0735 by E-mail: classmember@whafh.com or visit the firm's Website: www.whafh.com. E- mail should refer to Talarian. ********* 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., Trenton, New Jersey, and Beard Group, Inc., Washington, D.C. Enid Sterling, Aurora Fatima Antonio and Lyndsey Resnick, Editors. Copyright 2001. 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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