/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/011212.mbx C L A S S A C T I O N R E P O R T E R Wednesday, December 12, 2001, Vol. 3, No. 242 Headlines AETNA INC.: Savett Frutkin Lodges Securities Suit in E.D. Pennsylvania BASF CORPORATION: Minnesota Jury Awards Farmers $45M In Fraud Suit BLOCKBUSTER INC.: Proposes $45M Settlement To Texas Late Fees Suit BRIGHTPOINT INC.: Denies Fraud Charges In Securities Suit in S.D. IN CHEMICAL COMPANIES: Japanese Firms To Settle Antitrust Suit For $23.2M CORNING INC.: Fruchter Twersky Commences Securities Suit in W.D. NY CORNING INC.: Milberg Weiss Commences Securities Suit in W.D. New York DJ ORTHOPEDICS: Cauley Geller Commences Securities Suit in S.D. CA ECI TELECOM: Faces Amended Complaint For Securities Violations in VA ENRON CORPORATION: New York Considers Suit Over Retirement Fund Losses EQUIVA SERVICES: Sued By Gas Station Operators For Antitrust Violations INDIAN FUNDS: Interior Secretary Norton To Refute Contempt Charges MICROSOFT CORPORATION: Maryland Federal Judge Questions $1B Settlement MICROSOFT CORPORATION: Defends $1B Settlement, Presents Revisions MICROSOFT CORPORATION: Dissenting States Propose "Stiffer" Settlement MINNESOTA: School District Asks For Dismissal of Suit For Disabled Kids NAPOLI KAISER: Charged With Fraud in Fen-Phen Litigation Settlement REMEC INC.: California Court Dismisses Securities Suit With Prejudice SCHOLASTIC CORPORATION: Supreme Court Refuses To Stop Securities Suit SECURITIES LITIGATION: Underwriters Ask Judge To Recuse Self From Suits WAL-MART INC.: Asks CA Court To Dismiss Gender Discrimination Suit ZALE CORPORATION: Discovery In Credit Insurance Fraud Suits Drag On ZALE CORPORATION: Employees File Suit Seeking Overtime Pay in Delaware ********* AETNA INC.: Savett Frutkin Lodges Securities Suit in E.D. Pennsylvania ---------------------------------------------------------------------- Savett Frutkin Podell & Ryan PC initiated a securities class action on behalf of a class of persons who purchased the common stock of Aetna, Inc. (NYSE:AET) between December 1, 2000 and April 9, 2001 in the United States District Court for the Eastern District of Pennsylvania against the Company, its chief executive officer, John W. Rowe, and its chairman, William H. Donaldson. The suit charges defendants with violations of sections 10(b) and 20(a) the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The suit alleges that during the class period, the defendants announced that they had reached a definitive agreement to sell the Company's financial services and international businesses to ING Group N.V. and, in an integrated transaction, that the Company planned to spin-off its domestic healthcare and large case pensions businesses in the form of New Aetna, to its shareholders. The suit also alleges that defendants misled the investing public by falsely representing, among other things, that the New Aetna was implementing a number of strategic and operative initiatives which addressed among other things rising medical costs and improved the efficiency of the operations and that the New Aetna had adequate reserves for its medical expenses. In truth and in fact, the Company had recorded inadequate reserves for its medical expenses and was experiencing escalating medical costs due to a number of factors: (1) significant problems in its overpayment of claims or paying single claims multiple times; (2) inadequate pricing for risk enrollment; (3) adverse selection; (4) provider reimbursement rates, contracting issues; and (5) increased short term utilization. Then, on April 10, 2001, before the market opened, the Company shocked the investing community by announcing that its first quarter 2001 results were expected to be significantly lower than estimated as a result of increased medical costs due to higher utilization of healthcare services in the fourth quarter 2000 and the first quarter 2001. The Company announced that it expected to record in the first quarter approximately $90 million before tax of additional medical costs related to services performed in prior periods, primarily the fourth quarter 2000. As a result of this announcement, the price of the Company's common stock plunged from $36.15 on April 9, 2001 to a low of $28.75 on April 10, 2001, on heavy trading volume. For more information, contact Robert P. Frutkin or Renee C. Nixon by Mail: 325 Chestnut Street, Suite 700, Philadelphia, PA 19106 by Phone: 215.923.5400 or 800.993.3233 by E-mail: mail@savettlaw.com or visit the firm's Website: http://www.savettlaw.com/ BASF CORPORATION: Minnesota Jury Awards Farmers $45M In Fraud Suit ------------------------------------------------------------------ A Minnesota jury awarded recently $45 million to thousand of farmers in a class action against BASF Corporation alleging the chemical manufacturer misled and deceived the farmers in their herbicide purchases from chemical manufacturer BASF Corporation, according to a recent Associated Press report. Rob Shelquist, an attorney for the plaintiffs, associated with the Minneapolis firm Lockridge Grindal Nauen, said the $15 million in compensatory damages against the Company will be tripled to $45 million under a New Jersey consumer protection statute. Mr. Shelquist said the farmers can expect to receive between $2,000 and $10,000 each. After a four-week trial and about four hours of deliberations, the jury found that the Company engaged in "unconscionable commercial practice, deception, fraud, false pretense, false promise, or misrepresentation" relating to the Company's marketing and pricing for Poast and Poast Plus herbicides from 1992 to 1996. The farmers had claimed that the Company engaged in fraud by marketing the same thing as two different products, selling one at a premium price and leading farmers to believe the less expensive product was not registered with the EPA for use on certain crops. The Company labeled the more expensive Poast for crops such as sugarbeets, sunflowers, potatoes, and other vegetables and fruit. At the same time, it labeled cheaper Poast Plus for crops such as soybeans and cotton. The cost difference was about $4 per acre. The lawsuit was filed in 1997 by farmers in North Dakota, Minnesota and Montana and achieved nationwide class action status in 1999. Mr. Shelquist said the case ultimately excluded North Dakota farmers who purchased Poast in North Dakota because these farmers reached an out- of-court settlement with the Company four years ago. The Company had maintained that it sold "a good product at a fair price" and that farmers made money using its product. The company believes the verdict was unfair and plans to appeal, said Brian O'Neill, a lawyer with Faegre and Benson of Minneapolis, who represented the Company. BLOCKBUSTER INC.: Proposes $45M Settlement To Texas Late Fees Suit ------------------------------------------------------------------ Video rental chain Blockbuster, Inc. proposed a settlement worth $500 million in the consumer class action pending in Beaumont, Texas federal court relating to late fees charged to customers who returned their videos late between Jan. 1, 1992, and April 1 of this year. Geoffrey Miller, a professor at New York University Law School, vouched for the settlement's fairness in his testimony before the Court Monday, saying the settlement would provide customers valuable relief. He said "It is probably a better deal since the certificates represent the same amount or more than the amount of extended viewing fees the customers are disputing." Under the settlement, the Company would provide an estimated 40 million customers with certificates for free or discounted videos. According to Mr. Miller, such a plan would offer those customers more value and convenience than cash would. According to an Associated Press report, part of the proposed settlement would be $9.25 million in cash for attorneys' fees. Beaumont Judge Milton Gunn Shuffield had given preliminary approval to the settlement in April, but he required the Company to notify possible class action participants before any final approval. Company attorney Allan Jones told Associated Press that the Company would admit no wrongdoing, but would settle because of the number of customers involved. BRIGHTPOINT INC.: Denies Fraud Charges In Securities Suit in S.D. IN --------------------------------------------------------------------- Brightpoint, Inc. vehemently denied that it violated federal securities laws as alleged in the securities class action pending in the United States District Court for the Southern District of Indiana, Indianapolis Division on behalf of all purchasers of public traded Company securities between January 28,1999 and November 14,2001. The suit, which names the Company and directors Robert J. Laikin and J. Mark Howell as defendants, alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and of Section 20(a) of the Exchange Act. The suit alleges, among other things, that the defendants concealed adverse material information and made or participated in the making of untrue statements of material facts and omitted to state material facts concerning the business, finances, financial condition, performance, operations, products and future prospects of the Company. CHEMICAL COMPANIES: Japanese Firms To Settle Antitrust Suit For $23.2M ---------------------------------------------------------------------- Two Japanese chemical companies agreed to pay a combined $23.2 million to settle out-of-court a class action suit charging them with fixing the price of sorbates, chemical preservatives used primarily in high- moisture and high-sugar foods such as cheese and baked goods. Japan's Daicel Chemical Industries Ltd. and Nippon Synthetic Chemical Industry Co. revealed in separate statements that they would pay $16 million and $7.2 million, respectively to US food firms that accused them of price fixing, according to a Xinhua News Agency report. The antitrust suit was commenced in October 1999 by a group of US food companies against a number of foreign chemical firms, alleging violations of US antitrust law by manipulating the prices of sorbates to maintain their shares in the market. CORNING INC.: Fruchter Twersky Commences Securities Suit in W.D. NY ------------------------------------------------------------------- Fruchter and Twersky LLP initiated a securities class action in the United States District Court, Western District of New York on behalf of purchasers of the common stock or zero coupon convertible debentures of Corning, Inc. pursuant to a prospectus dated November 2, 2000, against the Company and: (1) Roger A. Ackerman, (2) Katherin A. Asbeck, and (3) James B. Flaws The suit charges that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. Specifically, the complaint charges that the registration statement and prospectus for the November 2000 offering contained material misrepresentations and omissions regarding demand for the Company's products and because it failed to disclose that it would have to write-off hundreds of millions of dollars in obsolete inventory. On July 10, 2001, the Company announced that it was taking a $5.1 billion charge related to two recent acquisitions and that it would write-off $300 million in excess and obsolete inventory. Subsequently, the Company reported a second quarter loss of $4.76 billion. For further details, contact Jack G. Fruchter by Mail: One Penn Pennsylvania Plaza, 19th Floor, New York, New York 10119 by Phone: 800. 484.5102 or 212.279.5050 by Fax: 212.279.3655 or by E-mail: JFruchter@FandT.org. CORNING INC.: Milberg Weiss Commences Securities Suit in W.D. New York ---------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP filed a securities class action on behalf of purchasers of the common stock or zero coupon convertible debentures of Corning, Inc. (NYSE:GLW) pursuant to a prospectus dated November 2, 2000 in the United States District Court, Western District of New York against the Company and: (1) Roger A. Ackerman, (2) Katherine A. Asbeck and (3) James B. Flaws The suit alleges that defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 by issuing a materially false and misleading registration statement and prospectus in connection with the Company's offering of common stock and debentures in November 2000. Specifically, the complaint alleges that the prospectus was materially false and misleading, among other reasons, because: (i) it stated that demand for the Company's products was robust; (ii) because it omitted to disclose that the Company was amassing hundreds of millions of dollars of obsolete inventory that would have to be written-off; and (iii) given the foregoing, the projection of 25% earnings growth in 2001, contained in the prospectus, was lacking in a reasonable basis at all times. On July 10, 2001, the Company announced it was taking a $5.1 billion charge primarily related to two recent acquisitions, that it would also write-off $300 million in excess and obsolete inventory, and that it would cut 1,000 jobs and close three plants. On July 25, 2001, the Company reported a massive second-quarter loss of $4.76 billion, or $5.13 per share. Company shares closed that day at $13.77, down 80% from the offering price. For further details, contact Steven G. Schulman or Samuel H. Rudman by Mail: One Pennsylvania Plaza, 49th fl. New York, NY, 10119-0165 by Phone: 800.320.5081 by Email: corningcase@milbergNY.com or visit the firm's Website: http://www.milberg.com/corning/ DJ ORTHOPEDICS: Cauley Geller Commences Securities Suit in S.D. CA ------------------------------------------------------------------ Cauley Geller Bowman & Coates LLP initiated a securities class action in the United States District Court for the Southern District of California on behalf of purchasers of DJ Orthopedics, Inc. (NYSE:DJO) common stock pursuant to the November 15, 2001 initial public offering against the Company, certain of its officers and directors and its underwriters. The complaint charges the defendants with violations of the Securities Act of 1933. On November 15, 2001, the Company completed an IPO of 9 million shares of stock pursuant to a registration statement/ prospectus. The offering was priced at $17 per share for total proceeds of $153 million. In the prospectus, the defendants represented that the Company was dependent, in part, on international sales to fuel its revenue growth and profitability. The complaint alleges that the statements in the prospectus regarding the Company's international sales and the accompanying risk disclosures regarding its ability to generate such growth were false and misleading and contained material omissions when made. In actuality, by the time of the IPO, the Company had known that its stock price of $17 reflected the defendants' contention that it would achieve its 4th Quarter 2001 earnings estimates. The complaint charges that prior to the IPO, defendants knew that the Company would not achieve its 4th Quarter earnings estimates. Moreover, this information was disclosed to certain of the underwriting defendants' sales people who, as a result of the change in the Company's projections, declined to support or otherwise purchase the shares in the "after market." Thus, contrary to the representations in the prospectus and obligations of the defendants, the prospectus omitted material facts, rendering the it false and misleading. Public investors who purchased shares traceable to the IPO based on the Company's representations, paying $17 per share for stock, have suffered damages. For more information contact Jackie Addison, Sue Null or Shelly Nicholson by Mail: P.O. Box 25438, Little Rock, AR 72221-5438 by Phone: 1.888.551.9944 by E-mail: info@classlawyer.com or visit the firm's Website: http://www.classlawyer.com ECI TELECOM: Faces Amended Complaint For Securities Violations in VA -------------------------------------------------------------------- An amended securities class action has been filed against ECI Telecom Ltd. (NASDAQ:ECIL) in the United States District Court for the District of Virginia, according to a Company press statement. ECI Telecom Ltd. is a provider of integrated network solutions for digital communications and data transmission systems. The amended complaint, which also names directors Doron Inbar and Avi Ben-Assayag as defendants, alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The suit further alleges that a fraudulent scheme, a deceptive course of business and the dissemination of false and misleading financial statements injured Company shareholders who purchased stock from May 2, 2000 through February 14, 2001. The court had dismissed the prior complaint filed by the same plaintiffs against the Company, Doron Inbar, Avi Ben-Assayag and Jonathan Kolber without prejudice, saying the plaintiffs failed to prove the defendants "possessed the requisite state of mind for a securities fraud action." The defendants said in a press statement that they intend to vigorously defend the action and expect to file a motion to dismiss. Pursuant to the Private Securities Litigation Reform Act of 1995, all discovery is stayed pending a decision on the defendants' motion to dismiss. ENRON CORPORATION: New York Considers Suit Over Retirement Fund Losses ---------------------------------------------------------------------- New York State's common retirement fund, which lost $58 million due to the plunge in Enron Corporation stock, may file a federal class action against the failed energy giant, the New York Daily News recently reported. "We're considering it," a spokesman for state controller Carl McCall said. Mr. McCall is sole Trustee of the $112 billion pension fund. The state's retirement fund is but one of the many retirement funds that took a substantial "hit" when the Company's stock plunged from a high of $85 a share to a recent 66 cents. Representatives of several states' pension funds met early last week and estimated the country's public pension funds lost $250 million when the Company plunged. Enron's stock was widely held by many state pension funds because it was included in the Standard & Poor 500 index (S&P). The fund serves a million retired and current public employees. It held 4.6 million shares of the Company's stock in both index funds and separately. All the stock was sold on November 29, when the Company was dropped from S&P's 500 index because its value had fallen so low. New York City's $80 billion public employee pension fund, however, still holds approximately 2.8 million shares, said spokesman David Neustadt, for City Controller, Alan Hevesi. "We're still trying to figure out the losses, and we're studying our options." Enron filed for bankruptcy about a week ago, the largest Chapter 11 filing in history. Just weeks earlier, the company revealed it had overstated profits and sharply understated its total debt burden. This led to a downgrade of its debt to junk status, which, in turn, led to the withdrawal by its smaller rival, Dynegy, from a $9 billion merger deal. The US Department of Labor said that it was looking into the company's own retirement funds. Employees, whose retirement accounts were made up almost entirely of the Company's stock, reportedly have lost 80% to 90% of their funds' value due to the stock's precipitous fall. Adding to the mix, a company spokesman confirmed that just days before filing bankruptcy, the Company paid $55 million in incentives to 500 key employees to keep them on staff. Securities and Exchange Commission Chief Robert Herdman said the Company's rapid demise and a recent string of accounting irregularities at other big companies indicated "a threat to the confidence in our system of financial and our capital markets." EQUIVA SERVICES: Sued By Gas Station Operators For Antitrust Violations ----------------------------------------------------------------------- Equiva Services LLC, the joint venture set up oil giants Shell Oil Company, Texaco, Inc. and Saudi Refining Inc. to refine and market their products, faces an antitrust class action filed in Los Angeles federal court by 39 independent service station operators. The suit took its first major step forward this week as lawyers for both sides presented their depositions. Plaintiffs told the court that that the three major oil companies have conspired to fix prices and raised rents in a bid to drive them out of business since 1998. The plaintiffs, who rent their gas stations but own their businesses, claim the joint venture violates antitrust law and is forcing dealers out of business across the country. Texaco has since left the venture, after it acquired regulatory approval to merge with Chevron Corporation. Los Angeles gas station operator Fred Dagher says in an interview with Associated Press, "Fix the price, raise the rent, and you get rid of the dealers. Then you can control the price of gas with one phone call." He asserted that before the joint venture, there were 2,500 independent dealers across the country. Today, only 1,100 exist. "What hurt these stations is the gas companies, not the economy," he added. He also said average monthly rents for independent service station operators have increased to $8,900 from $2,500 in 1998. Joseph Alioto, the attorney representing the independent dealers, said outside court that the members of Equiva increased prices they charged independent dealers between 25 cents and 40 cents per gallon in 1998. At the time, crude oil cost about $10 a barrel, the lowest price since the Depression, he said. "Damages will be quite substantial," he said. Cameron Smyth, a spokesman for Equiva, said the joint venture was formed to improve marketing efficiencies, and the alliance is confident the judge will rule in its favor, according to an Associated Press report. INDIAN FUNDS: Interior Secretary Norton To Refute Contempt Charges ------------------------------------------------------------------ Defense lawyers are facing an uphill battle to keep Interior Secretary Gale Norton from being cited with contempt of court in a class action launched by 300,000 Indians seeking an accounting for billions of dollars in a federally-run Indian trust fund, the Individual Indian Monies Trust, The Wall Street Journal recently reported. Government lawyers, at a federal-court hearing, in Washington, DC, will bear the burden of proving that Ms. Norton has not acted in contempt by failing to comply with prior court orders to reform the accounting system that has failed to "account" for what seems to be the loss or theft of the royalties and rents derived from use of Indian-owned lands for such activities as farming, grazing, mining and logging. The trust-fund system dates from the 1880s when Congress divided remaining Indian lands into individual plots, which they assigned to individual Indians under pre-Second World War policies of the US government. The task of presenting the Secretary's case has been complicated by last week's events, which angered US District Court Judge Royce C. Lamberth. Norton was facing four charges of contempt for not making reform efforts that would place her in compliance with the judge's orders, now she is facing five. Judge Lamberth tacked on the fifth charge after a day of conflicting government testimony about actions taken by Ms. Norton, her aides and her lawyers to assure computer security for the Indian trust fund. Accusing Ms. Norton, her aides and her lawyers of "committing a fraud on the court," Judge Lamberth ordered the Interior Department to disconnect from the Internet "all information technology systems that house or provide access to individual trust Indian trust data" until the system is secured. Previously a court-appointed investigator, in order to test the system, was able to hack into the trust-fund accounting system at the Department and manipulate financial data, thus proving to Judge Lamberth that hundreds of millions of dollars of American Indians' monies were at risk to security breaches via the Internet. In other arms of the Interior, sites weren't penetrable, such as the US Fish and Wildlife Service, the US Geological Survey and the Bureau of Land Management, among others. Eric Ruff, Director of Communications for the Interior said Ms. Norton's lawyers will stress that she is proposing an effective reform of the system by creating a new office at Interior called the Bureau of Indian Trust Assets Management. It would take control of the trust fund, which operates as a banking system for 285,000 individual American Indians and processes $300 million a year. "There has been a lot of history of motion and no progress in this case, and it has created a lot of frustration. We understand this, and we're trying to change history," Mr. Ruff explained. Next week, Mr. Ruff said, Ms. Norton will be going to Albuquerque, New Mexico, to hold the first of a series of meetings to explain the proposal to tribal leaders. Some of them object to having trust fund management removed from the Bureau of Indian Affairs, which is largely run by reservation managers, most of whom are Indians. Judge Lamberth held Ms. Norton's predecessor, former Secretary Bruce Babbitt, in contempt of court in 1999 for providing misleading information in the same case and for ignoring court orders. The government was fined $625,000 as a result, and could face more fines depending on the outcome of the hearing. Ms. Norton also could be jailed, but that is not likely. The heart of the case, to be threshed out next year, involves determining how much money Indian account-holders are entitled to. The plaintiffs argue it amounts to billions of dollars. Interior officials have said there is no evidence of major misallocations. Attempts to settle the case have failed. MICROSOFT CORPORATION: Maryland Federal Judge Questions $1B Settlement ---------------------------------------------------------------------- Federal judge J. Frederick Motz examined the controversial $1 billion agreement proposed by software giant Microsoft Corporation to settle hundreds of antitrust class actions, raising concerns over its actual dollar value, and addressing claims that the settlement favored the Company over rival Apple Corporation. Under the settlement, the Company would donate $1 billion in cash, software, computers and training to some of the nation's poorest schools, a deal that has been criticized by many. Some critics allege that the $1 billion settlement was a paltry sum to pay for the Company's monopolistic practices, while others believe that the deal was a legal ruse to further the Company's market share in a sector controlled by rival Apple Computers. Judge Motz said that he might have to subtract the value of donated software as well as the value of goodwill the settlement generates for Microsoft. He told Robert Hall, an economist testifying in favor of the settlement, "If Microsoft is generating goodwill out of this, it should put more into this." Judge Motz also considered objections posed by Apple Computers that the agreement would flood schools with refurbished personal computers running Microsoft's Windows operating system and other software. He said, "If in the solution there are structural biases, however good the intention, then that's something that's got to be of concern." According to a Reuters report, Judge Motz is trying to weigh the value of the proposed settlement against the probability the Company could lose and pay more if the class action suits were allowed to proceed in court. The judge asked the Company why it did not just distribute the money and let schools spend it on whatever software they liked. Microsoft Deputy General Counsel Tom Burt said the software giant could help more schools under the proposed settlement, distributing more software at a lower cost than if the same schools went out and bought programs on the open market, according to Reuters. He accused Apple of trying to take Microsoft's settlement money and get it spent on Apple products. "Microsoft believes this settlement fully maximizes the value of this case," he said. MICROSOFT CORPORATION: Defends $1B Settlement, Presents Revisions ----------------------------------------------------------------- Microsoft Corporation presented several changes to the $1 billion settlement providing cash, computers, software and training to the nation's poorest schools in a hearing with Baltimore Judge J. Frederick Motz after the proposed agreement drew criticism from various sectors. Critics of the controversial settlement, forged to settle hundreds of private antitrust class actions, fear that it was not a severe enough punishment for the Company's abuse of its monopoly power. Others opined that providing Microsoft computers and software to schools would only enhance its monopoly and hold on the market. During the hearing, the Company defended the settlement saying it would "close the digital divide" by helping poor schools get used computers and free software. Company lawyer Tom Burt said the settlement is "very fair and even generous." According to the Orlando Sentinel, the Company responded to criticism by proposing changes to the settlement, which are: (1) Changing the way the foundation that will oversee the money will pick its board members. Microsoft said two software makers would join the foundation: Connectix, which makes a program that lets Windows software work on rival Apple computers, and education software maker Key Curriculum Press; (2) Allowing the foundation, not Microsoft, to oversee the distribution of $90 million in teacher training funds that are part of the settlement. In response to Apple's contention that the settlement might encroach on one of the markets where Apple still holds a big share, Mr. Burt said that schools would be able to make their own technology choices. "This is going to be a platform-neutral settlement that is not going to be influenced by Microsoft." The Company also said the settlement has the support of the National Education Association, the United Negro College Fund and other education groups. Mr. Burt said he hopes more companies will join the foundation and stressed that schools will be able to make their own technology choices, according to the Orlando Sentinel. He told the Sentinel, "This is not a settlement that imposes any solutions on local schools.The eligible schools are enabled to implement local technology plans." MICROSOFT CORPORATION: Dissenting States Propose "Stiffer" Settlement --------------------------------------------------------------------- Nine states who opted out of the settlement agreement between Microsoft Corporation and the Justice Department in the federal class action against the Company have proposed a "stiffer" settlement package. The federal suit accused the Company of several illegal business practices, including: (1) commingling middleware and operating system software code; (2) discriminatory licensing; (3) failure to make timely disclosure of interfaces rivals need to market software compatible with Windows; and (4) actual or threatened retaliation against customers and rivals to discourage development and use of competing software Last month, the Company reached an agreement with the Justice Department that gives computer makers more freedom to load software from its competitors. Nine states signed on to the settlement, however the other states and the District of Columbia rejected the settlement, saying it did not go far enough in preventing the Company from committing further antitrust violations in the future in other markets. Under their own proposal, the dissenting states, California, Iowa, Connecticut, Kansas, Florida, Massachusetts, West Virginia, Utah, Minnesota and the District of Columbia asked for: (i) timely and broad-based computer code sharing; (ii) mandatory distribution of Java; (iii) a version of Microsoft's Internet Explorer browser available as open source; and (iv) tougher enforcement, including naming a special master with substantial authority. The restrictions would run for 10 years. The unbundled version of Windows would come without a media player and other middleware. Iowa Attorney General Tom Miller told TechWeb that the restrictions were "strong but fair," and that the remedies would achieve the objectives of the appellate court decision "to prohibit Microsoft's illegal conduct and prevent similar acts in the future, to spark fair competition, and to take away some of the illegal gains achieved by Microsoft." Microsoft spokesman Jim Desler called the dissident states' proposed remedies "extreme and not commensurate with what is left of the case..The settlement we reached with the Department of Justice and nine of the plaintiff states is a fair and reasonable compromise that is good for consumers and will be good for the economy." Microsoft will file a legal response to the states' proposal on Dec. 12. US District Judge Colleen Kollar-Kotelly is conducting hearings to decide if the Justice Department settlement is in the public interest while at the same time continuing litigation, with remedy hearings tentatively to begin March 11, according to a TechWeb report. MINNESOTA: School District Asks For Dismissal of Suit For Disabled Kids ----------------------------------------------------------------------- The Anoka-Hennepin School District has asked the US District Court in St. Paul, Minnesota to dismiss a class action filed against it alleging that it has not exerted enough effort to ensure quality education for disabled kids. Kerr Law Office, Inver Grove Heights, with the assistance of Judith Gran of the Public Interest Law Center of Philadelphia, filed the suit on behalf of nine children and their parents. The suit names as defendants the district and: (1) the Minnesota Department of Children Family and Learning, (2) Superintendent Roger Giroux and (3) Susan Butler, director of special education The suit alleges alleges that the district failed to: (i) ensure children are educated in the least restrictive environment; (ii) ensure there is adequate staff development, and (iii) ensure parents are provided notice of their rights under the IDEA (Individuals with Disabilities Education Act). According to the Blaine Spring Lake Park Life, the suit asserts that the students named in the suit have a right to: (a) a free appropriate public education in the least restrictive environment that is reasonably calculated to result in a meaningful education; (b) an individualized education program tailored to the unique needs of the child; (c) a comprehensive system of personnel development for administrators, regular education teachers, special education teachers, related services personnel, and paraprofessionals; (d) inclusive education to the maximum extent appropriate; and (e) the procedural safeguards outlined in the IDEA and state law. The suit claims that the district has more than 5,000 children in its special education system and has been the subject of numerous complaints and special education hearings. Attorney for the plaintiffs Sonja Kerr of The Public Interest Law Center of Philadelphia asserts "Anoka-Hennepin has previously resisted efforts at a systemic solution of the situation." Negotiation, advocacy, complaint filings with the Minnesota Department of Children, Family and Learning, due process hearings and informal discussions failed to bring results and the school board allegedly refused to mediate the concerns of all plaintiffs as a group, according to the lawsuit. Judge John Mason will preside in a hearing today to consider the school district's motion to dismiss the suit, according to Paul Cady, District 11 legal counsel. He emphasized that the issues raised by the families of the special education children have been dealt with through due process at the district and state levels. The plaintiffs had until Nov. 30 to file a response, and the school district had until Dec. 7 to submit a final reply, he said. NAPOLI KAISER: Charged With Fraud in Fen-Phen Litigation Settlement ------------------------------------------------------------------- Law firm Napoli, Kaiser and Bern (NKB) faces a class action suit filed in United States District Court for the Southern District of New York, alleging that the Firm defrauded an estimated 5,600 people involved in litigation surrounding the popular diet drug Fen-Phen of hundreds of millions of dollars. The suit accuses the Firm's partners Paul Napoli, Gerald Kaiser and Marc Jay Bern of violations of the Racketeer Influence and Corrupt Organizations Statute (RICO). The suit also accuses them of conspiracy as well as numerous violations of the Lawyers Code of Professional Responsibility. The suit contends that the Firm convinced thousands of plaintiffs who suffered medical damages from Fen-Phen to opt out of the national class action settlement with promises that the firm would return higher damage awards by filing individual cases. Instead, the Firm secretly settled all the suits en masse with drug manufacturer American Home Products (NYSE:AHP), and then presented plaintiffs with settlement offers allegedly from American Home that were below what the firm had promised to deliver. The suit seeks to represent all those plaintiffs who were represented by the Firm. According to Steve Berman of Hagens Berman, the law firm filing the action, the Firm began a national recruitment program in 1999 that included advertising and the development of a referral network of law firms across the country. The campaign was designed to convince those entitled to settlements under the Fen-Phen national class action to opt out and allow the Firm to file individual suits on their behalf. NKB promised these clients that the firm would take on each of their cases on an individual basis. "Their campaign led people to believe that the national class-action settlement was horribly under-funded, and that they would recover larger sums of money if they would allow NKB to represent them," Mr. Berman said. The suit claims that the Firm neither had the intention nor the ability to try thousands of individual cases. From the outset, the suit alleges, the Firm secretly planned to settle the individual cases with American Home Products in a single, consolidated settlement. "We intend to prove that NKB never intended to set one foot in a courtroom for any of these cases," Mr. Berman added. "We know, for instance, that they filed one single complaint on behalf of 1,600 unrelated plaintiffs. Their goal was to convince AHP that NKB could prolong the Fen-Phen issue for years, convincing the company to make a quick settlement." According to the suit, American Home Products and Napoli Kaiser met and agreed to a wholesale settlement that required the Firm to stop soliciting new clients and stop prosecuting the cases of existing clients. The settlement left the issue of individual settlement amounts and manner of payment to the Firm, the suit states. However, NKB never disclosed to its clients that the firm had reached a lump-sum settlement and that its clients would be competing with each other for a portion of an agreed fee. "This placed the firm in a conflict; they were pitting one client against another for settlement dollars.NKB never disclosed to the plaintiffs; instead the firm pretended that they were continuing to negotiate for each client with AHP, when in reality the firm was not," Mr. Berman asserted. According to the complaint, the Firm typically opened these individual settlement negotiations with a $10,000 offer, purportedly made by AHP, knowing that similar injuries were getting much larger settlements and jury verdicts when their claims were pursued zealously. Mr. Berman also said it was standard practice for the firm to tell a client they had a "new offer from AHP" or "AHP would not accept" an amount the client wanted, when in fact there was no negotiation with American Home. Mr. Berman noted that the exact amount of the settlement is yet unknown, but he estimates it to be in the hundreds of millions of dollars. Under the agreements signed with plaintiffs, the Firm was entitled to a contingency fee of one third, compared to nine percent awarded under the national settlement. Once they achieved the mass settlement, the suit claims, the Firm then began compelling plaintiffs to accept offers purported to be from AHP. Mr. Berman asserts, "We have evidence that shows partners with NKB had a scripted program in place that browbeat plaintiffs into accepting low-ball settlements.They used their position of trust to convince plaintiffs that they were fighting for their interests, when in fact they were not. They had secretly settled their cases and were instead working to get the clients' cases wrapped up as quickly as possible." According to court documents, the Firm developed a program known within the firm as "Bern's Road Show," in which partner Marc Bern would intimidate plaintiffs into accepting the offer, often berating the plaintiff's case, telling them their injury claims were groundless and they were lucky that the Firm had brought them such a generous settlement. If the plaintiffs balked at the amount of the settlement, the suit contends, Bern threatened to withdraw from the case and abandon the client. For more information, contact Mark Firmani by Phone: 206.443.9357 or by E-mail: mark@firmani.com. Interested parties can also visit the firm's Website: http://www.hagens-berman.com REMEC INC.: California Court Dismisses Securities Suit With Prejudice --------------------------------------------------------------------- The United States District Court for the Southern District of California has dismissed with prejudice the securities class action filed against REMEC, Inc. (NASDAQ:REMC), certain of its officers and directors, and its underwriters. Law firm Milberg Weiss Bershad Hynes & Lerach LLP commenced the suit for Charles Vezzetti and all purchasers of Company Securities between December 1,1997 and June 12,1998, alleging violations of the Securities Exchange Act of 1934. Last October 2001, the court granted the Company's motion to dismiss the complaint, but gave the plaintiffs the opportunity to file an amended complaint. The plaintiffs did not file an amended complaint, therefore, on December 7, 2001, at the parties' request, the court signed an order dismissing the case in its entirety with prejudice. REMEC, Inc. is a designer and manufacturer of high frequency subsystems used in the transmission of voice, video and data traffic over wireless communications networks and in space and defense electronics applications. SCHOLASTIC CORPORATION: Supreme Court Refuses To Stop Securities Suit --------------------------------------------------------------------- The Supreme Court refused to block a class action against Scholastic Corporation, alleging the Company violated federal securities laws by concealing from investors the slowing sales of its Goosebump books. The suit was commenced in 1997, after the Company announced that investors should expect share losses. The suit also charged Company Vice President Raymond Marchuk with selling about $1.2 million in company stock, or 80 percent of his holdings. Lawyer for the plaintiffs Stephen A. Whinston told the court that Mr. Marchuk had not sold any stock for 20 months until the first week of January 1997 and the final day of 1996. The sales came shortly after he participated in a conference call in which he assured investors that sales were not declining, according to an Associated Press report. Mr. Whinston added that the company had been told by a toy store chain that Goosebumps books were not selling well because of the "scary nature" of the series. The suit was initially filed in Federal Court. The court dismissed the suit, using as a basis the Private Securities Litigation Reform Act passed by Congress in 1995 to protect companies from frivolous fraud lawsuits. Undaunted, the plaintiffs filed an appeal with the 2nd US Circuit Court of Appeals, who reinstated the case, saying the federal court wrongly interpreted the 1995 law. By refusing to hear the appeal, the Supreme Court missed a chance to define when investors can sue a company. According to Company attorney Michael J. Chepiga, the case was important because the 2nd Circuit jurisdiction includes the business district of New York. In court documents, Mr. Chepiga wrote "Virtually any securities fraud suit involving a publicly traded company can be filed in the 2nd Circuit. And the court's decisions have created the most lenient pleading standards in the nation." He added appeals courts have adopted different standards for securities fraud lawsuits. "The longer this conflict goes unresolved, the greater the impact will be on securities lawsuits and on the courts that have to deal with them." Lawyers for the stockholders said they have adequate evidence that the company was painting a "rosy picture" when internally company executives knew there were problems, according to an Associated Press report. SECURITIES LITIGATION: Underwriters Ask Judge To Recuse Self From Suits ----------------------------------------------------------------------- US District Judge Shira Scheindlin refused several investment banks' petition asking her to recuse herself from handling thousands of securities class actions pending in the Southern District of New York, alleging the investment banks fraudulently handled hot initial public offerings in Wall Street in the late 1990s. A Reuters report states that forty-two Wall Street firms and 263 companies have been named as defendants in lawsuits that allege the investment banks and the companies they brought public artificially pumped up prices of newly issued shares. The plaintiffs in these suits, mainly individual investors, accuse the Wall Street firms of requiring institutional clients to buy more IPO shares on the first day of trading to guarantee a rise in the stock price, in a practice known as "laddering." The Wall Street firms have denied wrongdoing. Some of the investment banks mentioned in the suits filed a motion in October asking that Judge Scheindlin step down because she and members of her family bought shares in some of the IPOs named in the suits. Among the defendants, all the underwriters except two, Morgan Stanley and Dain Rauscher, joined the petition. In their recusal motion, lawyers for the defendant firms said their clients feared Scheindlin would show partiality to the plaintiffs since she is among those "allegedly damaged by the scheme." Scheindlin refuted these claims in a 67-page opinion last week, saying she and her family sold the stocks and waived "any interest in pursuing any claims with respect to these purchases." Goldman Sachs Group, Inc. lawyer Vince DiBlasi said they will seek an order from an appeals court requiring Judge Scheindlin to recuse herself from the case. He told Reuters "We filed the letter the other day." Judge Scheindlin has set another hearing for January. WAL-MART INC.: Asks CA Court To Dismiss Gender Discrimination Suit ------------------------------------------------------------------ Wal-Mart Inc. asked the California Federal Court to dismiss, or transfer to Arkansas Federal Court, a gender discrimination class action filed against the company dismissed, the Dow Jones Business News recently reported. Six current and former employees filed the suit in June, alleging that the Company discriminates against women in areas of pay, compensation and promotions. The plaintiffs, who are from California, Texas, Ohio, Illinois and Florida, claim that the retail giant: (1) advances male employees more quickly than females; (2) denies females equal job assignments, promotions, training and compensation; and (3) retaliates against women who have spoken out against the alleged practices. Alleging a pattern of discrimination, the suit points out that 72 percent of the Company's hourly workers are female, but only a third of the managers and supervisors in the company are women. Meanwhile, at the Company's top 20 competitors, women make up 56 percent of the supervisory and managerial ranks, according to U.S. Labor Department statistics cited in the lawsuit. The Company "emphatically" denied the allegations. The potential class, which the plaintiff attorneys claim could be as high as 500,000 women, includes all present and former female employees of WalMart's retail outlets, including Wal-Mart discount stores, supercenters, neighborhood markets and Sam's Clubs. The Company argued in its motion to dismiss, that the suit fails to follow procedures outlined in the 1964 Civil Rights Act. The Company contends that when plaintiffs are from several different states, the law requires the lawsuit to be filed in the federal court district where the company is headquartered. ZALE CORPORATION: Discovery In Credit Insurance Fraud Suits Drag On ------------------------------------------------------------------- Jewelry retailer Zale Corporation faces two class actions charging that it marketed credit insurance to customers in violation of state statutory and common laws. The suits include claims based on fraud, breach of contract, and consumer protection laws. Both actions are in the discovery stage, and neither has been certified as a class action. The Company has vowed to vigorously defend against the alleged claims. The first suit was commenced in November 3, 1999 in the Circuit Court for Colbert County, State of Alabama against the Company and entities: (1) Jewelers National Bank, (2) Zale Indemnity Company, (3) Zale Life Insurance Company, (4) Jewelers Financial Services, (5) Jewel Re-Insurance, Ltd., and (6) certain employees of the Company. Another suit was commenced in July 2000 in the United States District Court for the Eastern District of Texas, Texarkana Division charging the above defendants, except for Jewelers Financial Services, with violating federal anti-racketeering laws. ZALE CORPORATION: Employees File Suit Seeking Overtime Pay in Delaware ---------------------------------------------------------------------- Zale Corporation and its Delaware branch faces a class action pending in the Superior Court of California, County of Los Angeles, Central District on behalf of current and former salaried store managers and assistant store managers of the Company in California. The suit alleges that these individuals were entitled to overtime pay and should not have been classified as exempt employees under California law and seeks recovery of overtime pay, declaratory relief and attorneys' fees. The Company vehemently denied the charges in the action and stated its intent to vigorously defend against the charges in a regulatory filing with the Securities and Exchange Commission. ********* 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. For subscription information, contact Christopher Beard at 240.629.3300. * * * End of Transmission * * *