/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/011221.mbx C L A S S A C T I O N R E P O R T E R Friday, December 21, 2001, Vol. 3, No. 249 Headlines AARON BROTHERS: Ex-Employees' Overtime Pay Suit Nears Motion Deadline APROPOS TECHNOLOGY: Berman DeValerio Announces Lead Plaintiff Deadline CENTRA SOFTWARE: Wolf Haldenstein Commences Securities Suit in S.D. NY DELIA*S INC.: Asks DE Court To Dismiss Consolidated Securities Suit DELIA*S INC.: Awaits Certification of Consolidated Suit in S.D. NY DIVING UNLIMITED: Recalls 3,500 Diving Valves For Potential Injury DJ ORTHOPEDICS: Milberg Weiss Commences Securities Suit in S.D. CA ENRON CORPORATION: Shapiro Haber Commences Securities Suit in S.D. TX EXTENSITY INC.: Bernstein Liebhard Commences Securities Suit in S.D. NY FEDERATED DEPARTMENT: Dragging Securities Suit in NY "Without Merit" GAME TRACKER: Recalls 25T Climbing Sticks, Steps After Injury Reports JO-ANN STORES: Discovery Phase Drags On In CA Overtime Pay Suit MICHAELS STORES: Court Approves $3.2M Settlement In CA Overtime Suit NBTY INC.: Securities Suits' Dismissal Decisions Pending In NY, FL NOVEN PHARMACEUTICALS: Berger Montague Files Securities Suit in S.D. FL OPTICAL CABLE: Federman Sherwood Initiates Securities Suit in W.D. VA PROVIDIAN FINANCIAL: Keller Rohrback Considers Possible ERISA Suit RESONATE INC.: Bernstein Liebhard Commences Securities Suit in S.D. NY SRI SURGICAL: Berger Montague Commences Securities Suit in M.D. FL TAKE-TWO INTERACTIVE: Milberg Weiss Lodges Securities Suit in S.D. NY TOYS R US: Consumers Sue For Unauthorized Use of Private Information UNION DISCORD: Home-Care Workers Say State, Union Laws Unconstitutional XO COMMUNICATIONS: Cohen Milstein Initiates Securities Suit in E.D. VA *Class Actions Lawsuits Find Accepting Home in Madison County, Illinois ********* AARON BROTHERS: Ex-Employees' Overtime Pay Suit Nears Motion Deadline --------------------------------------------------------------------- The Los Angeles County Superior Court in California has set January 31, 2002 as the deadline by which time plaintiffs in the overtime pay class action against retailer Aaron Brothers, Inc must either file a motion for class certification or file a motion for preliminary approval of any settlement which may be agreed to by the parties involved in the suit. Suzanne Collins, a former assistant manager of the Company's retail stores, filed a class action in April 1999 against the Company on behalf of its former store managers, assistant store managers, and managers-in-training. The suit alleges that the Company violated various California laws by erroneously treating its store managers, assistant store managers, and managers-in-training as "exempt" employees who are not entitled to overtime compensation. Based on these allegations, the suit asserts that the Company: (1) violated various California Labor Codes; (2) violated Section 17200 of the California Business and Professions Code; and (3) engaged in conversion. In June 2001, Ms. Collins amended the suit to expand the purported class to: (i) include all current salaried store managers, assistant store managers, and managers-in-training of the Company based in California; (ii) add a new plaintiff as a class representative; and (iii) add two additional causes of action for injunctive and declaratory relief. Trial in the suit has yet to be scheduled. The Company believes it will prevail in the suit, but cannot give assurance that they will be successful in defending the suit or that the final resolution of the suit will not materially affect future operating results. APROPOS TECHNOLOGY: Berman DeValerio Announces Lead Plaintiff Deadline ---------------------------------------------------------------------- Berman DeValerio Pease Tabacco Burt and Pucillo announced that investors in Apropos Technology, Inc. (Nasdaq:APRS) have until the end of the month to submit a lead-plaintiff petition in a lawsuit tied to the company's initial public offering. The class action is pending in the U.S. District Court for the Northern District of Illinois on behalf of all investors who bought Apropos stock in its February 17, 2000 public offering or on the open market through May 15, 2000. According to the complaint, the prospectus for the Company's February 17, 2000 offering falsely stated that co-founders Patrick K. Brady and William W. Bach were active members of its executive management team when they had stopped playing important roles within the company months before the prospectus was issued. Named as defendants are the company, its top directors and the underwriters who helped take it public. The prospectus listed Mr. Brady as Chief Technology Officer and Mr. Bach as Vice President of technology. However, company President and CEO Kevin G. Kerns had effectively ousted Mr. Brady after a power struggle that culminated in July 1999. Though Mr. Brady maintained his title, he no longer had a company office or any employees who reported to him. Similarly, Mr. Kerns stripped Mr. Bach of his executive managerial responsibilities and involvement in shaping the company's core technology. Mr. Kerns, who became the de-facto CTO, attempted to hire a replacement for Brady before the prospectus was issued, but was unsuccessful. So, Mr. Brady and Mr. Bach were listed in the prospectus as technology officers. The Company issued nearly 4 million shares of common stock at $22 per share to thousands of investors based on offering materials that falsely stated that the founders who designed its key technological product were managing the company. "As a technology company whose business plan and future success depended heavily on proprietary technology, investors considered it important that the Apropos founders, the people who developed and patented that proprietary technology, still believed in the company, its business and its technology," the complaint says. "Plaintiffs and the other class members have lost tens of millions of dollars as a result of these material misrepresentations and omissions in the prospectus." The December 31, 2001 lead plaintiff deadline affects only those investors who wish the court to consider them as a potential lead plaintiff. For more information, contact Steven D. Morris or Michael G. Lange by Mail: One Liberty Square, Boston, MA 02109 by Phone: 800.516.9926 by E- mail: law@bermanesq.com or visit the firm's Website: http://www.bermanesq.com. CENTRA SOFTWARE: Wolf Haldenstein Commences Securities Suit in S.D. NY ---------------------------------------------------------------------- Wolf Haldenstein Adler Freeman and Herz LLP initiated a securities class action in the United States District Court for the Southern District of New York on behalf of purchasers of Centra Software, Inc. (NASDAQ: CTRA) from February 3,2000 to December 6,2000. The suit alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In February 2000, the Company commenced an initial public offering of 5,000,000 of its shares of common stock, at an offering price of $14 per share. In connection therewith, the Company filed a registration statement, which incorporated a prospectus with the SEC. The complaint further alleges that the prospectus was materially false and misleading because it failed to disclose, among other things, that: (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the restricted number of shares issued in connection with the IPO; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares to those customers in the IPO in exchange for which the customers agreed to purchase additional shares in the aftermarket at pre-determined prices. For more details, contact Wolf Haldenstein Adler Freeman and Herz LLP By Mail: 270 Madision Avenue, New York NY 10016 by Phone: 800.575.0735 by E-mail: classmember@whafh.com or visit the firm's Website: http://www.whafh.com DELIA*S INC.: Asks DE Court To Dismiss Consolidated Securities Suit ------------------------------------------------------------------- dELiA*s Inc. asked the Delaware Chancery Court to dismiss a consolidated securities suit filed on behalf of stockholders of iTurf Inc., a partly-owned subsidiary of the Company at the time against: (1) iTurf Inc., (2) dELiA*s Inc. and (3) each of iTurf's directors. The consolidated suit arose from three suits commenced in August 2000 challenging the Company's purchase of the remaining non-Company owned shares of iTurf. The suits allege that the defendants breached their fiduciary duties to iTurf's public stockholders and that the merger exchange ratio was unfair to iTurf's public stockholders. The actions were consolidated and an amended complaint was filed early this year. The Company later filed a motion to dismiss the suit in April 2001. The Company labeled the suit "without substantial merit" and stated its intent to vigorously contest the consolidated suit in a disclosure to the Securities and Exchange Commission. However, the Company qualified that they could not predict the outcome of any litigation or whether the resolution of the litigation could have a material adverse effect on its business or financial position. DELIA*S INC.: Awaits Certification of Consolidated Suit in S.D. NY ------------------------------------------------------------------ The United States District Court for the Southern District of New York has yet to certify a consolidated securities suit against dELiA*s Inc. and certain of its officers and directors, and one former officer of a subsidiary. The consolidated suits arose from two suits commenced in June 1999 on behalf of the purchasers of our securities during the period January 20, 1998 through September 10, 1998. The suit generally alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by making material misstatements and by failing to disclose allegedly material information regarding trends in the Company's business. The suit also alleges that the individual defendants are liable for those violations under Section 20(a) of the Securities Exchange Act. In April 2000, the defendants filed a motion to dismiss the lawsuit, which the court denied in March 2001. The Company said in a disclosure to the Securities and Exchange Commission that it intends to vigorously defend against the suit. In the same disclosure, the Company expressed confidence that the ultimate resolution of this lawsuit will have a material adverse effect on its business. DIVING UNLIMITED: Recalls 3,500 Diving Valves For Potential Injury ------------------------------------------------------------------ Diving Unlimited International Inc. is cooperating with the US Consumer Product Safety Commission (CPSC) by voluntarily recalling 3,500 Overpressure Valves (OPV) used with Buoyancy Control Systems. The overpressure valve can stick in the open position, posing a drowning hazard to divers. The Company has received two reports of the valves sticking open. No injuries have been reported. These Buoyancy Control Systems come in two versions, a jacket style and a wings style. The overpressure valve is installed on these units. It is very difficult to distinguish the defective overpressure valves from those not affected. Therefore, all overpressure valves with red pulls are included in this recall. The jacket model has the Company logo printed on the jacket pocket, epaulette, and weight pockets. The wings model has the Company logo printed on the epaulette and weight pockets. The letters "DUI" are printed on the permanent hang tags found on the Buoyancy Control System. Authorized dealers nationwide sold these Buoyancy Control Systems from November 1997 through November 2001 for about $590. For more information, contact the Company by Phone: 800.325.8439 between 8 am and 5 pm PT Monday through Friday or visit the firm's Website: http://www.DUI-Online.com. DJ ORTHOPEDICS: Milberg Weiss Commences Securities Suit in S.D. CA ------------------------------------------------------------------ Milberg Weiss Bershad Hynes and Lerach 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) stock pursuant to the Company's November 15, 2001 Initial Public Offering. The complaint charges the Company, certain of its officers and directors and its underwriters 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 suit 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. Prior to the IPO, defendants allegedly 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 4th quarter projections, declined to support or otherwise purchase the shares in the "after market." Contrary to the representations in the prospectus and obligations of the defendants, the prospectus omitted to state material facts, rendering it false and misleading. Public investors who purchased shares traceable to the IPO based on the Company's representations, paying $17 per share for Company stock, have suffered damages. On December 12, 2001, the Company filed an S-1 registration statement that disclosed the existence of the complaint. Despite the material allegations in the complaint, the defendants claimed in the S-1 that the "allegations lack merit." Counsel for plaintiff and the putative class intend to pursue swift and vigorous recovery of money lost as the result of defendants' actions and, in the alternative, the recision of the purchases of the Company's shares. For more information, contact William Lerach by Phone: 800.449.4900 by E-mail: wsl@milberg.com or visit the firm's Website: http://www.milberg.com ENRON CORPORATION: Shapiro Haber Commences Securities Suit in S.D. TX --------------------------------------------------------------------- Shapiro Haber and Urmy LLP initiated a securities fraud class action on behalf of purchasers of 7% Exchangeable Notes due July 31, 2002 issued by Enron Corporation (NYSE:ENE) in the United States District Court for the Southern District of Texas. The suit, which is believed to be the first action filed on behalf of purchasers of the notes, seeks class action status on behalf of a class consisting of all purchasers of the notes during the period from the initial public offering of the notes on August 17, 1999 to the present. The suit names as defendants: (1) Goldman, Sachs & Co., (2) Banc of America Securities LLC, (3) Salomon Smith Barney Inc., (4) Arthur Andersen LLP, (5) Kenneth L. Lay, (6) Andrew S. Fastow, (7) Jeffrey K. Skilling and (8) Richard A. Causey The suit alleges that the defendants violated sections 11 and 12(2) of the Securities Act of 1933, which makes the named defendants strictly liable for any materially false or misleading statement or omissions in the registration statement or prospectus for the Notes. The suit also alleges claims under section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Specifically, the suit alleges that the registration statement and prospectus for the notes were false and misleading in that the Company's financial statements included in the prospectus are now admitted by the Company to have been materially false. For more information, contact Thomas G. Shapiro Liz Hutton by Mail: 75 State Street, Boston, MA 02109 by Phone: 800.287.8119 by Fax: 617.439.0134 by E-mail: cases@shulaw.com or visit the firm's Website: http://www.shulaw.com EXTENSITY INC.: Bernstein Liebhard Commences Securities Suit in S.D. NY ----------------------------------------------------------------------- Bernstein Liebhard and Lifshitz initiated a securities class action in the United States District Court for the Southern District of New York on behalf of purchasers of Extensity, Inc. (NASDAQ: EXTN) common stock from January 26,2000 to December 6,2000. The suit alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In January 2000, the Company commenced an initial public offering of 4,000,000 of its shares of common stock, at an offering price of $20 per share. In connection therewith, the Company filed a registration statement, which incorporated a prospectus with the SEC. The complaint further alleges that the prospectus was materially false and misleading because it failed to disclose, among other things, that: (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the restricted number of shares issued in connection with the IPO; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares to those customers in the IPO in exchange for which the customers agreed to purchase additional shares in the aftermarket at pre-determined prices. For more information, contact Ms. Linda Flood by Mail: 10 E. 40th Street, 22nd Floor New York NY 10016 by Phone: 800.217.1522 by E-mail: infor@bernlieb.com or visit the firm's Website: http://www.bernlieb.com FEDERATED DEPARTMENT: Dragging Securities Suit in NY "Without Merit" -------------------------------------------------------------------- Federated Department Stores faces a consolidated securities class action filed in the United States District Court for the Southern District of New York on behalf of persons who purchased shares of the Company between February 23,2000 and July 20,2000 against the Company and certain members of its senior management. The suit, originally filed as five separate suits in August, September and October 2000, alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The suit also alleges that the Company, among other things, made false and misleading statements regarding its financial condition and results of operations and failed to disclose material information relating to the credit delinquency problem at its subsidiary Fingerhut. In a disclosure to the Securities and Exchange Commission, the Company labeled the suit "without merit" and states its intention to defend itself vigorously against the allegations in the suit. GAME TRACKER: Recalls 25T Climbing Sticks, Steps After Injury Reports --------------------------------------------------------------------- The Game Tracker, Inc. is cooperating with the US Consumer Product Safety Commission (CPSC) by voluntarily recalling 25,000 climbing sticks and tree steps. The buckles on the climbing sticks and tree steps can fail, posing a risk of serious injury to hunters. The Company and CPSC have received 16 reports of buckles failing, including one hunter who suffered a partial finger amputation and five others who suffered cuts, sprains, and bruises. The recalled Gorilla Ultralite Climbing Sticks, model number 3163, have the serial numbers 040501, 050501, and 060801, printed on the main brace of the stick. The climbing sticks come in three to a package, are gray in color, have black swivel fold down foot pegs, and a black strap and buckle system. The recalled Strap-on Tree Steps, model numbers 3152 and 3153, have serial number 2899 stamped on the side of the metal step. The tree steps have a black strap, with a metal J hook, black buckle, and a metal step. Hunting supply stores and catalogs nationwide sold these climbing sticks and tree steps from February 1999 through September 2001 for between $7 and $100. For more information, contact the Company by Mail: The Game Tracker Inc., Attn: Product Safety Coordinator, PO Box 380, 3475 Eastman Dr., Flushing, MI 48433, or by Phone: 800.241.4833 (between 8 am and 5 pm ET Monday through Friday, or visit the firm's Website: http://www.thegametracker.comfor a free repair of the climbing sticks and a free replacement for the tree steps. JO-ANN STORES: Discovery Phase Drags On In CA Overtime Pay Suit --------------------------------------------------------------- Jo-Ann Stores, Inc. faces a consolidated class action suit filed by former Company employees in the Superior Court of California on behalf of the Company's former and current California store management employees. In August 2000, Sandy Lortz, a former Jo-Ann's employee filed the first lawsuit. That suit was later consolidated with another complaint filed by former employee, Regina Salas. The consolidated suit alleges that the Company violated certain California laws by erroneously treating its store management employees as "exempt" employees who are not entitled to overtime compensation. The case is in the discovery phase and no trial date has been set. The Company intends to defend this lawsuit vigorously. MICHAELS STORES: Court Approves $3.2M Settlement In CA Overtime Suit -------------------------------------------------------------------- The Alameda County Superior Court granted final approval to an agreement worth $3.2 million entered by Michaels Stores, Inc. to settle a class action filed on behalf of all the Company's former and current assistant store managers, seeking overtime compensation. Taiyeb Raniwala, a former assistant manager of a Company store, filed the suit in May 2000 charging the Company with violating various California laws by erroneously treating its stores' assistant store managers as "exempt" employees who are not entitled to overtime compensation. Based on these allegations, the suit asserts that the Company: (1) violated various California Wage Orders; (2) violated Section 17200 of the California Business and Professions Code; and (3) engaged in conversion. In July 2000, Ms. Raniwala amended her complaint to correct certain deficiencies in the original suit. In June 2001, the Company negotiated a tentative settlement with Ms. Raniwala, which the court approved last month. The distribution of the settlement proceeds must be made by January 19, 2002. The settlement effectively dismissed all claims against the Company. NBTY INC.: Securities Suits' Dismissal Decisions Pending In NY, FL ------------------------------------------------------------------ NBTY, Inc. vowed to vigorously oppose several securities suits pending in various state courts filed on behalf of purchasers of the Company's stock between January 27, 2000 and June 15, 2000 against the Company and certain of its officers and directors. The first consolidated stockholder suit is pending in the US District Court of the Eastern District of New York and alleges that the defendants failed to disclose material facts during the class period that purportedly resulted in a decline in the price of the Company's stock after June 15, 2000. In October, 2001, the Company made an application to the court requesting the dismissal of the lawsuit on the basis that it is legally deficient. That motion is presently pending. In addition to the consolidated class action, two stockholder derivative actions were filed in 2000 in the Chancery Court in Delaware and in a Florida State court against certain officers and directors. The derivative claims are predicated upon the stockholder class actions pending in New York. Proceedings in the Delaware derivative action have been stayed pending the outcome of the Company's motion to dismiss the consolidated class action suit and a motion is pending to dismiss the Florida action on jurisdictional grounds. The Company denies all claims of wrongdoing in the suits but cannot give any reassurance with regard to the final outcome of the litigation. NOVEN PHARMACEUTICALS: Berger Montague Files Securities Suit in S.D. FL ----------------------------------------------------------------------- Berger & Montague PC initiated a securities class action against Noven Pharmaceuticals (NASDAQ:NOVN) and its principal officers and directors in the United States District Court for the Southern District of Florida (Miami) on behalf of all persons or entities who purchased the Company's securities during the during period from March 27, 2001 through and including November 1, 2001, inclusive. The suit charges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of l934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between March 27, 2001 and November 1, 2001. Throughout the class period, the Company publicly touted two of its women's hormone replacement products and represented that sales of these agents would be substantial. These statements, as alleged in the complaint, were materially false and misleading because, by November 13, 2000, defendants knew that Novartis Pharma AG, its exclusive marketing agent in Europe, was not aggressively marketing the Company's two hormone drugs, and that Novartis was instead marketing its own competing drug, Estraderm. On August 2, 2001, the Company issued a press release that only partially revealed the truth, stating that sales to Novartis were weaker than analysts and investors had been led to believe. In response, the Company's stock price plunged 43%, to close at $18.98 on August 3, 2001. Subsequently, on November 1, 2001, the Company issued a press release that revealed, for the first time, that: (1) Novartis had its own hormone replacement system and would not be converting to the Company's product; (2) Novartis had excess inventories of the Company's products; and (3) as a result, the Company's European sales would decline substantially in the fourth quarter of 2001 and 2002. In response to this announcement, Company stock price fell by 33% to $14.89. For further details, contact Todd S. Collins or Douglas M. Risen or Kimberly A. Walker by Mail: 1622 Locust Street, Philadelphia, PA 19103 by Phone: 888.891.2289 or 215.875.3000 by Fax: 215.875.5715 by E-mail: InvestorProtect@bm.net or visit the firm's Website: http://www.bm.net OPTICAL CABLE: Federman Sherwood Initiates Securities Suit in W.D. VA --------------------------------------------------------------------- Federman & Sherwood commenced a securities class action in the United States District Court for the Western District of Virginia on behalf of purchasers of the common stock of Optical Cable Corporation (Nasdaq: OCCF) during the period between July 31, 2000 and October 8, 2001, inclusive against the Company and certain of its officers and directors The suit charges the defendants with violations of the Securities Exchange Act of 1934. The complaint alleges that during the class period, defendants issued to the investing public false and misleading information that materially misstated the Company's condition and prospects. Moreover, the Company failed to disclose material information necessary to make its prior statements not misleading. The suit further alleges that defendants violated the federal securities law by engaging in a conspiracy and/or course of conduct pursuant to which they made a series of materially false and misleading statements and failed to make and/or omitted necessary, required, accurate, and material statements concerning the business and financial operations of the Company, its common stock, and the holdings of Mr. Kopstein, with the intent and having the effect of substantially inflating the price of common stock. For more information, contact William B. Federman by Mail: 120 N. Robinson, Suite 2720 Oklahoma City, OK 73102 by Phone: 405.235.1560 by Fax: 405.239.2112 or by E-mail: wFederman@aol.com PROVIDIAN FINANCIAL: Keller Rohrback Considers Possible ERISA Suit ------------------------------------------------------------------ Keller Rohrback LLP is currently investigating potential Employee Retirement Income Security Act (ERISA) claims on behalf of participants and beneficiaries of Providian Financial Corporation's (NYSE:PVN) retirement and 401(k) plans. The investigation period covers June 6, 2001 through October 18, 2001 and focuses on concerns that, under the law interpreting ERISA, the Company and its plan administrators may have breached their fiduciary duties of loyalty and prudence by failing to disclose and inform the plan participants and beneficiaries with respect to the Company's operations and prospects for second and third quarters 2001. Rather than providing complete and accurate information to the plan's participants, it may be alleged that the Company and the plan administrators may have withheld and concealed material information, thereby encouraging participants and beneficiaries to continue to make and to maintain substantial investments in company stock and the plans. This investigation is being conducted in light of recent events. In late June 2001, the Company changed the way it processes its bankruptcy filings and thus changed when it recognizes losses and deferred the recognition of approximately $30 million of charge-offs from June (and second quarter 2001) into July. The Company allegedly manipulated its financial statements for second quarter 2001 and shaved 40 basis points off its second quarter 2001 managed net charge-off rate of 10.3% and boosted reported EPS by $0.06. Without this change, the loss rate would have been 10.7%, well above defendants' guidance of 9.5%-10%. Defendants made no mention of this change on the conference call or in the Company's second quarter 2001 10-Q. In fact, management only admitted this change after they came under pressure from analysts following a flood of calls to their investor relations department in late August 2001. During the class period, taking advantage of the inflation in Company stock, certain of the Company's officers and directors sold almost $22 million worth of their own stock at artificially inflated prices of as much as $49.30 per share. These sales were out of line with their prior trading history. For more information, contact Jennifer Tuato'o, Ray Farrow, Britt Tinglum, or Lynn Sarko by Phone: 800.776.6044 by E-mail: investor@kellerrohrback.com or visit the firm's Website: http://www.SeattleClassAction.com. RESONATE INC.: Bernstein Liebhard Commences Securities Suit in S.D. NY ---------------------------------------------------------------------- Bernstein Liebhard and Lifshitz LLP initiated a securities class action in the United States District Court for the Southern District of New York on behalf of purchasers of Resonate, Inc.'s (NASDAQ: RSNT) stock from August 2,2000 to December 6,2000. The suit alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In August 2000, the Company commenced an initial public offering of 4,000,000 of its shares of common stock, at an offering price of $21 per share. In connection therewith, the Company filed a registration statement, which incorporated a prospectus with the SEC. The complaint further alleges that the prospectus was materially false and misleading because it failed to disclose, among other things, that: (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the restricted number of shares issued in connection with the IPO; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares to those customers in the IPO in exchange for which the customers agreed to purchase additional shares in the aftermarket at pre-determined prices. For further details, contact Ms. Linda Flood by Mail: 10 E. 40th Street, 22nd Floor, New York, NY, 10016 by Phone: 800.217.1522 by E- mail: info@bernlieb.com or visit the firm's Website: http://www.bernlieb.com SRI SURGICAL: Berger Montague Commences Securities Suit in M.D. FL ------------------------------------------------------------------ Berger & Montague PC filed a securities class action against SRI Surgical Express, Inc. (NASDAQ: STRC) and its principal officers and directors in the United States District Court for the Middle District of Florida (Tampa) on behalf of all persons or entities who purchased Company securities during the period from July 23, 2001 through and including November 27, 2001, inclusive. The suit charges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of l934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between July 23, 2001 and November 27, 2001. Specifically, on July 23, 2001 the Company issued a press release announcing financial results for the second quarter of 2001, which reflected an increase in earnings and revenues from the second quarter of 2000. The press release attributed the seemingly positive results to processing and delivery efficiencies and a supposedly lucrative contract with Health Trust Purchasing Group (HGP). These results were incorporated into the Company's financial statements on Form 10-Q, filed with the Securities and Exchange Commission on July 26, 2001. On October 22, 2001, the Company issued a press release announcing record revenues for its third quarter of 2001, which it attributed, in part, to the HGP contract. These statements are alleged to be materially false and misleading because the Company's business was being negatively impacted by the HGP contract and the Company's seemingly impressive growth was achieved in part, through improper revenue recognition. On November 27, 2001, the Company issued a press release announcing that it would restate its earnings and revenues for the third quarter of 2001 because certain revenues should not properly have been recognized in that quarter. Its financial performance, as restated, does not meet analysts' expectations for the third quarter and that the Company will not meet analysts' expectations for the fourth quarter 2001 due to increased sales and administrative expenses and startup costs associated with new business. In reaction to the announcement, the price of the Company's common stock plummeted by 40%, to close at $14.63 per share on November 28, 2001. For more details, contact Todd S. Collins, Douglas M. Risen or Kimberly A. Walker by Mail: 1622 Locust Street, Philadelphia, PA 19103 by Phone: 888.891.2289 or 215.875.3000 by Fax: 215.875.5715 by E-mail: InvestorProtect@bm.net or visit the firm's Website: http://www.bm.net TAKE-TWO INTERACTIVE: Milberg Weiss Lodges Securities Suit in S.D. NY --------------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP commenced a securities class action on behalf of purchasers of the securities of Take-Two Interactive Software Inc. (NASDAQ: TTWO) between February 24, 2000 and December 17, 2001 inclusive in the United States District Court for the Southern District of New York against the Company and: (1) Ryan A. Brant, CEO until February 26, 2001, thereafter Chairman, (2) Kelly G. Sumner, Director until February 26, 2001, thereafter CEO, (3) James H. David Jr., CFO from the Company's third quarter of fiscal year 2000, (4) Paul Eibeler, President and Director, and (5) Larry Muller, CFO until the third quarter of the Company's fiscal year 2000 The suit charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between February 24, 2000 and December 17, 2001, concerning its financial performance for the Company's fiscal year 2000 and the first three quarters of the Company's fiscal year 2001. Throughout the class period, defendants issued press releases reporting the Company's quarterly and year-end financial performance, and filed reports confirming such performance with the United States Securities and Exchange Commission. These reports positively portrayed the Company's performance during the class period and discussed several quarters of supposedly "record" results. These statements, as alleged in the complaint, were materially false and misleading because the Company had, throughout the class period, improperly recognized revenues, thereby inflating its reported sales and earnings. On December 14, 2001, the price of the Company's stock plunged 31%, falling from $15.05 to $10.33, as news leaked that it will likely restate previously filed financial reports. On December 17, 2001, the Company issued a press release announcing that it will restate its financial results for its fiscal year 2000 and the first three quarters of its fiscal year 2001. According to the press release, the Company had improperly recognized revenue on products that were subsequently returned. For fiscal year 2000, the restatement will have the effect of decreasing net sales by $12-$15 million and decreasing net income by $3.1-$3.7 million. For the three quarters of 2001, the restatement will have the effect of decreasing net sales by approximately $9.5 million and increasing net income by $0.3 million. For further details, contact Steven G. Schulman or Samuel H. Rudman by Phone: 800.320.5081 by E-mail: taketwocase@milbergNY.com or visit the firm's Website: http://www.milberg.com TOYS R US: Consumers Sue For Unauthorized Use of Private Information -------------------------------------------------------------------- Toys R Us, Inc. faces a federal and a state class action filed on behalf of all persons who have visited one or more of the company's web sites and either made an online purchase or allegedly had information about them unlawfully "intercepted," "monitored," "transmitted," or "used." The consolidated federal suit, now pending in the United States District for the Northern District of California, arose from suits commenced in August 2000 in these venues: (1) eight suits in the United States District Court for the District of New Jersey; (2) three in the United States District Court for the Northern District of California; and (3) two in the United States District Court for the Western District of Texas; The state class action was commenced in the Superior Court of the State of California, County of San Bernardino. Both federal and state suits name as defendants the Company, affiliates Toysrus.com, Inc. and Toysrus.com, LLC, and Coremetrics, Inc, an Internet marketing company. The suits generally assert various claims under the federal privacy and computer fraud statutes, as well as under state statutory and common law, arising out of an agreement between the Company and Coremetrics. The suits allege that the Company tracks its web site users' activities online and shares that information with third parties in violation of the law. The Company and Coremetrics consequently filed a joint application with the Judicial Panel on Multidistrict Litigation to have all of the federal actions consolidated and transferred to the United States District court for the Northern District of California, which the panel approved in November 2000. The Company moved for a stay of the state action pending resolution of the actions filed in federal court, which the court granted in May 2001. Consequently, the plaintiffs subsequently voluntarily dismissed the action without prejudice. The Company then filed a motion to dismiss the federal suits, which the court granted in part and denied in part in October 2001. The Court's order dismissed one cause of action without leave to amend, dismissed a second cause of action with leave to amend and denied the Company's motion as to the third cause of action. On October 16, 2001 plaintiff's filed an amended complaint to remedy the defects in the cause of action previously dismissed with leave to amend. UNION DISCORD: Home-Care Workers Say State, Union Laws Unconstitutional ----------------------------------------------------------------------- The state and a public employees' union are being sued over a law that classifies home-care providers as public employees and requires them to pay union dues, the Associated Press recently reported. The National Right to Work Legal Defense Foundation (Right to Work) filed a class action suit in US District Court on behalf of 80,000 home-care providers in Los Angeles County. The Service Employees International Local 434B, the county's Personal Assistance Services Council (PASC) and Attorney General Bill Lockyer, along with several California officials, are named as defendants. The suit asks that the union's contract with Personal Assistance Service Council (PASC), as well as its ability to collect mandatory dues payments, be revoked as an unconstitutional infringement on workers' First Amendment rights to freedom of speech and association. Attorneys are also demanding that the union dues paid by the workers be returned. Stefan Gleason, Vice President of Right to Work, said, "This statute appears to be a fund-raising scam by the union to force home- care providers to join the union and pay dues as a condition of employment. .Based on 80,000 people in the county alone, we're looking at about $20 million that is skimmed off the top of this public benefit program." Although they are reimbursed through the state, the workers are independently hired, fired, supervised and trained by individual recipients of home care. Therefore, they should not be covered under a public employee bargaining agreement, Mr. Gleason said. Tyrone Freeman, President of Local 434B, called the lawsuit "an attempt to turn back the clock on LA's frailest residents." The 1999 establishment of the PASC, the county registry through which the workers are screened and unionized, has brought standards and accountability to the home-care system, he said. XO COMMUNICATIONS: Cohen Milstein Initiates Securities Suit in E.D. VA ---------------------------------------------------------------------- Cohen, Milstein, Hausfeld & Toll PLLC commenced a securities class action in the United States District Court for the Eastern District of Virginia, on behalf of purchasers of the common stock of XO Communications, Inc. (NASDAQ: XOXO) during the period of April 4, 2001 through and including November 29, 2001. The suit alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10-b(5) by issuing false and misleading statements regarding XO's financial condition as well as its present and future business prospects. In particular, the suit alleges that defendants misled the investing public concerning the Company's ability to survive until it would be cash flow positive. Throughout the class period, defendants stated that the Company would be able to survive at least into the middle of 2003 without the need for further financing. However, on November 29, 2001, defendants announced a transaction where the shareholders' equity was destroyed in exchange for an investment of $800 million. Trading in the Company's stock was quickly halted. For more details, contact Steven J. Toll or Mary Ann Fink by Mail: 1100 New York Avenue, NW West Tower, Suite 500 Washington, DC 20005 by Phone: 888.240.0775 or 202.408.4600 by E-mail: stoll@cmht.com or mfink@cmht.com *Class Actions Lawsuits Find Accepting Home in Madison County, Illinois ----------------------------------------------------------------------- Madison County's once bustling steel plants and oil refineries have quieted, and about the biggest thing left in the southern Illinois county is a 170-foot-high water tank shaped like a bottle of ketchup that sits along Highway 159, according to a US News & World Report commentary. However, Madison County has a new growth industry, the class action lawsuit. In Edwardsville, the county seat, the courthouse bustles as nationally-known law firms recruit local lawyers to handle cases. Residents call its third floor "Rodeo Drive" because of the high- quality haberdashery of the lawyers who gather there. With a population of 258,941, US News & World Report points out, Madison County has hosted 50 class action lawsuits so far this year, up from 39, the same time mid-December, the prior year. The conservative Manhattan Institute calculates that Madison County's per capita class action filing rate is about 20 times the national average. "It's a booming business," says William Schroeder, a law professor at Southern Illinois University. Ask corporate lawyers, both here and elsewhere, and they will explain the great activity. Madison County's judges just seem more sensitive to the claims of plaintiffs. The plaintiffs' lawyer would seem derelict if he didn't get their case into this environment, and lawyers are doing that. Madison County has become Exhibit "A" in the growing movement to keep lawyers from shopping around for friendly courtrooms. Consider the case of Strasen v. Allstate Insurance, says U.S. News & World Report as an illustration. The case alleges that Allstate uses a faulty database to decide appropriate medical treatment and payment for certain kinds of claims. Similar cases have been filed across the country, all seeking nationwide class-action status. None succeeded before, but in Madison, one did. The reason for this success, some lawyers say, lies in Madison County's blue-collar roots, which makes it a sympathetic venue for claimants. If you got hurt at one of the local factories and filed a tort claim for damages, chances are the jurors hearing your case did the same kind of work. Unlike in St. Louis to the west, jurors and judges have no allegiance to a corporate behemoth downtown. There really aren't any. Each plaintiff's damages may be small, but taken together they can amount to a staggering sum. In nearby Williamson County, a class- action suit against State Farm Mutual alleged that the insurance company directed auto shops to use generic, or "after-market," parts, such as hoods and fenders, to repair damaged cars without telling the policyholders. A jury in 1999 agreed and awarded plaintiffs $456 million. A judge, says US News & World Report, more than doubled the verdict to $1.2 billion. While corporate lawyers say the award, which is under appeal, showcases a runaway system, few are willing to chance a similar loss. Once a case is certified as a class action, plaintiffs' lawyers expect a call from their opponents with an expensive settlement offer. In fact, in recent memory, no jury has decided on a class action case. Defendants hasten to settle. The friendliness of juries and judges to class actions is not necessarily a reputation that is "well deserved," says P.J. O'Neill, the county's Chief Judge since 1978. "If there's anything to it, it's the matter of the expertise of the lawyers." Five decades of heavy litigating has drawn some of the country's best lawyers to Madison and made the judges there well equipped to handle the cases, he says. If that makes the county a good place to file a lawsuit, well, so be it. "Getting another class action case is not something we look forward to," he says. However, torts are undeniably good for the local economy. When court is in session, according to this report, the lunch spots on Main Street fill up, and the courthouse needs plenty of clerks to move the paperwork. ********* 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 * * *