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/raid1/www/Hosts/bankrupt/CAR_Public/030602.mbx C L A S S A C T I O N R E P O R T E R Monday, June 2, 2003, Vol. 5, No. 107 Headlines AG-BAG INTERNATIONAL: Reaches Settlement in Bag Antitrust Suit AMERICAN SEAFOODS: WA Court Heard Appeals on Crewmembers' Suit AON CORPORATION: Plaintiffs File Consolidated Securities Lawsuit CERTEGY CHECK: CA Court Preliminarily Approves Suit Settlement COMMERCE ONE: NY Court Dismisses in Part Securities Fraud Suit COMMERCE ONE: Named as Defendant in FL Securities Suit V. CSFB COMMTOUCH SOFTWARE: Reaches Settlement For Securities Fraud Suit CONCEPTUAL MARKETING: Recalls 1.1M Metal Blades For Injury Risk DELTA AIR LINES: 50 Travel Agents Opt Out of NC Antitrust Suit DELTA AIR LINES: Court Grants Summary Judgment in Antitrust Suit DELTA AIR LINES: Court Dismisses Travel Agents' Antitrust Suit DIAMOND TRIUMPH: Faces Unfair Trade Practices Suit Filed in PA ENRON CORPORATION: Mulls Suing Bankers Over Bad Financial Advice FIRST UNION: NY Court Consolidates Suits V. Gotham Golf Merger FIRST UNION: Plaintiffs Ask OH Court To Block Merger With Gotham LEASECOMM CORPORATION: TX Attorney General Inks Suit Settlement MCDONNELL DOUGLAS: Judge Gives Final Approval To Partial Accord MORGAN GROUP: Lodges Lawsuit Over Financing Agreement With GMAC NETWORK ENGINES: NY Court Refuses To Dismiss Securities Lawsuit NUANCE COMMUNICATIONS: Court Dismisses in Part Securities Suit NUI CORPORATION: Plaintiffs Launch Consolidated Stock Suit in NJ ORCHID BIOSCIENCES: NY Court Dismisses in Part Securities Suit PACER TECHNOLOGY: Stockholders File Suit To Oppose Cyan Merger PACIFIC CAPITAL: Suit Over IRA Accounts Moved to Federal Court PACIFIC CAPITAL: Faces Consumer Suit Over RAL Agreements in CA PHOENIX HOME: Dismissal of NY Lawsuit V. Reorganization Appealed PROVIDENT FINANCIAL: Faces Securities Fraud Lawsuit in S.D. Ohio PUBLIC STORAGE: Consumers Commence Suit Over Storage Units in CA PUBLIC STORAGE: Plaintiffs Appeal Denial of Class Certification RAMBUS INC.: CA Court Dismisses Suit For Securities Violations SUPPORTSOFT INC.: NY Court Dismisses in Part Securities Lawsuit TEXAS: House, Senate Don't Agree Over Medical Malpractice Caps TEXAS: Special Session To Be Held For Medical Malpractice Bill TEXAS: Nursing Facility Faces Suit For Putting Residents at Risk TOM BROWN: Named as Defendant in Suit For Wyoming Royalty Owners UNITED STATES: Legal Immigrants To Sue Over Delay of Green Card UNITED STATES: Court Allows Refugee's Deportation To Somalia VARSITY BRANDS: Stockholders Sue Over Proposed Acquisition in TN New Securities Fraud Cases ALLOU HEALTHCARE: Rabin Murray Lodges Securities Suit in E.D. NY DIVINE INC.: Schiffrin & Barroway Launches Securities Suit in IL ********* AG-BAG INTERNATIONAL: Reaches Settlement in Bag Antitrust Suit -------------------------------------------------------------- Ag-Bag International Limited reached an end to an ongoing class action commenced in February 8, 1998, by S&S Forage & Equipment Company alleging conspiracy to fix prices and sales quotas involving silage bag manufactures and vendors with plaintiff's dismissing their complaint in its entirety with prejudice on May 23, 2003. Ag-Bag International Limited President, Larry Inman, stated, "This finally brings to a close a long 5 years of tedious litigation, defense and costs. We are extremely glad to finally have this matter behind us with its dismissal." Ag-Bag International Limited is a northwest company headquartered in Warrenton, Oregon with a second major facility located in Blair, Nebraska. The Company, through its international operations, manufactures and sells to the agricultural industry its farm feed management systems for the high moisture storage of silage and grains. The Company also provides services within the area of composting. For more details, contact Mike Wallis by Phone: 800/334-7432 AMERICAN SEAFOODS: WA Court Heard Appeals on Crewmembers' Suit -------------------------------------------------------------- The United States District Court for the Western District of Washington heard oral arguments on plaintiffs' and defendants' appeals in the class action filed against American Seafoods Group, LLC by two former vessel crewmembers alleging that the Company breached the terms of their crew member agreements, resulting in the underpayment of the individuals' crew shares for the 2000 "A" season. The plaintiffs also claimed that the Company had violated certain federal requirements that entitle them to be paid the highest rate of wages paid to similarly rated crew members aboard other vessels. On October 11, 2000, the action was certified as a class action, with the plaintiff class consisting of all of the crewmembers on all of our vessels during the 2000 "A" season. The plaintiffs' claim requested damages of approximately $23 million. On January 8, 2002, the court ruled in favor of the plaintiffs on one of their four specific claims after finding they had proved that the Company diluted each individual's crew share by dividing each individual share by a number that was larger than the number of shares assigned to the whole crew, thereby depriving the crew members of their full wages. The court awarded damages in the aggregate amount of $1,607,254 and attorneys' fees and expenses in an aggregate amount to be determined. The plaintiffs have requested attorneys' fees of approximately $600,000. On April 29, 2002, the court awarded $383,234 in attorneys' fees and expenses, and an additional $103,588 to be paid out of the plaintiffs' award at no additional cost to the Company. The court further found that the Company's underpayment of crew shares was not willful. The court also found that the Company did not estimate roe prices in good faith for the third fishing trip of each vessel in the 2000 "A" season. The court did not award the plaintiffs any damages with respect to this finding because the Company had paid the crewmembers a bonus amount in excess of any damages that resulted from the roe price estimates. The plaintiffs have filed a Notice of Appeal in connection with one of the three claims that the court rejected. The appealed claim alleges that the crew contracts did not comply with the provisions of the applicable statutes, which govern the form, and content of crewmember contracts. The Company has filed a separate Notice of Appeal with respect both to the grant of attorneys' fees and the award of damages against the Company. The court heard oral argument on May 6, 2003. AON CORPORATION: Plaintiffs File Consolidated Securities Lawsuit ---------------------------------------------------------------- Plaintiffs in the securities class actions filed against Aon Corporation filed an amended consolidated suit in the United States District Court for the Northern District of Illinois, Eastern Division, on behalf of purchasers of the Company's Common Stock between May 4, 1999 and August 6, 2002. The complaint also names as defendants Patrick G. Ryan, Chairman and Chief Executive Officer, and Harvey N. Medvin, Executive Vice President and Chief Financial Officer. The amended suit contains allegations of violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under such Act relating to the Company's press release issued on August 7, 2002. The plaintiff seeks, among other things, class action certification, compensatory damages in an unspecified amount and an award of costs and expenses, including counsel fees. CERTEGY CHECK: CA Court Preliminarily Approves Suit Settlement -------------------------------------------------------------- The United States District Court for the Eastern District of California granted preliminary approval to a consumer class action filed against Certegy Check Services, Inc. This lawsuit was based on a claim that, during the period August 1992 through December 31, 1996, the Company improperly assessed a service charge on unpaid checks, which allegedly violated provisions of the Federal Fair Debt Collection Practices Act and California's Unfair Business Practices Act. The action sought, among other remedies, a refund of all service charges collected from California consumers during this period, prejudgment interest, statutory damages under the Fair Debt Collection Practices Act, and attorneys' fees, an earlier Class Action Reporter story states. These amounts in the aggregate could have exceeded $18 million if the plaintiffs had prevailed in the case. In November 2002, the Company entered into a memorandum of understanding with the plaintiffs providing for a settlement whereby the Company will pay $3.975 million, net of amounts covered under a Letter of Agreement with the Company's insurance carriers, to the plaintiffs in exchange for a full and final release of all claims asserted. COMMERCE ONE: NY Court Dismisses in Part Securities Fraud Suit -------------------------------------------------------------- The United States District Court for the Southern District of New York dismissed in part the consolidated securities class action filed against Commerce One, Inc., several company officers and directors and the three lead underwriters in the Company's initial public offering (IPO) The amended complaint alleges violations of Section 11 and Section 15 of the Securities Act of 1933, Section 20(a) of the Securities Exchange Act of 1934 and Section 10(b) of the Exchange Act (and Rule 10b-5, promulgated thereunder) as a result of alleged conduct of the underwriters of the IPO to engage in a scheme to under price the IPO and then artificially inflate the Company stock price in the aftermarket. The complaint seeks unspecified damages on behalf of a purported class of purchasers of common stock between July 1, 1999 and June 15, 2001. Various plaintiffs have filed similar actions asserting virtually identical allegations against more than 200 other companies. The lawsuits against Commerce One and other companies have been coordinated for pretrial purposes with these other related lawsuits and have been assigned the collective caption In re Initial Public Offering Securities Litigation. On July 15, 2002, the issuer defendants and individual defendants filed an omnibus motion to dismiss addressing issues generally applicable to the defendants as a group. On October 9, 2002, the district court entered an order dismissing all of the living individual Company officers and directors from the case without prejudice. On February 16, 2003, the district court entered an order denying most of the defenses asserted by the defendants in the omnibus motion to dismiss and allowing most of the case to proceed. COMMERCE ONE: Named as Defendant in FL Securities Suit V. CSFB -------------------------------------------------------------- Commerce One, Inc., along with its Chief Executive Officer and former Chief Financial Officer, were named as defendants in a securities class action filed primarily against Credit Suisse First Boston in the United States District Court, Southern District of Florida. In that case, the plaintiff alleges that various investment banks, issuer companies, and individuals violated securities laws by engaging in a scheme to under-price initial public offerings and then artificially inflate prices of those stocks in the aftermarket. It is presently unclear whether or not this latest action will be transferred and coordinated with the other coordinated actions in federal court in New York. COMMTOUCH SOFTWARE: Reaches Settlement For Securities Fraud Suit ---------------------------------------------------------------- Commtouch Software Ltd. settled the shareholder class action filed on behalf of shareholders against it in early 2001. The litigation was initiated against the company and two members of management in response to the company's announcement that it had decided to restate earnings for the first three quarters of 2000, alleging violations of the antifraud provisions of the Securities Exchange Act of 1934. Judge William H. Alsup of the United States District Court for the Northern District of California, presiding over the litigation, signed a preliminary order confirming the settlement terms, which call for the payment of $15 million to shareholders who are members of the class by virtue of their shareholdings in the company during the class period (April 19, 2000 through February 13, 2001). The settlement terms do not include any admission or finding of wrongdoing on the part of the company or individual defendants, who maintained their denials of improper behavior throughout the proceedings. Carolyn Chin, Chairman of the Board of Commtouch, commented, "We are relieved that this unfortunate episode is now behind us, and we can concentrate all of our attention on our anti-spam solutions - ASAP!(TM) - and the growth of the business. We very much appreciate all those who have stood by us during the difficult times." For more details, contact Gary Davis by Phone: 650/864-2290 or by E-mail: media@commtouch.com CONCEPTUAL MARKETING: Recalls 1.1M Metal Blades For Injury Risk --------------------------------------------------------------- Conceptual Marketing & Development, Inc. is cooperating with the US Consumer Product Safety Commission by voluntarily recalling approximately 1.1 million metal blades for their model 4650 weed cutting attachment. The blades can break off and hit consumers causing severe impact and laceration injuries. The Company and the commission are aware of 16 reports of blades breaking, resulting in 12 injuries. Injuries have ranged from lacerations requiring stitches to tendon and bone injuries. Only cast aluminum metal alloy blades are included in the recall. The blades measure 1/4 inch thick, 1 inch wide and 4 inches long, and are a dull silver color. Blades that are either smooth on the bottom or have ridges are included in the recall. All of the blades were made in the USA. Home improvement and hardware stores nationwide sold the blades with the weed cutting attachments, or separately as replacements, from November 1999 through December 2001.The model 4650 weed cutter with blades sold for about $15 and a set of three replacement blades sold for about $6. For more details, contact the Company by Phone: (800) 210-9949 between 8 am and 5 pm PT Monday through Friday. DELTA AIR LINES: 50 Travel Agents Opt Out of NC Antitrust Suit -------------------------------------------------------------- Fifty travel agents opted out of the class action filed against several airlines, including Delta Air Lines, Inc. in the United States District Court for the Eastern District of North Carolina on behalf of all travel agents in the United States, Puerto Rico and the US Virgin Islands which sold tickets on the defendant airlines between 1997 and 2002. The lawsuit alleges that the airline defendants conspired to fix travel agent commissions in violation of Section 1 of the Sherman Act. The plaintiffs have asserted similar individual claims in a lawsuit filed in the United States District Court for the Northern District of California. The Company is vigorously defending these lawsuits. Although the ultimate outcome of these matters cannot be predicted with certainty, management believes that the resolution of these actions will not have a material adverse effect on its condensed consolidated financial statements. DELTA AIR LINES: Court Grants Summary Judgment in Antitrust Suit ---------------------------------------------------------------- The United States District Court for the Central District of California granted Delta Air Lines, Inc.'s motion for summary judgment in the class action filed on behalf of all travel agencies from which the Company has demanded payment for breach of the agencies' contractual and fiduciary duties to Delta in connection with Delta ticket sale transactions from September 20, 1997 to the present. The lawsuit alleges that the Company's conduct violates the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO) and creates liability for unjust enrichment. The plaintiff's time to appeal has not yet expired. The Company is vigorously defending these lawsuits. Although the ultimate outcome of these matters cannot be predicted with certainty, management believes that the resolution of these actions will not have a material adverse effect on its condensed consolidated financial statements. DELTA AIR LINES: Court Dismisses Travel Agents' Antitrust Suit -------------------------------------------------------------- The United States District Court for the Southern District of New York dismissed without prejudice the class action filed against several airlines, including Delta Air Lines, Inc., on behalf of a nationwide class of travel agents. The suit alleges that the airlines breached their contracts with and their duties of good faith and fair dealing to US travel agencies when the airlines discontinued the payment of published base commissions to US travel agencies at various times beginning in March 2002. In April 2003, the court granted the airlines' motion to dismiss this lawsuit, and granted plaintiff leave to file an amended lawsuit. The Company is vigorously defending the suit. Although the ultimate outcome of these matters cannot be predicted with certainty, management believes that the resolution of these actions will not have a material adverse effect on the Company's consolidated financial statements. DIAMOND TRIUMPH: Faces Unfair Trade Practices Suit Filed in PA -------------------------------------------------------------- Diamond Triumph Auto Glass, Inc. faces a class action filed in the Court of Common Please of Luzerne County, Pennsylvania on behalf of its customers. Plaintiffs allege, among other things, that the Company violated certain sections of the Pennsylvania Unfair Trade Practices and Consumer Protection Law and common law. Plaintiffs allege that this alleged conduct has caused monetary damages, and are seeking damages in an amount to be determined at trial. The Company believes the allegations are without merit and plans to vigorously contest this complaint. ENRON CORPORATION: Mulls Suing Bankers Over Bad Financial Advice ---------------------------------------------------------------- Enron Corporation is now considering bringing legal action against its own principal bankers over the issue of their having given the company bad financial advice that helped lead to the downfall of the Houston energy company, The Wall Street Journal reports. The latest strategy, laid out in a pair of little-noticed motions filed in bankruptcy court in Manhattan, reveals not only the attempt by Enron's chief executive officer Stephen F. Cooper to settle all the litigation involving Enron and its bankers, shareholders and creditors, but it also reveals how difficult it has become for Enron's principal bankers, including J.P. Morgan Chase & Co. and Citigroup Inc., to remove or even distance themselves from the ruins of Enron's collapse. Both of the banks, above-named, along with numerous other Enron advisers, already have been sued by the company's shareholders for allegedly helping the company hide debt, and they face investigations from the regulators over such alleged involvements. The Enron phenomenon is part of a rising pile of legal problems for the banking industry. For example, earlier this month, a federal judge in New York refused to dismiss a lawsuit brought by former shareholders of WorldCom Inc., now known as MCI, against Citigroup, J.P. Morgan and other underwriters of WorldCom bonds. A more current example of the banking industry's ongoing legal problems is the lawsuit brought last Friday by Allied Irish Banks PLC, which sued Bank of America Corporation and Citigroup over their dealings with a former trader who notched $691 million of losses for Allfirst Financial Inc., formerly an Allied unit. Bankruptcy experts say it is not surprising that the banks would find themselves targeted, since when it comes to litigation involving companies in bankruptcy, accounting firms and banks are regarded as having the deepest pockets around. Enron's consideration of potential claims against its bankers is part of its broad effort to orchestrate a settlement that will involve the large-pocketed bankers. In the recent filing, Enron said lawyer H. Lee Godfrey of Susman Godfrey LLP, had agreed to represent the company "in connection with the evaluation, investigation, assertion and negotiation of claims, causes of action, demands and other obligations against" 16 financial institutions. While it might seem strange for a company accused of fraud to blame its advisers for its losses, the duty of a company in Chapter 11 is to recoup as much money as possible for its creditors. Federal bankruptcy law allows companies to try to reclaim money paid out in the months prior to the bankruptcy filing that benefited one set of creditors at the expense of another. Many of the financial institutions that worked for Enron already are at the center of investigations and litigation over the controversial financial transactions they helped arrange for the company, and the special-purpose entities they were involved in setting up. Enron shareholders, who are represented by William S. Lerach of the law firm Milberg Weiss Bershad Hynes & Lerach, have sued many of them. Mr. Lerach already has said that he would look dubiously upon any effort by Enron to assert claims against its bankers for their financial advice. "In our view, that is not a legitimate effort," he said. "It is an effort by the primary wrongdoer to divert money away from the true victims of the wrongdoing to itself." Lawyers involved in the bankruptcy case per se, view Mr. Cooper's initiative as an effort to take control of the lawsuit settlement process and to stake a claim to a portion of any settlement money that Enron shareholders can wring out of the banks. Hiring a Texas litigator to represent Enron, these people say, could help in that process. "At the end of the day, there is an issue between Mr. Lerach and the estate and the creditors as to who gets what," said a person involved in the matter. "What Mr. Cooper is doing is hiring a Lerach-type guy to represent the estate. No bank is going to settle only with Mr. Lerach or only the estate. This has everything to do with getting a global peace and getting this behind you." Martin Bienstock, lead bankruptcy lawyer for Enron, did not elaborate on the potential claims against the banks, except to explain briefly the theory under which the banks might have caused harm to Enron. "In some instances, the people at the company and its board of directors thought the transactions they were entering into were appropriate, because they were recommended by some of the financial institutions that were serving as both lenders and advisors to the company," Mr. Bienstock has said. Late last week, New York federal bankruptcy Judge Arthur J. Gonzalez, who is handling Enron's bankruptcy, and Houston federal Judge Melinda Harmon, who presides over the shareholders' class action, ordered the lawyers involved to attend an unusual "joint status conference." In their order, the two judges said only that the hearing "would be beneficial to the resolution of these cases." FIRST UNION: NY Court Consolidates Suits V. Gotham Golf Merger -------------------------------------------------------------- The Supreme Court of New York in New York granted class certification to a consolidated suit filed against First Union Real Estate Equity & Mortgage Investments, on behalf of holders of the Trust's convertible preferred shares. The first suit was filed in April 2002, alleging that the proposed transaction with Gotham Golf Corporation was approved by the Trust's Board of Trustees in violation of fiduciary duties owed to the holders of the Trust's convertible preferred shares. The suit seeks, among other things, unspecified damages, an injunction of the proposed transaction and the court's certification of the lawsuit as a class action. Named as defendants in the lawsuit were the Trust, its five then trustees and Gotham Partners, LP. In November 2002 the court issued an order granting motions for preliminary injunction. On December 2002, the court issued an order re-affirming its preliminary injunction barring the proposed merger of the Trust with and into Gotham Golf. The court's order also extended indefinitely the preliminary injunction previously granted with respect to the proposed merger transaction and directed the parties of the lawsuit to attend a preliminary conference for the purpose of scheduling discovery. The Trust filed a notice of appeal of the preliminary injunction with the Appellate Division of the New York Supreme Court. Oral argument with respect to the appeal was held before a judicial panel of the Appellate Division - First Department of the New York Supreme Court on March 11, 2003. There is no specific timetable for the appellate court to render its decision. It is not possible to predict the outcome of the appellate process with respect to lifting the injunction. In the event that the Appellate Division rules that the injunction should not be lifted, the case will proceed to trial on the merits. In the event that the injunction imposed by the trial court were lifted and dissolved, it is the intention of the Trust and, to the best of the Trust's knowledge, Gotham Partners and the other Gotham Partners-affiliated parties to the proposed merger transaction, to take the steps necessary to consummate the proposed transaction. However, any party to the suit may seek leave of the Appellate Division to appeal to the Court of Appeals of the State of New York an adverse ruling by the Appellate Division regarding the injunction granted by the trial court. In November 2002, First Carolina Investors, Inc., a holder of preferred shares, filed a separate lawsuit in New York Supreme Court for New York County, naming the same defendants as in the first case. On December 20, 2002, the suits were consolidated alleging, among others, breach of contract, aiding and abetting breach of contract, tortuous interference with the contract, breach of fiduciary duties, aiding and abetting of breach of fiduciary duties and unconscionability against the defendants. On April 30, 2003, the trial court granted the plaintiff's motion to certify the litigation as a class action. The Trust regards the lawsuit as being without merit and will vigorously defend against the asserted claims. FIRST UNION: Plaintiffs Ask OH Court To Block Merger With Gotham ---------------------------------------------------------------- Plaintiffs asked the United States District Court for the Northern District of Ohio, Eastern Division to issue a preliminary injunction blocking the merger of First Union Real Estate Equity & Mortgage Investments with Gotham Partners, LP. The suit was filed by a purported holder of the Trust's common shares, on behalf of itself and the Trust common shareholders as a class. Named as defendants in the lawsuit are the Trust, Gotham Partners, William Ackman and the four current Trustees of the Trust. The lawsuit seeks a declaration that the lawsuit is maintainable as a class action and certification that the plaintiff, K-A & Company, Ltd., is the representative of the class. Among the allegations asserted are breach of fiduciary duty and aiding and abetting thereof in connection with the transactions contemplated by the Merger Agreement. The relief requested by the plaintiff includes an injunction preventing the defendants from proceeding with consummation of the merger, rescission of the merger if it occurs, an accounting for any profits realized by the defendants as a result of the actions complained of, an order permitting the creation of a shareholders' committee composed of the Trust common shareholders and their representatives to manage the affairs of the Trust, compensatory damages and the costs and disbursements of plaintiff's counsel. On April 10, 2003, the plaintiff filed a motion for a preliminary injunction seeking an order preventing the defendants from consummation of the merger. The defendants have filed a motion requesting the court to stay consideration of the plaintiff's motion pending a decision on the appeal of the preliminary injunction entered by the New York Supreme Court for New York County in a similar suit. The court has not ruled on either motion and there is no timetable for a ruling. LEASECOMM CORPORATION: TX Attorney General Inks Suit Settlement ---------------------------------------------------------------- Texas Attorney General Greg Abbott announced a seven-state settlement today that stops deceptive practices of Massachusetts-based finance company Leasecomm Corporation and its parent company Microfinancial, Inc. These companies finance a variety of products for small businesses, but they have also financed many deceptive business opportunities. The settlement, which also includes the Federal Trade Commission, corrects problems many consumers reported when they signed up for business opportunities through vendors. The consumers later found that financing for the ventures was done through leases with Leasecomm and that these could not be cancelled. When they complained about the fraudulent nature of the businesses, Leasecomm pursued collections aggressively and reported many disputed amounts to credit agencies as delinquent. The announcement substantially changes the way Leasecomm conducts its business. The company can no longer finance business opportunities; it must cease collections on many of the court judgments it obtained against consumers (about 600 in Texas); and it must allow consumers to defend against collection suits where they live or where the lease was signed. "This really amounted to a sham that almost guaranteed a mountain of debt for the consumer, yet the vendors promised grand profits leading to financial freedom," said Attorney General Abbott. "The pattern of contractual deception to avoid legal entanglements is just outrageous. We have laws in this state to bring such frauds to justice and get relief for those who were harmed." Leasecomm financed items such as credit card swiping machines for point-of-sale purchases and online customer payment systems (called "virtual terminals"). Consumers often complained that these items malfunctioned to the point of being useless in conducting the enterprises for which they had contracted. Moreover, the consumers had unwittingly entered into non- cancelable contracts for up to four years in payment for the products and the worthless business opportunities. The business opportunities included Internet web malls, multilevel marketing, pyramid schemes, medical billing software, coupon clipping programs and other get-rich-quick schemes that duped consumers with deceptive contracts. Leasecomm's "leases" typically went for up to $4,000 with a four-year payout, and most often the leases failed to explain what the consumers were actually paying for. In one incident, a consumer complained that she went to a seminar for starting Web-based businesses. She was given a hard sell, told to sign many documents, and only later learned that she had authorized a regular draft from her checking account of about $65 a month to Leasecomm. When she got home and called the vendors, she was told she needed to pay an additional $2,000 for "business coaching." At that point the vendor told her that she would be in the vending business. Another consumer reported Leasecomm taking $89 a month from his bank account, even though he informed Leasecomm that he never received working copies of the software he purchased to start his own business. The company he originally signed up with also had moved and left no forwarding phone number. Despite this, Leasecomm still insisted that he must direct his complaints to this defunct business. Consumers in other states reported similar experiences. Besides Texas, other states endorsing today's settlement are Massachusetts, Florida, Illinois, North Dakota, North Carolina and Kansas, as well as the District Attorney of Ventura County, California. MCDONNELL DOUGLAS: Judge Gives Final Approval To Partial Accord --------------------------------------------------------------- A federal judge gave final approval recently to a partial $36 million settlement in a class action filed against McDonnell Douglas Corporation, the Associated Press Newswires reports. US District Judge Sven Erik Holmes also approved an $8.75 million payment for plaintiffs' attorney fees, plus $1 million for their costs and expenses, leaving $26.25 million for the plaintiffs. The partial settlement resolves all claims in the lawsuit except the issue of back pay. Judge Holmes held a hearing on May 7, to gauge the fairness of the agreement, which was reached during private mediation in January in San Francisco. Some of the plaintiffs argued against the pact at the hearing, but Judge Holmes said the objections did not establish a basis for rejecting the settlement. Judge Holmes found McDonnell Douglas liable on September 5, 2001, for violating the Employee Retirement Income Security Act, when it announced in December 1993, that it was closing its Tulsa plant. The class action with 1,074 plaintiffs was filed in 1994. Judge Holmes ruled that back pay would not be excluded when considering damages. However, plaintiffs' attorneys convinced the judge that the plaintiffs are dying off as the issue of back pay continued to elude settlement. McDonnell Douglas, which merged with Boeing in 1997, claimed in one of its filings that back pay "dwarfs every other category of damages." Thus, partial settlement emerged as a way to serve all interests. Plaintiffs' attorney Joseph Farris said each of the plaintiffs will receive from $5,000 to about $150,000, under the terms of the partial settlement. MORGAN GROUP: Lodges Lawsuit Over Financing Agreement With GMAC --------------------------------------------------------------- Morgan Group Holdings, Inc. on behalf of itself and all other persons who purchased or acquired its securities during the period of November 13, 2001 through August 19, 2002, commenced a class action against: (1) Anthony T. Castor III, its Chief Executive Officer during the class period, (2) Gary J. Klusman, Chief Financial Officer during the class period, (3) Michael Archual, the President of Drive Away, Inc., a subsidiary of the Company, during the class period and (4) Ernst & Young LLP, the Company's independent auditor during the class period The lawsuit seeks recovery of monetary damages as a result of the Company's failure to truthfully disclose the status of its compliance with loan covenants and other provisions contained within a financing agreement between the Company and GMAC Commercial Credit LLC (GMAC) and to properly report receivables due to GMAC pursuant to the Revolving Credit and Security Agreement governing the Credit Facility. The lawsuit alleges that as a result of the failure to comply with the loan covenants contained in the credit agreement during the relevant period and the subsequent discovery of such violations, the Company was effectively deprived of credit sources. The lawsuit further alleges that this loss of financing ultimately forced the Company and its subsidiaries to file for bankruptcy protection, thereby causing damages to the Company and all other investors in Company securities during the class period. NETWORK ENGINES: NY Court Refuses To Dismiss Securities Lawsuit --------------------------------------------------------------- The United States District Court for the Southern District of New York refused to dismiss the consolidated securities class action filed against Network Engines, Inc. and: (1) Lawrence A. Genovesi (the Company's Chairman and former Chief Executive Officer), (2) Douglas G. Bryant (the Company's Chief Financial Officer and Vice President of Finance and Administration), (3) FleetBoston Robertson Stephens, Inc., (4) Credit Suisse First Boston Corporation, (5) Goldman Sachs & Co., (6) Lehman Brothers Inc. and (7) Salomon Smith Barney, Inc. The suit alleges that the defendants violated the federal securities laws by issuing and selling securities pursuant to the Company's initial public offering in July 2000 (IPO) without disclosing to investors that the underwriter defendants had solicited and received excessive and undisclosed commissions from certain investors. The suit also alleges that the underwriter defendants entered into agreements with certain customers whereby the underwriter defendants agreed to allocate to those customers shares of the Company's stock in the offering, in exchange for which the customers agreed to purchase additional shares of the Company's stock in the aftermarket at pre-determined prices. The suit alleges that such tie-in arrangements were designed to and did maintain, distort and/or inflate the price of the Company's common stock in the aftermarket. The suit further alleges that the underwriter defendants received undisclosed and excessive brokerage commissions and that, as a consequence, they successfully increased investor interest in the manipulated IPO securities and increased their individual and collective underwritings, compensation and revenues. The suit seeks damages and certification of a plaintiff class consisting of all persons who acquired shares of the Company's Common Stock between July 13, 2000 and December 6, 2000. In July 2002, the Company, Mr. Genovesi and Mr. Bryant joined in an omnibus motion to dismiss challenging the legal sufficiency of plaintiffs' claims. The motion was filed on behalf of hundreds of issuer and individual defendants named in similar lawsuits. In October 2002, Mr. Genovesi and Mr. Bryant were dismissed from this case without prejudice. Plaintiffs opposed the motion, and the court heard oral argument on the motion in November 2002. On February 19, 2003, the court issued an opinion and order denying the motion as to the Company and the case may now proceed to discovery. NUANCE COMMUNICATIONS: Court Dismisses in Part Securities Suit -------------------------------------------------------------- The United States District Court for the Northern District of California dismissed in part the consolidated securities class action filed against Nuance Communications, Inc. and certain of its present and former officers and directors. The consolidated complaint was filed on behalf of a purported class of persons who purchased the Company's stock during the period January 31, 2001 through March 15, 2001, alleging false and misleading statements and insider trading in violation of the federal securities laws, specifically Section 10(b), 20(a) and 20A of the Securities Exchange Act of 1934, and seeks unspecified damages. In April 2003, the court granted in part and denied in part defendants' most recent motion to dismiss. No trial date has been set. NUI CORPORATION: Plaintiffs Launch Consolidated Stock Suit in NJ ---------------------------------------------------------------- Plaintiffs in the securities class actions filed against Nui Corporation lodged an amended consolidated suit in the United States District Court for the District of New Jersey. The suit alleges that the Company and its president and chief executive officer violated federal securities laws by issuing false statements and failing to disclose information regarding the company's financial condition and current and future financial prospects in its earnings statements, press releases, and in statements to analysts and others. The amended complaint, brought on behalf of a putative class of purchasers of the Company's common stock between November 8, 2001 and October 17, 2002, asserts claims under Section 10(b), including Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act against the Company, its president and chief executive officer, and its chief financial officer. Specifically, the amended complaint alleges that the defendants: (1) failed to disclose material facts that would impair the company's current and future earnings, including the allegedly accurate amount and explanation of the company's bad debts, a purportedly illegal practice by the company in "re-terminating" intrastate calls; alleged accounting improprieties in connection with purportedly unearned revenue and allegedly inaccurate earnings per share information; and (2) inflated the company's earnings materially by allegedly making misleading statements concerning, and failing to properly record, bad debt costs, allegedly attributing the company's rising costs to incorrect and immaterial factors and purportedly pursuing illegal telecommunications billing practices. The amended complaint seeks unspecified monetary damages on behalf of the class, including costs and attorneys fees. Furthermore, on December 23, 2002, a law firm made a public announcement with respect to a lawsuit purportedly filed in the Southern District of New York on behalf of a putative class of purchasers of the Company's common stock between November 8, 2001 and October 17, 2002 against the Company and John Kean, Jr., alleging violations under Section 10(b), including Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act. Specifically, the announcement alleges that the company knowingly or recklessly failed to properly record fixed cost expenses, accrue necessary pension expenses and reserve adequate amounts for its self-insured medical benefits in its quarterly financial statements. At this time, the company has not been served with the purported complaint. Although the company intends to vigorously defend these lawsuits, it is not possible at this time to determine a likely outcome. ORCHID BIOSCIENCES: NY Court Dismisses in Part Securities Suit -------------------------------------------------------------- The United States District Court for the Southern District of New York dismissed in part the consolidated securities class action filed on behalf of persons purchasing Orchid Biosciences, Inc.'s stock between May 4, 2000 and December 6, 2000. The suit alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, and Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint alleged that, in connection with the Company's May 5, 2000 initial public offering, the defendants failed to disclose additional and excessive commissions purportedly solicited by and paid to the underwriter defendants in exchange for allocating shares of the Company's stock to preferred customers and alleged agreements among the underwriter defendants and preferred customers tying the allocation of IPO shares to agreements to make additional aftermarket purchases at pre-determined prices. Plaintiffs claim that the failure to disclose these alleged arrangements made the Company's registration statement on Form S-1 filed with the SEC in May 2000 and the prospectus, a part of the registration statement, materially false and misleading. Plaintiffs seek unspecified damages. On February 19, 2003, the court decided to dismiss the Section 10(b) claims against the Company. The claims against individuals officers named as defendants were earlier dismissed without prejudice, subject to a tolling agreement. There is currently a draft settlement agreement in review by defendant issuers. The Company has not reserved any amount related to this case as it believes that the allegations are without merit and it intends to vigorously defend itself against the plaintiffs' claims. PACER TECHNOLOGY: Stockholders File Suit To Oppose Cyan Merger -------------------------------------------------------------- Pacer Technology faces a class action filed in the Superior Court of the State of California, for the County of San Bernardino on behalf of all public holders of the Company's stock. The suit also names as defendants: (1) Ellis T. Gravette, Jr., (2) Carl E. Hathaway, (3) Richard S. Kay and (4) John G. Hockin, II This complaint, which has not yet been served on the Company or, to its knowledge, on any of the other named defendants, seeks: (i) an order from the Court affirming that the action may be maintained as a class action and certifying the plaintiff as the representative of the public shareholders; (ii) an injunction to prevent consummation of Cyan's proposed acquisition of Pacer and (iii) unspecified damages No action has yet been taken by the Company or its directors with respect to the Cyan proposal, other than to appoint a Special Committee of the Board to consider that proposal and any alternatives to that proposal that may be available to the Company. As a result, the Company believes that the allegations in the complaint are without merit. If the suit is served, the Company intends to vigorously defend against it. PACIFIC CAPITAL: Suit Over IRA Accounts Moved to Federal Court -------------------------------------------------------------- Pacific Capital Bancorp moved the class action filed against it on behalf of persons who lost funds from their Individual Retirement Accounts (IRAs) which were invested with Mr. Reed Slatkin to the United States District Court in Los Angeles, California. Mr. Slatkin has pled guilty to having operated a fraudulent scheme which defrauded hundreds of investors. The Company is the custodian of approximately 30 self-directed IRA accounts. The participants of the accounts specifically directed the Trust Division of the Company to invest their IRA funds in a limited partnership operated by Mr. Slatkin. The participants each signed a written investment direction in which they directed the Company to invest their funds in the Slatkin limited partnership, stated that they had verified the security of the investment and the financial strength of the partnership, and held the Company harmless for any and all claims or loss resulting from the investment. The plaintiffs are seeking compensation from the Company for the loss of funds that were invested in the Slatkin limited partnership at their direction. The Company believes that there is no merit to the claims made in this action and intends to vigorously defend itself. PACIFIC CAPITAL: Faces Consumer Suit Over RAL Agreements in CA -------------------------------------------------------------- Pacific Capital Bancorp faces a class action filed on behalf of persons who entered into a refund anticipation loan (RAL) application and agreement with the Company from whose tax refund the Company deducted a debt owed by the applicant to another RAL lender. The lawsuit is pending in the Superior Court in San Francisco, California. The Company is a party to a separate cross-collection agreement with each of the other RAL lenders by which it agrees to collect sums due to those other lenders on delinquent RALs by deducting those sums from tax refunds due to its RAL customers and remitting those funds to the RAL lender to whom the debt is owed. This cross-collection procedure is disclosed in the RAL Agreement with the RAL customer and is specifically authorized and agreed to by the customer. The plaintiff does not contest the validity of the debt, but contends that the cross-collection is illegal and requests damages on behalf of the class, injunctive relief against the Company, restitution of sums collected, punitive damages and attorneys' fees. The Company believes that there is no merit to the claims made in this action and intends to vigorously defend itself. PHOENIX HOME: Dismissal of NY Lawsuit V. Reorganization Appealed ---------------------------------------------------------------- Plaintiffs appealed the Supreme Court of the State of New York for New York County's dismissal of a class action filed against Phoenix Home Life Mutual Insurance Company, challenging its reorganization and the adequacy of the information provided to policyholders regarding the plan of reorganization. The plaintiff sought to maintain a class action on behalf of a putative class consisting of the eligible policyholders of Phoenix Life as of December 18, 2000, the date the plan of reorganization was adopted. Plaintiff seeks compensatory damages for losses allegedly sustained by the class as a result of the demutualization, punitive damages and other relief. The defendants named in the lawsuit also include The Phoenix Companies, Inc., directors of Phoenix Life, as well as Morgan Stanley & Co. Incorporated, financial advisor to Phoenix Life in connection with the plan of reorganization. A motion to dismiss the claims asserted in this lawsuit has recently been granted. The plaintiff has filed a notice of appeal. The Company believes the suit is without merit. PROVIDENT FINANCIAL: Faces Securities Fraud Lawsuit in S.D. Ohio ---------------------------------------------------------------- Provident Financial Group, Inc. faces a class action filed in the United States District Court for the Southern District of Ohio by shareholder Silverback Master Ltd. The suit also names as defendants: (1) PFGI Capital Corporation, (2) Provident's President Robert L. Hoverson, (3) Provident's Chief Financial Officer Christopher J. Carey, (4) Allen L. Davis and (5) John R. Farrenkopf The suit, filed on behalf of all purchasers of PRIDES in or traceable to a June 6, 2002 offering of those securities registered with the Securities and Exchange Commission and extending to March 5, 2003, is based upon circumstances involved in a restatement of earnings announced by the Company on March 5, 2003. It alleges violations of securities laws by the defendants in the Company's financial disclosures during the period from March 30, 1998 through March 5, 2003 and in the June 2002 offering. PUBLIC STORAGE: Consumers Commence Suit Over Storage Units in CA ---------------------------------------------------------------- Public Storage, Inc. faces a class action filed in California Superior Court in Orange County on behalf of a putative class of renters who rented self-storage units from the Company. Plaintiff alleges that the Company misrepresented the size of its storage units and has brought claims under California statutory and common law relating to consumer protection, fraud, unfair competition, and negligent misrepresentation. Plaintiff is seeking monetary damages, restitution, and declaratory and injunctive relief. Based upon the uncertainty inherent in any putative class action, the Company cannot presently determine the potential damages, if any, or the ultimate outcome of this litigation. The Company is vigorously contesting the claims upon which this lawsuit is based. PUBLIC STORAGE: Plaintiffs Appeal Denial of Class Certification --------------------------------------------------------------- Plaintiffs appealed California Superior Court for Los Angeles County's denial of class certification for the suit filed against Public Storage, Inc. on behalf of California resident property managers who claim that they were not compensated for all the hours they worked. The named plaintiffs have indicated that their claims total less than $20,000 in aggregate. This maximum potential liability cannot be estimated, but can only be increased if a class is certified or if claims are permitted to be brought on behalf of the others under the California Unfair Business Practices Act. The plaintiffs' motion for class certification was denied in August 2002. This denial does not deal with the claim under the California Unfair Business Practices Act. The Company is continuing to vigorously contest the claims in this case and intends to resist any expansion beyond the named plaintiffs on the grounds of lack of commonality of claims. The Company's resistance will include opposing the plaintiffs' appeal of the court's denial of class certification and opposing the claim on behalf of others under the California Unfair Business Practices Act. RAMBUS INC.: CA Court Dismisses Suit For Securities Violations -------------------------------------------------------------- The United States District Court for the Northern District of California dismissed the securities class action filed against Rambus, Inc. and certain of its top officers and directors by the Teachers' Retirement System of Louisiana and Louisiana Municipal Police Employees' Retirement System. The complaint alleged that defendants misrepresented that the Company owned certain enforceable patents when, in fact, Rambus obtained the patents through fraud. These allegations were based upon the evidentiary record developed in a federal lawsuit in Virginia titled Rambus, Inc. v. Infineon Techs. AG, which resulted in a jury verdict that Rambus had committed actual fraud. On January 29, 2003, the Federal Circuit Court of Appeals overturned the jury verdict against Rambus in the Infineon case, finding that Rambus's conduct did not constitute actual fraud. Based on this ruling, lead plaintiffs moved to dismiss the suit with prejudice. The dismissal of the suit does not prevent any individual investor covered by this suit from bringing his own lawsuit against the Company, so long as the lawsuit is brought within the time provided by the statute of limitations. For more details, contact Bernstein Litowitz Berger & Grossmann LLP by Phone: (858) 793-0070 or by E-mail: nikio@blbglaw.com. SUPPORTSOFT INC.: NY Court Dismisses in Part Securities Lawsuit --------------------------------------------------------------- The United States District Court for the Southern District of New York dismissed in part the consolidated securities class action filed against SupportSoft, Inc. and: (1) Radha Basu, (2) Brian Beattie, (3) Credit Suisse First Boston Corporation, (4) Bear, Stearns & Co. Inc., and (5) FleetBoston Robertson Stephens, Inc. The complaint alleged, inter alia, that the Company's registration statement and prospectus dated July 18, 2000 for the issuance and initial public offering of 4,250,000 shares of the Company's common stock contained material misrepresentations and/or omissions, related to alleged inflated commissions received by the underwriters of the offering. The lawsuit seeks unspecified damages as well as interest, fees and costs. Similar complaints have been filed against 55 underwriters and more than 300 other companies and other individual officers and directors of those companies. All of the complaints against the underwriters, issuers and individuals have been consolidated for pre-trail purposes before US District Court Judge Scheindlin of the Southern District of New York. Pretrial motions and discovery were stayed pending a ruling on a motion to dismiss the claims by defendants. On February 19, 2003, the court issued an opinion granting defendants' motion in part, and denying the motions in part. In summary, the court ruled that the case may proceed against the underwriters on the theories alleging violations of section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, the case may proceed against the Company, Radha Basu and Brian Beattie with respect to a claim for violation of section 15 of the Securities Act of 1933, and, subject to a pending motion for reconsideration against Mr. Beattie with respect to a claim for violation of section 10(b). The Company has retained Pillsbury Winthrop LLP as its lead counsel, and tendered notice to its insurance carrier pursuant to the terms of our insurance policy. While the Company cannot predict with certainty the outcome of the litigation, it believes that the claims against it and its officers are without merit and intends to defend the lawsuit vigorously. TEXAS: House, Senate Don't Agree Over Medical Malpractice Caps -------------------------------------------------------------- The survival of legislation aiming to limit civil liability lawsuits depends on whether the House will accept the Senate's higher limits on medical malpractice awards; specifically, the caps for pain and suffering, Associated Press Newswires reports. Senator William Ratliff, R-Mount Pleasant, said he will go no lower in setting caps for pain and suffering awards than $250,000 per doctor and $750,000 total. The House version sets a $250,000 maximum. This dispute appears to be the "sticking point" between the two chambers as Senator Ratliff, author of the Senate version of the bill, says he has gone low enough. The impasse on the medical malpractice caps has kept the bill from moving forward as the legislative session approaches its end on Monday next. Sponsor of the House bill, Rep. Joseph Nixon, R-Houston, said the lower cap of $250,000 is needed, standing alone; the Senate version with its $750,000 total "guarantee(s) that three doctors are going to get sued in every case." Senator Ratliff's refusal to call for a conference committee to negotiate the difference has frustrated the doctors and business groups who support Mr. Nixon's plan. However, Senator Ratliff said the bill can be saved. "It doesn't need to die," the Senator said, as he explained that both versions shield individual doctors from having to pay more than $250,000. Mr. Ratliff considers the higher cap for total damages is necessary so as to rectify the most egregious cases of negligence. The malpractice caps are part of a sweeping piece of legislation that would change the way Texans can pursue civil lawsuits. The bill is designed to limit the number of lawsuits filed by making new rules for class actions by: (1) placing limits on which parties pay for damages; (2) creating new protections for retailers and manufacturers; and (3) restricting attorney's fees The civil liabilities lawsuits and the medical malpractice bills had started out separately, but a House committee rolled the two bills into one before moving quickly to approve the combined bill. The full House passed the measure over vocal Democratic opposition. Senator Ratliff's State Affairs Committee listened to more than 60 hours of testimony from all parties, and this deliberate pace earned Senator Ratliff praise from all corners on the issue. Senator Ratliff's original plan would have removed any award cap if a jury reached an unanimous verdict. This was a plan he reluctantly agreed to abandon, but which he has referred to, when he said, "I have moved (my position) far more than anybody else in this building." The stalemate has led to speculation in the Capitol that Governor Perry, who supports the House position, would call a special session if the bill dies or if he is forced to sign the Senate version into law. TEXAS: Special Session To Be Held For Medical Malpractice Bill -------------------------------------------------------------- Governor Rick Perry has confirmed that he will call a special session as early as next week if the Senate does not move to reduce the medical malpractice award caps for pain and suffering to $250,000, the Associated Press Newswires reports. The leader of the House effort, Rep. Joseph Nixon, R-Houston, said that the Governor had promised him a special session if the caps are not approved. Governor Perry has declared lowering the medical malpractice rates for doctors an emergency issue for the legislative session, but the House and Senate have yet to resolve what is becoming a bitter stalemate over how low to cap pain and suffering damage awards. The House plan sets the cap at $250,000 maximum per plaintiff. The Senate plan, written by Senator William Ratliff, R-Mount Pleasant, caps doctor liability at $250,000 for each physician, with a maximum of $750,000 per plaintiff. It also sets $500,000 as the maximum for hospitals. Rep. Nixon said his $250,000 cap is the only way to make malpractice insurance affordable for doctors. Medical groups say skyrocketing costs are forcing doctors to close their practices or move out of state and that caps would curb frivolous lawsuits. Senator Ratliff said that both versions shield individual doctors from having to pay more than $250,000. He said he favors the higher cap for total damages as a way to rectify the most egregious cases of negligence. The medical malpractice issue is part of a larger bill with sweeping changes to the way civil liability lawsuits are to be filed in Texas. The bill would create new liability protections for manufacturers and retailers while creating new rules for class actions and limits on which parties pay for damages. The result of a special session could be that lawmakers would be forced to start from 'scratch' on a bill that was the subject of bitter debate for several days in the House and a month of testimony in the Senate. The House last week set up a negotiating team to work out their differences. Senator Ratliff, so far, has refused, saying he sees no need because there does not seem to be any ground for negotiations. TEXAS: Nursing Facility Faces Suit For Putting Residents at Risk ---------------------------------------------------------------- Texas Attorney General Greg Abbott filed a lawsuit on behalf of the state against the operators of a Fort Worth nursing facility that failed to meet minimum licensing standards and put residents at serious risk. Inspectors who visited Westhaven Nursing Center at 1617 West Cannon in Fort Worth found numerous health and safety violations at the facility during their visits in the summer of 2001. One allegation involves the sexual assault of a 58-year-old male resident by a staff member, who was assisted by another employee. The victim was sodomized with objects and verbally abused while three nurse aides watched; they reportedly failed to intervene or report the incident. Weeks later, a 22-year-old male resident left the facility undetected. He had recently been admitted with diagnoses of a closed head injury, seizures, psychosis and weakness in the left side of his body. The State's investigation found he had tried to leave once before, and that staff were aware the door alarm was not working properly at the time of his disappearance. Police found the man dead of hyperthermia (unusually high body temperature) two days after he left the center. "These facilities are supposed to be in the business of caring for our loved ones, not putting them in harm's way," Attorney General Abbott said. "At a minimum, we must hold this industry to the standards set by law. Anything less is unacceptable." Acting on a referral from the Texas Department of Human Services, the attorney general's Elder Law and Public Health Division filed suit against Haskell-based D&D Investments, Inc., owners of Westhaven. The State seeks civil penalties of $1,000 to $20,000 per day, per violation, of the Texas Health and Safety Code. The State suit also asks for attorneys' fees, court costs and any other relief the court deems appropriate. "We will use whatever resources the law allows to make these people pay for their mistakes," Attorney General Abbott said. "Anyone else who may be doing the same thing would be wise to bring their facilities into compliance, or they will find themselves in the same situation." TOM BROWN: Named as Defendant in Suit For Wyoming Royalty Owners ---------------------------------------------------------------- Tom Brown, Inc. is a party to an action brought in Sweetwater County, Wyoming by three overriding royalty interest owners seeking certification as a class of all non-governmental entities which are paid royalties or overriding royalties by the Company in Wyoming. This action is one of more than a dozen virtually identical class action lawsuits filed in various Wyoming courts against producers and operators in Wyoming. The complaint alleges that the Company violated the Wyoming Royalty Payment Act by improperly deducting gas transportation costs in calculating royalties and overriding royalties on Wyoming production and by failing to properly itemize all deductions taken on its payee reports. The issue in the case is whether transportation of natural gas off the lease to market is deductible transportation or nondeductible gathering within the meaning of the Act. In January 2003, the Wyoming Supreme Court agreed to answer two certified questions in a separate lawsuit which are what is meant by the term "gathering" as that term is employed in the Act in defining nondeductible "costs of production," and when do the causes of action for recovery of the reporting penalty and for improper deductions under the Act accrue. Because of the preliminary nature of these proceedings, it is not possible to fully determine the ultimate loss exposure or probable outcome of this litigation. UNITED STATES: Legal Immigrants To Sue Over Delay of Green Card --------------------------------------------------------------- More than a dozen legal US residents plan to sue the government in a class action over delays in receiving their important papers, such as the green card, Associated Press Newswires reports. The Lawyer's Committee for Civil Rights Under Law, of Texas (Texas Lawyer's Committee) and the Mexican American Legal Defense and Educational Fund, planned to file the lawsuit in federal court in McAllen, Texas. The lawsuit aims to press the government to do something about the delay. It is hoped that the lawsuit will prompt the government to at least issue temporary documents. The lawsuit will name as defendants Tom Ridge, Secretary of Homeland Security, and Eduardo Aguirre Jr., acting director for the Bureau of Citizenship and Immigration Services. Executive Director Javier Maldonado, of the Texas Lawyer's Committee, and other immigration advocates, believe the delay is linked to national security crackdowns following the September 11, 2001, terrorist attacks. They also attribute the delay to the confusion surrounding the absorption of what was the Immigration and Naturalization Service into the multipurpose Homeland Security Agency. One note out of San Antonio told the immigrants that their cases were "being processed in chronological order" and that "there is no historical timeframe for background checks to be completed in any set amount of time." However, for each of the cases in the lawsuit, said Mr. Maldonado, the fingerprinting and background checking had been completed, as required, and a judge, accordingly, had awarded the legal permanent residency. UNITED STATES: Court Allows Refugee's Deportation To Somalia ------------------------------------------------------------ A three-judge panel of the Eighth US Circuit Court of Appeal voted 2 to 1 that the United States can deport a Somali refugee even though Somalia has no functioning government, the Associated Press Newswires reports. This decision overturns a lower court ruling that blocked Keyse Jama's deportation. Mr. Jama was ordered deported because of an assault conviction in 1999, and the appeals court decision could have implications for other Somalis in Seattle and elsewhere who face deportation. "The ruling reaffirms the position we have been taking all along, that we do have the authority to remove Mr. Jama from the United States to Somalia," said Tim Counts, a spokesman for the Bureau of Immigration and Customs Enforcement. Whether the other country accepts - or can accept - someone who has been deported is irrelevant, wrote Judge Morris Sheppard Arnold with support from Judge Pasco Bowman. "Whether it is politically wise, efficient or considerate of the United States to remove an alien without prior acceptance of the alien's destination country is, quite simply, a question that lies outside our province," Judge Arnold wrote. As a result of the US District Court rulings in Seattle and Minneapolis, no Somalis have been deported from the United States for more than a year. The Eighth Circuit Court ruling overturns the District Court ruling in Minneapolis. The Seattle rulings are not directly affected by the appellate decision, because Washington state is covered by the Ninth US Circuit Court of Appeals based in San Francisco. Somali leaders responded to the decision with the hope that the appellate ruling would be overturned. "We still have faith in the system and know there is a rule of law," said Osman Sahardeed, assistant executive director of the Somali Community of Minnesota. Minnesota is believed to have the largest Somali population in the country. Michelle Garnett McKenzie of the Minnesota Advocates for Human Rights, and a member of Mr. Jama's legal team, said that if Mr. Jama agrees, his legal team will appeal, initially by asking for a rehearing by all 10 judges of the Appeals Court. If that is denied, the next step is the Supreme Court. In 2001, Mr. Jama went to court to stop the deportation proceedings that began after he pleaded guilty to assault, thereby losing his legal residency status. US District Court Judge John Tunheim in Minneapolis ruled that he could not be deported because there was no functioning government in Somalia to accept him. US District Court Judge Marsha Pechman of Seattle cited Judge Tunheim's findings and ruled first for five Somalis and then in a class action case covering potential Somali deportees nationwide, that the government could not deport anyone to a country that lacks a functioning government. Her ruling did not, however, apply to Mr. Jama and a few others who had filed cases individually. VARSITY BRANDS: Stockholders Sue Over Proposed Acquisition in TN ---------------------------------------------------------------- Varsity Brands, Inc. and its directors face a class action lawsuit filed with the Chancery Court in Tennessee on May 15, 2003, alleging, among other things, that the defendants breached their fiduciary and other duties owed to the Company's stockholders in connection with the acquisition of the company by its senior management and a wholly-owned subsidiary of an affiliate of Leonard Green & Partners, LP. Plaintiffs are seeking, among other things, injunctive relief and legal fees and expenses. The company and its directors believe that the allegations contained in the lawsuit are without merit and they intend to contest the action vigorously. New Securities Fraud Cases ALLOU HEALTHCARE: Rabin Murray Lodges Securities Suit in E.D. NY ---------------------------------------------------------------- Rabin Murray & Frank LLP initiated a securities class action filed in the United States District Court for the Eastern District of New York on behalf of all persons or entities who purchased or otherwise acquired Allou Healthcare Inc. securities (AMEX:ALU) during the period June 22, 1998 to April 9, 2003, both dates inclusive. The suit names as defendants: (1) Victor Jacobs, (2) Herman Jacobs, (3) David Shamilzadeh, (4) Mayer Rispler & Company, (5) Arthur Andersen LLP, and (6) KPMG LLP The complaint alleges that defendants violated the Securities Exchange Act of 1934 by making a series of materially false and misleading statements concerning the Allou's financial results during the class period. In particular, the complaint alleges that Allou failed to disclose, among other facts, that: (i) the Company was materially overstating its accounts receivables, resulting in an overstatement of revenues and earnings; (ii) that Allou was materially overstating its inventory, thus inflating its net worth; and (iii) the Company's financial statements were not prepared in conformity with Generally Accepted Accounting Principles. As a result, the Company's securities price was artificially inflated during the class period. On April 24, 2003, however, the Company filed with the SEC a Form 8-K which admitted that Allou had overstated it inventory by approximately $35 million and its accounts receivable by approximately $75-$80 million. As a result of defendants' false and misleading statements the price of Allou securities was artificially inflated throughout the class period, causing plaintiff and the other members of the class to suffer damages. For more details, contact Eric J. Belfi or Sharon Lee by Phone: (800) 497-8076 or (212) 682-1818 by Fax: (212) 682-1892 by E- mail: email@rabinlaw.com DIVINE INC.: Schiffrin & Barroway Launches Securities Suit in IL ---------------------------------------------------------------- Schiffrin & Barroway, LLP initiated a securities class action in the United States District Court for the Northern District of Illinois, Eastern Division on behalf of all purchasers of divine, inc. (Other OTC:DVINQ.PK - News) (formerly listed on NASDAQ) securities from November 12, 2001 through February 18, 2003, inclusive. The complaint charges defendants Andrew J. Filipowski (Chief Executive Officer and Chairman of the Board of Directors) and Michael P. Cullinane (Chief Financial Officer and Executive Vice President) with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Throughout the class period, defendants issued a series of material misrepresentations to the market between November 12, 2001, and February 18, 2003, which served to artificially inflate the price of divine securities. As alleged in the complaint, defendants failed to disclose and misrepresented the following material adverse facts: (1) divine was engaged in a scheme of inflating its revenues by approximately $65 million by instructing employees of its wholly-owned subsidiary, RoweCom, to offer discounts to library customers that paid cash in advance -- months before payments were due to publishers -- even though divine had no plan to pay its obligations to publishers; (2) divine was fraudulently diverting nearly $74 million from RoweCom's operations; (3) divine lacked adequate financial and internal controls with respect to its RoweCom operations; and (4) as a result of the foregoing, divine lacked a reasonable basis to project profitability by year-end or an ability to maintain its operations without bankruptcy protections. On February 18, 2003, the close of the class period, divine announced that "despite efforts over the past several months to minimize operating expenses and various liabilities, its board of directors has determined that it must seek alternatives to protect the value and viability of its operations. As a result, divine has engaged Broadview International LLC as advisors to assist in exploring strategic options, which may include asset divestitures, comparable transactions, and/or the filing of a voluntary petition under Chapter 11 of the United States Bankruptcy Code." In response to this announcement, the price of divine stock declined precipitously. During the class period, divine completed two acquisitions, among numerous others -- acquiring Viant Corporation and Delano Technology Corporation -- using its common stock as currency. For more details, contact Marc A. Topaz or Stuart L. Berman by Mail: Three Bala Plaza East, Suite 400, Bala Cynwyd, PA 19004 by Phone: 1-888-299-7706 (toll free) or 1-610-667-7706 or by E- mail: info@sbclasslaw.com ********* A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the Class Action Reporter. Submissions via e-mail to carconf@beard.com are encouraged. Each Friday's edition of the CAR includes a section featuring news on asbestos-related litigation and profiles of target asbestos defendants that, according to independent researches, collectively face billions of dollars in asbestos-related liabilities. The Asbestos Defendant Profiles is backed by an online database created to respond to custom searches. Go to http://litigationdatasource.com/asbestos_defendant_profiles.html ********* 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 2003. 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 * * *