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C L A S S A C T I O N R E P O R T E R
Wednesday, May 1, 2013, Vol. 15, No. 85
Headlines
3PD INC: Fox Rothschild Discusses Use of Preemption Defense
ARKANSAS: Medical Board Sued Over Law Banning All Abortion Care
BANK OF AMERICA: Judge Won't Dismiss Claims on Unlawful Kickbacks
CHEMTALL: Marshall County Class Action Settlement May Get Approval
CITIGROUP INC: Class Action Focuses on Temporary Legal Help Cost
CLOVER STORNETTA: Faces Class Action Over Cane Juice Mislabeling
ELBIT IMAGING: Sued in Tel Aviv for Failing to Make Note Payments
EXPERIAN INFORMATION: 9th Cir. Reverses Approval of $45MM Accord
FISHER COMMS: Being Sold for "Inadequate" Amount, Suit Claims
GADDEL ENTERPRISES: Judge Says Investors May Void Transfers
GLAXOSMITHKLINE: Judge Says Insurers May Seek Reimbursement
GROEB FARMS: Faces Class Action Over Illegal Honey Dumping
LIFE TECHNOLOGIES: Being Sold for Too Little, Suit Claims
MCCLATCHY CO: Sued Over Double Bills on Renewing Subscription
MISSOURI: Ellisville Sued Over Ordinance Limiting Flashing Signals
MODUSLINK GLOBAL: Bid to Dismiss Suit Over Restatement Pending
MOTRICITY INC: Bid to Dismiss Amended Complaint Granted in Jan.
NL INDUSTRIES: Continues to Defend Suits Over Use of Lead Pigment
ORLEANS LEVEE: Class Action Settlement Notification Program Begins
PALOMAR MEDICAL: Being Sold for Too Little, Suit Claims
PEPPERMILL CASINOS: Faces Class Action Over Unadvertised Fees
PEREGRINE PHARMACEUTICALS: Defends Consolidated Suit in Calif.
POSTROCK ENERGY: Paid $4.5MM in Dec. to Settle Kansas Suit
REGIS CORP: Faces Class Action Over Wage Payment Violations
SCIENTIFIC GAMES: Faces Class Suits Over Proposed WMS Acquisition
SINO-FOREST CANADA: McCarthy Tetrault Discusses Court Ruling
SOUTHERN CAREERS: Faces Class Action for Defrauding Students
SPARTECH CORP: Awaits Filing of Deal to Settle Merger Suits
STANDARD FIRE: Jones Day Discusses Class Action Ruling
UNIVERSITY OF ALABAMA: Faces Suit Over "Unethical By Design" Study
VISA INC: May 28 Opt-Out Deadline Set for Cash Settlement Class
*********
3PD INC: Fox Rothschild Discusses Use of Preemption Defense
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Mark Tabakman at Fox Rothschild LLP said that "When I am faced with
a wage suit, whether individual or class action, I always look for
a "magic bullet" a quick fix, a tactic that might make the entire
suit go away in one fell (and less costly) swoop.
One of these tactics is to use a preemption defense. Where there
exists a labor contract, the argument is that the National Labor
Relations Act preempts the wage hour suit, meaning the employees
have to arbitrate their claims. There are other types of
preemption defenses, as illustrated by the defendant's attempted
use of one in a recent case. The tactic failed, but the principle
remains an important one.
A federal judge has held that a federal transportation statute did
not preempt state wage law claims filed by a class of truck
drivers, who claimed they were really employees, not independent
contractors. The case is entitled Martins et al v. 3PD Inc., and
was filed in federal court in the District of Massachusetts.
The judge rejected the Company's contention that the wage hour
claims and misclassification allegations were preempted by the
Federal Aviation Administration Authorization Act of 1994. This
statute, in sweeping fashion, preempts state laws that address
issues of price, route, or service for any motor carrier regarding
hauling of cargo or property. The defendant claimed the broad
range of this federal law trumped the state law claims.
The court stated that "3PD argues that plaintiffs' claims are
preempted by the FAAAA for two reasons: (1) they impermissibly
seek to 'enlarge or enhance the bargain' that the parties entered
into, and (2) they would affect the price of motor carrier
services." The court rejected both arguments, holding that both
contentions relied on the premise that the individuals were
independent contractors, but that, according to the court, was the
quintessential issue in the litigation. The court also certified
the class.
Always examine a possible preemption defense. This is easier to
do when there exists a labor contract, but the possibility of
preemption must always be considered, as it can eliminate a class
action in a single motion.
ARKANSAS: Medical Board Sued Over Law Banning All Abortion Care
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Erik De La Garza at Courthouse News Service reports that two
doctors filed a federal class action against the Arkansas State
Medical Board, challenging a new state law banning all abortion
care at 12 weeks of pregnancy.
Lead plaintiffs Drs. Louis Jerry Edwards and Tom Tvedten sued all
14 members of the Arkansas State Medical Board, including board
President Joseph M. Beck, on their own behalf and on behalf of
their patients. They claim the law banning abortion care after 12
weeks of pregnancy violates "over forty years of settled United
States Supreme Court precedent."
The complaint states: "This is a constitutional challenge under 42
U.S.C. S 1983 to Act 301 of the Arkansas General Assembly of 2013,
to be codified as Ark. Code Ann. SS 20-16-1301-1307 ('the Act').
In violation of over forty years of settled United States Supreme
Court precedent, the Act bans abortion care starting at 12 weeks
of pregnancy, threatening the rights, liberty, and well-being of
Arkansas women and their families. Flouting the protections of
the Fourteenth Amendment to the United States Constitution, the
Act violates the right to be free from unwarranted intrusion by
politicians into matters so fundamentally affecting the course of
a woman's life as the decision whether and when to have a child,
and whether or not to carry a previable pregnancy to term. The
Act would usurp this decision that -- as a constitutional matter
-- must rest with a woman, her family, and her doctor."
The only exceptions to the ban are to save a woman's life, to
prevent "substantial and irreversible impairment of a major bodily
function," and "for cases of statutorily defined rape or incest."
"Under the Act, plaintiffs, medical doctors, are subject to the
severe sanction of license revocation for providing abortion care
starting at 12 weeks of pregnancy. The Act thus denies
plaintiffs' patients their constitutionally guaranteed right to
decide to end a previability pregnancy," the complaint states.
The doctors claim that 20 percent of abortions in Arkansas take
place "at and after 12 weeks."
"The Act will prohibit most of these post-12 week, previability
abortions. Absent an injunction, plaintiffs will have no choice
but to turn away patients in need of abortion care. The
constitutional rights of Arkansas women would suffer irreparably,
as would their well-being and dignity," the complaint states.
"The Act presents physicians in Arkansas with an untenable choice:
to face license revocation for continuing to provide abortion care
in accordance with their best medical judgment or to stop
providing the critical care their patients seek."
They seek declaratory judgment that the law is unconstitutional,
and want its enforcement enjoined.
Their lead counsel is Bettina Brownstein, a cooperating attorney
with the ACLU in Little Rock.
BANK OF AMERICA: Judge Won't Dismiss Claims on Unlawful Kickbacks
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Rose Bouboushian at Courthouse News Service reports that Bank of
America cannot dismiss claims that it funneled unlawful kickbacks
from private mortgage insurers to reinsurance subsidiaries,
costing borrowers more than $284.7 million, a federal judge ruled.
In a putative federal class action, Thomas Riddle, Marilyn Fischer
and Jeffrey Stanton said that Bank of America and its affiliates
funneled unlawful kickbacks from private mortgage insurers to the
reinsurance subsidiaries that the lenders created, so that the
reinsurers received hundreds of millions of dollars in premiums
but assumed little or no actual risk.
"Each of these reinsurance contracts effectively allowed the
reinsurer to opt out of the scheme at its choosing and without
suffering adverse consequences," the amended complaint states.
The borrowers meanwhile allegedly paid at least $284.7 million all
together for mortgage insurance.
Claiming that the statute of limitations under the Real Estate
Settlement Procedures Act had lapsed, Bank of America and the
affiliates moved to dismiss. The class countered that the statute
should be tolled because the defendants "knowingly and actively
concealed the basis for plaintiffs' claims."
Senior U.S. District Judge Berle Schiller in Philadelphia refused
to dismiss the action on April 11.
"Plaintiffs have alleged that their mortgage documents
affirmatively misled them to believe that kickbacks and unearned
fees were actually fees for services rendered," Schiller wrote.
"This court agrees that '[a]llegations of misleading mortgage
documents are sufficient to allege equitable tolling in a RESPA
case.' Barlee, 2013 WL 706091. Plaintiffs argue that defendants'
form documents merely informed them of the possibility that their
loans would be insured, but failed to accurately inform them if
their loans were indeed insured. They also claim that they were
never told that the agreements failed to transfer risk as required
to be legitimate and that 'defendants misrepresented the
relationship between Bank of America, [Bank of America Reinsurance
Corp.] BOA RE, and the [private mortgage insurance] PMI providers'
and failed to disclose which entity would insure their loans.
Whether these arguments ultimately bear fruit must be decided at a
later date. At this stage, however, plaintiffs' allegations that
defendants dressed up an illegal scheme to appear as a legitimate
transaction is sufficient to deny defendants' motion to dismiss on
the issue of equitable tolling."
Bank of America's reliance on RESPA's statute of limitations
failed.
"If plaintiffs are able to prove the facts alleged in their
amended complaint, they may be entitled to have the statute of
limitations equitably tolled," Schiller wrote. "Therefore, the
court will deny the motion to dismiss to afford the parties the
opportunity to develop the record relating to plaintiffs'
equitable tolling allegations. However, defendants have raised
legitimate arguments about the timeliness of plaintiffs' claims
and that plaintiffs failed to exercise due diligence in
discovering those claims. Therefore, before the parties pour
significant time and resources into the merits of plaintiffs'
claims and whether this litigation can be certified as a class
action, the court will afford the parties an opportunity to
conduct limited discovery on the statute of limitations issue."
Bank of America Corp. remains as a defendant along with United
Guaranty Residential Insurance Co., Radian Guaranty Inc., and
Genworth Mortgage Insurance Corp. Previously, the plaintiffs
voluntarily dismissed their claims against Triad Guaranty
Insurance Corp., Republic Mortgage Insurance Co., and Mortgage
Guaranty Insurance Corp.
CHEMTALL: Marshall County Class Action Settlement May Get Approval
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John O'Brien, writing for The West Virginia Record, reports that
it appears a proposed Marshall County class action settlement that
sets up a medical monitoring system for West Virginians who worked
at coal and water treatment plants will be approved.
The docket of the case Stern v. Chemtall, et al., shows no one
objected to the settlement before an April 1 deadline to do so.
The proposed settlement was approved Dec. 3 by Marshall Circuit
Judge David W. Hummel, Jr., who will conduct a fairness hearing on
May 1 at which he will likely give the settlement final approval.
In a January article in the West Virginia Record, Ted Frank, the
founder of the Center for Class Action Fairness, said the proposed
settlement appeared unfair because the monitoring program has
approximately the same monetary value as the fees requested by
plaintiffs attorneys.
Plaintiffs attorneys plan to request one-third of the $13.95
million, plus almost $2 million in costs.
"A settlement fee request where the attorneys propose to get $6.62
million and the class members get $6.58 million is unfair on its
face -- especially when it appears structured so that much of that
$6.58 million will actually end up in the hands of third parties
long after the attorneys have collected their checks," Mr. Frank
said.
Money left in the medical monitoring fund after a court-approved
deadline will be given to the Blanchette Rockefeller Neurosciences
Institute in Morgantown and the Center for Rural Health at the
Joan C. Edwards School of Medicine at Marshall University.
The case involves the chemical polyacrylamide, often referred to
as "flocculent" or "floc." Workers at coal and water treatment
plants who were possibly exposed to it make up the class.
The lawsuit said workers at plants that used the chemical have a
higher risk for sensory or autonomic nervous system deficits but
doesn't allege any injuries have yet occurred.
The defendants were manufacturers and distributors of the chemical
and included Chemtall, CIBA Specialty Chemicals, Cytec Industries,
G.E. Betz, Hychem, Ondeo Nalco, Stockhausen and Zinkan
Enterprises.
Class members must file a claim form to get a medical examination.
A deadline to do so has not been determined yet, but attorneys
involved say it could be as early as March 1, 2014.
Class members cannot exclude themselves from the settlement, which
means they can't sue as individuals for free examinations.
However, should a class member develop an injury, he or she will
still be able to file a lawsuit.
Representing the plaintiffs is R. Dean Hartley of Hartley &
O'Brien. G.E. Betz will be responsible for paying attorneys fees
and costs to the plaintiffs lawyers.
The defendants agreed not to dispute the fees award. They are
also paying $750,000 in notice and administrative costs.
The complaint, filed in 2003, says the class members are at an
increased risk for cancer of the testicles, adrenal gland, mammary
gland, uterus, thyroid, pancreas, brain, spinal cord and lungs.
"The acrylamide monomer is toxic and is an irritant," says the
complaint, filed in 2003.
"Cases of acrylamide poisoning show signs and symptoms of local
effects due to irritation of the skin and mucous membranes and
systemic effects due to the involvement of the central, peripheral
and autonomic nervous systems.
"The neurotoxicity of acrylamide has been recognized since the
early 1950s during toxicologic studies prompted by the advent of
large-scale production of acrylamide for the polymer industry.
"Within five months of commencing manufacture of acrylamide,
several factory workers developed a peripheral neuropathy
strikingly similar to neurologic signs previously noted in animals
chronically intoxicated with acrylamide.
CITIGROUP INC: Class Action Focuses on Temporary Legal Help Cost
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Jennifer Smith, writing for The Wall Street Journal, reports that
attorneys for a group of plaintiffs who sued Citigroup Inc. want
to bill their clients as much as $550 an hour for contract lawyers
who sifted through reams of documents in the case. The problem,
according to one legal gadfly, is that the plaintiffs' firm
probably paid no more than $60 to $75 an hour for the help.
Ted Frank, a litigator who often objects to class-action
settlements, is taking issue with the nearly $100-million cut
plaintiffs' attorneys are seeking of a proposed settlement between
Citigroup and investors who claim the bank hid the extent of its
exposure to toxic mortgage debt. Mr. Frank says the requested
share -- 16.5% of the $590 million settlement -- is based in part
on bloated billing for thousands of hours of mostly routine legal
work, and would be a windfall that rewards the lawyers at the
expense of their clients.
The dispute is putting a spotlight on the practice of marking up
the price of temporary legal help in class-action suits, sometimes
by extraordinary margins. And it raises questions about methods
used to calculate how big a share of the winnings should go to
plaintiffs' firms, which pay for legal costs up front, taking on
risk in hopes of a big payday later.
Law firms increasingly rely on armies of contract attorneys to
review the massive amounts of material generated during the
discovery phase of litigation. Firms might hire lawyers directly,
paying them $25 to $40 an hour, or through staffing agencies that
bill $50 to $80 an hour for their services, depending on an
attorney's qualifications and the complexity of the assignment.
Such arrangements can save the firms a lot of money, but the
savings aren't always passed on to the client. Markups are
permissible as long as the total fee remains "reasonable" and the
contract lawyers' work is charged to the client as a fee for legal
services (not as an expense), according to a 2000 nonbinding
ethics opinion issued by the American Bar Association, which cited
similar opinions by bar groups in Virginia, Colorado and the
District of Columbia.
A law firm might charge a client more because the firm is
professionally liable for the contract lawyer's work, or because
it provided the temps with office space or computers, said Stephen
Gillers, a law professor and legal-ethics expert at New York
University School of Law. "All of that justifies a markup," he
said. "The question is how much."
Kirby McInerney LLP, the New York firm representing the lead
plaintiff in the Citigroup case, said its fee request is fair
given the risks it assumed by taking on the case.
"The fact that the billing rates of contract attorneys are in
excess of what the law firm pays them is not unusual or untoward,"
said Ira Press, a partner at Kirby McInerney. "That's to cover
overhead and have a profit built in."
The average contract lawyer rate it cites -- about $465 an hour --
reflects the going price in the New York legal market for lawyers
with similar expertise, the firm said. Much of the work done by
Kirby McInerney's contract lawyers required an understanding of
sophisticated financial structures and concepts, it said in court
filings. All told, the contract attorneys worked more than 61,000
hours on the Citigroup case.
But Mr. Frank and others say that much of the work contract
lawyers perform in such cases requires no special expertise, and
that plaintiffs' firms use their labor to artificially inflate
legal fees. "We have not heard from a single paying client in the
New York area who pays $500 an hour for contract attorneys,"
Mr. Frank, a Citigroup shareholder, said at a hearing on the fee
request in Manhattan federal court before Judge Sidney H. Stein.
Mr. Frank's efforts in the Citigroup case are funded by a
nonprofit group he founded called the Center for Class Action
Fairness. A handful of other parties have also filed objections
to the settlement on other grounds; a ruling on the settlement is
expected in coming weeks.
In big securities cases like the Citigroup matter, judges often
evaluate plaintiffs' law-firm fee requests by stacking that amount
up against a calculus known as a lodestar: the number of hours the
lawyers worked on the case, times the reasonable hourly rate for
each of the lawyers, with a further multiplier whose size depends
on how much risk the firm incurred by taking on the case.
How much Kirby McInerney paid its temp lawyers isn't the point,
Judge Stein said at last week's hearing. "The issue," he said,
"is what a reasonable client would pay."
To support its fee request, Kirby McInerney has cited more than a
dozen large securities class actions where judges approved
settlements where the average rates for contract lawyers weren't
much lower than those for firm associates, according to court
filings. For instance, the average hourly fee for contract
lawyers in the Enron Corp. case settled in 2008 was $305.83,
compared with $349.90 for the average associate.
Judges rarely question the market rates in such applications
because they "don't want to open Pandora's box," said Lester
Brickman, an expert on class-action litigation and professor at
Yeshiva University's Benjamin N. Cardozo School of Law.
To be sure, plaintiffs' firms aren't the only lawyers who make a
profit off contract lawyers. Defense firms also use them for
document review and other tasks, and they too may charge clients
more than what they paid for those services, according to two
litigators at major U.S. law firms who said arrangements vary
depending on the client, the firm and the case.
But in other instances firms pass on contract-lawyer costs
directly to clients as an expense. Some big corporations and
financial institutions even cut their own deals with staffing
agencies, and direct firms to use those providers exclusively.
For example, in the Citigroup case the bank hired its own contract
lawyers, according to Citigroup's lawyer, Brad Karp --
bkarp@paulweiss.com -- of Paul, Weiss, Rifkind, Wharton & Garrison
LLP. "I believe the cost was $25 to $35 an hour," Mr. Karp told
Judge Stein at the hearing. "But Citigroup is a large vendor and
has enormous market power."
Big law-firm clients also typically negotiate such costs at the
front end of a case. That doesn't always happen with class
actions, where agreements with lawyers who take such cases on a
contingency basis might have looser parameters.
"A corporation whose law firm hires contract lawyers can protect
itself, it's quite sophisticated," said Mr. Gillers of NYU. "This
is an after-the-fact claim that the plaintiffs' firms make in
their application to the court . . . The question is, who's
watching the lawyers."
CLOVER STORNETTA: Faces Class Action Over Cane Juice Mislabeling
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Allen Yesilevich, writing for Class Action Central, reports that a
class action complaint was filed against Clover Stornetta Farms
Inc. accusing the natural foods manufacturer of breaking federal
laws and misleading customers by mislabeling an element in its
yogurt and dairy products.
According to the class action lawsuit, the U.S. Food and Drug
Administration has cautioned food companies to refrain from using
the phrase "organic evaporated cane juice," because it breaches
numerous labeling requirements with respect to using common and
usual names of ingredients. Clover Stornetta Farms has
disregarded these regulations and unlawfully included the phrase
on its labels, the lawsuit concludes.
"The FDA has instructed that sweeteners derived from sugar can
syrup should not be listed in the ingredient declaration by names
which suggest that the ingredients are juice, such as evaporated
cane juice," the complaint states. "The FDA considers such
representations to be false and misleading because they fail to
reveal the basic nature of the food and its characterizing
properties."
The plaintiffs who filed the complaint said they would not have
purchased Clover Stornetta Farms's berry cream and vanilla bean
yogurt products if they were aware that the products had sugar or
dried cane syrup.
The FDA released guidance for ingredients categorized as
evaporated cane juice in October 2009, which informed companies to
not use the term because evaporated cane juice is not an FDA-
approved common or usual name for any type of sweetener, the
lawsuit states.
The lawsuit, which accuses Clover Stornetta Farms of unlawful,
unfair and fraudulent business practices as well as misleading
advertising, was filed on behalf of a nationwide class of
thousands of people who were deceived into buying the company's
yogurt and dairy items.
ELBIT IMAGING: Sued in Tel Aviv for Failing to Make Note Payments
-----------------------------------------------------------------
Elbit Imaging Ltd. on April 15 disclosed that the Company received
a purported class action lawsuit filed against the Company in the
District Court of Tel Aviv on April 11, 2013, by a holder of
Series B Notes, in connection with allegations, mainly that the
Company failed to pay Series A and B Notes on February 2013. The
plaintiff argues that the failure to pay results from the
Company's failure to timely identify and react to the decline in
its business. The total amount claimed, if the lawsuit is
certified as a class action, is estimated by the plaintiff to be
approximately NIS82 million. The personal amount claimed by the
plaintiff is approximately NIS622,000. At this preliminary stage,
the Company is unable to assess the lawsuit's chances of success
and intends to vigorously defend against it.
About Elbit Imaging Ltd.
Elbit Imaging Ltd. operates in the following principal fields of
business: (i) Commercial and Entertainment Centers, (ii) U.S. Real
Property, (iii) Hotels, (iv) Medical Industries, (v) Residential
Projects - Initiation, construction and sale of residential
projects and other mixed-use real property projects, predominately
residential, located primarily in India; (vi) Fashion Apparel -
Distribution and marketing of fashion apparel and accessories in
Israel; and (vii) Other Activity - venture capital investments.
EXPERIAN INFORMATION: 9th Cir. Reverses Approval of $45MM Accord
----------------------------------------------------------------
Tim Hull at Courthouse News Service reports that fat incentive
awards to the named plaintiffs in a class action against credit-
reporting agencies tainted a $45 million settlement, the 9th
Circuit ruled.
The federal appeals court in Pasadena refused to put an end to
eight years of wrangling over allegations that Experian
Information Solutions, Equifax Information Services, and Trans
Union routinely reported debts discharged in bankruptcy and
refused to investigate disputes over the status of such debts.
Several plaintiffs sued the companies in 2005 and 2006 for
violating federal credit-reporting laws, and the cases were
consolidated as a proposed class action in the Central District of
California.
A 2008 settlement ordered the credit agencies to change their
policies and procedures, and the parties later agreed to a
$45 million award -- $15 million from each of the defendants. The
agreement was to give actual damages to about 15,000 class
members.
Those who lost out on employment because of an inaccurate credit
report would get $750; those who couldn't get a mortgage or a
lease would receive $500; and those denied car loans or credit
would get $150. About 755,000 other class members would receive a
"convenience award" of $26 each.
The agreement also includes an "incentive award, to each of the
named plaintiffs serving as class representatives in support of
the settlement not to exceed $5,000."
It also, of course, allowed for attorneys' fees and costs, which
ultimately reached about $16 million, according to the ruling.
U.S. District Judge David Carter approved the settlement in 2011,
but several objectors challenged the move and took the issue to
the 9th Circuit.
During oral arguments before the appellate court last month, the
attorney for the objectors, George Carpinello with Boies, Schiller
& Flexner of Albany, N.Y., argued that the incentive awards had
created a fatal conflict of interest. In defense, Michael
Caddell, with Caddell & Chapman of Houston, said that the
incentives merely rewarded those few plaintiffs who had been
deeply involved in the case from the start, and were not intended
to influence or coerce the plaintiffs into going along with the
settlement.
A three-judge panel agreed with the objectors in a unanimous
reversal earlier this month, with one judge calling for the
disqualification of the class's attorneys.
"The conditional incentive awards changed the motivations for the
class representatives," Judge Ronald Gould wrote for the panel.
"Instead of being solely concerned about the adequacy of the
settlement for the absent class members, the class representatives
now had a $5,000 incentive to support the settlement regardless of
its fairness and a promise of no reward if they opposed the
settlement," he added.
"The conditional incentive awards removed a critical check on the
fairness of the class-action settlement, which rests on the
unbiased judgment of class representatives similarly situated to
absent class members."
In a concurrence, U.S. District Judge Sam Haddon, who sat on the
panel by designation from the District of Montana, wrote that the
class's lawyers were "singularly committed to doing whatever was
expedient to hold together an offer of settlement that might
yield, as it did, an allowance of over $16 million in lawyers'
fees."
"Such adherence to self-interest, coupled with the obvious
fundamental disregard of responsibilities to all class members
-- members who had little or no real voice or influence in the
process -- should not find favor or be rewarded at any level," he
wrote. "Although within the discretion of the district court in
the first instance, I conclude that class counsel should be
disqualified from participation in any fee award ultimately
approved by the district court upon resolution of the case on the
merits."
Class council Mike Caddell, of Caddell & Chapman in Houston, said
the ruling shows how judges "really just don't like incentive
awards at all." Though the settlement had allowed for incentive
awards of up to $5,000 for the four class representatives, the
trial judge lowered the figure to $3,000, he added. This payment
should not have derailed what would have been the second largest
fair-credit reporting award in history, Caddell said.
"There was really not an issue as to an actual conflict," Caddell
said. "This is just a question of appearance." He said that the
class representatives had already approved the settlement before
the incentive award even came up, adding that the amounts here are
quite small when compared with other incentive payments that have
passed the 9th Circuit's scrutiny.
"They [the judges] haven't given us any real guidance," he said.
Caddell added that this case has inspired a change in the way his
firm handles incentive awards, which he called "service awards."
In his most recent settlement cases, Caddell has "applied for a
service award" even if the class representatives did not approve
the settlement, he said.
Class co-counsel Michael Sobol, of Lieff Cabraser Heimann &
Bernstein in San Francisco, also voiced his disappointment with
the ruling.
"We still believe the settlement agreement did not condition any
service award to the class members upon their approval of the
settlement, and therefore presented no conflict of interest, as
indeed the District Court which has presided over the case since
2005 determined in its detailed and comprehensive findings," Sobol
said in an email. "The Ninth Circuit today found no fault with
the reasonableness of the settlement terms, and we remain
optimistic that upon remand, consistent with the opinion today, we
will gain approval of the substantive settlement terms and deliver
its substantial benefits to the class."
He added that "the potential monetary benefits come on the heels
of the historic injunctive relief approved earlier in the case
which requires, for the first time, that the credit bureaus
reconcile conflicting information in consumers' credit histories."
FISHER COMMS: Being Sold for "Inadequate" Amount, Suit Claims
-------------------------------------------------------------
Courthouse News Service reports that Fisher Communications is
selling itself to Sinclair Broadcast Group for a "grossly
inadequate" $41 a share or $373 million, shareholders say in a
class action in King County Court.
GADDEL ENTERPRISES: Judge Says Investors May Void Transfers
-----------------------------------------------------------
Rose Bouboushian at Courthouse News Service reports that investors
who were fleeced in a $7 million Ponzi scheme can void transfers
made to certain "insiders" that profited off the fraud, a federal
judge ruled.
Claiming that they lost $57,000 in a Ponzi scheme orchestrated by
Lizette Morice and her purported real estate investment firm,
Gaddel Enterprises Inc., Thomas Carroll and Kimberly Baker hope to
represent a class of 2,800 other investors. They sued William
Stettler III and 92 other investors that allegedly reaped more
than $5.1 million in proceeds from the scam.
From early 2006 to July 2007, Morice allegedly told mortgage
brokers and individual investors that Gaddel purchased foreclosed
properties and resold them to large corporations at a profit.
Morice and her colleagues recruited investors at her New Jersey
home, in her Pennsylvania and New Jersey offices, and at elaborate
black-tie affairs paid for by Gaddel, according to the complaint.
Investors were told that they minimum $1,000 contributions would
entitle them to a share of its profits since state regulations
barred Gaddel from serving as the owner of record for more than a
certain number of properties per quarter.
Morice and others allegedly amassed more than $7 million, though
no real estate transactions ever took place. After pleading
guilty to seven counts of mail fraud in 2008, Morice was sentenced
to 10 years in prison and ordered to pay about $7.3 million in
restitution at a rate of $25 per quarter, which will take about
71,500 years.
Carroll and Baker moved for summary judgment against 12 of the
defendants and their entities. They demanded return of investment
profits that Gaddell allegedly transferred to nine of the
investors during the course of the fraud. They also sought the
return of investment profits and principal, as well as salaries
and commissions, allegedly paid to three so-called insiders named
in the suit.
Looking only at the claim against the insiders, U.S. District
Judge Mary McLaughlin concentrated on the claims against salaried
Gaddel employees Albin Delgado, James Martin and Troy McClain.
She refused to grant summary judgment against Martin, his wife,
McClain, and their respective entities.
Although Martin said in an email that a $1,000 investment could
become $1 million in two years, he may have not known of the
scheme, according to the ruling.
"Martin's sales pitches and correspondences with Morice aligned
with Gaddel's representations in general -- that investing small
amounts of monies in foreclosed properties can lead to huge
returns -- and offered no proof that he was privy to any unique
knowledge regarding the scheme," McLaughlin wrote. "His
understanding that no other investment offered comparable returns
is by itself insufficient for the court to presume inquiry notice.
A reasonable jury could find that Martin's belief in his employer,
however uninformed, was not so unfounded that he should have known
it was too good to be true."
The judge also found a genuine dispute as to whether McClain knew
of the scheme.
"In an unsworn verification [McClain] submitted to the court, he
stated that he had no knowledge of Morice's network of mortgage
brokers or corporate contacts," McLaughlin wrote. "He has also
recounted in great detail the elaborate galas thrown by Morice and
the distinguished guests who attended. He emphasized that many of
Gaddel's investors were well-respected in the mortgage industry.
It would not be unreasonable for a factfinder to believe McClain's
version and to find that he was not on inquiry notice of the
scheme."
Delgado and his company, Albinator Enterprises, did not fare as
well.
"Without any argument from Delgado, either in the form of a brief
in opposition or during oral argument, the court does not have any
facts with which to rebut the plaintiffs' contentions against
him," McLaughlin wrote.
In 2010, McLauglin refused to dismiss claims against MJD
Investments, Michael DeBronzo, Rabbit2007 Inc., and Ian Virgin.
GLAXOSMITHKLINE: Judge Says Insurers May Seek Reimbursement
-----------------------------------------------------------
Rose Bouboushian at Courthouse News Service reports that insurers
that paid to treat the heart problems developed by users of
Avandia and Paxil can seek reimbursement from GlaxoSmithKline in
state court, a federal judge ruled.
UnitedHealth Group and Humana Health Plan took the British
multinational drugmaker to court over health care expenses
Medicare patients incurred after using the drugs, which have been
linked to potentially life-threatening cardiovascular
complications. They filed in the Court of Common Pleas of
Philadelphia County under the federal Medicare Secondary Payer
Act, which gives private insurers a right to sue for reimbursement
and allows for double damages.
The suit is part of the Avandia multidistrict litigation, which
resulted in a $3 billion settlement from Glaxo in July 2012.
Months later, Glaxo agreed to spread $90 million across 38 states
to settle claims that it fraudulently misrepresented Avandia's
safety risks.
The U.S. Supreme Court declined on April 15 to let Glaxo pursue
claims that insurers cannot sue after they provide Medicare
Advantage services and incur their own costs.
Glaxo removed UnitedHealth and Humana's claims to the Eastern
District of Pennsylvania, arguing that the claims are exclusively
within federal court jurisdiction under the Employee Retirement
Income Security Act (ERISA).
U.S. District Judge Cynthia Rufe found this maneuver premature,
however, because the insurers had merely filed a praecipe to issue
a writ of summons and precomplaint interrogatories.
Under Section 1446(b) of 28 U.S.C., a defendant must file a
removal notice within 30 days of receiving the complaint.
"The ruling has been interpreted in this district to mean that
'removal is not proper until a complaint has been served on the
defendants,'" Rufe wrote. "'Accordingly, because plaintiffs here
have not served a complaint, defendants' notice of removal was not
too late, it was too early.'
"The court appreciates that it appears likely that once complaints
have been filed the state court actions will be removable on the
basis of federal question jurisdiction under ERISA or [Class
Action Fairness Act] CAFA but cannot hold that this is necessarily
so, which is why the 'bright line rule' adopted by the Court of
Appeals in Sikirica applies," she added, citing the 2005 decision
of the 3rd Circuit in Sikirica v. Nationwide Insurance Co.
Rufe said the complaint is the operative document for removal.
"In ruling that removal is premature, the court affirms its
earlier ruling in the first UnitedHealth removal, and follows the
established law of this district and the 3rd Circuit in requiring
a complaint before a case may be removed," the ruling states.
UnitedHealth cannot collect attorneys' fees, however, because
Glaxo "had a colorable basis for its actions."
Glaxo has paid out at least $460 million for the litigation, CNBC
reported.
GROEB FARMS: Faces Class Action Over Illegal Honey Dumping
----------------------------------------------------------
Jack Bouboushian at Courthouse News Service reports that
businesses illegally imported Chinese honey, ducking tens of
millions of dollars in anti-dumping duties and depressing prices
for domestic honey, honey farms claim in two RICO class actions.
Chris Moore dba Moore's Honey Farm is lead plaintiff in one of the
three class actions in Federal Court. They sued Michigan-based
Groeb Farms Inc., Ernest and Troy Groeb and Horizon Partners, of
Milwaukee, Wisc., and Naples, Fla., which acquired Groeb Farms in
2007.
The plaintiffs accuse the defendants of "foisting on the
government and the domestic honey market illicit, low-cost Chinese
honey as legitimate honey. Defendants did it with the intent to
defraud the government and defraud and crowd out legitimate honey
producers to defendants' financial benefit and the financial
detriment of plaintiffs and class members."
The complaint adds: "In furtherance of their conspiracy,
defendants and their co-conspirators (i) caused honey originating
in China (and possibly other unlawful sources), including honey
containing adulterated antibiotics, to be illegally transshipped
through intermediate countries (including, inter alia, India,
Thailand, Malaysia, and the Philippines) to the United States,
(ii) falsely represented to government import authorities that the
Chinese honey (a) originated in countries other than China and/or
(b) was not honey, but other products, including sugars and
syrups, and (iii) marketed, sold, and distributed fraudulently
declared Chinese-origin honey to businesses and persons throughout
the United States-to the financial detriment of Plaintiffs and
Class Members." (Parentheses in complaint.)
The average price of honey sold in the United States was $1.45 in
2010, but illegally imported honey was sold as low at 75 cents a
pound, the famers claim.
The American Honey Producers Association found that from 2008 to
2010, at least 80 million pounds of Chinese honey was imported
without paying anti-dumping duties, cheating the U.S. Treasury of
$300 million, according to the 41-page complaint.
"Defendants' conspiracy and wrongful acts inflicted severe
economic hardship on plaintiffs and class members that are
legitimate domestic honey producers and packers," the plaintiffs
say.
The plaintiffs claim that in February this year Groeb Farms signed
a Deferred Prosecution Agreement with the federal government,
admitting that its "unlawful actions 'caused losses to the United
States of no less than $78,866,216' in the form of unpaid
antidumping duties between February 2008 and April 2012. As part
of the Deferred Prosecution Agreement, Groeb Farms paid a
$2 million fine to the government."
The plaintiffs seek compensation for damage to their businesses
from the Groebs' illegal honey dumping.
"Defendants agreed to commit (and committed) these substantive
RICO offenses through the RICO enterprise (i.e., Groeb Farms) by
engaging in multiple predicate acts of mail fraud and/or
interstate and/or foreign wire fraud -- all the while knowing of,
and intentionally agreeing to, the overall objective of the scheme
to defraud and related matters as stated herein -- to wit,
unlawfully capturing the United States honey market, wrongfully
undercutting their competition, driving their competitors out of
business, and illicitly capturing for themselves the earnings and
profits that otherwise would have been earned by legitimate honey
producers, packers, and wholesalers," according to the complaint.
The class seeks treble damages for RICO violations, punitive
damages for negligent misrepresentation and unjust enrichment, and
an injunction against further illegal importation of Chinese
honey.
They are represented by Ben Barnow with Barnow and Associates of
Chicago.
Adee Honey Farms is lead plaintiff in the other class action,
which also alleges trademark violations. It is represented by Adam
Levitt with Grant & Eisenhofer.
Adee also is a co-plaintiff in the Moore complaint.
LIFE TECHNOLOGIES: Being Sold for Too Little, Suit Claims
---------------------------------------------------------
Courthouse News Service reports that Life Technologies (scientific
instruments) is selling itself too cheaply to Thermo Fisher, for
$76 a share of $13.6 billion, shareholders claim in Chancery
Court.
MCCLATCHY CO: Sued Over Double Bills on Renewing Subscription
-------------------------------------------------------------
Joe Harris at Courthouse News Service reports that subscribers
filed a class action against McClatchy and 30 of its newspapers,
including its flagship Bee papers, claiming the chain double bills
customers who renew their subscriptions.
Lead plaintiffs Elizabeth and Michael O'Shaughnessy sued The
McClatchy Company on behalf of subscribers, in Jackson County
Court. Thirty McClatchy papers are named as defendants, including
The Kansas City Star, the Sacramento Bee and the other Bee papers
in California, The Charlotte Observer and the Fort Worth-Star
Telegram.
The class claims that when customers renew a subscription,
McClatchy starts the new subscription from the day it renews it-
without letting the previous subscription run out-thereby charging
twice for overlapping days.
"Pursuant to the specific terms of the standard agreements,
subscription customers of defendant, including plaintiffs, agreed
to pay defendant, and did pay defendant, a flat fee for the
newspaper services to be provided by defendant during the specific
duration of the specific subscription period selected by the
customer, in the amount indicated in the standard agreements and
in accordance with the terms specified in the standard
agreements," the complaint states.
"Notwithstanding the express terms of the standard agreements, and
the express duration of the subscription period set forth in the
standard agreements, whenever defendant renews a customer's
subscription it begins the new subscription period to the end of
the current subscription period which results in an overlap in a
customer's subscription period."
The O'Shaughnessys claim the class includes "thousands of
members."
They seek actual and punitive damages for breach of contract,
breach of implied duty of good faith and fair dealing and
violation of consumer protection statutes.
They are represented by Theodore C. Beckett III with Beckett &
Hensley.
McClatchy is a highly regarded chain, known as one that has tried
to withstand the nationwide deterioration of the newspaper
business without resorting first to staff cuts and reduced news
coverage.
MISSOURI: Ellisville Sued Over Ordinance Limiting Flashing Signals
------------------------------------------------------------------
Joe Harris at Courthouse News Service reports that a federal class
action claims a St. Louis suburb unconstitutionally tickets
drivers who flash their headlights to warn other drivers about a
city speed trap -- a method of speech.
Lead plaintiff Michael J. Elli sued Ellisville, pop. 9,200,
25 miles west of St. Louis.
Elli claims the ticket he got from an Ellisville police officer
for flashing his headlights at oncoming traffic on Nov. 17, 2012
violated his right to free speech. He also claims that when he
appeared in court to fight the ticket, "the judge became agitated
and asked (him) if he had ever heard of 'obstruction of justice.'"
The complaint states: "Plaintiff observed a speed trap.
"Plaintiff communicated by flashing his headlamps to drivers
approaching in the opposite direction -- none of whom plaintiff
suspected of violating any law -- that they should proceed with
caution.
"The flashing of headlamps is commonly understood as conveying the
message to slow down and proceed with caution.
"The Missouri Department of Revenue, which is responsible for the
licensing of drivers within the State of Missouri, recommends
drivers flash their headlamps to warn other drivers of
emergencies.
"Plaintiff did not violate any law."
Elli claims it was the first ticket he got in 35 years of driving.
He says the John Doe officer cited him for violating an Ellisville
ordinance limiting flashing signals on vehicles.
Elli says no reasonable officer would believe that he violated the
law. He claims Ellisville Police Chief Tom Felgate told him it's
a moving violation, so points would be assessed against him if he
were found guilty.
"When plaintiff appeared in municipal court, as directed on the
citation, he was advised by the municipal judge that the standard
punishment imposed in the City of Ellisville for using headlamps
to communicate the presence of a speed-trap is a $1,000.00 fine,"
the complaint states.
"When plaintiff asserted to the municipal judge that he wanted to
plead not guilty because he did not believe flashing headlamps
violated 375.100, the judge became agitated and asked plaintiff
if he had ever heard of 'obstruction of justice.'"
Elli pleaded not guilty and was told to come back to court on
Feb. 21, 2013, but the charges were dropped on Feb. 12.
"Upon information and belief, it is a widespread practice of the
City of Ellisville to pull over, detain, and cite individuals who
are perceived as having communicated to oncoming traffic that a
speed-trap is ahead by flashing their headlamps, and then
prosecute and impose fines upon those individuals," the complaint
states.
"In addition, the widespread practice includes citing and
prosecuting individuals for violation of an ordinance that no
reasonable officer would believe the individuals had violated,
without reasonable suspicion or probable cause to believe they had
violated any law, and in retaliation for the individuals having
engaged in conduct protected by the First Amendment.
"City officials, including Felgate, are aware of the widespread
practice of citing and prosecuting individuals for violation of an
ordinance that no reasonable officer would believe the individuals
had violated, without reasonable suspicion or probable cause to
believe they had violated any law, and in retaliation for the
individuals having engaged in conduct protected by the First
Amendment."
The class consists of anyone who drove in Ellisville and
communicated or did not communicate with oncoming drivers by
flashing their headlights, for fear of a ticket. Elli wants
Ellisville enjoined from ticketing motorists who flash their
headlights and damages for constitutional violations and malicious
prosecution.
He is represented by Anthony Rothert with the ACLU of Eastern
Missouri.
MODUSLINK GLOBAL: Bid to Dismiss Suit Over Restatement Pending
--------------------------------------------------------------
ModusLink Global Solutions, Inc.'s motion to dismiss a
consolidated securities class action lawsuit arising from its June
11, 2012 announcement of the restatement of its financial results
remains pending, according to the Company's March 12, 2013, Form
10-Q filing with the U.S. Securities and Exchange Commission for
the quarter ended January 31, 2013.
On February 15, 2012, the staff of the Division of Enforcement of
the SEC initiated with the Company an informal inquiry, and later
a formal action, regarding the Company's treatment of rebates
associated with volume discounts provided by vendors. To date,
the SEC has not asserted any formal claims.
Following the June 11, 2012 announcement of the pending
restatement (the "June 11, 2012 Announcement"), shareholders of
the Company commenced three purported class actions in the United
States District Court for the District of Massachusetts arising
from the circumstances described in the June 11, 2012 Announcement
(the "Securities Actions"), entitled, respectively:
* Irene Collier, Individually And On Behalf Of All Others
Similarly Situated, vs. ModusLink Global Solutions, Inc.,
Joseph C. Lawler and Steven G. Crane, Case 1:12-CV-11044-
DJC, filed June 12, 2012 (the "Collier Action");
* Alexander Shnerer Individually And On Behalf Of All Others
Similarly Situated, vs. ModusLink Global Solutions, Inc.,
Joseph C. Lawler and Steven G. Crane, Case 1:12-CV-11078-
DJC, filed June 18, 2012 (the "Shnerer Action"); and
* Harold Heszkel, Individually and on Behalf of All Others
Similarly Situated v. ModusLink Global Solutions, Inc.,
Joseph C. Lawler, and Steven G. Crane, Case 1:12-CV-11279-
DJC, filed July 11, 2012 (the "Heszkel Action").
Each of the Securities Actions purports to be brought on behalf of
those persons who purchased shares of the Company between
September 26, 2007, through and including June 8, 2012 (the "Class
Period"), and alleges that failure to timely disclose the issues
raised in the June 11, 2012 Announcement during the Class Period
rendered defendants' public statements concerning the Company's
financial condition materially false and misleading in violation
of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5
promulgated thereunder. On February 11, 2013, following the
Company's restatement, the plaintiffs filed a consolidated amended
complaint in the Securities Action. The Company moved to dismiss
the amended complaint on March 11, 2013.
Waltham, Massachusetts-based ModusLink Global Solutions, Inc.,
through its wholly owned subsidiaries, is one of the leaders in
global supply chain business process management serving clients in
markets, such as consumer electronics, communications, computing,
medical devices, software, luxury goods and retail. The Company
designs and executes critical elements in its clients' global
supply chains to improve speed to market, product customization,
flexibility, cost, quality and service.
MOTRICITY INC: Bid to Dismiss Amended Complaint Granted in Jan.
---------------------------------------------------------------
Motricity, Inc.'s motion to dismiss the second amended complaint
of a consolidated securities lawsuit was granted in January 2013,
according to the Company's March 12, 2013, Form 10-K filing with
the U.S. Securities and Exchange Commission for the year ended
December 31, 2012.
Joe Callan filed a putative securities class action complaint in
the U.S. District Court for the Western District of Washington at
Seattle on behalf of all persons who purchased or otherwise
acquired common stock of Motricity between June 18, 2010, and
August 9, 2011, or in the Company's initial public offering. The
defendants in the case are Motricity, certain of the Company's
current and former directors and officers, including Ryan K.
Wuerch, James R. Smith, Jr., Allyn P. Hebner, James N. Ryan,
Jeffrey A. Bowden, Hunter C. Gary, Brett Icahn, Lady Barbara Judge
CBE, Suzanne H. King, Brian V. Turner; and the underwriters in the
Company's initial public offering, including J.P. Morgan
Securities, Inc., Goldman, Sachs & Co., Deutsche Bank Securities
Inc., RBC Capital Markets Corporation, Robert W. Baird & Co
Incorporated, Needham & Company, LLC and Pacific Crest Securities
LLC. The complaint alleges violations under Sections 11 and 15 of
the Securities Act of 1933, as amended, (the "Securities Act") and
Section 20(a) of the Securities Exchange Act (the "Exchange Act")
by all defendants and under Section 10(b) of the Exchange Act by
Motricity and those of the Company's former and current officers
who are named as defendants. The complaint seeks, inter alia,
damages, including interest and plaintiff's costs and rescission.
A second putative securities class action complaint was filed by
Mark Couch in October 2011 in the same court, also related to
alleged violations under Sections 11 and 15 of the Securities Act,
and Sections 10(b) and 20(a) of the Exchange Act. On November 7,
2011, the class actions were consolidated, and lead plaintiffs
were appointed pursuant to the Private Securities Litigation
Reform Act. On December 16, 2011, the plaintiffs filed a
consolidated complaint which added a claim under Section 12 of the
Securities Act to its allegations of violations of the securities
laws and extended the putative class period from August 9, 2011,
to November 14, 2011. The plaintiffs filed an amended complaint
on May 11, 2012, and a second amended complaint on July 11, 2012.
On August 1, 2012, the Company filed a motion to dismiss the
second amended complaint, which was granted on January 17, 2013.
New York-based Motricity, Inc. -- http://www.motricity.com/--
provides mobile data solutions serving mobile operators, consumer
brands and enterprises, and advertising agencies. The Company's
software as a service ("SaaS") based platform enables its
customers to implement marketing, merchandising, commerce, and
advertising solutions to engage with their target customers and
prospects through mobile devices.
NL INDUSTRIES: Continues to Defend Suits Over Use of Lead Pigment
-----------------------------------------------------------------
NL Industries, Inc., is defending lawsuits asserting personal
injury, property damage and governmental expenditures allegedly
caused by the use of lead-based paints, according to the Company's
March 12, 2013, Form 10-K filing with the U.S. Securities and
Exchange Commission for the year ended
December 31, 2012.
The Company's former operations included the manufacture of lead
pigments for use in paint and lead-based paint. The Company,
other former manufacturers of lead pigments for use in paint and
lead-based paint (together, the "former pigment manufacturers"),
and the Lead Industries Association (LIA), which discontinued
business operations in 2002, have been named as defendants in
various legal proceedings seeking damages for personal injury,
property damage and governmental expenditures allegedly caused by
the use of lead-based paints. Certain of these actions have been
filed by or on behalf of states, counties, cities or their public
housing authorities and school districts, and certain others have
been asserted as class actions. These lawsuits seek recovery
under a variety of theories, including public and private
nuisance, negligent product design, negligent failure to warn,
strict liability, breach of warranty, conspiracy/concert of
action, aiding and abetting, enterprise liability, market share or
risk contribution liability, intentional tort, fraud and
misrepresentation, violations of state consumer protection
statutes, supplier negligence and similar claims.
The plaintiffs in these actions generally seek to impose on the
defendants responsibility for lead paint abatement and health
concerns associated with the use of lead-based paints, including
damages for personal injury, contribution and/or indemnification
for medical expenses, medical monitoring expenses and costs for
educational programs. To the extent the plaintiffs seek
compensatory or punitive damages in these actions, such damages
are generally unspecified. In some cases, the damages are
unspecified pursuant to the requirements of applicable state law.
A number of cases are inactive or have been dismissed or
withdrawn. Most of the remaining cases are in various pre-trial
stages. Some are on appeal following dismissal or summary
judgment rulings in favor of either the defendants or the
plaintiffs. In addition, various other cases (in which the
Company is not a defendant) are pending that seek recovery for
injury allegedly caused by lead pigment and lead-based paint.
Although the Company is not a defendant in these cases, the
outcome of these cases may have an impact on cases that might be
filed against the Company in the future.
The Company believes that these actions are without merit, and the
Company intends to continue to deny all allegations of wrongdoing
and liability and to defend against all actions vigorously. The
Company does not believe it is probable that it has incurred any
liability with respect to all of the lead pigment litigation cases
to which it is a party, and liability to the Company that may
result, if any, in this regard cannot be reasonably estimated,
because:
* the Company has never settled any of the market share, risk
contribution, intentional tort, fraud, nuisance, supplier
negligence, breach of warranty, conspiracy,
misrepresentation, aiding and abetting, enterprise
liability, or statutory cases,
* no final, non-appealable adverse verdicts have ever been
entered against the Company, and
* the Company has never ultimately been found liable with
respect to any such litigation matters, including over 100
cases over a twenty-year period for which the Company was
previously a party and for which the Company has been
dismissed without any finding of liability.
Accordingly, the Company has not accrued any amounts for any of
the pending lead pigment and lead-based paint litigation cases.
In addition, the Company has determined that liability to it which
may result, if any, cannot be reasonably estimated because there
is no prior history of a loss of this nature on which an estimate
could be made and there is no substantive information available
upon which an estimate could be based.
In April 2000, the Company was served with a complaint in County
of Santa Clara v. Atlantic Richfield Company, et al. (Superior
Court of the State of California, County of Santa Clara, Case No.
1-00-CV-788657) brought by a number of California government
entities against the former pigment manufacturers, the LIA and
certain paint manufacturers. The County of Santa Clara sought to
recover compensatory damages for funds the plaintiffs have
expended or will in the future expend for medical treatment,
educational expenses, abatement or other costs due to exposure to,
or potential exposure to, lead paint, disgorgement of profit, and
punitive damages. In July 2003, the trial judge granted
defendants' motion to dismiss all remaining claims. The
Plaintiffs appealed and the intermediate appellate court
reinstated public nuisance, negligence, strict liability, and
fraud claims in March 2006. After disapproval of contingency fee
contracts by the trial court, and approval by the intermediate
appellate court, in July 2010, the California Supreme Court ruled
that public entities could pursue this public nuisance case
assisted by private counsel on a contingent fee basis after
revising the respective retention agreements to conform with the
requirements set forth in the Supreme Court's opinion. A fourth
amended complaint was filed in March 2011 on behalf of The People
of California by the County Attorneys of Alameda, Ventura, Solano,
San Mateo, Los Angeles and Santa Clara, and the City Attorneys of
San Francisco, San Diego and Oakland. That complaint alleged that
the presence of lead paint created a public nuisance in each of
the prosecuting attorney jurisdictions and seeks its abatement.
In early 2012, the trial judge lifted the stay that had been in
effect while the contingency fees were litigated; discovery is
proceeding. Currently, trial has been set for June 2013.
In June 2000, a complaint was filed in Illinois state court,
Lewis, et al. v. Lead Industries Association, et al. (Circuit
Court of Cook County, Illinois, County Department, Chancery
Division, Case No. 00CH09800). The Plaintiffs seek to represent
two classes, one consisting of minors between the ages of six
months and six years who resided in housing in Illinois built
before 1978, and another consisting of individuals between the
ages of six and twenty years who lived in Illinois housing built
before 1978 when they were between the ages of six months and six
years and who had blood lead levels of 10 micrograms/deciliter or
more. The complaint seeks damages jointly and severally from the
former pigment manufacturers and the LIA to establish a medical
screening fund for the first class to determine blood lead levels,
a medical monitoring fund for the second class to detect the onset
of latent diseases and a fund for a public education campaign. In
April 2008, the trial court judge certified a class of children
whose blood lead levels were screened venously between August 1995
and February 2008 and who had incurred expenses associated with
such screening. In March 2012, the trial court judge decertified
the class. In June 2012, the trial court judge granted plaintiffs
the right to appeal his decertification order, and in August 2012
the appellate court granted plaintiffs permission to appeal.
In January and February 2007, the Company was served with several
complaints, the majority of which were filed in Circuit Court in
Milwaukee County, Wisconsin. In some cases, complaints have been
filed elsewhere in Wisconsin. The plaintiffs are minor children
who allege injuries purportedly caused by lead on the surfaces of
the homes in which they reside. The Plaintiffs seek compensatory
and punitive damages. The defendants in these cases include the
Company, American Cyanamid Company, Armstrong Containers, Inc.,
E.I. Du Pont de Nemours & Company, Millennium Holdings, LLC,
Atlantic Richfield Company, The Sherwin-Williams Company, Conagra
Foods, Inc. and the Wisconsin Department of Health and Family
Services. In some cases, additional lead paint manufacturers
and/or property owners are also defendants. Of the cases filed,
five remain pending and four of the remaining cases have been
removed to Federal court (Burton, Owens, B. Stokes, and Gibson).
In June 2010, the defendant ARCO's motion for summary judgment was
granted in Gibson. In November 2010, Gibson was dismissed as to
all defendants in a ruling holding that application of Wisconsin's
risk contribution doctrine deprived defendants of due process. In
December 2010, the plaintiff appealed to the U.S. 7th Circuit
Court of Appeals. In light of the Gibson ruling and appeal, the
Clark case in state court and the cases in Federal Court have been
stayed.
In February 2010, the Company was served with a complaint in
Sifuentes v. American Cyanamid Company, et al. (United District
Court, Eastern District of Wisconsin, Case No. 10-C-0075). The
plaintiff in this case is a minor who alleges injuries purportedly
caused by lead on the surface of the home in which he resided.
The claims raised in this case are identical to those in the
Wisconsin cases. The Defendants include the Company, American
Cyanamid Company, Armstrong Containers, Inc., E.I. Du Pont de
Nemours & Company, Atlantic Richfield Company and The Sherwin-
Williams Company. In light of the Gibson ruling and appeal, the
parties have agreed to stay the case pending a decision.
In February 2011, the Company was served with an amended complaint
in Allen, et al. v. American Cyanamid, et al. (United States
District Court, Eastern District of Wisconsin, Case No. 11-C-55).
The case consists of 164 plaintiffs who allege injuries
purportedly caused by lead on the surfaces of the homes in which
they resided as minors. The complaint alleges negligence and
strict liability and seeks compensatory damages jointly and
severally from the Company, American Cyanamid Company, Armstrong
Containers, Inc., E.I. Du Pont de Nemours & Company, Atlantic
Richfield Company and The Sherwin-Williams Company. In May 2011,
defendants moved to dismiss the case for lack of diversity and
misjoinder. The case is currently stayed pending the appeal in
Gibson.
In April 2011, the Company was served with a complaint in Williams
v. Goodwin, et al. (Circuit Court, Milwaukee County, Case No.
2011-CV-1045). The plaintiff in this case is a minor who alleges
injuries purportedly caused by lead on the surfaces of the home in
which she resided. The complaint alleges negligence and strict
liability and seeks compensatory and punitive damages jointly and
severally from the Company, American Cyanamid Company, Armstrong
Containers, Inc., E.I. Du Pont de Nemours & Company, Atlantic
Richfield Company, The Sherwin-Williams Company as well as the
plaintiff's landlord, property manager and their insurance
companies. In October 2011, the judge stayed the case pending the
appeal in Gibson.
In May 2011, the Company was served with an amended complaint in
Valoe, et al. v. American Cyanamid, et al. (United States District
Court, Eastern District of Wisconsin, Case No. 11-CV-425). The
plaintiffs in this case are minors who allege injuries purportedly
caused by lead on the surfaces of the homes in which they resided.
The complaint alleges negligence and strict liability and seeks
compensatory damages jointly and severally from the Company,
American Cyanamid Company, Armstrong Containers, Inc., E.I. Du
Pont de Nemours & Company, Atlantic Richfield Company and The
Sherwin-Williams Company. In June 2011, the judge stayed the case
pending the appeal in Gibson.
In October 2012, the Company was served with a second amended
petition in Bullock, et al. v. Weed Property Management, LLC., et
al (District of Oklahoma County, Oklahoma, Case No. CJ-2011-8912).
The Plaintiffs in this case are a minor who alleges injuries from
lead paint exposure and his mother. The second amended petition
alleges negligence and strict products liability and seeks
compensatory and punitive damages from the Company, The Sherwin-
Williams Company and the plaintiffs' former landlords. In
November 2012, the defendants, including the Company, filed
motions to dismiss the case.
In addition to the litigation, various legislation and
administrative regulations have, from time to time, been proposed
that seek to (a) impose various obligations on present and former
manufacturers of lead pigment and lead-based paint with respect to
asserted health concerns associated with the use of such products,
and (b) effectively overturn court decisions in which the Company
and other pigment manufacturers have been successful. Examples of
such proposed legislation include bills which would permit civil
liability for damages on the basis of market share, rather than
requiring plaintiffs to prove that the defendant's product caused
the alleged damage, and bills which would revive actions barred by
the statute of limitations. While no legislation or regulations
have been enacted to date that are expected to have a material
adverse effect on the Company's consolidated financial position,
results of operations or liquidity, the imposition of market share
liability or other legislation could have such an effect.
The Company says new cases may continue to be filed against it.
The Company cannot assure you that it will not incur liability in
the future in respect of any of the pending or possible litigation
in view of the inherent uncertainties involved in court and jury
rulings. In the future, if new information regarding such matters
becomes available to the Company (such as a final, non-appealable
adverse verdict against the Company or otherwise ultimately being
found liable with respect to such matters), at that time the
Company would consider such information in evaluating any
remaining cases then-pending against it as to whether it might
then have become probable the Company has incurred liability with
respect to these matters, and whether such liability, if any,
could have become reasonably estimable. The resolution of any of
these cases could result in the recognition of a loss contingency
accrual that could have a material adverse impact on the Company's
net income for the interim or annual period during which such
liability is recognized and a material adverse impact on the
Company's consolidated financial condition and liquidity.
NL Industries, Inc. -- http://www.nl-ind.com/-- was organized as
a New Jersey corporation in 1891. The Dallas, Texas-based company
is primarily a holding company, and operates in the component
products industry through its majority-owned subsidiary, CompX
International Inc.
ORLEANS LEVEE: Class Action Settlement Notification Program Begins
------------------------------------------------------------------
A notification program began on April 15 as ordered by Judge Ivan
L.R. Lemelle of the United States District Court for the Eastern
District of Louisiana to alert those affected by flooding
resulting from Hurricane Katrina and/or Hurricane Rita about a
proposed partial class action settlement. A previous version of
the settlement was proposed in 2008. The revised settlement now
includes a claims process and a plan for how payments will be
calculated.
The Settling Defendants are: the Orleans Levee District, the Board
of Commissioners of the Orleans Levee District, the Lake Borgne
Basin Levee District, the Board of Commissioners of the Lake
Borgne Basin Levee District, the East Jefferson Levee District,
the Board of Commissioners of the East Jefferson Levee District
and their insurance company. The Released Parties include the
Settling Defendants, as well as the Board of Commissioners of the
Southeast Louisiana Flood Protection Authority-East, the Southeast
Louisiana Flood Protection Authority-East, their insurers and all
related people.
The lawsuit alleges levees and other flood and water control
structures failed and/or were overtopped as a result of Hurricanes
Katrina and Rita because they were not properly designed,
inspected, or maintained, and that this failure caused property
damage, personal injury and other losses. The Settling Defendants
say that the levees failed for reasons beyond their control and
that they did not do anything wrong.
The Settlement Class includes individuals, businesses and other
entities who: (a) at the time of Hurricane Katrina and/or Rita:
(1) were located, present or residing in the Parishes of
Jefferson, Orleans and St. Bernard, Louisiana, or (2) owned,
leased, possessed, used or had an interest in homes, places of
business or other property in these parishes; and (b) had any
losses, damages, and/or injuries in any manner related to, or in
any manner connected with Hurricane Katrina and/or Rita and any
alleged levee failures and/or waters that originated from, over,
under or through the levees under the authority or control of the
levee district defendants.
Three settlement funds totaling $20,208,957.20 as of November 30,
2012, have been established. This amount is the total insurance
money available to the three levee district defendants plus
interest. After fees, costs, expenses and Class Representative
awards are paid, remaining settlement funds will be paid to
eligible claimants.
A Special Master appointed by the Court has recommended a Limited
Fund Distribution Model to calculate how available funds will be
paid to people and businesses who submit valid claims.
Under the Distribution Model, payments are to be issued for the
following types of claims:
Individual Claims 1. Property Damage (residential) 2. Contents
Damage (residential) 3. Other Individual Claims a. Resident Claims
b. Non-Resident Claims c. Visitor Claims 4. Death Claims a.
Survival Claims b. Wrongful Death Claims
Commercial/Business Claims 1. Property Damage (commercial) 2.
Contents (commercial) 3. Loss of Business Income
A Detailed Notice, available at www.LeveeBreachClass.com, has more
information about these claim types and estimated payment amounts.
Claim forms are not available at this time and will become
available only after, and if, the Court approves the settlement.
Settlement Class members may request a claim form by visiting
www.LeveeBreachClass.com or writing to: Levee Breach Settlement,
PO Box 5053, Portland, OR 97208.
Notices informing Settlement Class members about their legal
rights will be mailed, and are scheduled to appear in local
newspapers leading up to a hearing on September 23, 2013, when the
Court will consider whether to approve the settlement including
the Distribution Model and attorney fees, costs and expenses and
awards to the Class Representatives up to a maximum Common Benefit
Cap of $3.5 million.
The Court has appointed the following lawyers to represent the
Settlement Class as "Class Counsel."
Levee-Plaintiff Subgroup: Daniel E. Becnel, Jr., Joseph M. Bruno
(Liaison Counsel), Walter Dumas, Blayne Honeycutt, Darleen Jacobs,
Hugh Lambert, and Gerald E. Meunier (Liaison Counsel)
MRGO-Plaintiff Subgroup: Jonathan Beauregard Andry, Joseph M.
Bruno (Liaison Counsel), Clay Mitchell and James P. Roy (Liaison
Counsel)
Those affected by the settlement cannot exclude themselves from
the settlement, but they can object to the settlement or any part
of it including the Distribution Model and Common Benefit Cap.
Settlement Class members may also ask to speak at the hearing.
August 1, 2013 is the deadline to object or ask to speak at the
hearing.
A website, www.LeveeBreachClass.com, has been established for this
case (called Vodanovich v. Boh Brothers Construction Co., LLC, No.
05-4191), where notices, the settlement agreement, the
Distribution Model and the Court's preliminary approval order may
be obtained. Those affected may also write to Levee Breach
Settlement, PO Box 5053, Portland, OR 97208 for more information.
PALOMAR MEDICAL: Being Sold for Too Little, Suit Claims
-------------------------------------------------------
Courthouse News Service reports that Palomar Medical Technologies
is selling itself too cheaply through an unfair process to
Cynosure, for $294 million in a cash and stock deal, shareholders
claim in Chancery Court.
PEPPERMILL CASINOS: Faces Class Action Over Unadvertised Fees
-------------------------------------------------------------
Courthouse News Service reports that Peppermill Casinos charge
unadvertised $6 to $12 per night "resort fees," plus taxes on it,
when people check in, a class action claims in Federal Court.
PEREGRINE PHARMACEUTICALS: Defends Consolidated Suit in Calif.
--------------------------------------------------------------
Peregrine Pharmaceuticals, Inc., is defending a consolidated
securities class action lawsuit pending in California, according
to the Company's March 12, 2013, Form 10-Q filing with the U.S.
Securities and Exchange Commission for the quarter ended
January 31, 2013.
On September 28, 2012, three complaints were filed in the U.S.
District Court for the Central District of California (the
"Court") against the Company and certain of its executive officers
and one consultant (collectively, the "Individual Defendants") on
behalf of certain purchasers of the Company's common stock. The
complaints have been brought as purported stockholder class
actions, and, in general, include allegations that the Company and
the Individual Defendants violated (i) Section 10(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Rule 10b-5 promulgated thereunder and (ii) Section 20(a) of
the Exchange Act, by making materially false and misleading
statements regarding the interim median overall survival results
of the Company's bavituximab Phase II second-line non-small cell
lung cancer trial, thereby artificially inflating the price of the
Company's common stock. The plaintiffs are seeking unspecified
monetary damages and other relief. On November 27, 2012, four
prospective lead plaintiffs filed motions to consolidate, appoint
a lead plaintiff, and appoint lead counsel.
On February 5, 2013, the court appointed James T. Fahey as lead
plaintiff in the action. The lead plaintiff had until April 8,
2013, to file an amended consolidated complaint against the
Company.
The Company believes that the various shareholder lawsuits are
without merit, and the Company intends to vigorously defend the
various actions and to seek dismissal of these complaints. Due to
the early stage of these proceedings, the Company believes that
the probability of an unfavorable outcome or loss related to these
proceedings and an estimate of the amount or range of loss related
to these claims, if any, from an unfavorable outcome are not
determinable at this time.
Peregrine Pharmaceuticals, Inc., -- http://www.peregrineinc.com/-
- is a biopharmaceutical company developing first-in-class
monoclonal antibodies focused on the treatment and diagnosis of
cancer. The Company is a Delaware corporation based in Tustin,
California.
POSTROCK ENERGY: Paid $4.5MM in Dec. to Settle Kansas Suit
----------------------------------------------------------
PostRock Energy Corporation disclosed in its March 12, 2013, Form
10-K filing with the U.S. Securities and Exchange Commission for
the year ended December 31, 2012, that it made a payment of $4.5
million in December 2012 pursuant to a settlement resolving a
putative class action lawsuit filed in Kansas.
The Company had been sued in royalty owner lawsuits filed in
Oklahoma and Kansas.
Oklahoma Lawsuits
In Oklahoma, lawsuits by a group of individual royalty owners and
by a putative class representing all remaining royalty owners were
filed in the District Court of Nowata County, Oklahoma.
Generally, the lawsuits alleged that the Company wrongfully
deducted post-production costs from the plaintiffs' royalties and
engaged in self-dealing agreements resulting in a less than market
price for the gas production. The Company denied the allegations.
Settlements were reached in each of the cases, and upon final
approval from the Court, the Company paid $5.6 million in
settlement of the Oklahoma lawsuits in July 2011.
Kansas Lawsuit
The Kansas lawsuit was a putative class action filed in the United
States District Court for the District of Kansas, brought on
behalf of all the Company's royalty owners in that state. The
Plaintiffs generally alleged that the Company failed to properly
make royalty payments by, among other things, charging post-
production costs to royalty owners in violation of the underlying
lease contracts, paying royalties based on sale point volumes
rather than wellhead volumes, allocating expenses in excess of the
actual and reasonable post-production costs incurred, allocating
production costs and marketing costs to royalty owners, and making
royalty payments after the statutorily prescribed time for doing
so without paying interest thereon. The Company denied the
plaintiffs' claims. The parties reached a settlement and on
December 30, 2011, the Court entered an order certifying a class
for settlement purposes consisting of all current and former
PostRock royalty and overriding royalty owners, approving the
parties' settlement and dismissing the action. The settlement
included a payment of $3.0 million that was made in January 2012,
and a payment of $4.5 million which was made in December 2012, for
a total of $7.5 million.
The Company recorded litigation reserve expense of $1.6 million
for the period from March 6 to December 31, 2010. Litigation
reserve expense was $11.6 million and nil for the years ended
December 31, 2011, and 2012, respectively.
PostRock Energy Corporation -- http://www.pstr.com/-- is a
Delaware corporation headquartered in Oklahoma City, Oklahoma.
The Company is an independent oil and gas company engaged in the
acquisition, exploration, development, production and gathering of
crude oil and natural gas. The Company's primary production
activity is focused in the Cherokee Basin, a 15-county region in
southeastern Kansas and northeastern Oklahoma.
REGIS CORP: Faces Class Action Over Wage Payment Violations
-----------------------------------------------------------
Kyla Asbury, writing for The West Virginia Record, reports that
two women, on behalf of all those similarly situated, are suing
Regis Corporation after they claim it violated the West Virginia
Wage Payment and Collection Act.
Lori Ryan Davis was employed by Regis until Feb. 18, 2011, in its
Marion County facility, and Rebekah Shaaya was employed by Regis
in its Monongalia County facility until May 24, according to a
complaint filed in Monongalia Circuit Court.
The plaintiffs claim when they were discharged from their
employments, Regis did not pay them all their wages and benefits
in full in a timely manner.
The defendant's actions violated the West Virginia Wage Payment
and Collection Act, which entitles them to damages for the unpaid
wages and benefits and liquidated damages, according to the suit.
The plaintiffs claim they are suitable class representatives
because they will fairly and adequately represent and protect the
interests of the class members and their interests do not conflict
with the interests of the class members.
Regis employed the class members in its West Virginia facilities
between June 30, 2010, until the present, according to the suit.
The plaintiffs are seeking compensatory damages with interest.
They are being represented by Frank X. Duff and Sandra K. Law of
Schrader Byrd & Companion PLLC.
Monongalia Circuit Court case number: 13-C-259
This entry was posted in Class Action, Monongalia County, News and
tagged Frank X. Duff, Regis Corporation, Sandra K. Law.
SCIENTIFIC GAMES: Faces Class Suits Over Proposed WMS Acquisition
-----------------------------------------------------------------
Scientific Games Corporation is facing class action lawsuits
arising from its proposed acquisition of WMS Industries Inc.,
according to the Company's March 12, 2013, Form 10-K filing with
the U.S. Securities and Exchange Commission for the year ended
December 31, 2012.
On January 30, 2013, the Company entered into a merger agreement
pursuant to which it agreed to acquire WMS Industries Inc.
("WMS"), a leading supplier of gaming machines and interactive
gaming systems and content, for $26.00 in cash per common share,
for a total enterprise value of approximately $1.5 billion. WMS
serves the gaming industry in the U.S. and international
jurisdictions by designing, manufacturing and marketing games,
video and mechanical reel-spinning gaming machines and video
lottery terminals, and by placing leased participation gaming
machines in regulated gaming venues. WMS also develops and
markets digital gaming content, products, services and end-to-end
solutions that address global online wagering and play-for-fun
social, casual and mobile gaming opportunities. Subject to the
approvals of WMS stockholders and gaming regulatory authorities
and other customary closing conditions, the transaction is
expected to be completed by the end of 2013.
The following complaints challenging the merger have been filed in
various jurisdictions: (i) in the Delaware Court of Chancery,
Shaev v. WMS Industries Inc., Gamache, et al. (C.A. No. 8279);
(ii) in the Circuit Court of Cook County, Illinois, Chancery
Division, Gardner v. WMS Industries Inc., Scientific Games
Corporation, et al., No. 2013 CH 3540 (Ill. Cir., Cook County);
(iii) in the Circuit Court of the Nineteenth Judicial Circuit of
Lake County, Illinois, Gil v. WMS Industries Inc., Scientific
Games Corp., et al., No. 13 CH 0473 (Ill. Cir., Lake County); (iv)
in the Delaware Court of Chancery, Hornsby v. Gamache, et al.
(C.A. No. 8295); (v) in the Circuit Court of the Nineteenth
Judicial Circuit of Lake County, Illinois, Sklodowski v. WMS
Industries, Inc., Scientific Games Corp., et al. (Ill. Cir., Lake
County); (vi) in the Delaware Court of Chancery, Barresi v. WMS
Industries Inc., Gamache, et al. (C.A. No. 8326); and (vii) in the
Circuit Court of Cook County, Illinois, Chancery Division,
Plumbers & Pipefitters Local 152 Pension Fund and UA Local 152
Retirement Annuity Fund v. WMS Industries Inc., Gamache, et al.
(Ill. Cir., Cook County). Each of the actions is a putative class
action filed on behalf of the public stockholders of WMS and names
as defendants WMS, its directors and Scientific Games Corporation.
The Shaev, Hornsby, Barresi and Plumbers & Pipefitters actions
also name Scientific Games International, Inc. (SGI) and the
Company's subsidiary, SG California Merger Sub, Inc., as
defendants. The complaints generally allege that the WMS
directors breached their fiduciary duties in connection with their
consideration and approval of the merger and that the Company
aided and abetted those alleged breaches. The complaints seek,
among other relief, declaratory judgment and an injunction against
the merger.
On February 25, 2013, the Delaware Court of Chancery consolidated
the Delaware actions under In re WMS Industries Inc. Stockholders
Litigation (C.A. No. 8279-VCP). On March 1, 2013, the plaintiffs
in the consolidated Delaware actions filed an amended complaint
adding allegations that the disclosures in WMS' preliminary proxy
statement were inadequate.
The Company says the outcome of these lawsuits cannot be predicted
with any certainty. An adverse judgment for monetary damages
could have a material adverse effect on the operations and
liquidity of WMS or the Company, as the case may be, and therefore
could adversely affect the combined business if the merger is
completed. A preliminary injunction could delay or jeopardize the
completion of the merger, and an adverse judgment granting
permanent injunctive relief could indefinitely enjoin completion
of the merger. The Company and WMS believe that the claims
asserted in the lawsuits are without merit and plan to defend
against them vigorously. A dditional lawsuits arising out of or
relating to the merger agreement or the merger may be filed in the
future.
Scientific Games Corporation -- http://www.scientificgames.com/
-- was incorporated in Delaware in 1984 and is headquartered in
New York. The Company is a global leader in providing customized,
end-to-end gaming solutions to lottery and gaming organizations
worldwide.
SINO-FOREST CANADA: McCarthy Tetrault Discusses Court Ruling
------------------------------------------------------------
Miranda Lam, Esq. -- mlam@mccarthy.ca -- Elder C. Marques, Esq. --
emarques@mccarthy.ca -- and Michael J.P. O'Brien, Esq. at McCarthy
Tetrault report that on March 20, 2013, Justice Morawetz of the
Ontario Superior Court of Justice (ONSC) approved a settlement by
Ernst & Young LLP in the Sino-Forest Canada (SFC) class
proceedings (Labourers' Pension Fund of Central and Eastern Canada
v. Sino-Forest Corporation). The $117-million settlement is the
largest third-party settlement made by an auditor in a Canadian
class action. Since securities legislation across all Canadian
jurisdictions was amended to make it easier to sue for negligent
misrepresentation -- including against third-party experts, such
as auditors -- it seems likely that Canadian class action
litigation will increasingly include claims similar to those made
in the SFC proceedings.
The settlement was approved over the objections of a group of
plaintiffs who argued that the agreement compromised their opt-out
rights in the class action and sought to retain the option of
filing their own suit against the auditor. Citing Robertson v.
Proquest Information and Learning Co (Robertson) and ATB Financial
v. Metcalfe and Mansfield Alternative Investments II Corp. (ATB
Financial), the ONSC dismissed the objecting plaintiffs' arguments
and approved the settlement.
The Class Proceedings
SFC was a Chinese integrated forest plantation operator and forest
productions company with a registered office in Ontario and a head
office in Hong Kong. Its shares began trading on the TSX in 1994.
From March 19, 2007, through June 2, 2011, SFC issued and had
outstanding various debt instruments and made three prospectus
offerings of common shares on the Toronto Stock Exchange (TSX)
involving various underwriters.
The class actions and the Companies' Creditors Arrangement Act
(CCAA) proceedings arose following a June-2011 report by short-
seller Muddy Waters Research that claimed SFC had engaged in a
complex fraudulent scheme, which the auditors were alleged not to
have uncovered. Three class proceedings were commenced in Ontario
against SFC. Two of these actions were stayed following a carriage
motion in January 2012. SFC's auditors Ernst & Young (auditor
from 1994-1998, 2000-2004 and 2007-2012) and BDO Limited (auditor
from 2005-2006), as well as 11 underwriters, were also named as
defendants in the Ontario proceedings.
The plaintiffs alleged that:
* SFC repeatedly misrepresented its financial position and its
compliance with Generally Accepted Accounting Principles (GAAP) in
its public disclosure; and that
* The auditors and underwriters failed to detect these
misrepresentations, causing an artificial inflation in SFC's share
price.
The claims against Ernst & Young included statutory primary and
secondary market claims under sections 130 and 130.1 of the
Ontario Securities Act, as well as common law claims of negligence
and negligent misrepresentation related to the prospectuses and
offering memoranda. Auditors can face liability both under common
law causes of action, as well as the applicable provincial
securities legislation, which has now removed the traditional
common law requirement that plaintiffs establish reliance on the
impugned misrepresentation in order to advance a secondary market
claim successfully.
The class action was stayed in March 2012 when SFC entered into
CCAA proceedings. As a result, the certification motion,
originally scheduled to be heard in November 2012, was postponed.
The Ernst & Young settlement was announced in December 2012, and
the settlement hearing took place on February 4, 2013.
The Hearing and Decision
The objecting plaintiffs opposed the no-opt-out and full third-
party release features of the Ernst & Young Settlement, making two
main arguments. First, they argued that if approved, the
settlement would vitiate the opt-out rights of class members as
granted by section 9 of the Ontario Class Proceedings Act (CPA),
and therefore the proposed settlement had to be approved solely
under the CPA. Second, they argued that the release was not
integral or necessary to the success of SFC's restructuring plan,
and the settlement was not essential or related to the
restructuring.
Justice Morawetz dismissed both arguments. In response to the
first position, he found that, since SFC is under CCAA protection,
the claims against Ernst & Young could not properly be considered
in isolation from the CCAA proceedings. As the ONSC noted, "it is
not possible to ignore the CCAA proceedings." Although the right
to opt-out of a class action is a fundamental right of procedural
fairness, the objectors would in any event be left with a claim
against Ernst & Young that would have to be put forward in the
CCAA proceedings.
In response to the second argument, Justice Morawetz found that
the release was rationally related to the purpose of the
restructuring plan and necessary for its implementation. He
rejected the claim that the settlement was not essential or
related to the plan, finding that "a significant aspect of the
Plan is a distribution to SFC's creditors. The significant and,
in fact, only monetary contribution that can be directly
identified, at this time, is the $117 million from the Ernst &
Young Settlement."
Factors Considered by the ONSC
When assessing a settlement in the CCAA context, the ONSC will
take into consideration the following three factors, as
articulated in Robertson:
* Whether the settlement is fair and reasonable;
* Whether it provides substantial benefits to other
stakeholders; and
* Whether it is consistent with the purpose and spirit of the
CCAA.
In order to be considered fair and reasonable, the release to be
given by the parties had to be justified as part of the
settlement. The ONSC applied the "nexus test" to assess the
connection between the third-party claim being compromised by the
plan and the restructuring achieved by the plan. This test,
adopted in ATB Financial, considers the following factors:
* Are the claims to be released rationally related to the
purpose of the plan?
* Are the claims to be released necessary for the plan of
arrangement?
* Are the parties who have claims released against them
contributing in a tangible and realistic way? and
* Will the plan benefit the debtor and the creditors generally?
In this case, the ONSC considered the above and determined that:
* A significant contribution to SFC's creditors came by way of
the settlement;
* All of the claims are intertwined and related to the purpose
of the plan;
* The settlement helps achieve the objectives of the plan;
* The settlement contributes to the plan in a tangible way;
* The settlement benefits claimants in the form of a tangible
distribution (and the approving, voting creditors had knowledge of
the nature and effect of the releases); and
The releases are fair and reasonable and not overly broad or
offensive to public policy.
Implications for Auditors
Amendments to securities legislation across provinces and
territories have made it easier for plaintiffs to pursue
securities class actions not only against issuers themselves, but
also third-party advisors, such as auditors. This is particularly
important in cases where the issuers may no longer be solvent or
otherwise unable to satisfy any future judgments against them,
motivating plaintiffs to identify more attractive defendants to
include in an action. Auditors will therefore remain an important
target for plaintiffs. Audit firms should consider establishing
strong internal governance and risk management policies, as well
as taking steps to better understand their areas of potential
litigation risk in this hostile class action environment.
SOUTHERN CAREERS: Faces Class Action for Defrauding Students
------------------------------------------------------------
Courthouse News Service reports that Southern Careers Institute
defrauded students at its seven Texas campuses, a class action
claims in Travis County Court.
SPARTECH CORP: Awaits Filing of Deal to Settle Merger Suits
-----------------------------------------------------------
Spartech Corporation awaits filing of settlement to resolve
merger-related class action lawsuits, according to the Company's
March 12, 2013, Form 10-Q filing with the U.S. Securities and
Exchange Commission for the quarter ended February 2, 2013.
On October 23, 2012, PolyOne Corporation ("PolyOne"), 2012
Redhawk, Inc., a wholly owned subsidiary of PolyOne ("Merger
Sub"), PolyOne Designed Structures and Solutions, LLC, a wholly
owned subsidiary of PolyOne ("Merger LLC"), and Spartech
Corporation ("Spartech") entered into an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which Spartech will be
merged with and into Merger Sub (the "Merger"), with Spartech to
be the surviving corporation in the merger (the "Surviving
Corporation") and a wholly owned subsidiary of PolyOne, which is
expected to be immediately followed by a merger of the Surviving
Corporation with and into Merger LLC (the "Subsequent Merger"),
with Merger LLC to be the surviving entity in the Subsequent
Merger and conduct business as PolyOne Designed Structures and
Solutions. At a special meeting of stockholders of Spartech
Corporation on March 12, 2013, the stockholders voted to approve
the merger agreement between Spartech and PolyOne Corporation.
Pursuant to the merger, stockholders will receive, in exchange for
each share of Spartech common stock, (1) $2.67 in cash, without
interest, and (2) 0.3167 of a PolyOne common share.
Five purported class action lawsuits have been filed by alleged
Spartech stockholders in connection with the proposed merger
transactions among Spartech, PolyOne Corporation ("PolyOne"), 2012
Redhawk, Inc. ("Merger Sub") and 2012 Redhawk, LLC (n/k/a PolyOne
Designed Structures and Solutions LLC) ("Merger LLC").
Two of these purported class actions were filed in the Circuit
Court of St. Louis County, Missouri, against Spartech, its
directors, PolyOne, Merger Sub, and Merger LLC. These actions,
Weinreb v. Spartech, et al. and Warren v. Spartech, et al., have
been consolidated for all purposes as In re Spartech Corporation
Shareholder Litigation (the "Missouri Stockholder Actions"). The
Missouri Stockholder Actions allege, among other things, that the
directors of Spartech breached their fiduciary duties owed to
stockholders by approving the proposed acquisition of Spartech by
PolyOne and by failing to disclose certain information to
stockholders. The Missouri Stockholder Actions further allege
that PolyOne, Merger Sub, and Merger LLC aided and abetted the
directors of Spartech in breaching their fiduciary duties. Among
other things, the Missouri Stockholder Actions seek to enjoin the
merger.
Two of these purported class actions were filed in Delaware
Chancery Court (the "Delaware Stockholder Actions"). One of the
Delaware Stockholder Actions, Gross v. Spartech, et al., was filed
against Spartech, its directors, PolyOne, Merger Sub, and Merger
LLC. The other Delaware Stockholder Action, Pill v. Spartech, et
al., was filed against Spartech and its directors. The Delaware
Stockholder Actions alleged, among other things, that the
directors of Spartech breached their fiduciary duties owed to
stockholders by approving the proposed acquisition of Spartech by
PolyOne and by failing to disclose certain information to
stockholders. Gross v. Spartech, et al. also alleged that
PolyOne, Merger Sub, and Merger LLC aided and abetted the
directors of Spartech in breaching their fiduciary duties. Among
other things, the Delaware Stockholder Actions sought to enjoin
the merger. After their request to stay the Delaware Stockholder
Actions was denied, plaintiffs in the Delaware Stockholder Actions
filed a Notice and (Proposed) Order of Dismissal on January 31,
2013, which was granted with modifications on February 1, 2013.
A purported class action was also filed in the United States
District Court for the Eastern District of Missouri against
Spartech, its directors, PolyOne, Merger Sub, and Merger LLC.
Faulkner v. Holt, et al. (the "Missouri District Court Stockholder
Action"), alleges, among other things, that the directors of
Spartech breached their fiduciary duties owed to stockholders by
approving the proposed acquisition of Spartech by PolyOne and by
failing to disclose certain information to stockholders. The
Missouri District Court Stockholder Action further alleges that
PolyOne, Merger Sub, and Merger LLC aided and abetted the
directors of Spartech in breaching their fiduciary duties. The
Missouri District Court Stockholder Action also brings a claim,
individually, against the directors of Spartech under Section
14(a) of the Securities Exchange Act of 1934 and Rule 14a-9
promulgated thereunder. Among other things, the Missouri District
Court Stockholder Action seeks to enjoin the merger.
PolyOne, Merger Sub, Merger LLC, Spartech, and Spartech's
directors believe the Missouri Stockholder Action, the Delaware
Stockholder Actions, and the Missouri District Court Stockholder
Action and the underlying claims are without merit.
On March 5, 2013, counsel for the parties in each of the lawsuits
entered into a Memorandum of Understanding (the "MOU"), in which
they agreed on the terms of a settlement of the Missouri
Stockholder Action, including the dismissal with prejudice of the
Missouri Stockholder Action and a release of all claims made
therein against all of the defendants. The MOU also provides for
dismissal with prejudice of the Missouri District Court
Stockholder Action. The proposed settlement is conditioned upon,
among other things, the execution of an appropriate stipulation of
settlement, consummation of the merger, and final approval of the
proposed settlement by the Circuit Court of St. Louis County,
Missouri. In addition, in connection with the settlement and as
provided in the MOU, the parties contemplate that plaintiffs'
counsel will seek an award of attorneys' fees and expenses as part
of the settlement. There can be no assurance that the merger will
be consummated, that the parties ultimately will enter into a
stipulation of settlement, or that the court will approve the
settlement even if the parties enter into such stipulation. If
the settlement conditions are not met, the proposed settlement as
contemplated by the MOU would become void. The settlement will
not affect the amount of the merger consideration that Spartech
stockholders are entitled to receive in the merger.
The defendants deny all fault or liability and deny that they have
committed any unlawful or wrongful act alleged in the Missouri
State Action, the Delaware Stockholder Actions, and the Missouri
District Court Stockholder Action or otherwise in relation to the
merger. The defendants have agreed to the terms of the proposed
settlement solely to avoid the substantial burden, expense, risk,
inconvenience and distraction of continued litigation, including
the risk of delaying or adversely affecting the merger.
Headquartered in Clayton, Missouri -- http://www.spartech.com/--
Spartech Corporation is an intermediary producer of plastic
products, including polymeric compounds, concentrates, custom
extruded sheet and rollstock products and packaging technologies.
The Company converts base polymers or resins purchased from
commodity suppliers into extruded plastic sheet and rollstock,
thermoformed packaging, specialty film laminates, acrylic
products, specialty plastic alloys, color concentrates and blended
resin compounds for customers in a wide range of markets.
STANDARD FIRE: Jones Day Discusses Class Action Ruling
------------------------------------------------------
Paula Render, Esq. -- prender@jonesday.com -- and Jeffrey A.
LeVee, Esq. -- jlevee@jonesday.com -- at Jones Day report that on
March 19, 2013, the U.S. Supreme Court held in Standard Fire Ins.
Co. v. Knowles that named plaintiffs in class actions could not,
before class certification, avoid going to federal court by
stipulating to a cap on damages. Although Standard Fire was not
an antitrust case, the decision will uniquely impact antitrust
class action cases because the removal of state law claims to
federal court for coordinated proceedings in a single court is
critical to an antitrust defendant's ability to avoid duplicative
damage awards and to reduce the notoriously high costs of
antitrust discovery.
Background
The Court in Standard Fire considered the application of the Class
Action Fairness Act of 2005 (CAFA). CAFA gives the federal courts
jurisdiction over class action lawsuits in which there is minimal
diversity between the parties and the matter in controversy
exceeds $5 million. To remain in state court, the plaintiff, on
behalf of the proposed class, stipulated that he sought damages of
less than $5 million. The defendants removed the case to federal
district court under CAFA. In determining to send the case back
to the state, the federal court determined that, although in the
absence of the stipulated cap on damages the plaintiff class could
have sought damages over $5 million, the stipulation meant that
the CAFA threshold could not be met. The Supreme Court agreed to
hear the defendants' appeal of the remand order because of
conflicting decisions among the circuit courts.
In a unanimous decision, the Court decided that a named
plaintiff's stipulation to seek less than the $5 million CAFA
threshold on behalf of a proposed class of plaintiffs could not
defeat federal jurisdiction. In the Court's view, the stipulation
was not binding on the proposed class: the names plaintiff could
not bind the rest of the class with his promise before the class
was certified. Standard Fire thus reaffirms an earlier CAFA
decision holding that a plaintiff class representative could not
bind the rights of absent class members before class
certification. The Court also observed that allowing such
stipulations to evade jurisdiction would undercut CAFA's goal of
having federal courts consider interstate cases of national
importance. For example, the plaintiff's position would allow
plaintiffs to subdivide a $100 million class action worth into 21
separate state actions.
Importance of Standard Fire for Antitrust Class Actions
Some background helps put the significance of this decision in
context. Antitrust claims arising out of alleged price-fixing or
other conduct affecting a marketplace with multiple distribution
levels may be brought by (a) so-called direct purchasers (the
entities who bought directly from the alleged antitrust
violators), (b) indirect purchasers (generally, consumers/end
users), (c) intermediate indirect purchasers (entities at levels
in the distribution chain between direct purchasers and
consumers), and (d) so-called "opt-outs," generally large direct
or indirect purchasers pursuing their claims on their own instead
of as part of a class.
Prior to 1977, the federal courts struggled with how to apportion
damages among these classes of plaintiffs, based on how much the
group was overcharged by the defendants and how much of that
overcharge was passed on at each level of the distribution chain.
In 1977, the U.S. Supreme Court in Illinois Brick v. Illinois
addressed this difficulty. Determining that properly apportioning
damages was too difficult, the Court simply barred recovery under
federal antitrust laws to any party but a direct purchaser. In
response, some state legislatures enacted so-called "Illinois
Brick repealer statutes," which permit indirect purchaser suits
under their state antitrust laws. These repealer statutes allowed
indirect purchaser plaintiffs to bring antitrust class actions
under state law in spite of Illinois Brick, but in state courts.
Pre-CAFA, antitrust defendants in class actions faced an expensive
battle on multiple fronts. State antitrust class actions were
brought in the state whose Illinois Brick repealer statute was
being invoked. This could result in dozens of lawsuits, all
arising from and seeking damages for the same alleged antitrust
violation, each having to be litigated by defendants in each state
with an Illinois Brick repealer statute as well as in federal
court. One prominent example of this came in the wake of the
DOJ's successful antitrust case against Microsoft. After the U.S.
prevailed on its Sherman Act claims in 1999, indirect purchasers
of Microsoft software brought suit in more than a dozen different
states. Microsoft had to defend each of these state law claims,
including 14 different class certification decisions. Although
each of the 11 indirect purchaser class actions that were
certified by a state court settled before going to a jury, there
would have been 11 different juries or judges determining the
appropriate amount of damages to be received by the indirect
purchaser plaintiffs bringing the claims. In the pre-CAFA era,
the likelihood that defendants would pay damages for a single
overcharge to multiple claimants was high. Even in the cases that
settled, the prospect of numerous expensive court fights likely
prompted defendants to offer higher settlements to avoid
protracted litigation in state courts across the country.
CAFA enabled defendants to remove antitrust cases from states
courts to federal courts, from which the cases could then be
transferred to a single multidistrict litigation for coordinated
pretrial proceedings. The decision in Standard Fire further
ensures this coordination, which leads to the two benefits
especially important to antitrust defendants. First, with a
single judge hearing the cases in a coordinated manner, the threat
of duplicative recoveries by the various classes is diminished,
and even though defendants most frequently settle with classes
that obtain certification, those settlements are likely to be
lower given that the class plaintiffs know they will have to prove
their overcharges and damages in the same case, before the same
judge and likely the same jury, as the other classes. Even though
cases coordinated for pretrial proceedings should theoretically go
back to the originating district court for trial, as a practical
matter this rarely occurs; and in any event the coordination of
proceedings such as expert discovery would nevertheless reduce the
risk of duplicative recovery. Second, the parties do not need to
litigate the same issues in numerous fora, and the risk that
multiple judges will allow wide-ranging, but different, discovery
is reduced -- a particular concern in antitrust cases where
discovery is especially broad and expensive.
The plaintiff in Standard Fire attempted with his stipulation to
roll back CAFA in a case that would have otherwise qualified for
removal to federal court. The Standard Fire decision removes one
potential crack in the CAFA dam by preventing plaintiffs from
staying out of federal court simply by limiting the class's
damages, and preserves the uniformity and cost savings afforded by
CAFA. These benefits are magnified when applied to class actions
brought under the antitrust laws.
UNIVERSITY OF ALABAMA: Faces Suit Over "Unethical By Design" Study
------------------------------------------------------------------
Iulia Filip at Courthouse News Service reports that the University
of Alabama exposed premature babies to death and blindness in a
study that was "unethical by design," parents claim in a federal
class action. The defendants assigned premature babies with low
birth weight varying oxygen levels by "the flip of a coin,"
without disclosing the risks to their parents, five sets of
parents with six children say in the complaint.
The parents claim their children who were born or treated at The
University of Alabama-Birmingham Hospital suffered permanent
neurological and vision damage, and that other babies died as a
result of the study.
The complaint states: "The Office of Human Research Protection
('OHRP') recently determined that the University of Alabama's
'conduct of this study was in violation of the regulatory
requirements for informed consent, stemming from the failure to
describe the reasonably foreseeable risks of blindness,
neurological damage and death,' and further determined that
'participating in the study did have an effect on which infants
died, and on which developed blindness.'"
Lead plaintiffs the Looney family sued University of Alabama
Institutional Review Board Director Sheila Moore, its chairman
Dr. Ferdinand Urthaler, the individual members of the board, and
Dr. Waldemar Carlo, the neonatologist who led the study at the
university's hospital in Birmingham.
The plaintiffs, whose babies were born weighing less than 2
pounds, seek to represent all babies who were injured in the
study, and their families.
"This case involves clinical research performed on infants born
very prematurely with extremely low birth weights, who depend upon
receiving the appropriate quantity of oxygen in order to survive
and thrive, and depend upon the individuals responsible for their
treatment to act in their best medical interests," the complaint
states.
"The standard of care dictates that a physician treating a
premature, low-birth-weight infant must select an appropriate
blood oxygen saturation level of between 85 and 95 percent, as
dictated by the infant's specific medical needs, and that level
should be adjusted in accordance with the infant's individual
specific needs and progress.
"The plaintiffs, who were all born prematurely and with low birth
weights, participated in a study at the University of Alabama that
was conducted between 2004 and 2009 wherein they randomly received
a fixed amount of oxygen (either low or high).
"The study was unethical by design because, among other things,
the infants who were the human subjects were randomized into the
two arms of the study; in other words, the amount of oxygen
initially received by each subject was determined by 'the flip of
a coin,' and that amount was not adjusted in accordance with
individual medical needs.
"The study was further unethical by design because the informed
consent document failed to disclose to the parents of the subjects
any risks whatsoever with respect to which arm of the study their
infants were randomized into, beyond the small risk of a minor
skin breakdown.
"The researchers should have known that, because of what is
referred to as 'the therapeutic misconception,' parents of such
infants desired one thing and one thing alone: that their newborn
babies receive the best care to fit their individual needs and
that they would never consent to their children receiving care
based only on the need of researchers achieving some generalized
knowledge.
"The Office of Human Research Protection recently determined that
the University of Alabama's 'conduct of this study was in
violation of the regulatory requirements for informed consent,
stemming from the failure to describe the reasonably foreseeable
risks of blindness, neurological damage and death,' and further
determined that 'participating in the study did have an effect on
which infants died, and on which developed blindness.'"
(Parentheses in complaint).
The OHRP is a branch of the U.S. Department of Health and Human
Services.
The plaintiffs' babies were among 1,300 premature and low-birth-
weight infants in the University of Alabama's study, the
"Surfactant, Positive Pressure, and Oxygenation Randomized Trial,"
from 2004 to 2009.
Instead of receiving oxygen based on medical needs, the babies
were randomly assigned certain oxygen levels, which could lead to
a severe eye disease known as "retinopathy of prematurity,"
blindness, brain damage, chronic lung disease, and death,
according to the complaint.
"UAB-Birmingham served as the lead site in connection with the
oxygen aspect of the experiment," the complaint states.
"The oxygen aspect of the experiment was a misguided effort to
test the effects of receiving too little or too much oxygen on
infants' survival, neurological development, and likelihood of
developing retinopathy of prematurity.
"Infants, including the plaintiffs, were 'randomized' within the
experiment such that, without regard to their individual medical
needs, they randomly received either the lower or higher ranges of
oxygen levels, which levels were not subject to adjustment.
"Indeed, whether each plaintiff and each study participant would
receive oxygen within the 'low' or 'high' range was determined by,
in the words of the informed consent form, 'the flip of a coin.'"
The families claim the clinical trial violated federal regulations
on human research because it failed to provide informed consent,
it risked injuries that outweighed any possible benefits, and
targeted vulnerable infants who came from difficult economic
backgrounds. They say the protocol failed to spell out any risks
beside the risk that the names of enrollees could not be kept
confidential, and the risk of a skin breakdown.
The consent form suggested that the study was "low risk," that all
treatments were "standard of care," and that there was "no
predictable increase in risk for your baby," according to the
complaint. But the families claim the Office of Human Research
Protection concluded in March this year that the researchers had
enough information to know that participation in the study might
make a difference to an infant's chance of survival or of
developing blindness.
"At all relevant times, the defendants were aware that infants who
participated in the experiment would be placed at an increased
risk of death (because of receiving too little oxygen), blindness
(because of receiving too much oxygen), and lung disease and
neurological damage (because of not receiving the appropriate
amount of oxygen)," the complaint states.
"Despite this, the informed consent document provided to parents
at the University of Alabama, including the plaintiffs' parents,
failed to describe the reasonably foreseeable risks of blindness,
neurological damage, respiratory ailments, and death.
"Rather, in the section labeled 'Possible Risks,' the document
simply stated as follows: 'There is no known risk to your baby
from monitoring with the pulse oximeters used for this study. The
possible risk of skin breakdown at the site will be minimized by
your baby's nurse moving the oximeter to another arm or leg a
couple of times a day.'" (Parentheses in complaint).
The complaint adds: "The informed consent document also stated
that, because both groups of infants (the ones receiving more
oxygen, and the ones receiving less) would receive levels of
oxygen within the standard of care (85 to 95 percent), there was
no increased risk to the infants; in reality, as the OHRP found,
it was not the standard of care for an infant to receive a random
level between 85 and 95 percent, which would not be adjusted, and
many infants therefore faced far greater risks by participating."
(Parentheses in complaint).
The families say they would not have enrolled their children had
they known the substantial risks they faced. They say their
babies suffered severe and permanent visual and respiratory
disease, developmental delays, brain damage, underdeveloped lungs
and liver, and heart conditions as a result of their
participation.
They seek class certification and damages for negligence and
breach of fiduciary duty.
"A higher mortality rate in the lower oxygen saturation level was
an unexpected finding of the study, therefore we could not
communicate it as a potential risk in the parents' consent forms,"
Richard Marchase, UAB's vice president for research said in a
statement.
"Infants in both of the study groups survived at the same or
better rates than infants not enrolled in the study, even when
controlled for the seriousness of their condition."
Marchase said that future consent forms will clearly list all
possible risks of a study.
The families are represented by Reginald McDaniel of Birmingham,
and Alan Milstein with Sherman, Silverstein, Kohl, Rose & Podolsky
of Moorestown, N.J.
VISA INC: May 28 Opt-Out Deadline Set for Cash Settlement Class
---------------------------------------------------------------
Douglas H. Meal, Esq. -- douglas.meal@ropesgray.com -- and Seth C.
Harrington, Esq. -- seth.harrington@ropesgray.com -- at Ropes &
Gray reports that all entities that accept Visa-or MasterCard-
branded credit and/or debit cards must decide, on or before May
28, 2013, how to respond to the settlement agreement with Visa and
MasterCard on behalf of a class covering merchants who accept
Visa-or MasterCard-branded Payment cards in the United States.
The decision by any entity covered by the settlement to accept the
settlement offer, to opt-out of the settlement class, and/or to
object to the terms of the settlement agreement necessarily
involves a complex cost-benefit analysis of the value to be
received by such entity compared to the value of the rights
released by such entity under the settlement agreement. As a
result, any entity that accepts Visa-or MasterCard-branded credit
and/or debit cards is advised to carefully review the terms of the
proposed settlement so as to be in a position to make a considered
decision regarding the exercise of its opt-out and objection
rights regarding the settlement.
On November 27, 2012, the United States District Court for the
Eastern District of New York issued an order granting preliminary
approval of the Definitive Class Settlement Agreement dated
October 19, 2012 among class plaintiffs and defendants in the
putative class actions and individual plaintiff actions
consolidated as In re Payment Card Interchange Fee and Merchant
Discount Antitrust Litigation, No. 05-MD-1720-JG-JO. The
Interchange Fee Litigation proceedings involved claims alleging
that Visa and MasterCard, separately, and together with various
financial institutions, violated antitrust laws and caused
merchants to pay excessive fees for accepting Visa and MasterCard
credit and debit cards, including by agreeing to set, apply and
enforce default interchange fees, limiting what merchants could do
to encourage customers to use other forms of payment, and
continuing such conduct after Visa and MasterCard changed their
corporate structures.
The Class Settlement Agreement establishes two classes: a "Cash
Settlement Class," which includes all persons, business, and other
entities that accepted any Visa or MasterCard cards in the United
States between January 1, 2004 and November 28, 2012 and a "Rule
Changes Settlement Class," which includes all persons,
business, and other entities that, as of November 28, 2012 or at
any point in the future, accept any Visa or MasterCard cards in
the United States.
* In exchange for the settlement and release of Defendants,
members of the Cash Settlement Class who submit a valid claim will
receive payment from a settlement fund, comprised of a maximum
cash payment of $6.05 billion and a payment based on a reduction
in interchange fees during an eight-month "Interchange Period,"
which has an estimated value of $1.2 billion.
* In exchange for the settlement and re lease of Defendants,
members of the Rule Changes Settlement Class will not receive any
monetary payment. Instead, Visa and MasterCard have agreed to
make changes to their rules and practices by permitting, under
certain conditions, surcharges on credit (not debit) cards and
discounts or other financial incentives to customers who do not
use Visa or MasterCard cards, allowing merchants to accept Visa or
MasterCard at fewer than all of a merchant's "trade names" or
"banners," and, for merchants that form buying groups, agreeing to
accept proposals about card acceptance on behalf of the group's
members.
Members of the Cash Settlement Class have until May 28, 2013 to
decide whether (a) to "opt out" of the class or (b) to object to
the terms of the settlement.
Members of the Cash Settlement Class who do not exclude themselves
from the settlement will be eligible to receive payment from the
settlement fund based on the covered entity's interchange fees
attributable to Visa and MasterCard transactions from January 1,
2004 through November 28, 2012. In exchange, members of the Cash
Settlement Class will release Visa and MasterCard and other
entities from claims that are alleged or which could have been
alleged in any of the complaints filed in the Interchange Fee
Litigation, including, but not limited to, claims based on or
relating to any interchange rules, interchange fees, or
interchange rates, any Merchant Fee, or any "no surcharge" rules,
"honor all cards" rules, "no minimum purchase" rules, "no
discounting" rules , "non-discrimination" rules, "anti-
steering" rules, "all outlets" rules, "no bypass" rules, or "no
multi-issuer" rules.
Additionally, members of the Cash Settlement Class who do not
exclude themselves from the settlement may also submit an
objection to the Class Settlement Agreement, which the Court will
consider in deciding whether or not to finally approve the
settlement.
Members of the Cash Settlement Class who decide to opt-
out will not be eligible to receive any payment from the
settlement fund but would remain entitled to assert claims against
Visa and MasterCard that are alleged or that could have been
alleged in any of the complaints filed in the Interchange Fee
Litigation based on any conduct, acts, transactions, events,
occurrences, statements, or failures to act prior to November 28,
2012.
Members of the Rules Changes Settlement Class may not "opt out" of
the settlement and, thus, will be deemed to have released those
claims contained in the release and covenant not to sue in the
Class Settlement Agreement, which includes claims related to the
period after November 28, 2012 that are alleged or that could have
been alleged in any of the complaints filed in the Interchange Fee
Litigation, including, but not limited to, claims based on or
relating to any interchange rules, interchange fees, or
interchange rates, any Merchant Fee, or any "no surcharge" rules,
"honor all cards" rules, "no minimum purchase" rules, "no
discounting" rules, "non-discrimination" rules, "anti-steering"
rules, "all outlets" rules, "no bypass" rules, or "no multi-
issuer" rules. However, members of the Rules Changes Settlement
Class may submit an objection to all or any portion of the
settlement by May 28, 2013, which the Court will consider in
deciding whether or not to finally approve the settlement.
The Court has scheduled a final fairness hearing for September 12,
2013, at which the Court will consider any objections submitted by
Class members and during which Class members may have an
opportunity to speak regarding the terms of the Class Settlement
Agreement.
*********
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., Fairless Hills, Pennsylvania,
USA, and Beard Group, Inc., Washington, D.C., USA. Noemi Irene
A. Adala, Joy A. Agravante, Valerie Udtuhan, Julie Anne L. Toledo,
Christopher Patalinghug, Frauline Abangan and Peter A. Chapman,
Editors.
Copyright 2013. 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
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Information contained herein is obtained from sources believed to
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The CAR subscription rate is $775 for six months delivered via
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are $25 each. For subscription information, contact
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