/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990218.MBX C L A S S A C T I O N R E P O R T E R Thursday, February 18, 1999, Vol. 1, No. 10 Headlines ADA LITIGATION: 4th Circuit Says States Can Levy Disability Fees AIDS-TAINTED BLOOD: French Victims' Families Want Judge Removed AGRIBIOTECH: Says Shareholder Suits Lack Merit; Mounting Defense ALLSTATE & GEICO: Consumer-Advocacy Web Site Established AMAGASAKI POLLUTION: 2.42 Billion Yen Company Settlement Ratified AMERICAN BANKNOTE: Kantrowitz Goldhamer Files Suit in New York ASSISTED LIVING: Stoll Stoll Files Complaint in Oregon CELL PATHWAYS: Milberg Weiss Files Complaint in Pennsylvania CELL PATHWAYS: Gross Firm Files Complaint in Pennsylvania CELL PATHWAYS: Company Denies Allegations in Class Action Suits CHINESE TRAINEES: Scores File Suit in Japan for Unpaid Wages CITIZENS UTILITIES: Nogales City Council Approves Settlement DOW CORNING: Creditor Ballots due May 14, 1999 GENCOR INDUSTRIES: Milberg Weiss Files Complaint in Florida HOLOCAUST VICTIMS: Munich Lawyer Criticizes Compensation Fund HOLOCAUST VICTIMS: U.S. Lawyers Criticize Compensation Fund INSO, CORP.: Berman DeValerio File Complaint in Massachusetts JDA SOFTWARE: Barrack Rodos Files Complaint in Arizona PEDIATRIX MEDICAL: Burt & Pucillo File Complaint in Florida PEDIATRIX MEDICAL: Wolf Popper File Complaint in Florida PHILIP SERVICE: Texas Shareholder Suit Attacks Morgan Stanley RENT-A-CENTER: Earnings Strong Despite $11.5MM Settlement Charges SAN FRANCISCO SCHOOLS: School Desegregation Suit Settled SERVICE CORPORATION: Stull Stull Files Complaint in Texas SMARTALK TELESERVICES: Olsen Law Firm Appointed Lead Counsel TEXACO, INC.: Company Wants Environmental Suit Tried in Ecuador TOBACCO LITIGATION: Ohio Unions' Insurers Go to Trial Monday TOBACCO LITIGATION: Virginia Decides How to Use Settlement Funds WABASH NATIONAL: Shalov Stone Files Complaint in [New York] ********* ADA LITIGATION: 4th Circuit Says States Can Levy Disability Fees ---------------------------------------------------------------- The Fourth Circuit Court of Appeals rejected a regulation designed to protect the disabled, ruling 2 to 1 last week that states can charge fees to cover the cost of access programs for people with disabilities. The Court ruling voids a regulation enacted under the Americans with Disabilities Act and allows states to charge disabled people for such things as handicapped license plates and handicapped parking placards. It applies in the five states the Court covers: Virginia, Maryland, North Carolina, South Carolina and West Virginia. The Greensboro News & Record relates that the ruling stems from a case in North Carolina. Five disabled residents sued the state, saying the Department of Motor Vehicles broke the law by charging $5 for handicapped parking signs. The residents argued that the federal regulation prohibits states from charging for programs that give the disabled equal access. A federal District Court judge dismissed the case. The 4th Circuit upheld the district judge's decision, saying the regulation is unconstitutional. Stephen Senn, a Lakeland, Fla., lawyer who argued for the disabled plaintiffs, said the ruling is a setback for disability law. "We're disappointed," Senn said. "We lost a case that we think is a good one." The Justice Department had argued on behalf of the disabled North Carolinians. They said that when judging the ADA, courts should look at the constitutionality of the act as a whole, not at specific parts. But the appeals court, considered to be one of the most conservative in the nation, rejected that argument. In his majority opinion, Chief Judge J. Harvie Wilkinson III said courts can examine the legality of each smaller regulation inside a broader law. In his opinion, Wilkinson made a case for stronger states' rights. He cited a 1997 Supreme Court ruling in a Texas case in which the justices said certain federal laws have taken too much power away from the states and handed it to Congress. Justice Department spokeswoman Gina Talamona said department lawyers were reviewing the decision and would have no immediate comment. The government could ask the full appeals court to review the decision. The 4th Circuit ruling contradicts previous court rulings in other regions of the country, including Ohio and New Jersey. AIDS-TAINTED BLOOD: French Victims' Families Want Judge Removed --------------------------------------------------------------- >From Paris, Reuters reports that families of victims in France's AIDS-tainted blood scandal called on Tuesday for the removal of the judge overseeing the trial of three former ministers accused of delaying moves to screen blood products. Lawyer Francois Honnorat, speaking for the Association of Blood Recipients, said a formal request for the removal of magistrate Christian Le Gunehec would be filed later in the day to the Supreme Court. "He is preventing our taking part in the hearings and we consider this an intolerable demonstration of partiality," Honnorat told reporters. Honnorat, Reuters relates, spoke after Le Gunehec rejected applications from more than a dozen lawyers to allow a greater number of victims to testify. The magistrate based his refusal on legal grounds which allow him to set the number of people who can take part in the trial. Victims' groups estimate at least 3,600 people, including hospital patients and haemophiliacs, were infected and more than 1,000 died from AIDS contracted from tainted blood. Former Premier Laurent Fabius stands accused of blocking the introduction of a U.S. test to screen blood donors for AIDS until a rival French test came on the market. He denies the charges. Also on trial are Edmond Herve, a former junior health minister, and his boss Georgina Dufoix, a former minister for social affairs and health, who also say they were unaware at the time of the debate over when to begin screening blood. All three are accused of negligence in 1984-85 when evidence was rapidly accumulating that AIDS was a killer disease that could be transmitted via transfusions and the blood-derived products haemophiliacs use to control bleeding. Each faces up to five years in jail and 500,000 francs ($86,000) in fines if convicted by the special Court of Justice of the Republic made up of parliamentarians and professional judges. AGRIBIOTECH: Says Shareholder Suits Lack Merit; Mounting Defense ---------------------------------------------------------------- AgriBioTech, Inc. (Nasdaq National Market:ABTX) Tuesday announced fiscal 1999 second quarter results for the period ended Dec. 31, 1998. Due to the seasonal nature of the seed business, the Company noted, second quarter losses are typical for ABT. The company reported a net loss of $10.3 million on net sales of $75.9 million for the second quarter of fiscal 1999. In announcing second quarter results, ABT acknowledged it has recently been the subject of class action lawsuits brought by various law firms. "Management believes that all are without merit and will vigorously defend them. In that regard, ABT has retained the services of a leading law firm that specializes in defending these types of cases, Wilson Sonsini Goodrich & Rosati of Palo Alto, California," the Company said. ALLSTATE & GEICO: Consumer-Advocacy Web Site Established -------------------------------------------------------- A consumer advocacy web site at http://www.safeautorepair.orgwas launched this week and is designed to help consumers with questions regarding the proposed class action lawsuits filed against GEICO, a unit of Berkshire Hathaway Inc. (BRKA), and Allstate (ALL). The lawsuits claim the insurers compel repair shops to use substandard non-factory-authorized parts when repairing GEICO and Allstate policyholder vehicles. Both nationwide actions, filed Jan. 27 in Arizona's Maricopa County Superior Court, seek class action status, claiming the companies' actions constitute a breach of contract with customers. GEICO and Allstate policies state that repairs will be made using parts that restore vehicles to pre-crash physical condition and cash value. In addition to information about the suit, the Web site offers consumers information on the use of non-factory-authorized parts and tips on avoiding sub-standard repairs. AMAGASAKI POLLUTION: 2.42 Billion Yen Company Settlement Ratified ----------------------------------------------------------------- Nine companies in an air pollution suit pending before the Kobe District Court agreed yesterday to pay patients and families of deceased victims 2.42 billion yen (about $20.4 million) in damages in a court-brokered settlement. The defendants, including Kansai Electric Power Co., agreed on the damages payment to the asthma patients and families of deceased victims, on condition that the plaintiffs use 920 million yen of the money to protect the environment of Amagasaki, Hyogo Prefecture. The other defendants are Sumitomo Metal Industries Ltd., Kobe Steel Ltd., Asahi Glass Co., Kubota Corp., Kansai Coke and Chemical Co., Furukawa Co., Godo Steel Ltd. and Nakayama Steel Products Co. The 379 plaintiffs -- officially recognized patients of diseases caused by air pollution in Amagasaki and families of deceased victims -- seek an additional 7 billion yen in damages from the central government, Hanshin Expressway Public Corp. Mitsuko Matsu, leader of the plaintiffs, said they will continue the suit against the state and the public corporation. The settlement came more than a month before the Kobe District Court was scheduled to conclude the hearing March 26. The nine companies apparently decided to settle as they might lose the suit like many other companies that faced similar court battles, sources close to the case told Kyodo News. AMERICAN BANKNOTE: Kantrowitz Goldhamer Files Suit in New York -------------------------------------------------------------- The law firm of Kantrowitz, Goldhamer & Graifman, P.C. announced that a class action lawsuit has been filed on behalf of a proposed class of shareholders who purchased the common stock of American Bank Note Holographics, Inc. (NYSE: ABH) during the period July 15, 1998 through January 25, 1999, inclusive. The lawsuit has been filed in the U.S. District Court for Southern District of New York. Named as defendants are ABH and certain of its officers and directors. The complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1933 and Rule 10b-5 promulgated thereunder, and Section 11 of the Securities Act of 1933 by making false and misleading statements which materially overstated the Company's revenues, net income and sales for the first, second and third quarters of 1998 and for the fiscal years 1996 and 1997. ASSISTED LIVING: Stoll Stoll Files Complaint in Oregon ------------------------------------------------------ Stoll Stoll Berne Lokting & Shlachter P.C., filed a class action suit in the United States District Court for the District of Oregon on behalf of all persons who purchased the 6% convertible subordinated debentures due 2002 of Assisted Living Concepts, Inc. (Amex: ALF) from the date they were first offered, October 24, 1997, through February 1, 1999, inclusive. The complaint charges the Company and William McBride III, Keren Brown Wilson, Stephen Gordon and Rhonda Marsh with violations of the Securities Exchange Act of 1934. After seven straight quarters of reporting allegedly increasing profitability, on February 1, 1999, the Company announced that is was restating its income for 1997 and the nine months ended September 31, 1998. As a result of the restatement, the Company's net income will be substantially less than previously reported. An official of American Retirement Corp. ("ARC") stated that ARC had dropped its plans to merge with the Company as a result of the restatement. The complaint alleges that defendants issued a series of false and misleading statements about Assisted Living's earnings, profitability and business condition and issued financial statements during the Class Period that were materially false and misleading and violated Generally Accepted Accounting Principles, thereby misleading investors regarding Assisted Living's true financial condition and then-current financial performance. As a result, the price of Assisted Living's 6% convertible subordinated debentures were artificially inflated during the Class Period. On February 1, 1999, the date of the Company's announcement, the price of Assisted Living's 6% debentures plummeted from its closing price on the previous trading day of $80 3/4 to $58 per bond. During the Class Period, the 6% debentures traded as high as $112 1/2. CELL PATHWAYS: Milberg Weiss Files Complaint in Pennsylvania ------------------------------------------------------------ Milberg Weiss Bershad Hynes & Lerach LLP announced that a class action lawsuit was filed on February 12, 1999 in the United States District Court for the Eastern District of Pennsylvania, on behalf of all persons who purchased the common stock of Cell Pathways, Inc (Nasdaq: CLPA), between November 11, 1998 and February 2, 1999, inclusive. The complaint charges CPI and certain officers of the Company during the relevant time period with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that defendants issued a series of materially false and misleading statements regarding the efficacy and near-term commercialization of the Company's cancer treatment drug, PREVATAC(TM)(exisulind). Because of the issuance of a series of false and misleading statements, the price of CPI common stock was artificially inflated during the Class Period. CELL PATHWAYS: Gross Firm Files Complaint in Pennsylvania --------------------------------------------------------- Law Offices Bernard M. Gross, P.C., on February 12, 1999, filed a class action lawsuit in the United States District Court for the Eastern District of Pennsylvania on behalf of a class consisting of all persons who purchased the common stock of Cell Pathways Inc. from November 11, 1998 through and including February 2, 1999 and were damaged thereby, inclusive. The Complaint charges Cell Pathways(NYSE: CLPA) and certain of its officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. According to the Complaint, during the Class Period, defendants disseminated numerous announcements concerning PREVATAC (exisulind), its current and future prospects concerning PREVATAC (exisulind) in violation of the federal securities laws. The Complaint alleges that the defendants' false statements artificially inflated the price of Cell pathways stock. CELL PATHWAYS: Company Denies Allegations in Class Action Suits --------------------------------------------------------------- Responding to the class action lawsuits filed against it, Cell Pathways, Inc. said in a prepared statement that it, "believes that the allegations are without merit and intends to vigorously contest the litigation." CHINESE TRAINEES: Scores File Suit in Japan for Unpaid Wages ------------------------------------------------------------ Sixty Chinese trainees filed a suit against a fresh food association in Japan's Chiba Prefecture and 15 companies Wednesday, seeking 38 million yen in unpaid wages. Executives of the Choshi-based National Fresh Food Logistics Cooperative Association have been indicted for raking off part of wages paid to overseas trainees hired by member companies. Sixteen other Chinese trainees filed a similar damage suit against the defendants Dec. 21, seeking 19 million yen in unpaid wages. According to the suit filed Wednesday with the Yokaichiba branch of the Chiba District Court, Kyodo News reports, one plaintiff, Liu Zhengbo, 33, worked for Kimura Shoten, a seafood processing company based in Choshi. Liu was promised 1.26 million yen in wages for a one-year apprenticeship program but received only 840,000 yen after one year of work, it said. The other 59 plaintiffs also had their wages reduced in the same way, the suit said. Susumu Suzuki, president of the association, and another association executive were indicted in December on charges of taking money from trainees' wages and embezzlement. The wages were deposited by the companies with the association before being handed to the trainees, the suit said. At the first court hearing Wednesday of the first suit, an official of one of the companies said, "We didn't know the association had been deducting money from the wages," Kyodo relates. A Tokyo legal-aid group which filed the suit on behalf of the Chinese trainees told Kyodo it may file more suits against the companies concerned if they do not settle with the plaintiffs. CITIZENS UTILITIES: Nogales City Council Approves Settlement ------------------------------------------------------------ The Arizona Daily Star reports that the City of Nogales settled its complaint against Citizens Utilities, relying on a consumer advocacy office to oversee the company's improvements in electric service. On a 5-0 vote, the Nogales City Council set in motion the repayment of $15 to each of the approximately 12,500 Citizens customers in Santa Cruz County. The vote also established a new process for claims against Citizens by consumers who say they lost equipment during repeated outages late last year. As reported in yesterday's edition of the CAR, nine outages occurred, some of them affecting the entire county. At two public hearings this winter, customers complained that televisions, VCRs and other pieces of electrical equipment were damaged. The Arizona Corporation Commission must approve aspects of the settlement other than the rebates and the claims procedure, the Star related. Among those aspects is a requirement that Citizens present a history of its improvements in electric service over the last several years and a plan for future improvements to the Residential Utility Consumer Office and the city. DOW CORNING: Creditor Ballots due May 14, 1999 ---------------------------------------------- Bankruptcy Judge Arthur Spector has set May 14, 1999, as the deadline for thousands of women worldwide suing Dow Corning Corp. over silicone gel breast implants to vote on a $3.2 billion settlement proposal. The complicated deal, as Reuters describes it, will end years of legal fighting, is part of a larger, $4.5 billion bankruptcy reorganization plan first developed in 1995 to help Dow Corning, a 50-50 joint venture of Dow Chemical Co. and Corning Inc., cope with the thousands of suits filed against it over the implants. Judge Spector approved the plan for distribution to women for voting. Jointly proposed by Dow Corning and the Tort Claimants' Committee, the plan which calls for Dow Corning to send creditors a description of the settlement and ballots for voting by March 15, Dow Corning spokesman Kevin Wiggins said. The ballots must then be returned by May 14. "All claimants will have to accept or reject the settlement proposal," Wiggins said. Two-thirds of voters must approve the plan for it to go forward, Wiggins said. A confirmation hearing is scheduled for June 28 to allow opponents to air their views, after which the judge will issue a final ruling on whether the plan should be confirmed. The proposed settlement gives women three settlement options with payments ranging from $2,000 to more than $300,000 under certain conditions. Women who opt out of the settlement have six months to decide if they want to sue the company separately. GENCOR INDUSTRIES: Milberg Weiss Files Complaint in Florida ----------------------------------------------------------- A class action lawsuit, Civil Action No. 99-165-CV-18-B, was filed in the United States District Court for the Middle District of Florida, on behalf of all persons who purchased the common stock of Gencor Industries, Inc. (Amex: GX), between February 5, 1998 and January 28, 1999, inclusive, by the law firm of Milberg Weiss Bershad Hynes & Lerach. The complaint charges Gencor and certain officers and directors of the Company during the relevant time period with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that defendants issued a series of materially false and misleading statements regarding Gencor, its products and the strength of its business. Because of the issuance of a series of false and misleading statements, the price of Gencor common stock was artificially inflated during the Class Period. HOLOCAUST VICTIMS: Munich Lawyer Criticizes Compensation Fund -------------------------------------------------------------- >From Bonn, Reuters reports that a Munich lawyer involved in a lawsuit against German industry for Nazi-era injustices on Tuesday criticised the size of a proposed compensation fund and the number of companies participating. A group of 12 leading German companies has proposed a fund to compensate people who were forced to work as slave labourers or whose property was expropriated by the Nazis. "The companies involved here are the tip of the iceberg," lawyer Michael Witti told Reuters. He estimated the real number of companies involved in Nazi-era injustices amounted to more than 200. While no figure for the total value of the fund was given at an earlier news briefing in Bonn, Witti said he believed a sum in the billions of marks was under discussion. But he said the amount would have to be "far greater" than the three billion marks ($1.72 billion) cited by media reports. The fund, which has the backing of Chancellor Gerhard Schroeder, is aimed at pre-empting lawsuits against German firms. Witti is part of mainly U.S.-based legal team which has filed an $18 billion class-action lawsuit naming some of Germany's top banks and 100 other institutions as defendants. "This does not mean an end for the class action, that is clear," he said, repeating past statements that any settlement would have to take place in a court of law. The issue of Holocaust compensation has become an increasingly risky one for German business. HOLOCAUST VICTIMS: U.S. Lawyers Criticize Compensation Fund ----------------------------------------------------------- A group of lawyers representing Holocaust survivors in class actions against 14 German companies charged with using slave labor expressed their opposition to unilateral German efforts to resolve the claims through a German compensation fund. The group is led by Philadelphia-based Berger & Montague, P.C. "During World War II, our clients were forced to endure unspeakably brutal conditions by German companies eager to rent their bodies from the Nazi SS for their economic benefit. After the end of the War, these companies (with few exceptions) totally rejected efforts to compensate the victims. No one took up their cause. The Allied Governments totally ignored their claims, and, indeed, restored freedom and wealth to all German industrialists convicted of war crimes. Jewish organizations, with no outside support, were able to negotiate token settlements with only a handful of companies and agreed to provide no further assistance in slave labor claims. For half a century, slave labor victims have been ignored while some perpetrators of slave labor have gone on to become multi-billion dollar international conglomerates," Berger & Montague said in a statement. "We favor a speedy resolution of these claims. But we cannot accept one that has been dictated by the German companies. This is not a war which they won and which entitles them to impose terms of surrender. If the German companies truly want to get this behind them, they should sit down with the slave labor victims and work out a mutually agreeable settlement that treats the victims with the dignity that has been so lacking over the past 55 years," Berger & Montague added. INSO, CORP.: Berman DeValerio File Complaint in Massachusetts ------------------------------------------------------------- Berman DeValerio & Pease LLP filed a lawsuit filed charging Inso Corp. (Nasdaq:INSO) with overstating its revenues and earnings. The case was filed as a class action in the United States District Court for the District of Massachusetts on behalf of all persons and entities who purchased the common stock of Inso Corp. during the period February 3, 1998 through and including January 29, 1999 and who suffered losses on their investments. The action charges that Inso issued materially false and misleading financial statements during the Class Period. On February 1, 1999, the Company announced that, due to accounting irregularities, it would restate its 1998 financial results for its first, second and third fiscal quarters. During the Class Period, while its revenues and earnings were materially overstated, certain of Inso's officers sold more than 1.5 million of their Inso common stock and collected proceeds of almost $4 million. When Inso revealed that its financial statements had been overstated, its common stock price plunged by more than 60% on February 1, 1999. JDA SOFTWARE: Barrack Rodos Files Complaint in Arizona ------------------------------------------------------ Barrack, Rodos & Bacine, filed a class action proceeding in the United States District Court for the District of Arizona on behalf of all persons who purchased the common stock of JDA Software Group Inc. (Nasdaq: JDAS) between January 29, 1998 and January 5, 1999, inclusive. The Complaint charges JDA and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, defendants caused JDA to report strong financial results, claiming that JDA was continuing to experience great demand for its software products and services and that JDA would post strong revenue and earnings growth throughout 1998 and 1999. The revenue and EPS growth reported by JDA caused the Company's stock to trade at artificially inflated levels, allowing JDA's senior insiders to sell $43 million of their own JDA stock and JDA itself to issue and sell more than $90 million of stock via a public offering, raising badly needed cash which defendants used to purchase Comshare Inc.'s Arthur Retail Business Systems division. The Arthur Acquisition was a key part of defendants' alleged scheme in that it allowed defendants to continue to hide JDA's declining revenues and EPS by reporting and disseminating false financial statements and concealing JDA's problems with: (i) its newly introduced enterprise products; (ii) its rapidly deteriorating licensing revenue; and (iii) its disorganized and leaderless European and Latin America sales forces. When JDA finally admitted that its sales force was in disarray, that its previously reported financial results were false and would have to be restated and that JDA would be reporting huge 4Q98 losses, JDA stock plummeted to just $6-1/16 per share, 80% lower than the levels where defendants had sold more than $140 million of JDA stock. PEDIATRIX MEDICAL: Burt & Pucillo File Complaint in Florida ----------------------------------------------------------- Burt & Pucillo, LLP filed a class action lawsuit on February 16, 1999, in the United States District Court for the Southern District of Florida, on behalf of all persons who purchased the common stock of Pediatrix Medical Group, Inc. (NYSE:PDX), between April 28, 1998 and February 12, 1999, inclusive. The Complaint charges Pediatrix and certain of its executive officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as well as Rule 10b-5 promulgated thereunder. The complaint alleges that defendants issued a series of materially false and misleading statements during the Class Period regarding the Company's financial condition and results of operations. These false and misleading statements caused the price of Pediatrix's common stock to be artificially inflated during the Class Period. PEDIATRIX MEDICAL: Wolf Popper File Complaint in Florida -------------------------------------------------------- A class action lawsuit was filed against Pediatrix Medical Group, Inc. (NYSE: PDX) in the United States District Court for the Southern District of Florida by the law firm Wolf Popper LLP on behalf of persons who purchased or otherwise acquired Pediatrix securities in the open market during the period April 28, 1998 through February 12, 1999. The Complaint charges that defendants violated the U.S. securities laws by issuing materially false and misleading statements and by omitting to disclose material facts required to be disclosed, in order to make the statements issued not materially false and misleading throughout the Class Period. PHILIP SERVICE: Texas Shareholder Suit Attacks Morgan Stanley ------------------------------------------------------------- Former Texas stakeholders in U.S.-based Allwaste Inc., now an arm of Canada's Philip Services Corp. , are suing U.S. investment house Morgan Stanley Dean Witter & Co., saying it should have known Philip was in financial trouble before it arranged a 1997 marriage between it and Allwaste, according to a news report circulated by Reuters. New York-based Morgan Stanley, one of the largest brokerages in America, has been targeted by former employees and executives of U.S.-based Allwaste, now part of Hamilton, Ontario-based Philip, a company that recovers metals from scrap and provides industrial waste disposal services. The employees and executives they say they have watched the worth of their options in the Houston, Texas-based waste management company plunge with the dwindling value of Philip stock after the deal. Allwaste stock options were rolled into Philip options as part of the July 31, 1997 merger. Their suit, Reuters relates, asserts that Morgan Stanley breached its fiduciary duties. The action is the latest in a long list of lawsuits involving Philip Services. The company has gone from a high-flying waste management firm and acquisition artist to a company ravaged by unexpected losses, a copper trading scandal and legal actions. The case of James A. Collins and co-plaintiffs versus Morgan Stanley Dean Witter and employee Ian Pereira, who helped clinch the deal, was filed in the Galveston division of the U.S. District Court for the Southern District of Texas. The lawsuit seeks class action status on behalf of all Allwaste employees who owned stock options in the industrial services firm at the time it merged with Philip in 1997. The plaintiffs allege that Morgan Stanley, the successor of Morgan Stanley & Co. Inc., conducted a cursory investigation of Philip before telling Allwaste and its stakeholders that the deal was fair. Pereira signed the fairness opinion. If it had investigated, Morgan Stanley would have known that "there were substantial questions regarding Philip and the integrity of its management. In fact, Philip had dramatically overstated its revenues and assets or failed to state many of its liabilities," the lawsuit states. As a result, Morgan Stanley and Pereira breached their fiduciary duties, it said. The suit claims that Morgan Stanley gave a fairness opinion based on a few calls and a "pretend" investigation. If it had dug deeper, it would have seen public reports questioning the integrity of Philips' management and the value of Philip. Patrick Zummo, one of the lawyers representing the plaintiffs, told Reuters Monday that Allwaste wasn't involved in Philip's plummeting stock price. "Allwaste, as far as we can see, is not the reason that the Philip stock price has declined so badly. Those problems all appeared (before) or pre-existed the merger," Zummo said. Some of the holders were counting on the Allwaste stock options to help boost their pensions, Zummo said. "Many of them would have held these options as part of retirement." RENT-A-CENTER: Earnings Strong Despite $11.5MM Settlement Charges ----------------------------------------------------------------- Rent-A-Center, Inc. (Nasdaq: RCII) (formerly known as Renters Choice, Inc.), announced revenues and net earnings for the quarter and year ended December 31, 1998. Revenues for the quarter ended December 31, 1998 were $350.3 million, a $258.0 million increase from $92.3 million for the same period of the prior year. This 279.6% increase includes incremental revenues of $21.9 million and $223.5 million from the acquisitions of Central Rents, Inc. and Thorn Americas, Inc., respectively. The Company's original core businesses remained strong during the quarter, contributing $104.9 million in total revenues. Same- store revenues (revenues earned in stores operated for the entirety of both periods) during the fourth quarter of 1998 increased 9.9% from the comparable quarter of 1997. Net earnings for the quarter ended December 31, 1998, before a non-recurring charge of $11.5 million associated with the pending settlement of two class action lawsuits in New Jersey, were $9.7 million. The 30.7% increase in net earnings over the fourth quarter of 1997 includes the additional expenses associated with the assimilation of Central Rents and Thorn Americas, and came despite the increased interest and amortization costs associated with those acquisitions. Net earnings for the year ended December 31, 1998, after the fourth quarter $11.5 million non-recurring charge and the third quarter $7.5 million non-recurring acquisition related charges, were $24.8 million, compared with $25.9 million in the year ended December 31, 1997. Excluding these non-recurring charges, net earnings and diluted earnings per share for the year would have been $35.1 million and $1.24, respectively, representing growth in net earnings and diluted earnings per share of 35.8% and 20.4%. This growth was principally driven by increased total revenues of $478.2 million, which increased from $331.5 million for the year ended December 31, 1997, to $809.7 million in 1998, representing an increase of 144.3%. Although the inclusion of the operations of both Central Rents and Thorn Americas accounts for a significant portion of this increase, the Company experienced growth in its core rent-to-own stores, with same-store sales (representing approximately 420 stores) increasing by 8.1% for the year. SAN FRANCISCO SCHOOLS: School Desegregation Suit Settled -------------------------------------------------------- A settlement was reached Tuesday just as a federal trial was to begin to decide the constitutionality of the city's school desegregation program, which bars any school from having more than 45% of any one racial or ethnic group. U.S. District Judge William Orrick ordered details kept confidential until a hearing is scheduled for preliminary approval of the lawsuit's settlement. But participants' comments indicated that limits on racial and ethnic groups at each school in the 63,000-student district, part of a 1983 court order, would be repealed. The agreement between the school district and the National Association for the Advancement of Colored People is "a balanced resolution that achieves the objectives that plaintiffs in this case set," Daniel Girard, lawyer for three Chinese-American students and their parents, who filed the suit in 1994, told an Associated Press reporter. "This is definitely worth the fight," Charlene Loen told the AP, whose 14-year-old son, Patrick Wong, was denied admission to elite Lowell High School in 1994 because the school then required higher test scores from Chinese Americans than other ethnic groups. The 1983 order, the AP recalled, which resolved a 1978 discrimination suit by the NAACP, contained a 45% ceiling on any racial or ethnic group at a school. The limit is 40% at alternative or "magnet" schools. A draft settlement that was brought to Orrick earlier in the day would prohibit assigning students based on race or ethnicity but would let the district consider their socioeconomic status, said Patrick Manshardt, a lawyer for the state Board of Education who saw the draft but was not part of the negotiations, the AP added. SERVICE CORPORATION: Stull Stull Files Complaint in Texas --------------------------------------------------------- Stull, Stull & Brody, on February 16, 1999, commenced a securities class action lawsuit in the United States District Court for the Southern District of Texas against Service Corp. International (NYSE:SRV) and certain of its officers on behalf of investors who either surrendered their Equity Corporation stock for Service Corp. shares (as a result of their merger) or who purchased Service Corp. securities in the period between July 23, 1998 and January 26, 1999. The complaint alleges that defendants violated the federal securities laws (Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933) by, among other things, engaging in aggressive and improper accounting practices that inflated earnings and Service Corp.'s stock price during the Class Period. SMARTALK TELESERVICES: Olsen Law Firm Appointed Lead Counsel ------------------------------------------------------------ Kurt B. Olsen, Esq., of The Olsen Law Firm, has been appointed by the Court as Lead Counsel in the SmarTalk Teleservices, Inc. Securities Litigation and has filed an amended complaint on behalf of purchasers of SmarTalk Teleservices, Inc. (Nasdaq: SMTK, SMTKQ) securities between August 13, 1997 and January 7, 1999. The amended complaint consolidates the pending class actions previously filed against SmarTalk during August 1998, and also includes defendants' ongoing fraudulent conduct perpetrated after the August 1998 complaints were filed. The initial complaints filed by Lead Counsel charge SmarTalk and certain of its officers and directors, and its outside auditors, with violations of the Securities Exchange Act of 1934 during a class period of May 13, 1997 to August 10, 1998. The amended complaint includes defendants' ongoing misconduct subsequent to August 10, 1998, including defendants' financial fraud which culminated with defendants restating not only SmarTalk's fiscal 1997, first quarter 1998 and second quarter 1998 results, but also its third quarter 1998 results as detailed in SmarTalk's January 7, 1999 announcement. The January 7, 1999 announcement caused SmarTalk's stock price to further collapse to $1-1/2 per share. The Company has declared bankruptcy and the stock is no longer trading. The amended complaint continues to name SmarTalk's officers and directors and SmarTalk's outside auditor, PricewaterhouseCoopers, LLP, with violations of the securities laws. Since August 1998, Lead Counsel says that it has spent hundreds of hours investigating the facts and prosecuting this litigation and are taking all necessary steps to protect the interests of SmarTalk investors in this action and in the bankruptcy proceedings. Nevertheless, at least three complaints have been filed during January and February, 1999 by other law firms purporting to represent class members in this action. These actions have not been filed by Court Appointed Lead Counsel in this action, but rather by other counsel who were not involved in prosecuting and investigating this action from its inception. The allegations contained in these recently filed complaints appear to only cover the last few months of the Period covered by Lead Counsel's February 16, 1999 Amended Complaint. TEXACO, INC.: Company Wants Environmental Suit Tried in Ecuador --------------------------------------------------------------- News reports say that lawyers for Texaco, Inc., want the billion- dollar class-action toxic waste lawsuit brought by Ecuadorean Indian tribes should be tried in Ecuador, rather than White Plains, New York. TOBACCO LITIGATION: Ohio Unions' Insurers Go to Trial Monday ------------------------------------------------------------ Health-care insurers for Ohio's labor unions are suing the tobacco industry for almost $2 billion to cover the costs of treating smoking-related illnesses. The federal lawsuit claims tobacco companies targeted blue-collar workers and their children through advertising and promotional gimmicks that encouraged them to smoke. "We found documents that indicate that the tobacco industry was aware that people with lower incomes and less education, and who go to work right after high school, are more susceptible to the advertising of the Marlboro man image, Joe Camel, etc., and this is the most vulnerable group to purchase their tobacco products," said Mike Withey, an attorney from Seattle representing the plaintiffs. The suit was brought by an Ohio group representing more than 100 labor union trust funds, which hold the money union members and their employers set aside for health insurance. The tobacco industry also discovered the health hazards of cigarette smoking through its research and kept that information from the public, according to the lawsuit, which goes to trial Monday in U.S. District Court. Tobacco industry attorneys maintain there are no legal grounds for the lawsuit. Tobacco companies, like any other business, have a legal right to advertise, said Robert Weber, an attorney who represents R.J. Reynolds Co., which makes such cigarettes as Camel, Vantage, Winston and Salem and is one of the companies named in the suit. "What they're trying to say is that somehow Ohio working men and women don't somehow understand advertising and are more susceptible than other people in society and that's just hogwash," he said. The lawsuit is one of more than 30 similar ones across the nation. Judges have thrown out such lawsuits in Florida and Pennsylvania. The plaintiffs dismissed The Liggett Group, which makes Chesterfield, Lark, L&M and Eve cigarettes and is based in Durham, N.C., from the lawsuit in exchange for its cooperation. The defendants in the lawsuit are Philip Morris Inc., Lorillard Tobacco Co., RJR Nabisco Inc. and RJR Nabisco Holdings Corp., all based in New York; Brown & Williamson Tobacco Corp. of Louisville, Ky.; British American Tobacco of Middlesex, England; and United States Tobacco Sales and Marketing Co. of Greenwich, Conn. TOBACCO LITIGATION: Virginia Decides How to Use Settlement Funds ---------------------------------------------------------------- Vitginia's House of Delegates and the Senate, the Richmond Times- Dispatch reports, voted unanimously Wednesday to use 60% of the State's share of a $206 billion tobacco settlement to set up two statewide funds. One fund would hold 50% of the money to reimburse Virginia tobacco farmers for lost income and to study how to lessen their ties to the crop. The other fund would reserve 10% to combat youth smoking. WABASH NATIONAL: Shalov Stone Files Complaint in [New York] ----------------------------------------------------------- A class action was commenced on behalf of all persons who purchased the securities of Wabash National Corp. (NYSE: WNC) in the period between April 20, 1998 and January 15, 1999. The lawsuit alleges that the defendants (Wabash and certain of its executives) violated the federal securities laws by, among other things, overstating the company's financial condition. As a result of defendants' conduct, the complaint alleges that the price of Wabash securities was artificially inflated, causing public investors to suffer damages. The Plaintiffs are represented by the New York City law firm of Shalov Stone & Bonner and the Indianapolis law firm of Maddox Koeller Hargett & Caruso. ********* ********* 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., Princeton, NJ, and Beard Group, Inc., Washington, DC. Peter A. Chapman, Editor. Copyright 1999. All rights reserved. ISSN XXXX-XXXX. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *