/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990310.MBX C L A S S A C T I O N R E P O R T E R Wednesday, March 10, 1999, Vol. 1, No. 24 Headlines ALTRIS SOFTWARE: Announces Settlement of Securities Class Action CEPHALON, INC.: Begins Non-Binding Mediation with Shareholders CRANE CO.: Settling Leaky Toilet Claims Despite Class Formation INTERNATIONAL AUTOMATED: Continues Defense of Shareholder Suit INTERNATIONAL HERITAGE: Pyramid Victims May Recover Some Funds LEHMAN BROTHERS: Update About Status of Material Litigation LYCOS, INC.: Spector & Roseman Files Complaint in Massachusetts NORTHWEST AIRLINES: Asks 8th Circuit to Reconsider Antitrust Case ORBITAL SCIENCES: Schubert & Reed Files Complaint in Virginia SAIPAN WORKERS: "Hey, hey, ho, ho, Gap sweatshops have to go." TOBACCO LITIGATION: Allegheny County Sues Cigarette Makers USDA EMPLOYEES: Afro-American Employees Charge Discrimination VANSTAR CORPORATION: Waiting for Ruling on Amended Complaint ********* ALTRIS SOFTWARE: Announces Settlement of Securities Class Action ---------------------------------------------------------------- Altris Software, Inc. (OTC BB:ALTS) announced today that it has entered into a memorandum of understanding that provides for the settlement of the consolidated securities class action lawsuits currently pending against the company. The settlement provides that the claims against Altris Software, its former chairman and chief executive officer Jay Tanna and its chief financial officer John W. Low will be dismissed. Under the terms of the settlement, in exchange for the dismissal and release of these claims, (a) the company's insurance carrier will pay $2,500,000 to the class of plaintiffs; (b) the company will issue to the plaintiffs 2,304,271 shares of its common stock, and (c) the company will cooperate with plaintiffs' counsel by providing certain documents and information regarding the claims asserted in the class actions. The settlement is subject to certain customary conditions, including the execution of a definitive settlement agreement, notice to the class and approval by the Court. Roger H. Erickson, the company's president and chief executive officer stated, "This settlement is an important step forward for Altris that will enable the Company to avoid costly and protracted litigation and to focus the Company's efforts on meeting the needs of our customers and addressing the strategic issues facing the Company." CEPHALON, INC.: Begins Non-Binding Mediation with Shareholders -------------------------------------------------------------- Cephalon, Inc., a current director and officer, and a former officer have been named as defendants in a number of civil actions filed in the U.S. District Court for the Eastern District of Pennsylvania, which have been consolidated into a single class action. The plaintiff class is comprised of those persons and entities who purchased Cephalon common stock, or traded in options to buy or sell Cephalon common stock, during the period June 12, 1995 through and including June 7, 1996. Plaintiffs seek to hold defendants liable for stock trading losses that stem from alleged violations of the U.S. securities laws and alleged common law negligent misrepresentation. More specifically, plaintiffs have alleged that statements by the Company and the named defendants relating to the results of certain clinical studies of MYOTROPHIN were misleading. A judgment in this matter could materially exceed the coverage which may be available under its directors' and officers' liability insurance. The Company is vigorously defending this lawsuit and believes that there are valid defenses against the claims, but the defense of the action is expensive, and the costs of defense will reduce the available insurance coverage that might otherwise be available to satisfy the claims. In an effort to resolve this dispute, in January 1999, the Company engaged a mediator to initiate a non-binding mediation process and commenced discussions with counsel for the lead plaintiffs. CRANE CO.: Settling Leaky Toilet Claims Despite Class Formation --------------------------------------------------------------- Crane Canada, Inc., a subsidiary of Crane Co., is the defendant in a class action pending in British Columbia, Canada alleging damages to property from water escaping from toilet tanks manufactured by Crane Canada. Crane Canada has settled past claims for property damage arising from water escaping from cracked toilet tanks on a case by case basis, and has entered into claims handling agreements with a number of property insurers to process such claims pursuant to agreed claim procedures and reimbursement formulas. Although the class certification order has been upheld on appeal, Crane Canada continues to settle property damage claims in accordance with the claims handling agreements and to enter into such agreements with additional insurers. Accordingly, the company believes that the pending legal action will not have a material impact on its liabilities. Based on the historical trends for claims related to cracked toilet tanks and the experience of Crane Canada in resolving such claims, the company believes that pending and reasonably anticipated future claims are not likely to have a material effect on its results of operations or financial condition. INTERNATIONAL AUTOMATED: Continues Defense of Shareholder Suit -------------------------------------------------------------- On July 2, 1996, shareholders of INTERNATIONAL AUTOMATED SYSTEMS, INC., commenced a class action law suit filed against it by shareholders for securities violations. The class action has been brought on behalf of all persons and entities who purchased shares of common stock from May 13, 1996 to June 27, 1996. The suit is seeking damages incurred based on the decrease in the Company's stock price because of alleged material misrepresentations by the Company regarding new technology developed by the Company. The ultimate outcome of the litigation cannot presently be determined. Accordingly, no provision for any liability that may result upon adjudication has been made in the accompanying financial statements and the possible effect it will have on future financial statements is unknown. Except for proceedings resulting in the denial of class certification, the parties have not engaged in extensive discovery. No settlement discussions have occurred to date. The company intends to continue vigorously defending the lawsuit. On August 13, 1996 INTERNATIONAL AUTOMATED SYSTEMS, INC., was served a formal order of private investigation by the U.S. Securities and Exchange Commission (SEC). This investigation has resulted in a complaint against IAS and Neldon Johnson being filed by the SEC in the United States District Court, Central Division, on September 23, 1998. Donnel Johnson and Randale Johnson were also named as relief defendants. IAS continue to stand by its Digital Wave Modulation (DWM) technology and its inventor and president Neldon Johnson. IAS and Neldon Johnson denies the allegation of participation in fraudulent microcap schemes and the other substantive allegations filed in the complaint by the SEC and intend to vigorously defend the lawsuit. INTERNATIONAL HERITAGE: Pyramid Victims May Recover Some Funds -------------------------------------------------------------- The News Observer Raleigh reports that a proposal calls for bankrupt International Heritage Inc. to use a $5 million bond to settle the Securities and Exchange Commission's one-year-old civil complaint against the company has aroused opposition from creditors and Stanley Van Etten, IHI's controversial chief executive. The North Carolina bankruptcy court is scheduled to hear arguments March 31 over the settlement proposed by IHI's court-appointed trustee, attorney Holmes Harden. IHI posted the $5 million bond last year after the SEC filed a civil complaint accusing the company of being a massive illegal pyramid scheme. The bond was required by a federal judge to pay any judgments arising from the SEC action. IHI has steadfastly denied the SEC's allegations, arguing that it was a legitimate network marketing company like Amway. An unusual feature of the proposed settlement is that the SEC wouldn't receive the $5 million. Instead, the agency would turn over the money to the trustee, who would use it to cover administrative costs of the bankruptcy proceeding and then to pay claims against the company. Priority would be given to paying back disgruntled IHI sales representatives who paid up to $1,850 for the right to recruit other sales reps but say they never received anything in return. About 195,000 creditors are seeking more than $12 million in claims, according to court documents. The settlement proposed by Harden would end the SEC's claims against the company, but not against the individual defendants - Van Etten and IHI co-founders Claude W. Savage of Charlotte and Larry G. Smith of Greenville, S.C. The SEC's case against them is in the discovery phase, and no trial date has been scheduled, SEC attorney William Hicks said. Opposition to the trustee's settlement proposal comes as no great surprise, because the bond is a prime asset of the bankrupt company. IHI, which blamed negative publicity generated by the SEC complaint for killing its business, filed for bankruptcy the day before Thanksgiving. In addition to Van Etten, IHI's bankruptcy attorney, a former sales rep pursuing a class-action lawsuit against IHI, and the companies that supplied the $5 million bond have filed objections to the proposed settlement. "It is pretty well a foregone fact that it is not going to be approved," Van Etten said of the settlement proposal. A major theme of those objecting to the settlement is that Harden hasn't justified it. "Before the court accepts the bald conclusion of the trustee as to the ability of the SEC to 'prove up its claims,' the proof of such ability should be offered to the court with an opportunity for codebtors, lienholders, or other parties with interest to respond," states the objection filed on Van Etten's behalf. Van Etten put up $3.5 million cash for the bond -- the other $1.5 million came from the bond companies -- and has claimed that he is entitled to get his money back if the SEC fails to win its case. Overall, Van Etten has asserted secured claims totaling $6 million. A secured claim has the highest priority in Chapter 7 bankruptcy cases. Attorney Brent Wood of Raleigh's Wood & Francis, which represents Van Etten, said that given Van Etten's secured interest in the bond, he should have been consulted about the settlement, but wasn't. He also said the bond was obtained on the ground that IHI would fight the SEC's case, not just hand the money to the agency. Wood said Van Etten is interested in giving up his secured claim in exchange for settling the SEC case against him individually. "That is what we are discussing with Holmes and the SEC right now," Wood said. Meanwhile, one of the bond companies, Connecticut-based Acstar Insurance, argues that its bond contract with IHI gives Acstar "the exclusive right to determine for itself" whether to settle or defend any claims. Harden said he was unaware of that contract provision when he negotiated the settlement with the SEC. He is researching the legal issues surrounding Acstar's claim. "They contend we can't settle without their input. The SEC disputes that," he said. Harden also said he's willing to compromise. "We'll try to fashion a resolution that resolves all the objections and makes the bond money available to pay creditors' claims. That is our goal," he said. Harden also said it's unclear whether Van Etten has a right to a claim on the $5 million bond. "That is another legal issue we haven't resolved," he said. "I will certainly look at it closely. I would like to make the argument that he doesn't have that interest." As for the merits of the settlement proposal, Harden called it a no-brainer. First, the bankrupt IHI doesn't have the money to defend against the SEC action. And even if it contested the action and won, IHI would get only $3.5 million to pay administrative costs and creditors' claims, because the $1.5 million put up by the bond companies would revert to them. So, winning the case would actually bring less money to IHI than the $5 million that would be disbursed under the proposed settlement. "That is a lot of money toward satisfying creditors' claims in this case," Harden said. "To me, it is a logical conclusion to the SEC's litigation against the company." LEHMAN BROTHERS: Update About Status of Material Litigation ----------------------------------------------------------- In its latest annual report filed with the Securities and Exchange Commission, LEHMAN BROTHERS HOLDINGS, INC., advises investors about the status of material litigation now pending: BAMAODAH V. E.F. HUTTON & COMPANY INC. In April 1986, Ahmed and Saleh Bamaodah commenced an action against E.F. Hutton & Company Inc., ("EFH") to recover all losses the Bamaodahs had incurred since May 1981 in the trading of commodity futures contracts in a nondiscretionary EFH trading account. The Dubai Civil Court ruled that the trading of commodity futures contracts constituted illegal gambling under Islamic law and that therefore the brokerage contract was void. In January 1987, a judgment was rendered against EFH in the amount of $48,656,000. On January 5, 1991, the Dubai Court of Appeals affirmed the judgment. On March 22, 1992, the Court of Cassation, Dubai's highest court, revoked and quashed the decision of the Court of Appeals and ordered that the case be remanded to the Court of Appeals for a further review. On April 26, 1994, the Dubai Court of Appeals again affirmed the judgment of the Dubai Civil Court. The Company appealed the judgment to the Court of Cassation, which reversed the Court of Appeals on November 27, 1994 and ordered that a new expert be appointed to review the case. A new expert was appointed, who returned a report favorable to EFH. The Court ordered a review of additional documents and has set an April 1999 hearing date. ACTIONS RELATING TO FIRST CAPITAL HOLDINGS INC. Concurrent with the bankruptcy filing of First Capital Holdings ("FCH") in May, 1991 and the conservatorship and receivership of its two life insurance subsidiaries, First Capital Life Insurance Company and Fidelity Bankers Life Insurance Company ("Fidelity Bankers Life"), a number of lawsuits were commenced, naming one or more of Holdings, Lehman Brothers and American Express as defendants. Most of these actions have been subsequently settled and/or dismissed. The only material matter still pending is described below. THE VIRGINIA COMMISSIONER OF INSURANCE ACTION. On December 9, 1992, a complaint was filed in the United States District Court for the Eastern District of Virginia (the "Virginia Court") by Steven Foster, the Virginia Commissioner of Insurance (the "Commissioner") as Deputy Receiver of Fidelity Bankers Life. The Complaint names Holdings and Weingarten, Ginsberg and Leonard Gubar, a former director of FCH and Fidelity Bankers Life, as defendants. The Complaint alleged that Holdings acquiesced in and approved the continued mismanagement of Fidelity Bankers Life and that it participated in directing the investment of Fidelity Bankers Life assets. The complaint asserted claims under the federal securities laws and asserts common law claims including fraud, negligence and breach of fiduciary duty and alleged violations of the Virginia Securities laws by Holdings. It sought no less than $220 million in damages to Fidelity Bankers Life and its present and former policyholders and creditors and punitive damages. On May 21, 1998, after trial, the Court entered a Judgment Order in accord with the jury verdict, ordering that the plaintiffs recover nothing and dismissing the complaint. On July 7, 1998, the Commissioner filed a Notice of Appeal to the United States Court of Appeals for the Fourth Circuit from such Judgment Order. EASTON & CO. V. MUTUAL BENEFIT LIFE INSURANCE CO., ET AL., EEASTON & CO. V. LEHMAN BROTHERS INC. Lehman Brothers was named as a defendant in two consolidated class action complaints pending in the United States District Court for the District of New Jersey (the "N.J. District Court"). Easton & Co. v. Mutual Benefit Life Insurance Co., et al. ("Easton I"), and EASTON & CO. V. LEHMAN BROTHERS INC. ("Easton II"). The plaintiff in both of these actions is Easton & Co., which is a broker-dealer located in Fort Lee, New Jersey. Both of these actions allege federal securities law claims and pendent common law claims in connection with the sale of certain municipal bonds as to which Mutual Benefit Life Insurance Company ("MBLI") has guaranteed the payment of principal and interest. MBLI is an insurance company which was placed in rehabilitation proceedings under the supervision of the New Jersey Insurance Department on or about July 16, 1991. Easton I was commenced on or about September 17, 1991. The litigation was purportedly brought on behalf of a class consisting of all persons and entities who purchased DeKalb, Georgia Housing Authority MultiFamily Housing Revenue Refunding Bonds (North Hill Ltd. Project), Series 1991, due November 30, 1994 (the "DeKalb Bonds") during the period from May 3, 1991 (when the DeKalb bonds were issued) through July 16, 1991. Lehman Brothers acted as underwriter for this bond issue, which was in the aggregate principal amount of $18.7 million. Easton II was commenced on or about May 18, 1992, and named Lehman Brothers as the only defendant. Plaintiff purported to bring this second lawsuit on behalf of a class composed of all persons who purchased "MBLI-backed Bonds" from Lehman Brothers during the period April 19, 1991 through July 16, 1991. On or about February 9, 1993, the N.J. District Court granted plaintiffs' motion for class certification in Easton I. The parties agreed to certification of a class in Easton II for purchases of certain fixed-rate MBLI-backed bonds during the class period. LBI, together with the other defendants in Easton I and Easton II, has agreed to settle both cases, subject to court approval. ACTIONS RELATING TO THE SALES AND MARKETING OF LIMITED PARTNERSHIPS Under the terms of an agreement between American Express and Holdings, American Express has agreed to indemnify Holdings for liabilities which it may incur in connection with any action relating to any business conducted by The Balcor Company, a former Lehman Brothers subsidiary ("Balcor"), in which Holdings is named as a parent company or control person of Balcor. Holdings believes that some of the allegations in certain of the actions described below are covered by this indemnity. IN RE LEHMAN BROTHERS LIMITED PARTNERSHIP LITIGATION. On October 18, 1996, a purported first consolidated and amended class action complaint was filed in the Court of Chancery of the State of Delaware in and for New Castle County on behalf of all persons who purchased units in various public, proprietary limited partnerships organized by Shearson or E.F. Hutton & Co. or operated by affiliates of those entities between 1981 and the present (with certain exceptions). Defendants are LBI and 56 Lehman-affiliated general partners. The complaint alleges that defendants breached their fiduciary duties or aided and abetted such a breach by allegedly misrepresenting and or failing to disclose the nature of the risks and the status and financial condition of the partnerships; collecting excessive fees; failing to exercise due care in selecting investments for the partnerships; and recommending and selling the partnerships as suitable investments. The complaint seeks, among other things (1) to certify the case as a class action; (2) to declare that defendants breached their duties; (3) to enjoin defendants from operating the partnerships for their own benefit, (4) to account for all profits and impose a constructive trust on them; and (5) to award compensatory damages, costs and expenses and attorneys' fees. KLEIN, ET AL. V. LEHMAN BROTHERS, INC., ET AL. On January 15, 1998, a purported third amended class action complaint was filed in the Superior Court of New Jersey, Law Division: Union County on behalf of investors in certain specified limited partnerships sponsored by Balcor and sold by various entities, including, among others, Shearson and certain of its affiliates. Named as defendants are LBI, various affiliates of LBI, American Express Company, Smith Barney Holdings, Inc., Balcor, a number of Balcor-originated limited partnerships and various individuals and entities affiliated with Balcor. The complaint alleges claims in connection with the marketing, sale and operation of the limited partnerships for common law fraud and deceit, equitable fraud, negligent misrepresentation, breach of fiduciary duty and contract and violation of certain New Jersey statutes relating to the sale of securities. The complaint seeks compensatory damages for lost principal and interest, general damages and punitive damages, treble damages under the New Jersey statutes, and costs and attorneys' fees. On September 24, 1998, the Court filed an opinion dismissing the complaint, and plaintiffs have appealed that dismissal. BRUSS, ET AL. V. LEHMAN BROTHERS INC., ET AL. On January 25, 1999 a purported class action complaint was filed in the Superior Court of New Jersey, Law Division: Essex County on behalf of investors in certain specified limited partnerships sponsored by Balcor and sold by various entities, including, among others, Shearson and certain of its affiliates. The complaint mirrors the claims raised, the relief sought and the defendants named in KLEIN, ET AL. V. LEHMAN BROTHERS, INC., ET AL. COUNTY OF ORANGE ET AL. V. BEAR STEARNS & CO. ET AL. On December 6, 1996, the County of Orange, California (the "County") filed a complaint in the United States Bankruptcy Court for the Central District of California (the "Complaint"), naming 15 broker-dealers, along with various subsidiaries, including LBI, Lehman Brothers International (Europe), Lehman Capital Corp and Lehman Commercial Paper, Inc. (the "Lehman defendants"), as defendants. The Complaint alleges that defendants sold the County unsuitable securities and entered into unsuitable reverse repurchase transactions with the County that were ULTRA VIRES. The County seeks a declaration that the reverse repurchase agreements are void and unenforceable and violated the California Constitution and Government Code, and it claims that the defendants violated the California Constitution and Government Code and committed negligence. No damages are specified, and restitution is sought. Immediately after filing the Complaint, the parties entered into a stay of the action. On July 1, 1998, the case was transferred to the United States District Court for the Central District of California, and on August 21, 1998 the stay was lifted. On November 10, 1998 the Lehman defendants answered the Complaint, denying its material allegations. On December 21, 1998, the County moved to amend the Complaint to add breach of fiduciary duty and aiding and abetting breach of fiduciary duty claims, and the Court has ruled that plaintiff may file the amended complaint (the "Amended Complaint"). On January 5, 1999, the Court entered an order granting summary judgment for defendants on the ULTRA VIRES claims. LEHMAN BROTHERS COMMERCIAL CORPORATION AND LEHMAN BROTHERS SPECIAL FINANCING INC. V. MINMETALS INTERNATIONAL NON-FERROUS METALS TRADING COMPANY On November 15, 1994, two Lehman Brothers subsidiaries, Lehman Brothers Commercial Corporation ("LBCC") and Lehman Brothers Special Financing Inc. ("LBSF"), commenced an action against Minmetals International Non-Ferrous Metals Trading Company ("Minmetals") and China National Metals and Minerals Import and Export Company ("CNM") in the United States District Court for the Southern District of New York alleging breach of contract against Minmetals and breach of guarantee against CNM. The litigation arose from the refusal by Minmetals and CNM to honor their obligations with respect to certain foreign exchange and swap transactions. LBCC and LBSF seek to recover approximately $52.5 million from Minmetals and/or CNM. On June 26, 1995, the court granted CNM's motion to dismiss the claims against it, but also granted LBCC and LBSF leave to replead. Minmetals filed fourteen counterclaims against Lehman entities based on violations of federal securities and commodities laws and rules, and theories of fraud, breach of fiduciary duty and conversion. The court denied a motion by the Lehman counterclaim defendants to dismiss the six fraud-based counterclaims. On June 24, 1996, the court granted the motion of LBCC and LBSF to file an amended complaint naming CNM as an additional defendant. Discovery is complete, and summary judgment motions are pending before the court. ACTIONS RELATING TO NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATIONS SYSTEM ("NASDAQ") MARKET MAKER ANTITRUST AND SECURITIES LITIGATION. Beginning in May, 1994, several class actions were filed in various state and federal courts against various broker-dealers making markets in NASDAQ securities, including LBI. Plaintiffs in these cases alleged violations of the antitrust laws, securities laws and have pled a variety of other statutory and common law claims. All of these actions were based on the theory that because odd-eighth quotes occur less often than quarter quotes, NASDAQ market makers must be colluding wrongfully to maintain a wider spread. By Order filed October 14, 1994, the Judicial Panel on Multidistrict Litigation consolidated these actions in the Southern District of New York and ordered that all related actions be transferred and coordinated for all pretrial purposes. The case is captioned In Re NASDAQ Market-Makers Antitrust Litigation, MDL No. 1023. On December 16, 1994, plaintiffs served a consolidated Amended Complaint naming 33 defendants including LBI. Plaintiffs claim violations of the federal antitrust laws including Section I of the Sherman Antitrust Act. Plaintiffs seek unspecified compensatory damages trebled in accordance with the antitrust laws, costs including attorneys' fees as well as injunctive relief. The court dismissed the action with leave to replead, stating that the complaint failed to identify the securities involved with sufficient specificity. The plaintiffs repled and the defendants answered the amended complaint on November 17, 1995. On December 23, 1997, LBI settled the class action along with 29 other broker-dealers. The Court entered a Final Judgment and Order of Dismissal on November 9, 1998. AIA HOLDING SA ET AL. V. LEHMAN BROTHERS INC. AND BEAR STEARNS & CO., INC. On July 9, 1997, LBI was served with a complaint in the U.S. District Court for the Southern District of New York in which 277 named plaintiffs assert 24 causes of action against LBI and Bear Stearns & Co., Inc. The amount of damages claimed is unspecified. The claims arise from the activities of an individual named Ahmad Daouk, who was employed by an introducing broker which introduced accounts to Shearson Lehman Hutton between 1988 and 1992. Daouk allegedly perpetrated a fraud upon the claimants, who are mostly investors of Middle Eastern origin, and the complaint alleges that Shearson breached various contractual and common law duties owed to the investors. On March 27, 1998, the District Court dismissed without prejudice 18 of the 24 counts pleaded in the complaint. On July 3, 1998 the plaintiffs served their First Amended Complaint containing 18 causes of action against LBI and/or Bear Stearns. ACTIONS RELATING TO BRE-X MINERALS LTD. (A) MCNAMARA ET AL. V. BRE-X MINERALS LTD. ET AL. On July 25, 1997, an Amended Class Action Complaint was filed in the United States District Court for the Eastern District of Texas against 16 defendants, including LBI, which seeks unspecified compensatory damages, interest, costs and attorney's fees on behalf of purchasers of Bre-X common stock and/or Bresea common stock. The Complaint raises claims under the federal securities laws and the common law of fraud and negligent misrepresentation. The Complaint's stated basis for naming LBI is that one of its securities analysts published research on Bre-X. On or about November 21, 1997, several defendants, including LBI, moved to dismiss the Complaint, or, in the alternative, to transfer venue to the Southern District of New York. Plaintiffs have also filed a motion for class certification, which is stayed pending resolution of the motions to dismiss. On January 6, 1999, the Court issued an order dismissing the claims of Canadian plaintiffs who bought their shares on Canadian exchanges. The remaining motions to dismiss are still pending. (B) KLAASEN V. LEHMAN BROTHERS INC. ET AL. On October 2, 1997, William L. Klaasen, "individually and for all those similarly situated within the State of California," filed a Complaint against LBI in the Superior Court for the State of California in and for the County of San Diego. The Complaint raises a claim for common law negligence, and seeks, on behalf of California purchasers of Bre-X and Bresea stock, class certification, rescission, interest, compensatory and punitive damages, disgorgement and restitution of profits and compensation received by LBI, and costs. The action is currently stayed by consent until the earlier of April 1, 1998 or 30 days following the decision on the motion to dismiss in the MCNAMARA case. (C) CHOW ET AL. V. BRE-X MINERALS LTD. ET AL. On October 10, 1997, 125 named plaintiffs filed an action in the Court of Queen's Bench of Alberta, in Calgary, Canada, against 35 named defendants, including LBI. Plaintiffs claim against LBI, which has not yet been served, is for common law negligence. IN RE MOBILEMEDIA SECURITIES LITIGATION LBI was named as a defendant in several purported class actions filed in December, 1996 in the United States District Court for the District of New Jersey in connection with (I) a November 7, 1995 offering of common stock of MobileMedia Corporation; and (ii) a November 7, 1995 offering of 9 3/8% senior subordinated notes of MobileMedia Communications Inc. due in 2007. On November 3, 1997, a consolidated amended class action complaint was filed naming certain of MobileMedia Corporation's officers and directors and the four co-lead underwriters of these offerings, including LBI. MobileMedia filed for Chapter 11 bankruptcy protection on January 30, 1997, and therefore is not named as a defendant. The complaint alleges that the underwriters violated Sections 11 and 12 of the Securities Act. Plaintiffs seek rescission and unspecified compensatory damages. HAROLD GILLET, ET AL. V. GOLDMAN SACHS & CO., ET AL., YAKOV PRAGER, ET AL. V. GOLDMAN, SACHS & CO., ET AL., DAVID HOLZMAN, ET AL. V. GOLDMAN, SACHS & CO., ET AL. Beginning in November, 1998, three class actions were filed in the United States District Court for the Southern District of New York against in excess of 25 underwriters of IPO securities including LBI. Plaintiffs in these cases seek compensatory and injunctive relief for alleged violations of the antitrust laws based on the theory that the defendant underwriters fixed and maintained fees for underwriting certain IPO securities at supracompetitive levels. Plaintiffs plan to file a Consolidated Amended Complaint. LYCOS, INC.: Spector & Roseman Files Complaint in Massachusetts --------------------------------------------------------------- Spector & Roseman, P.C., commenced a class action lawsuit Monday in the United States District Court in the District of Massachusetts on behalf of all purchasers of Lycos, Inc. (NASDAQ:LCOS), common stock during the period of Jan. 25, 1999 through Feb. 9, 1999. The Complaint alleges that Lycos and the Chief Executive Officer of the Company during the Class Period violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Complaint charges that the defendants issued a series of materially false and misleading statements concerning the Company's commitment to remaining independent notwithstanding the fact that Lycos was in serious and advanced discussions to merge with USA Networks Inc. at the time. Because of the issuance of these false and misleading statements, the price of Lycos common stock was artificially inflated during the Class Period. The Complaint alleges that on Feb. 9, 1999, the Company shocked the market by announcing that it had signed a definitive agreement to merge with USA's e-commerce and Internet assets and Ticketmaster Online-Citysearch, Inc. and that post transaction Lycos shareholders would own a mere 30% of the newly formed company. Further, it was reported that Lycos shareholders would receive 2.25 shares of USA, consideration of $94.50 per Lycose share which was then trading at $127 per share, plus an option to buy preferred shares in the newly formed company. As a result of this announcement, the price of Lycos stock collapsed from a Class Period high of $127.25 to $87.25 per share. NORTHWEST AIRLINES: Asks 8th Circuit to Reconsider Antitrust Case ----------------------------------------------------------------- Northwest Airlines has filed a Rehearing Petition with the 8th Circuit Court of Appeals asking the Court to re-hear a case accusing Northwest of antitrust violations. Last month, the 8th Circuit reinstated a class action antitrust case filed by a group of frequent flyers who claim Northwest's takeover of Republic Airlines was an anti-competitive move that drove up Northwest's ticket prices. Northwest spokeswoman Marta Laughlin says the Company has asked the same three-judge panel that reinstated the lawsuit to review its decision one more time. ORBITAL SCIENCES: Schubert & Reed Files Complaint in Virginia ------------------------------------------------------------- On March 5, 1999, Schubert & Reed LLP filed a class action in the United States District Court for the Eastern District of Virginia, on behalf of a class of purchasers of Orbital Sciences Corporation common stock (NYSE: ORB) during the period 4/21/98 through 2/16/99, inclusive. The suit names as defendants Orbital Sciences Corporation, its Chairman and CEO David W. Thompson and CFO Jeffrey V. Pirone for violations of the federal securities laws. On Tuesday, February 16, 1999, after the close of trading, Orbital Sciences Corporation announced that it was restating the first three fiscal quarters of 1998, and that earnings had decreased during the first three quarters, instead of increasing as previously reported. The restatement reduces previously reported net income by approximately $1,774,000 (or approximately $0.07 per diluted share) in the first quarter of 1998, by approximately $1,421,000 (or approximately $0.04 per diluted share) in the second quarter of 1998, and by approximately $6,175,000 (or approximately $0.15 per diluted share) in the third quarter of 1998. Total diluted earnings per share for the nine months ended September 30, 1998 were reduced from $0.62 to $0.37 per share. Insiders reaped more than $3 million in insider trading proceeds during the period now being restated. On news of the restatement, ORB shares fell $2.25 to close at $27.375 on February 17, 1999, losing 7.5% of their value in a single day's trading, off 44% from their class period high of $49.125. The stock closed March 5, 1999 at $25.50. SAIPAN WORKERS: "Hey, hey, ho, ho, Gap sweatshops have to go." -------------------------------------------------------------- Protesters across the country demonstrated Saturday outside stores they say sell clothing made in sweatshop conditions, according to an Associated Press report. In San Francisco, as many as 300 activists crowded in front of the Gap flagship store in the busy downtown shopping district. Police arrested 16 after they blocked a doorway to the store, said Capt. Dennis Martel. Several hundred activists marched up Manhattan's Fifth Avenue in the rain. "We don't want clothes made in sweatshops," said a sign hoisted over a sea of umbrellas. The Gap has been charged with violating U.S. anti-peonage laws and having its clothes manufactured with indentured labor, mostly young Asian women working on the U.S. island of Saipan. Class- action lawsuits filed in January in California by human rights groups claim Saipan workers face beatings, forced abortions, vermin-infested quarters and armed guards all while making clothing tagged "Made in the USA." Protester Emma Berkman, a bicycle messenger, says she no longer buys clothing "unless it says it's union-made. You can't trust anybody otherwise." Other anti-Gap protests happened in front of Northern California stores in Berkeley, Fresno, Santa Monica and Santa Barbara. In Cambridge, Mass., about 10 Harvard University students spent an hour in the cold weather handing out leaflets in front of The Gap and chanting, "Hey, hey, ho, ho, Gap sweatshops have to go." In a statement, Gap company officials said they were "deeply concerned by the allegations in the lawsuits. We simply do not, and will not, tolerate the type of conduct alleged in factories where we do business." TOBACCO LITIGATION: Allegheny County Sues Cigarette Makers ---------------------------------------------------------- Allegheny County, Pennsylvania, filed a lawsuit against the major cigarette makers, seeking to recover its own costs for treating people with smoking related ailments. The Pittsburgh Post-Gazette reports the lawsuit asks for damages the county incurred for treatments at Kane Hospitals, the county jail, and in insurance claims of county employees. The county is already challenging the $11.3-billion settlement big tobacco reached with 46 states inclduing Pennsylvania. That settlement blocks other lawsuits. USDA EMPLOYEES: Afro-American Employees Charge Discrimination ------------------------------------------------------------- The Department of Agriculture's billion dollar settlement of the Black Farmers' suit will not buy it peace for long, as a second class action from within its own ranks raises new questions about USDA's conduct toward Black Farmers. USDA's Farm Service Agency is still embroiled in controversy over its billion dollar settlement of a suit brought by Black Farmers challenging USDA discrimination in farm loans. Now, the agency is facing new questions about the Farmers in a class action involving over 300 of its own African American employees, to be tried at the EEOC beginning April 12, 1999. "It's not surprising that the Farm Service Agency was discriminating against the Black Farmers," said class attorney Joseph D. Gebhardt, "when they have for years systematically excluded African Americans from policymaking positions in the upper levels of agency management." Gebhardt has met obstruction from USDA's attorneys when he questioned white managers' treatment of the Black Farmers in depositions last week. "USDA's managers are being instructed not to answer when I ask them what, if anything, they did to provide assistance to the Black Farmers," said Gebhardt, who is asking the EEOC to compel USDA to answer. The employees' suit alleges that white Farm Service Agency managers have systematically denied promotions to African American employees serving at grades GS-12, GS-13, and GS-14. For example, the agency promoted a white woman with only a high school degree over an African American man with a Ph.D. from Ohio State University, and assigned another GS-14 African American employee, Harry Millner, to a position with no duties. A white manager admitted he was afraid Millner would oppose Agency policy, but he could identify no specific policies, and, at USDA's attorney's instruction, would say nothing about policy toward the Black Farmers. VANSTAR CORPORATION: Waiting for Ruling on Amended Complaint ------------------------------------------------------------ On July 3, 1997, a trust claiming to have purchased shares of the Common Stock filed suit in Superior Court of the State of California. The suit is entitled David T. O'Neal Trust, Dated 4/1/77, v. Vanstar Corporation, et al., Consolidated Case No. CV767266. On January 21, 1998, the same plaintiff, along with another plaintiff claiming to have purchased shares of Common Stock, filed suit in the United States District Court for the Northern District of California, making allegations virtually identical to those in the earlier suit. The recent suit is captioned David T. O'Neal Trust, Dated 4/1/77, et al. v. Vanstar Corporation, et al., Case No. C- 98-0216 MJJ. Both suits name as defendants the Company, certain directors and officers of the Company, and the Company's principal stockholder, Warburg Pincus Capital Co., L.P., and certain of its affiliates. The complaints in both suits generally allege, among other things, that the defendants made false or misleading statements or concealed information regarding the Company and that the plaintiffs, as holders of the Common Stock, suffered damage as a result. The plaintiffs in both suits seek class action status, purporting to represent a class of purchasers of Common Stock between March 11, 1996 and March 14, 1997, and seek damages in an unspecified amount, together with other relief. The complaint in the first suit purports to state a cause of action under California law; the complaint in the recent suit purports to state two causes of action under the Securities Exchange Act of 1934. On January 28, 1998, the California Superior Court dismissed the plaintiffs' complaint in the first suit but granted the plaintiffs leave to amend to cure the deficiencies in their complaint. The plaintiffs have amended the complaint, but the court has not yet ruled on the sufficiency of that amended complaint. The Company believes that the plaintiffs' allegations in both suits are without merit and intends to defend the suits vigorously. On October 8, 1998, Vanstar Corporation and InaCom Corp., entered into an Agreement and Plan of Merger, providing for InaCom to acquire the Company through the merger of a wholly-owned subsidiary of InaCom with and into the Company. ********* 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. 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