/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990317.MBX C L A S S A C T I O N R E P O R T E R Wednesday, March 17, 1999, Vol. 1, No. 29 Headlines ADVANCED MICRO: Milberg Weiss Files Complaint in California ADVANCED MICRO: Berger & Montague Files Complaint in California AMERICA WEST: Kaplan Kilsheimer Files Complaint in Arizona AMERICA WEST: Barrack Rodos Files Complaint in Arizona BON-TON STORES: Decries Nine West Shoe Antitrust Litigation DAIMLERCHRYSLER: Plaintiffs Seek Nationwide Class Certification DATASTREAM SYSTEMS: Cauley Firm Files Complaint in South Carolina LUCIENT TECHNOLOGIES & AT&T: Y2K Defect Class Action Suit Filed LYCOS, INC.: Finkelstein Thompson Files Suit in Massachusetts NORTH FACE: Weiss & Yourman File Complaint in [California] NORTH FACE: Scott & Scott Files Complaint in Colorado NORTH FACE: Abbey Gardy Files Complaint in Colorado NORTH FACE: Wolf Popper Files Complaint in Colorado NORTH FACE: Kaplan Kilsheimer Files Complaint in Colorado NORTH FACE: NASDAQ Halts Trading OLD GUARD: Summary Judgment Granted in Policyholder Suit PEDIATRIC SERVICES: Schoengold & Sporn Files Complaint in Georgia SAFESKIN CORPORATION: Milberg Weiss Files Complaint in California SAFESKIN CORPORATION: Weiss & Yourman Files Suit in California SAFESKIN CORPORATION: Wolf Popper Files Complaint in California STAFFMARK, INC.: Cauley Firm Files Complaint in Arkansas ********* ADVANCED MICRO: Milberg Weiss Files Complaint in California ----------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action has been commenced in the United States District Court for the Northern District of California on behalf of persons who purchased the publicly traded securities of Advanced Micro Devices, Inc. (NYSE: AMD) between October 6, 1998 and March 8, 1999. The complaint charges AMD and its Chairman and CEO, William Sanders, III with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, defendants issued a series of materially false and misleading public statements about AMD's operations and prospects, including the purported success of its flagship K6 microprocessor. In January 1999, AMD disclosed for the first time that its newest K6 chip was experiencing production and design problems, which had resulted in significant yield and production problems during late 1998. However, defendant Sanders again assured investors that AMD's problems were "behind us now" and that AMD was on track to post strong performance in the first quarter of 1999. On March 8, 1999, AMD shocked investors, admitting that the production problems which defendants assured investors had been resolved had in fact adversely affected K6 production throughout January and February of 1999, and that AMD would suffer a "significant loss" for 1Q99. This revelation caused the price of AMD shares to drop to approximately $17 per share, almost 50% below its Class Period high. ADVANCED MICRO: Berger & Montague Files Complaint in California --------------------------------------------------------------- Arthur S. Feldman filed a class action lawsuit in the United States District Court for the Northern District of California against Advanced Micro Devices, Inc. (NYSE: AMD) and Chief Executive Officer, Jeffrey Sanders. The case is captioned Feldman v. Advanced Micro Devices, Inc., C.A. No. C-99-1133MMC. The lawsuit was filed on behalf of all purchasers of AMD securities between November 9, 1998 and March 8, 1999, inclusive. The Complaint asserts that defendants violated Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. The lawsuit alleges that defendants' material misrepresentations and omissions caused the Company's stock to trade at artificially inflated levels during the Class Period. In summary, the Complaint states that during the Class Period defendants made materially false and misleading statements about the demand for AMD's ability to produce high speed K6 microprocessors that could compete with industry giant Intel's Pentium II chips. Defendants failed to disclose that they had serious design flaws and production problems that severely restricted the number of 350+ MHz K6 chips that they could produce. The inability to produce a sufficient volume of high speed chips caused AMD to have to sell its chips at lower prices, severely depressing its earnings. Even when defendants publicly disclosed during the Class Period production problems with the high speed K6 microprocessors, they claimed that the "production glitch" was behind them and that they could increase production in the first quarter of 1999. These statements were false and misleading and lacked a reasonable basis because defendants knew that the design and production problems were continuing and that AMD could not produce the high speed chips in the announced amounts. Defendants' announcement on March 8, 1999 that it would fall short of its shipment goals and suffer a significant loss for the first quarter, was laying off 300 employees and would take charges in the first quarter and second quarters of 1999 shocked the market, causing the price for AMD's stock to plummet from a high of $32 during the Class Period to $16 following the announcement. AMERICA WEST: Kaplan Kilsheimer Files Complaint in Arizona ---------------------------------------------------------- Kaplan, Kilsheimer & Fox LLP has filed a Class Action against AMERICA WEST HOLDINGS CORP. (NYSE: AWA) and certain of its officers and directors in the United States District Court for the District of Arizona. The suit is brought on behalf of all persons or entities who purchased or acquired Class B Common Stock of America West between November 19, 1997 and September 3, 1998 inclusive. The complaint charges America West and certain of its officers, directors and its controlling shareholders with violations of the Securities Exchange Act of 1934 by issuing false statements about America West's supposed competitive advantages due to its exceptionally low operating costs, industry leading aircraft utilization rates, cost-savings outsourced aircraft maintenance procedures, improving financial results, record earnings per share ("EPS") and prospects for continued EPS growth. As a result, the defendants artificially inflated America West's stock to a Class Period and all-time high of $31-5/16 on April 21, l998. This enabled America West's insiders to sell 2.4 million shares of their publicly traded America West stock, 97% of the publicly traded stock they owned, in just 90 days, for $67.8 million in proceeds. In late June 1998, when it became public that America West was under increased surveillance by the Federal Aviation Administration ("FAA"), America West assured investors this was "routine" and the FAA had discovered no "significant maintenance or operational problems." However, on September 3, 1998, America West suddenly revealed that, due to major operational disruptions resulting from serious maintenance problems, its 3rdQ and 4thQ '98 EPS would be well below levels previously forecast and that America West had to incur millions of dollars in additional costs to purchase more spare planes and spare parts, to build nine additional "overnight" maintenance facilities and hire hundreds of additional aircraft mechanics, even offering to rehire the 375 aircraft mechanics America West had fired as part of an attempt to lower its operating costs. America West's stock declined by 31% from $20-5/16 on September 2, 1998 to $14, on volume of almost 2.6 million shares, the largest one-day stock price decline on the largest one-day trading volume in America West's history. AMERICA WEST: Barrack Rodos Files Complaint in Arizona ------------------------------------------------------ Barrack, Rodos & Bacine announced that it commenced a class action lawsuit in the United States District Court for the District of Arizona on behalf of all purchasers of the publicly traded Class B common stock of America West Holdings Corp. (NYSE: AWA) between November 19, 1997 and September 3, 1998, inclusive. The complaint charges America West and certain of its officers, directors and its controlling shareholders with violations of the Securities Exchange Act of 1934 by issuing false statements about America West's supposed competitive advantages due to its exceptionally low operating costs, industry- leading aircraft utilization rates, cost-savings outsourced aircraft maintenance procedures, improving financial results, record earnings per share ("EPS") and prospects for continued EPS growth. As a result, the defendants artificially inflated America West's stock to a Class Period and all-time high of $31-5/16 on April 21, 1998. This enabled America West's insiders to sell 2.4 million shares of their publicly traded America West stock, 97% of the publicly traded stock they owned, in just 90 days, for $67.8 million in proceeds. In late June 1998, when it became public that America West was under increased surveillance by the Federal Aviation Administration ("FAA"), America West assured investors this was "routine" and the FAA had discovered no "significant maintenance or operational problems." However, on September 3, 1998, America West suddenly revealed that, due to major operational disruptions resulting from serious maintenance problems, its 3rdQ and 4thQ 98 EPS would be well below levels previously forecast and that America West had to incur millions of dollars in additional costs to purchase more spare planes and spare parts, to build nine additional "overnight" maintenance facilities and hire hundreds of additional aircraft mechanics, even offering to rehire the 375 aircraft mechanics America West had fired as part of an attempt to lower its operating costs. America West's stock declined by 31% from $20-5/16 on September 2, 1998 to $14, on volume of almost 2.6 million shares, the largest one-day stock price decline on the largest one-day trading volume in America West's history. BON-TON STORES: Decries Nine West Shoe Antitrust Litigation ----------------------------------------------------------- The Bon-Ton Stores, Inc. (Nasdaq: BONT) said in a statement last week that it has been named together with other department stores and Nine West in an antitrust class action alleging that it engaged in conduct violative of the antitrust laws relating to the sale of shoes manufactured by Nine West. The class action seeks unspecified damages against all defendants. The Company intends to vigorously defend this lawsuit. DAIMLERCHRYSLER: Plaintiffs Seek Nationwide Class Certification --------------------------------------------------------------- The Plaintiffs in Crawley v. DaimlerChrysler Corp. have filed their post trial petition with the Court of Common Pleas of Philadelphia County, in which they request the Court to expand the case from a Pennsylvania class to include the entire nation. In papers filed by Joseph C. Kohn and Martin J. D'Urso of the firm of Kohn, Swift & Graf, P.C., and Isaac H. Green, Jr., of the firm of Adrian Moody, P.C., the Plaintiffs also requested the Court to triple the $59 million compensatory damage award under the Pennsylvania Consumer Protection Law, and order DaimlerChrysler to pay the Plaintiffs' attorneys' fees. On February 18, 1999, after a three week trial, the jury found that air bags in Chrysler vehicles manufactured between 1988 and 1991 were defective because they caused serious hand, wrist and arm burns when 500-600 degree gases were vented from holes located where drivers most frequently hold their hands. The jury also found that Chrysler committed fraud and violated three provisions of the Pennsylvania Consumer Protection Law by concealing the dangerous defect in the air bags even after its own study had confirmed an unacceptable burn risk. The verdict was the largest ever in an air bag case, and one of the largest jury verdicts in a consumer class action in the country. The Plaintiffs had originally requested the Court to certify the case on behalf of all vehicles in the United States. In a ruling in 1994, the Court limited the class to Pennsylvania drivers only. "The jury found that Chrysler's air bag was defective and that Chrysler lied to consumers about its product. There is no reason why the citizens of other states should not receive the protection and benefits of the jury's findings. Chrysler had the opportunity to fully and fairly defend itself and it lost. It would be an unnecessary burden on the judicial system to have to relitigate this issue in 50 states," said Joseph C. Kohn, counsel for the Plaintiffs. Plaintiffs also have requested the Court to triple the damage award under the Pennsylvania Consumer Protection Law. "The jury found by clear and convincing evidence that Chrysler committed fraud. Tripling the award will send a clear message to the DaimlerChrysler executives from Detroit to Berlin that injuring and misleading consumers will not be tolerated," said Martin J. D'Urso, co-counsel for Plaintiffs. The Plaintiffs cited a recent appellate decision in which the Pennsylvania Superior Court instructed that, when fraud had been found, a failure to award treble damages would do "violence to the intent and purpose" of the Pennsylvania Consumer Protection Law. The Plaintiffs also noted that DaimlerChrysler has recently paid one of its Co-Chairmen, Robert Eaton, salary and stock options for 1998 worth almost $70 million. "Chrysler's claims that the jury award was excessive ring terribly hollow in light of such an astronomical payment. If there is a compensation system that has run amuck, it's one that would pay one chief executive more than 82,000 defrauded consumers. Yet, absent trebling, that's precisely what would happen here," said Kohn. Under Pennsylvania procedure, the trial court will rule on the post trial motions of the parties before any appeals can be taken. DATASTREAM SYSTEMS: Cauley Firm Files Complaint in South Carolina ----------------------------------------------------------------- The Law Offices of Steven E. Cauley, P.A. today announced that a class action has been filed in United States District Court, District of South Carolina on behalf of all purchasers of Datastream Systems, Inc. (Nasdaq: DSTM) common stock during the period April 1, 1998 to October 20, 1998. The complaint charges that Datastream and certain of its officers and directors violated the federal securities laws, alleging that defendants improperly inflated earnings from operations by utilizing accounting treatments not in conformity with generally accepted accounting practices. As a result, the complaint alleges that the price of Datastream common stock was artificially inflated during the Class Period and when Datastream surprised investors by issuing a press release on October 20, 1998 announcing disappointing earnings for the third quarter of 1998, Datastream stock collapsed $4-1/8 or 29%, to $10 per share. LUCIENT TECHNOLOGIES & AT&T: Y2K Defect Class Action Suit Filed --------------------------------------------------------------- The law firm of Beatie and Osborn LLP has commenced a class action lawsuit on behalf of all individuals or entities who purchased, leased, or acquired in any other way telecommunications equipment sold by Lucent Technologies, Inc. and AT&T Corp. which are not Year 2000 compliant (see attached list). The Complaint alleges, among other things, that Lucent and AT&T violated consumer protection laws and breached warranties. It seeks damages or repair or replacement with systems that do not have the defect. Though Lucent and AT&T have known about the Year 2000 problem since the 1980's, they have continued to market non Y2K compliant products and have not disclosed the defect to their customers. Most customers never knew until recently that their equipment had the problem. Lucent and AT&T have told customers that (1) failure to correct the Y2K problem will result in telephone system shut-downs and corrupted data after December 31, 1999; and (2) the Y2K problem can be corrected, in some cases for $8,000 or more per system. Lucent and AT&T knew the equipment was defective. In some cases they gave the purchaser or lessee a document saying in large letters that the telecommunications system, which was acquired by the customer and which had the defect, had "a powerful new platform that will carry your business beyond the year 2000 with state-of-the-art memory technology." They shirk their responsibility to correct the Y2K problem by recently filing court papers which seek to dismiss the lawsuit because the proposed class representative has not yet spent money to upgrade its messaging system, i.e., it has not yet suffered damage. Similar actions involving non Y2K compliant software have been dismissed because the proposed class representatives had not already spent money for repairs. Would an automobile manufacturer refuse to retrofit a defective auto part because a customer had not yet been killed? The following voice messaging and other telecommunications products sold by Lucent and AT&T are listed by them on their web site as Y2K non-compliant: Advanced Multimedia Communication Products Internet Telephony Gateway (ITG) Multimedia Call Exchange (MMCX)(R1.x) Call Accounting Products 93B CSMDR (all) 94A LSU (all) CAS and CAS+ (all) CAS Hospitality (all) CAS Terminal (pre-2.0) CDRP-3B2, CDRU-3B2, CDRU-PC (all) Cost Allocator (V1 and V2) Integrated Solutions CAS (V1.1) Integrated Solutions CAS (V1.0) Merlin Legend Reporter (pre-V1.1) Telemanagement Series (TMS)(1.0) Call Management Products CentreVu CMS (R3V4 and earlier) CMS (R2 on 3B2, R3V1-R3V4) Home Agent (R4) Merlin Legend Enhanced Service Center Merlin Legend CMS (all) Computer Telephone Integration Products ISDN Gateway on 3B2 (all) Integrated Solution Products Integrated Solution II Platform (all) Integrated Solution III Platform (all releases on Master Controller II) Integrated Solution III Platform (Master Controller II+, Master Controller III, Map 5) Large Messaging Products AUDIX Voice Power (2.1.1 and 3.0, MCIII, Olivetti) AUDIX Voice Power (R2.1.1 and R3.0 on MAP5 IDE) AUDIX Voice Power (all other platforms and releases) Definity AUDIX (prior to 3.1) FAX Attendant (all) Integrated Solutions AUDIX Voice Power, FAX Attendant, Lodging INTUITY AUDIX (R3.3, R3.3 IP18/International, R3.2,R2.0) INTUITY IMG (all) R1 AUDIX Large (all) R1 AUDIX Small (Pre-R1V8:2) Small Messaging Products 3B2 Message Server (all) Classic Mail (all) Merlin Mail (R3.0) Merlin Mail (R1 and R2) Partner Mail (R1.9 and earlier) Switching Systems DEFINITY G3rV1-G3rV3(all issues) DIMENSION (600, 600SN, 2000 -- all feature packages) HORIZON CMS (all) System 25 (prior to R3V4) System Management Products CSM (all) Integrated Solutions Merlin Legend System Programming (all) Manager III Manager IV (all) Monitor I (all) OneVision DEFINITY G3 Fault Management (1.4 and prior) Terranova ECS (pre-R6.0) Trouble Tracker (R7.0) VMAAP (all) Video Conferencing Systems ESM (prior to R4.1.11) Voice Response INTUITY CONVERSANT (V5.O) CONVERSANT VIS INTRO (V3.1.1) CONVERSANT VIS (V4.0, V4.0i) CONVERSANT VIS (V3.1.1, V3.0) CONVERSANT VIS (V2.1) Inbound Call Director (all) Wireless Systems DEFINITY Wireless Personal Communications Manager (R1.0, R1.1) LYCOS, INC.: Finkelstein Thompson Files Suit in Massachusetts ------------------------------------------------------------- Finkelstein, Thompson & Loughran hereby gives notice that a Class Action Complaint was filed today in the United States District Court for the District of Massachusetts, alleging violations of the Securities Exchange Act of 1934. Plaintiff seeks to represent a class of persons who purchased the common stock of Lycos, Inc. (Nasdaq: LCOS) between January 21, 1999 and February 9, 1999, inclusive. The Complaint names Lycos and CEO Robert Davis as defendants, alleging that these parties violated Sections 10(b) and 20(a) of the Exchange Act, as well as SEC Rule lOb-5 promulgated thereunder, by originating a series of materially misleading statements and omissions concerning the Company's intentions to remain an "independent" entity. Specifically, the Complaint alleges that, throughout the Class Period, the defendants repeatedly misrepresented that Lycos would remain an independent company and would not enter into a merger transaction. On February 9, 1999, Lycos announced that it was entering into a merger transaction with USA Networks, Inc. In response to this announcement, Lycos share prices plummeted, falling from a February 8, 1999 close of $127.25 to a February 9, 1999 close of $94.25. NORTH FACE: Weiss & Yourman File Complaint in [California] ---------------------------------------------------------- Weiss & Yourman has filed a class action lawsuit on behalf of purchasers of The North Face, Inc. (Nasdaq: TNFI) securities between April 25, 1997 and March 4, 1999 for violations of federal securities laws. Defendants include The North Face and certain of its officers and directors. The Complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10-b(5) by, among other things: issuing false misleading statements regarding The North Face's financial condition as well as its present and future business prospects. NORTH FACE: Scott & Scott Files Complaint in Colorado ----------------------------------------------------- Scott & Scott, LLC, announces that a class action has been commenced in the United States District Court for the District of Colorado on behalf of purchasers of The North Face Inc. (Nasdaq: TNFI) common stock between April 25, 1997 and March 4, 1999. The complaint charges North Face and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, the defendants falsely reported North Face's financial results and overstated its sales growth causing the Company's stock price to trade at as high as $29. Ultimately, on March 5, 1999, North Face was forced to announce that its full year 1998 results were "delayed" and that, contrary to its repeated assertions during the Class Period that its financials were properly stated, adjustments to its 1997 results might be necessary. On this news, North Face's stock price dropped to as low as $10-7/8. NORTH FACE: Abbey Gardy Files Complaint in Colorado --------------------------------------------------- The law firm of Abbey, Gardy & Squitieri, LLP commenced a Class Action suit in the United States District Court for the District of Colorado, on behalf of all purchasers of The North Face Inc. (Nasdaq: TNFI) common stock between April 25, 1997 and March 11, 1999, inclusive. The Complaint charges North Face and certain of its officers and directors with violations of the federal securities laws. Among other things, plaintiff claims that defendants issued a series of materially false and misleading statements regarding North Face's 1997 and 1998 financial results. On March 12, 1999, North Face announced that, following the completion of an investigation into its accounting practices, it will restate its 1997 financial statements and 1998 interim financial statements. NORTH FACE: Wolf Popper Files Complaint in Colorado --------------------------------------------------- A class action lawsuit has been filed against The North Face Inc. (Nasdaq: TNFI) in the United States District Court for the District of Colorado. The lawsuit was filed by the law firm of Wolf Popper LLP on behalf of persons who purchased or otherwise acquired North Face securities in the open market during the period April 25, 1997 through March 4, 1999. The Complaint charges that defendants violated the U.S. securities laws by issuing materially false and misleading statements and by omitting material facts required to be disclosed so as to make the statements issued not materially false and misleading throughout the Class Period. Specifically, the complaint alleges that during the Class Period, defendants falsely reported North Face's financial results and overstated its sales growth causing North Face's securities to trade at inflated prices. On March 11, 1999, North Face announced that it is likely to restate its financials for the fourth quarter of 1997 and the first quarter of 1998, and that it's Audit Committee was hiring independent accountants to assist its outside counsel with the investigation. NORTH FACE: Kaplan Kilsheimer Files Complaint in Colorado --------------------------------------------------------- Kaplan, Kilsheimer & Fox LLP has filed a class action in the U.S. District Court for the District of Colorado on behalf of all persons who purchased or otherwise acquired the common stock of The North Face, Inc. between April 27, 1997 and March 5, 1999. Defendants are North Face and certain of the Company's top executive officers. The Complaint alleges, among other things, that during the Class Period, defendants falsely reported North Face's financial results and overstated its sales growth, causing North Face's common stock to trade at artificially inflated prices. On March 11, 1999, North Face announced that it will likely restate its financial results for fiscal 1997 and the first quarter of fiscal 1998 following a review of its accounting procedures. NORTH FACE: NASDAQ Halts Trading -------------------------------- The Nasdaq halted trading of shares of The North Face Inc. last week as shareholder lawsuits mounted against the Carbondale, Colorado-based upscale outdoor sporting goods manufacturer. Groups of shareholders around the country filed five separate class-action suits against North Face following the company's announcement that it is auditing its accounting procedure and expects to restate its financial reports for 1997 and 1998. The complaints allege North Face executives reported false financial results and exaggerated sales increases, which led to inflated stock prices. The Nasdaq has requested additional information from North Face, said spokesman Mike Shokouhi in Washington, D.C. He declined to be more specific in an interview with the Rocky Mountain News. The holdup could last anywhere from a day to a couple of months, he said. "I can't say how long it will be halted," Shokouhi told the RMN. "It depends on how long it takes the company to respond, how long it takes our analysts to go through the information, how detailed the information is." The Nasdaq request came after North Face last week tabled an offer to buy out shareholders at $17 a share, or $212.5 million. The manufacturer's chief executive officer, James Fifield, made the offer with Leonard Green & Partners, a merchant banking firm that also is a majority owner of Denver- based Gart Sports Inc. Fifield, who had been a member of North Face's board, became chief executive last spring and moved the company from its San Leandro, Calif., headquarters to Carbondale in July, the RMN recalls. North Face officials surprised the investment community last Friday by reporting the company was experiencing unexpected delays in preparing audited financial statements related to the offer. On Thursday, officials announced the board of directors has set up an audit committee to evaluate its accounting procedures during the fourth quarter of 1997 and the first quarter of 1998. "We're looking at it ourselves, but I can't give out any more information at this time," said spokeswoman Ashley Devery. Devery, who said the audit and the trading halt are not related to the lawsuits, also declined to comment on the shareholders' claims. The halt in trading was not only expected, it also strengthens shareholders' claims, said Michael Schwartz of Wolf Popper, a New York law firm representing three shareholders. "It was the icing on the cake," he said. North Face went public in 1996 and ended the year with a net income of $5.6 million. Net income rose 96 percent to $11.1 million in 1997. And last year's net income was up 24 percent to $13.8 million. The suit accuses North Face of overshipping goods to retailers and recording the additional merchandise as sales. "It's called stuffing the channels, and then recognizing it as revenues," Schwartz said. OLD GUARD: Summary Judgment Granted in Policyholder Suit -------------------------------------------------------- Old Guard Insurance Company, a wholly owned subsidiary of Old Guard Group, Inc. (Nasdaq: OGGI), announced today that the United States District Court for the Eastern District of Pennsylvania ruled on Old Guard's motion for summary judgment in a class action law suit brought by four Old Guard policyholders. In an opinion issued on March 5, 1999, Judge Clifford Scott Green granted the motion for summary judgment as to the federal constitutional claims and retained jurisdiction over the remaining state law claims. The suit, which was initiated in February 1997, challenges the constitutionality of the Pennsylvania statute under which three of the Old Guard insurance companies converted from mutual insurance companies to stock insurance companies in February 1997. The statute authorizes mutual insurance companies to convert to stock companies by providing subscription rights to purchase stock to their policyholders. In his Memorandum addressing the motion for summary judgment, Judge Green noted that regarding federal constitutional claims the "state action" doctrine requires the plaintiffs to show that the defendants "may be considered state actors or that they acted under color of state law ...." Judge Green found that the plaintiffs were unable to show that the defendants were state actors, nor were the plaintiffs able to show a "sufficiently close nexus between the state and the challenged action" to uphold the federal constitutional claims. Commenting on the rulings, Old Guard President David E. Hosler stated, "This decision should be heralded as a victory for mutual insurance companies and a very positive ruling for the entire insurance industry. While the state law claims remain to be decided, the granting of the motion for summary judgment regarding the federal constitutional claims validates the constitutionality of the Pennsylvania conversion statute and is a very positive step that paves the way for other mutual insurers to convert and raise capital through a subscription rights offering." Hosler continued, "Old Guard continues to be confident that our position with regard to all of the remaining claims will ultimately be upheld. In deciding to convert the three insurance companies, our Board of Directors considered the best interest of the companies as well as all of their stakeholders -- policyholders, employees, and the community. We followed a legally enacted statute that provided a way for the companies to raise capital, making the companies stronger and more able to pay the claims of their policyholders." PEDIATRIC SERVICES: Schoengold & Sporn Files Complaint in Georgia ----------------------------------------------------------------- On March 11, 1999, a lawsuit was filed in the Federal District Court for the Northern District of Georgia against Pediatric Services of America, Inc. (Nasdaq:PSAI), John D. Sansone (President, Chairman of the Board and Chief Executive Officer of Pediatric) and Stephen M. Mengert (Pediatric's Chief Financial Officer, Treasurer, and Secretary) on behalf of purchasers of the common stock of Pediatric during the period December 23, 1997 through and including July 29, 1998. The securities class action complaint charges the defendants with violations of the federal securities laws (Sections 10(b) and 20 of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder), by among other things, misrepresenting and/or omitting material information concerning Pediatric's accounts receivable, thereby artificially inflating the price of Pediatric shares during the Class Period. Specifically, far from having record revenue and earnings during the Class Period and strong internal controls for monitoring accounts receivable, the Company on or about July 29, 1998 admitted that it would be forced to dramatically increase reserves for accounts receivable primarily due to potentially higher uncollectible receivables. SAFESKIN CORPORATION: Milberg Weiss Files Complaint in California ----------------------------------------------------------------- Milberg Weiss Bershad Hynes & Lerach LLP announced that a class action has been commenced in the United States District Court for the Southern District of California on behalf of purchasers of Safeskin Corporation (Nasdaq: SFSK) common stock during the period October 29, 1998 to March 11, 1999. The complaint charges Safeskin and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that, among other things, Safeskin and certain of its officers and directors knowingly or recklessly overstated Safeskin's results of operations, net income and gross profit margin for the third and fourth quarters of fiscal year 1998 and misled the investing public as to the Company's opportunities for fiscal 1999. During the Class Period, defendants assured investors that the Company's growth was due to the fact that the Company's prior problems manufacturing sufficient products to meet their customer's needs were alleviated, and that its customers could purchase as much product as they needed. In fact, defendants knew or were reckless in failing to know that Safeskin was selling its customers more products than they needed or wanted by offering extended and favorable payment terms, actions which defendants repeatedly publicly denied. As a result of such conduct, defendants knew that they could not continue to report record earnings and income in future quarters. On March 11, 1999, after the market closed, defendants announced that revenues for its first quarter ending March 31, 1999 were expected to be $28 million below what defendants led the market to believe they were expecting, and that the Company was reducing its sales and earnings expectations in light of higher than estimated distributor inventory levels. Moreover, the Company announced that Safeskin estimated that sales for the year would be lower by approximately an additional $25 million. During the Class Period, Safeskin shares traded as high as $25- 15/16 per share. On the last trading day before the March 11, 1999 announcement, the price of Safeskin shares closed at $15-1/4 per share. After the announcement, the price of Safeskin common stock fell by approximately 37% to a trade as low as $9-5/8 per share. SAFESKIN CORPORATION: Weiss & Yourman Files Suit in California -------------------------------------------------------------- Weiss & Yourman has filed a class action lawsuit in the Southern District of California, Case No. 99-CV-457, on behalf of purchasers of Safeskin Corp. (Nasdaq: SFSK) securities between January 12, 1999 through March 11, 1999 for violations of federal securities laws. Defendants include Safeskin and its president, Richard Jaffe. The Complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10-b(5) by, among other things, issuing false misleading statements regarding Safeskin's financial condition as well as its business prospects, specifically projections for the first quarter of fiscal 1999. SAFESKIN CORPORATION: Wolf Popper Files Complaint in California --------------------------------------------------------------- A class action lawsuit has been filed against Safeskin Corporation (Nasdaq: SFSK) in the United States District Court for the Southern District of California. The lawsuit was filed by the law firm of Wolf Popper LLP on behalf of persons who purchased or otherwise acquired Softskin securities in the open market during the period October 29, 1998 through March 11, 1999. The Complaint charges that defendants violated the U.S. Securities laws by issuing materially false and misleading statements and by omitting material facts required to be disclosed so as to make the statements issued not materially false and misleading throughout the Class Period. Specifically, the complaint alleges that during the Class Period, defendants knowingly or recklessly overstated Softskin's results of operations and net income for the third and fourth quarters of fiscal year 1998 and misled the investing public as to the Company's opportunities for fiscal 1999, by "stuffing the channel," i.e., selling to its distributors more product than they wanted or could reasonably sell and thereby giving the false appearance that the Company's business was continuing to grow at record levels. STAFFMARK, INC.: Cauley Firm Files Complaint in Arkansas -------------------------------------------------------- The Law Offices of Steven E. Cauley, P.A. announced that a class action has been filed in United States District Court, Eastern District of Arkansas, on behalf of all purchasers of StaffMark Inc. (Nasdaq: STAF) common stock during the period October 8, 1998 through March 2, 1999. The complaint, which was filed by attorney Steven E. Cauley, alleges that StaffMark and certain of its officers and directors violated the federal securities laws by issuing false statements about StaffMark's business which caused its stock price to trade at artificially inflated prices. For example, the Complaint filed by Steven E. Cauley alleges that, on February 24, 1999, all levels of senior management of StaffMark stated that they were "confident about operations" and that, while December 98 and early January 99 business had been slow, StaffMark's business was ramping up "as fast or faster than expected." However, the Complaint filed by Steven E. Cauley alleges that, just five days later, StaffMark revealed that its revenues from its key Intellimark division had shown 0% growth in January and 4-5% growth in February, both well under budget, and that as a result, StaffMark's earnings for the first quarter of 1999 and Year 1999 would fall dramatically below expectations. The Complaint filed by Steven E. Cauley further alleges that these disclosures caused StaffMark common stock to collapse in price and that -- just one month prior to these revelations -- StaffMark's largest shareholder sold 250,000 StaffMark shares for $4 million. The Complaint filed by Steven E. Cauley also alleges that, just three months before StaffMark collapsed in price, StaffMark used $140 million worth of its artificially inflated stock as a currency to acquire Robert Walters plc, a European business. At the same time, according to the Complaint filed by Steven E. Cauley, StaffMark's CEO Clete Brewer had stated that StaffMark was "undervalued." ********* 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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