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C L A S S A C T I O N R E P O R T E R
Tuesday, March 23, 1999, Vol. 1, No. 33
Headlines
ALUMINUM COMPANY: All Discrimination Claims Mediated & Released
AMES DEPARTMENT: 1995 & 1996 Shareholder Suits Still Pending
AMGEN, INC.: Hearing on Motion to Dismiss Scheduled for May 3
ASARCO, INC.: Environmental Class Action Litigation Status Report
ASARCO, INC.: Asbestos Litigation Status Report
CSX TRANSPORATION: 20 Damage Trials Scheduled to Begin this Month
DONALDSON LUFKIN: Annual Report Summarizes Material Litigation
FIRST ALLIANCE: Discovery On-Going in Shareholder Class Action
FIRST ALLIANCE: Feds Investigate Lending Practices as States Sue
FOREMOST CORP.: Continues to Deny & Defend Policyholder Suits
GENERAL CHEMICAL: Denies Liability in Milwaukee Crypto Litigation
GENERAL CHEMICAL: Employee SO2 & SO3 Suits Enter Discovery Phase
GROW BIZ: Defense of Harbor Finance Tender Offer Suit Continues
H&R BLOCK: Indemnifies WorldCom & CompuServe for 80.1% of Losses
HENRY SCHEIN: Discloses Filing of Easy Dental Class Action Suit
HOST MARRIOTT: Class Action Settlement Warrants Have Expired
INTERACTIVE NETWORK: Believes Shareholder Settlement Imminent
KIMBERLY CLARK: Discovery Proceeds in Tissue Price Fixing Suits
LET'S TALK: Company Continues Defense of Shareholder Suit
LYCOS, INC.: Vowing to Contest Shareholder Complaints Vigorously
NCR CORP.: Discovery Proceeds in Ultra-High Speed Printer Suit
OWENS CORNING: Expects Supreme Court Decision in 2nd Quarter 1999
PHARMERICA, INC.: Continues Defense of Shareholder Litigation
POLYCOM, INC.: Believes it is Free of Videoconferencing Liability
SALOMON SMITH: Continues Defense of Refunding Mark-Up Litigation
SOLUTIA, INC: Defending Monsanto Claims; New RCRA/TSCA Complaint
SYNOVUS FINANCIAL: Bank Doesn't Fare Well with Alabama Juries
UNOCAL CORP.: Royalty & Working Rights Settlement Next Month
UNOCAL CORP.: Gasoline Supply Limitation and Price Fixing Suits
UNOCAL CORP.: Yadana Pipeline Workers' Cases Survive & Press On
UNOCAL CORP.: Highly Confident Lockheed Judgment Will Be Reduced
USG CORP.: Reports Status of Asbestos-Related Litigation
*********
ALUMINUM COMPANY: All Discrimination Claims Mediated & Released
---------------------------------------------------------------
As previously reported, in June 1995, ALUMINUM COMPANY OF AMERICA
Alcoa was served with a class action complaint in the matter of
John P. Cooper, et al. v. Aluminum Company of America, Case
Number 3-95-CV-10074, pending in the United States District Court
for the Southern District of Iowa. The named plaintiffs alleged
violation of Federal and state civil rights laws prohibiting
discrimination on the basis of race and gender. In June 1997,
the court approved a settlement agreement that provided for
complete settlement of all class-wide claims for injunctive
relief in consideration for $212,000 and implementation of
certain structural changes. The settlement also provided for
mediation of certain remaining individual claims for damages due
to a hostile work environment or wrongful termination. All other
claims were released under the terms of the agreement. All
claims have now been mediated and the claimants have executed
releases of all their claims against Alcoa.
AMES DEPARTMENT: 1995 & 1996 Shareholder Suits Still Pending
------------------------------------------------------------
In August 1995, in the Court of Chancery of the State of
Delaware, three shareholders of the Company, Gayle Dolowich,
Ivan J. Dolowich and Joseph Weiss, filed a class action lawsuit
against the seven new directors of AMES DEPARTMENT STORES, INC.,
elected at the 1995 annual meeting, Dickstein Partners Inc.
and the Company. In November 1995, the plaintiffs amended
their complaint to include a shareholder's derivative cause
of action against the Former Directors for breach of their
fiduciary duties to the Company and its shareholders. In the
amended complaint, the plaintiffs claim (under Section 225
of the Delaware Corporation Code) that in connection with
Dickstein Partners effort to solicit proxies in support of
the election of its nominees for directors of the Company,
Dickstein Partners issued a number of false and misleading
statements regarding its offer to acquire all of the Company's
shares it did not already own. On the Section 225 claim, the
plaintiffs seek an order nullifying the election of directors
and declaring there has been "no change of control" of the
Company. The derivative cause of action seeks damages against
the Former Directors. In January 1996 in the same Delaware
Chancery Court, another shareholder, Peter M. Fusco, filed a
substantially similar class action and shareholder derivative
suit against the parties named in the Dolowich suit. The Former
Directors filed a motion to dismiss the Dolowich and Fusco suits,
and in March 1997 the court denied that motion.
AMGEN, INC.: Hearing on Motion to Dismiss Scheduled for May 3
-------------------------------------------------------------
On August 7, 1998, two substantially related class action
complaints were filed against the Company and certain of its
current and former officers in the United States District Court
for the Central District of California and in the California
Superior Court for the County of Ventura. The actions were filed
by the same law firm on behalf of different named plaintiffs. The
respective plaintiff groups seek to represent the same class of
investors who purchased Amgen common stock between January 23,
1997 and August 11, 1997. Both complaints allege that the market
price of the Company's common stock was artificially inflated
during the Class Period as a result of alleged misrepresentations
made to the investing public. The complaints allege that Amgen
and several of its senior executives issued false statements
regarding: (i) the demand for and sales growth of two of Amgen's
products, EPOGEN(R) and NEUPOGEN(R); (ii) an arbitration
proceeding between Amgen and Johnson & Johnson regarding
entitlement to millions of dollars in "spillover" sales of
EPOGEN(R) and (iii) Amgen's 1996 fourth quarter and 1997 first
and second quarter results. The plaintiffs seek to recover
damages on behalf of all purchasers of Amgen common stock during
the Class Period. The Company has obtained a stay of the
California state court action pending resolution of the
federal action and, on February 4, 1999, the Company filed a
motion to dismiss the federal action which is scheduled for
hearing on May 3, 1999.
ASARCO, INC.: Environmental Class Action Litigation Status Report
-----------------------------------------------------------------
In its latest annual report, ASARCO, INC., provides investors
with a status report concerning various multi-plaintiff and class
action environmental suits pending against the Company:
A. Nebraska Soil Contamination. In 1997, ASARCO, INC., was
sued in United States District Court in Nebraska in a purported
class action. The complaint was brought on behalf of various
classes comprised of in excess of 80,000 individuals living or
owning property within approximately five miles of the Company's
former Omaha plant. The action asserts claims of trespass,
nuisance, negligence, strict liability, unjust enrichment,
medical monitoring, and under CERCLA due to the alleged
contamination of soils by airborne releases from the plant,
and seeks compensatory damages for diminution in property
value and loss of use, punitive damages, a declaration of
liability for future response costs, and creation of a medical
monitoring fund. In December 1998, the lawsuit was
dismissed for lack of subject matter jurisdiction. In
January 1999, plaintiffs filed an amended complaint, with leave
of court, which amended complaint is being challenged by the
Company.
B. Colorado Litigation. In 1997, the Company was sued in
state court in Denver, Colorado, in a purported class action
brought on behalf of property owners and other persons residing
in approximately 300 homes located within one mile of the
Company's Globe plant. The action asserts claims of trespass,
private nuisance, negligence, and strict liability allegedly due
to the contamination of properties by emissions from the plant,
and seeks compensatory damages for diminution in property value
and loss of use, as well as punitive damages. In December 1998,
the court certified the lawsuit to proceed as a class action.
C. Nebraska Water Contamination. In 1996, a citizens'
suit was brought against the Company alleging water
discharge permit violations under the CWA and violations
of RCRA at the Company's Omaha, Nebraska, lead refinery. The
Company is cooperating with the Nebraska Department of
Environmental Quality and voluntarily remediating the site
and, therefore, believes that the lawsuit is without
merit and is vigorously defending it.
D. Arizona Air Quality. In 1998, the Company received a
"60-day notice" under the federal Clean Air Act on behalf of a
Hayden, Arizona, resident and a local environmental group. The
notice states the senders' intent to commence a civil action in
United States District Court for the District of Arizona for
civil penalties for alleged violations of the Act at the
Company's Hayden smelter.
E. Washington Litigation. In 1995, the Company was sued
in federal court in Tacoma, Washington, by a retirement home
with 200 residents and 21 acres of property seeking damages for
diminution of property value, response costs, and attorneys'
fees. In 1996, the suit was dismissed on the grounds that
plaintiffs claims were barred by lack of subject matter
jurisdiction, lack of actual and substantial damages, or by the
applicable statute of limitations. The ruling was affirmed on
appeal in 1998 concluding the litigation.
F. Texas Litigation.
1. In 1994, the Company and one of its wholly-owned
subsidiaries, Encycle/Texas, Inc., were sued in state court in
Nueces County, Texas, in three purported class actions on behalf
of persons residing in neighborhoods around the Company's
Corpus Christi, Texas, property. These actions seek
compensatory and punitive damages for diminution of property
values, annoyance, loss of use and enjoyment, loss of income from
commercial uses, remediation costs, emotional distress, and
medical monitoring due to alleged contamination of plaintiffs'
properties by metals emitted from the Corpus Christi facility.
In 1994, two additional suits alleging contamination of
plaintiffs' properties by metals emitted from the Corpus
Christi facility were filed against the Company and two
of its wholly-owned subsidiaries, Encycle, Inc. and
Encycle/Texas, Inc., and several other defendants in state
court in Duval County, Texas. In this one suit, 290 plaintiffs
who resided and owned property near the Corpus Christi facility
seek compensatory and punitive damages for diminution in
property values, personal injuries, mental anguish, lost
wages, medical expenses, and medical monitoring.
2. In the second suit, two plaintiffs who owned and
operated a business near the Corpus Christi facility seek
compensatory and punitive damages for diminution of property
value and loss of profits.
G. Col-Tex Refinery. In 1993, the State of Texas notified
the Company that it and ten others persons are Potentially
Responsible Parties (PRPs) with respect to the Col-Tex Refinery
State Superfund site in Mitchell County, Texas, where the
Company stored diesel fuel in the mid-1970's. In 1996, the State
of Texas notified the Company that it is no longer considered
a PRP and that it has dismissed this claim.
Nevertheless, the Company has also been named as one of several
defendants in 14 lawsuits filed by or on behalf of
approximately 372 persons who have lived or owned property near
the Col-Tex Refinery site seeking compensatory and punitive
damages for alleged wrongful death, personal injury and
property damage. In 1997, the Company was dismissed from
three of those lawsuits involving approximately 170
individuals.
H. Pesticide Litigation. In 1994, the Company received
notice from the State of Texas that it is a PRP for remediation
of the site of a former pesticide manufacturing plant in Hunt
County, Texas, owned and operated by a former customer of
the Company. In addition, the Company has been named as one of
a number of defendants in nine lawsuits filed in various
Texas state courts by or on behalf of approximately 2,281
individuals who live or lived near the site for compensatory and
punitive damages, including damages for alleged personal
injuries and property damage, due to alleged exposure to
arsenic products that the Company sold to the manufacturer
at the site. The bankruptcy filing of the owner of the
former pesticide plant has resulted in all of these actions
being removed to federal court and transferred to the United
States District Court for the Northern District of Texas.
Also, in 1995, the Company was named as a third-party
defendant in a suit, pending in the United States District
Court for the Northern District of Texas, for contribution
under CERCLA and Texas state law involving approximately 15
parties alleged to be responsible for remediation of a railroad
property adjacent to the site.
I. El Paso Litigation. In 1997, the Company and five other
defendants, mostly metal companies, were sued in state court
in El Paso County, Texas, by approximately 360 plaintiffs,
including approximately 200 minors, seeking compensatory and
punitive damages for alleged personal injury, death, and
property damage resulting from toxic chemical discharges into
the air, water, and soil from the defendants' facilities
in El Paso.
J. Sinton Landfill. In 1996, a lawsuit was filed in
state court in San Patricio County, Texas, against Asarco
and two of its wholly-owned subsidiaries, Encycle, Inc. and
Encycle/Texas Inc., and ten other defendants by approximately 679
plaintiffs who allegedly own property and reside near a landfill
in Sinton, Texas. Plaintiffs seek compensatory and punitive
damages for personal injury and property damage allegedly caused
by defendants' disposal of toxic and hazardous wastes at the
landfill. In 1997, a similar lawsuit was filed on behalf of
23 additional plaintiffs. The landfill at issue is the same
one that was the subject of a previous lawsuit in Duval
County, Texas, by nearby residents, settlement of which was
reported on Form 10-K for 1995. In return for a settlement
payment, a co-defendant has agreed to indemnify the Company, and
its subsidiaries against any judgment in these cases.
ASARCO, INC.: Asbestos Litigation Status Report
-----------------------------------------------
In its latest annual report, ASARCO, INC., provides investors
with a status report concerning asbestos-related litigation in
which the Company is involved:
The Company and two subsidiaries, as of December 31, 1998,
are defendants in 1,126 asbestos personal injury lawsuits
brought by 10,321 primary and 4,588 secondary plaintiffs. In
certain of these lawsuits, against the Company and its wholly-
owned subsidiary Lac d'Amiante du Quebec, Ltee (LAQ),
plaintiffs , who are employees of other companies, allege death
or injury resulting from alleged exposure to asbestos fiber
supplied by LAQ and other suppliers to their employers'
manufacturing operations. The plaintiffs allege a broad range
of respiratory and other injuries, including disabling lung
changes, asbestosis, cancer, and mesothelioma, and typically
allege theories of strict liability, negligence, breach of
warranty, misrepresentation, ultra hazardous activity and
conduct, conspiracy, concert of action, market share or
enterprise liability, and alternative liability. The thrust of
the litigation is that the defendants failed to warn the primary
plaintiffs of the possible hazards associated with inhalation
of asbestos fibers while working with or being exposed to
such fibers. In other such asbestos lawsuits plaintiffs claim
exposure to asbestos products (such as insulation and brake
linings) manufactured by others. These cases typically allege
a failure to warn of possible health hazards associated with
those products and proceed on theories similar to those
asserted in the cases alleging exposure to LAQ fiber. In many
such cases LAQ and Asarco, having never manufactured such
products, have obtained dismissals. Such asbestos cases also
include, as of December 31, 1998, 25 cases brought by 4,147
primary plaintiffs against Capco Pipe Company, Inc. (Capco),
another wholly-owned subsidiary of the Company.
In 1991, the Judicial Panel on Multidistrict Litigation
transferred all asbestos cases pending in federal court to a
multi-district litigation (MDL 875) in the United States
District Court for the Eastern District of Pennsylvania for
coordinated and consolidated pretrial proceedings. Cases
containing less than one percent of LAQ's primary plaintiffs are
affected by this action.
In 1996, LAQ and nine former managerial and supervisory
employees of Capco were sued in two separate state court actions
in Alabama by 53 former Capco employees seeking substantial
compensatory and punitive damages for injuries and death
allegedly caused by workplace exposure to asbestos on
theories of product liability and negligence. Since that
time, eight additional former Capco employees have been added
to the litigation as plaintiffs and Capco was added as
a defendant with respect to one plaintiff not alleged to
have been a Capco employee. LAQ settled the claims of three
plaintiffs in 1998. Also in 1998, LAQ and nine former
managerial and supervisory employees of Capco were sued in
another Alabama state court action by five former Capco
employees seeking substantial compensatory and punitive damages
for injuries allegedly caused by workplace exposure to asbestos.
This action was brought under the same theories set forth in the
earlier Capco plant worker cases.
In 1996, Asarco was served with a complaint in a purported
class action filed in state court in West Virginia that also
names as defendants LAQ and 49 other companies. The action is
allegedly brought on behalf of a class of over 50,000 persons
who were exposed to asbestos at West Virginia work sites and
who are allegedly at increased risk of developing cancer.
The case seeks the establishment of a medical monitoring fund.
The case was subsequently removed to federal court by three of
the defendants and was thereafter transferred to MDL 875. In
1998, LAQ and Asarco were named in a purported class action
filed in state court in Charleston, West Virginia, against
69 asbestos and tobacco entities. The complaint seeks
compensatory and punitive damages and requests an order
certifying a class on behalf of persons having claims for
personal injury or death arising from exposure to asbestos fibers
and cigarette smoke. In 1998, Asarco was served by defendant
Owens-Corning with a writ to join over 360 additional
defendants, including LAQ and Asarco, in a medical monitoring
class action filed in 1996 in Pennsylvania state court.
As of December 31, 1998, LAQ, Asarco, and Capco have
settled or been dismissed from a total of approximately 9,821
asbestos personal injury lawsuits brought by approximately
106,246 primary and 60,273 secondary plaintiffs.
CSX TRANSPORATION: 20 Damage Trials Scheduled to Begin this Month
-----------------------------------------------------------------
In September 1997, a state court jury in New Orleans returned a
$2.5 billion punitive damages award against CSX Transportation,
Inc. The award was made in a class-action lawsuit against a
group of nine companies based on personal injuries alleged to
have arisen from a 1987 fire. The fire was caused by a leaking
chemical tank car parked on CSXT tracks and resulted in the 36-
hour evacuation of a New Orleans neighborhood. In the same
case, the court awarded a group of 20 plaintiffs compensatory
damages of approximately $2 million against the defendants,
including CSXT, to which the jury assigned 15% of the
responsibility for the incident. CSXT's liability under that
compensatory damages award is not material and adequate provision
was made for the award in a prior year.
In October 1997, the Louisiana Supreme Court set aside the
punitive damages judgment, ruling the judgment should not have
been entered until all liability issues were resolved. In
February 1999, the Louisiana Supreme Court issued a further
decision, authorizing and instructing the trial court to enter
individual punitive damages judgments in favor of the 20
plaintiffs who had received awards of compensatory damages, in
amounts representing an appropriate share of the jury's award.
While the trial court has not yet taken action under this
decision, the amounts of such punitive damages judgments, if
any, are not expected to be material. CSXT believes that this
February 1999 decision will expedite the process of full
appellate review of the 1997 trial. The claims of 20 additional
plaintiffs for compensatory damages are scheduled to be tried
beginning in March 1999. CSXT is pursuing an aggressive legal
strategy.
DONALDSON LUFKIN: Annual Report Summarizes Material Litigation
--------------------------------------------------------------
In its financial statements for the year ending December 31,
1998, DONALDSON LUFKIN & JENRETTE, INC., provides investors with
a report about the status of material litigation arising from
actions relating to its various businesses including various
civil actions and arbitrations arising out of its activities as a
broker-dealer in securities, as an underwriter and as an employer
and arising out of alleged employee misconduct.
I. Beginning on March 25, 1991, Dayton Monetary Associates
and Charles Davison, along with more than 200 other plaintiffs,
filed several complaints against DLJSC and a number of other
financial institutions and several individuals in the U.S.
District Court for the Southern District of New York. The
plaintiffs allege that DLJSC and other defendants violated civil
provisions of RICO by inducing plaintiffs to invest over $40
million during the years 1978 through 1982 in The Securities
Groups, a number of tax shelter limited partnerships. The
plaintiffs seek recovery of the loss of their entire investment
and an approximately equivalent amount of tax-related damages.
Judgments for damages under RICO are subject to trebling.
Discovery is complete. DLJSC's motions for summary judgments were
denied in April 1998. Trial has been scheduled for May 17, 1999.
DLJSC believes that it has meritorious defenses to the complaints
and is contesting the suits vigorously.
II. In October 1995, DLJSC was named as a defendant in a
purported class action filed in a Texas State Court on behalf of
the holders of $550.0 million principal amount of subordinated
redeemable discount debentures of National Gypsum Corporation
("NGC") canceled in connection with a Chapter 11 plan of
reorganization for NGC consummated in July 1993. The State Court
named plaintiff also filed an adversary proceeding in the U.S.
Bankruptcy Court for the Northern District of Texas seeking a
declaratory judgment that the confirmed NGC plan of
reorganization does not bar the class action claims. Subsequent
to the consummation of NGC's plan of reorganization, NGC's shares
traded for values substantially in excess of, and in 1995 NGC was
acquired for a value substantially in excess of, the values upon
which NGC's plan of reorganization was based. The two actions
arise out of DLJSC's activities as financial advisor to NGC in
the course of NGC's Chapter 11 reorganization proceedings. The
class action complaint alleges that the plan of reorganization
submitted by NGC was based upon projections by NGC and DLJSC
which intentionally understated forecasts, and provided
misleading and incorrect information to hide NGC's true value and
that defendants breached their fiduciary duties by, among other
things, providing false, misleading or incomplete information to
deliberately understate the value of NGC. The class action
complaint seeks compensatory and punitive damages purportedly
sustained by the class. On October 10, 1997, DLJSC and others
were named as defendants in a new adversary proceeding in the
Bankruptcy Court brought by the NGC Settlement Trust, an entity
created by the NGC plan of reorganization to deal with asbestos-
related claims. The Trust's allegations are substantially similar
to the claims in the State Court action. On January 21, 1998,
the Bankruptcy Court ruled that the State Court plaintiff's
claims were not barred by the NGC plan of reorganization insofar
as they alleged nondisclosure of certain cost reductions
announced by NGC in October 1993. DLJSC has appealed the
Bankruptcy Court's ruling. On May 7, 1998, DLJSC and others
were named as defendants in a second action in a Texas State
Court brought by the NGC Settlement Trust. The allegations of
this second Texas State Court action are substantially similar to
those of the earlier class action pending in State Court. In an
amended order dated January 5, 1999, the State Court granted
the class action plaintiff's motion for class certification.
Discovery is proceeding in both State Court actions. In early
February 1999, DLJSC filed motions for summary judgment which are
pending. Trial in the two State Court actions is expected in May
1999. DLJSC intends to defend itself vigorously against all of
the allegations contained in the complaints.
III. On January 26, 1996, a purported purchaser of certain
notes and warrants to purchase shares of common stock of Rickel
Home Centers, Inc. ("Rickel") filed a class action complaint
against DLJSC and certain other defendants for unspecified
compensatory and punitive damages in the U. S. District Court for
the Southern District of New York. The suit was brought on behalf
of the purchasers of 126,457 units consisting of $126,457,000
aggregate principal amount of 13 1/2% senior notes due 2001 and
126,457 warrants to purchase shares of common stock of Rickel
(the "Units") issued by Rickel in October 1994. The complaint
alleges violations of federal securities laws and common law
fraud against DLJSC, as the underwriter of the Units and as an
owner of 7.3% of the common stock of Rickel, Eos Partners, L.P.
and General Electric Capital Corporation, each as owners of 44.2%
of the common stock of Rickel, and members of the board of
directors of Rickel, including a DLJSC managing director. The
complaint seeks to hold DLJSC liable for alleged misstatements
and omissions contained in the prospectus and registration
statement filed in connection with the offering of the Units,
alleging that the defendants knew of financial losses and a
decline in value of Rickel in the months prior to the offering
and did not disclose such information. The complaint also alleges
that Rickel failed to pay its semi-annual interest payment due on
the Units on December 15, 1995 and that Rickel filed a voluntary
petition for reorganization pursuant to Chapter 11 of the
Bankruptcy Code on January 10, 1996. In April 1998, DLJSC's
motion to [dismiss] the complaint against it was denied, and
plaintiff's motion for class certification was denied. In
December 1998, the motion of two other potential class
representatives to intervene in the action was denied. DLJSC
intends to defend itself vigorously against all of the
allegations contained in the complaint.
IV. On January 24, 1997, various money management firms and
others who allegedly purchased and/or beneficially owned $116
million aggregate principal amount of Senior Subordinated Notes
(the "Notes") issued in May 1994 by Mid-American Waste Systems,
Inc. ("Mid-American") filed a complaint against DLJSC and a
number of other financial institutions and several former
officers and directors of Mid-American in the Court of Common
Pleas, Franklin County, Ohio. The action seeks rescission,
compensatory and punitive damages. The suit alleges violations
of federal securities laws and the Ohio Securities Act, and
common law fraud, aiding and abetting common law fraud, negligent
misrepresentation, breach of contract, breach of fiduciary
duty/acting in concert and negligence. DLJSC was an underwriter
for the initial offering of the Notes. The Notes went into
default in February 1996 and Mid-American filed a voluntary
petition for reorganization pursuant to Chapter 11 of the United
States Bankruptcy Code in January 1997. The complaint seeks to
hold DLJSC liable for various alleged misrepresentations and
omissions contained in the prospectus for the Notes and other
filings and for various oral representations concerning the
Notes, which plaintiffs claim were false and misleading. Fact
discovery is complete and expert discovery is ongoing. Both DLJSC
and plaintiffs filed motions for summary judgment, all of which
are pending. Trial is currently scheduled to commence on
May 4, 1999. Other alleged purchasers and/or beneficial owners of
an additional $15 million aggregate principal amount of the Notes
issued by Mid-American described above filed two additional
lawsuits against DLJSC both in the U.S. District Court for the
Southern District of Ohio, on April 14, 1997 and December 30,
1997. The allegations are substantially similar to those
described above. Discovery in these actions, consolidated with
fact discovery in the Ohio state court action described above, is
still ongoing. No trial date has been set in either case. On July
31, 1998, DLJSC filed a motion to dismiss the later filed action
for lack of timely service of valid process, which is pending.
DLJSC believes that it has meritorious defenses to all of the
allegations contained in all of the complaints described above
and is contesting the suits vigorously.
V. On January 20, 1999, the Plan Administrator for the
bankruptcy estate of Mid-American, represented by counsel for
plaintiffs in the Ohio state court action against DLJSC described
above, filed another action against DLJSC and other financial
institutions, several individuals and two law firms in the
Supreme Court of the State of New York based on factual
allegations similar to those made in the Ohio state court action.
The actions seeks compensatory and punitive damages. The
plaintiff alleges claims against DLJSC for breach of fiduciary
duty, aiding and abetting breach of fiduciary duty, professional
malpractice, common law fraud, constructive fraud, aiding and
abetting common law fraud, negligence, negligent
misrepresentation and breach of contract. The complaint alleges
that, as an underwriter, DLJSC is liable for alleged
misrepresentations and omissions in the prospectus for the Mid-
American Senior Subordinated Notes, and that, as Mid-American's
financial advisor after the initial offering, DLJSC allegedly
knew or should have known about and should have disclosed to Mid-
American that Mid-American's financial condition was precarious
and that publicly disclosed documents were false and misleading
regarding Mid-American's finances and operations. There has been
no discovery or other proceedings in this action. DLJSC believes
that it has meritorious defenses to all of the allegations
contained in the complaint and will contest the suit vigorously.
FIRST ALLIANCE: Discovery On-Going in Shareholder Class Action
--------------------------------------------------------------
In June 1998, Leon Rasachack and Philip A. Ettedgui filed a class
action suit on behalf of all purchasers of Class A Common Stock
in FIRST ALLIANCE CORP. between April 24, 1997 through May 15,
1998. The suit was filed in the Superior Court of California in
the County of Orange against the Company, Brian Chisick, Sarah
Chisick and Mark Mason. The complaint alleges that the Company
conspired against the purchasers of the stock during the class
period by failing to disclose known material adverse conditions
in making certain public statements about the Company's growth
prospects for the future. The plaintiffs in this class action
suit are seeking an unspecified amount for damages. The Company
is currently in discovery.
FIRST ALLIANCE: Feds Investigate Lending Practices as States Sue
----------------------------------------------------------------
In September 1998, First Alliance Corp. was informed by the
United States Department of Justice that it and the Attorneys
General of Arizona, Florida, Illinois, Massachusetts, Minnesota,
New York and Washington have initiated a joint investigation into
the lending practices of the Company.
"That investigation and any negative findings that may result
therefrom could have a significant adverse effect on the
Company's ability to obtain new and renew state lending licenses,
which, in turn, could have a significant adverse effect on the
Company's ability to maintain or expand its retail branch network
of offices and on the Company's results of operations and
financial condition," First Alliance says in its latest annual
report.
The DOJ has agreed to limit its initial inquiry to pricing
disparities, and is currently reviewing data provided by the
Company.
In October 1998, the Attorney General of Massachusetts filed an
action on behalf of the Commonwealth against the Company in the
Superior Court of Massachusetts, in the County of Suffolk. The
suit seeks to enjoin the Company from charging rates, points and
other terms which significantly deviate from industry-wide
standards or which are otherwise unconscionable or unlawful. The
Attorney General seeks injunctive relief and also seeks
restitution for all consumers, civil penalties, and the costs of
investigating and prosecuting the action, including attorneys'
fees. A preliminary injunction was granted, limiting the points
the Company can charge to a total of five. In addition, the
Company must advise the Attorney General before any foreclosure
actions are filed in the Commonwealth.
In November 1998, the Attorney General of Minnesota filed an
action on behalf of the State against the Company in Ramsey
County District Court. The suit alleges violations of Minnesota
Uniform Deceptive Trade Practices Act, the Consumer Fraud Act,
Truth in Lending Act and related federal regulations. The
Attorney General seeks injunctive relief, restitution, civil
penalties, attorneys' fees and costs. A decision on a preliminary
injunction limiting the Company's lending activities in the State
is currently pending.
In December 1998, the Attorney General of the State of Illinois
filed an action on behalf of the State against the Company in the
Cook County Circuit Court. The suit alleges violations of the
Illinois Consumer Fraud Act, Deceptive Trade Practices Act and
Illinois Interest Act. The Attorney General seeks injunctive
relief, restitution, civil penalties, rescission, revocation of
business licenses, attorneys' fees and costs. The Company has
filed a motion to dismiss, which should be heard sometime in
April 1999.
In December 1998, the American Association of Retired Persons
(AARP) filed an action against the Company and against Brian and
Sarah Chisick in the Santa Clara County Superior Court. The suit
alleges unfair, unlawful, fraudulent and deceptive business
practices and conspiracy. The AARP is seeking injunctive relief,
restitution, revocation of licenses, attorneys' fees and costs. A
motion to strike the allegation of the complaint has been filed.
FOREMOST CORP.: Continues to Deny & Defend Policyholder Suits
-------------------------------------------------------------
In its latest annual report, FOREMOST CORP OF AMERICA provides
investors with a report about the status of on-going class action
litigation in which it is involved:
(A) Alabama Litigation. The Company was named as a
defendant in a number of similar individual lawsuits and several
related class actions filed in various county Circuit Courts in
the state of Alabama and in the United States District Court for
both the Northern and Southern Districts of Alabama. The cases
in the Alabama Litigation have sought both compensatory and
punitive damages. In general, the complaints alleged that the
Company or its Alabama agents failed to disclose information
about insurance coverages and premium structure, misinformed
policyholders about coverages or policy provisions and in other
ways misrepresented the nature and extent of insurance sold in
Alabama. The Company denies all allegations and is vigorously
defending each suit. The compensatory damages, if any, in the
cases have been nominal for each individual claimant. The
primary risk exposure facing the Company involves the plaintiffs'
claims for punitive damages. During 1997, the principal
individual actions and the class actions against the Company in
the Alabama Litigation were settled or resolved. In connection
with the settlement of a group of the individual actions, three
Alabama circuit courts have entered orders providing that, with
respect to all claims or theories alleged in the cases settled,
the portion of the settlement amount allocated to punitive
damages is sufficient to both fully punish the Company and to
deter others from engaging in similar activities. In connection
with the settlement of the principal Alabama class action, the
Company has obtained general releases from Alabama policyholders
resolving further claims against the Company, except for claims
by persons who affirmatively "opted out" of the settlement. The
Company believes that these individual and class action
settlements have significantly reduced the Company's risk
exposure in the Alabama Litigation, and intends to continue its
vigorous defense of the remaining lawsuits.
(B) National Class Action. In April 1996, national class
actions were filed by the same group of plaintiffs' attorneys in
Wisconsin, Illinois and Florida state courts against the Company
and certain other defendants alleging misrepresentations in
connection with the sale of force-placed collateral protection
insurance. The complaints sought unspecified compensatory and
punitive damages. The Wisconsin case was conditionally class
certified by the Wisconsin state court, before service of the
complaint. On June 22, 1998, the Circuit Court of Waupaca
County, Wisconsin, issued an Order vacating the class
certification dismissing all claims against the Company in the
Wisconsin action, without prejudice. The case filed in the
Circuit Court of the Sixth Judicial Circuit, Champaign County,
Illinois, initially was dismissed by the trial court on the
Company's motion. Plaintiffs then filed amended pleadings, and
the Company renewed its motion to dismiss, which motion is
pending before the trial court. The action filed in the
Circuit Court of the Eleventh Judicial Circuit in and for Dade
County, Florida, has been stayed. The Company is vigorously
defending all of these cases and believes that none has merit.
The Company has not established a specific reserve for these
related actions, because the amount of the Company's liability
exposure, if any, cannot be reasonably estimated.
GENERAL CHEMICAL: Denies Liability in Milwaukee Crypto Litigation
-----------------------------------------------------------------
In March 1993, an outbreak of cryptosporidia occurred in the
public water supply of the City of Milwaukee. As a result of
that incident, several lawsuits have been filed with the
Milwaukee County Circuit Court against one or more of the City of
Milwaukee, its Department of Public Works, Sara Lee Corporation
("Sara Lee"), E.D. Wesley Co., Peck Foods Corporation, certain
hotels, numerous insurance companies, several municipalities and
General Chemical Group. The principal allegations against
General Chemical Group are that a water treatment chemical sold
to the City of Milwaukee by General Chemical Group should have
removed certain bacteria contained in the water supply and failed
to do so and that General Chemical Group consulted with the City
concerning the water purification.
One of the suits (Markwiese, et al. v. Peck Foods Corporation, et
al. filed in 1993) had been certified, prior to the service of a
complaint against General Chemical Group, as a class action in
favor of all persons who sustained damage as a result of the
wrongful acts of the various defendants. An appeal of this class
certification was filed by General Chemical Group and the City of
Milwaukee, and in a March 13, 1998 hearing, a new trial judge
ruled from the bench that this matter shall not proceed as a
class action. If this matter proceeds to trial, it is possible
that lawyers for the plaintiffs could appeal this ruling after
conclusion of the trial. In addition to the Markwiese action,
several other lawsuits have since been filed by the same lead
attorneys in the Circuit Court of Milwaukee County against the
same basic group of defendants.
In total, General Chemical Group believes the total number of
individual plaintiffs in all suits filed to date is approximately
700. The unspecified damages sought by these various complaints
is alleged to be "far in excess of $1.0 million dollars" for
personal injury, economic loss, emotional distress, pain and
suffering, medical expenses and punitive damages.
On September 17, 1998, the court preliminarily approved a class
action settlement with Sara Lee, whereby Sara Lee would pay to
the plaintiffs $250,000 to cover certain expenses related to the
litigation. Final approval of the settlement was granted by the
court on December 17, 1998. The remaining parties in the
litigation, including General Chemical Group, are continuing in
the discovery phase of the litigation.
General Chemical Group has denied all material allegations of the
complaints and will continue to defend these lawsuits vigorously.
Management further believes that the Company's available
insurance should provide adequate coverage in the event of an
adverse result in this matter, and that this matter will not have
a material adverse affect on the Company's results of operations
or financial condition.
GENERAL CHEMICAL: Employee SO2 & SO3 Suits Enter Discovery Phase
----------------------------------------------------------------
In April 1998, approximately 40 employees (and their respective
spouses) of the Sun Company, Inc. refinery in Marcus Hook,
Pennsylvania, filed lawsuits in the Court of Common Pleas,
Delaware County, Pennsylvania, against General Chemical Group,
alleging that sulfur dioxide and sulfur trioxide releases from
the Company's Delaware Valley facility caused various respiratory
and pulmonary injuries. Unspecified damages in excess of $50,000
for each plaintiff are sought. General Chemical Group has
answered the complaints, and the litigation has entered the
discovery phase. The Company has denied all material allegations
of the complaints and will vigorously defend itself in this
matter. Management further believes that the Company's current
accruals and available insurance should provide adequate coverage
in the event of an adverse result in this matter and that, based
on currently-available information, this matter will not have a
material adverse affect on the Company's results of operations or
financial condition.
GROW BIZ: Defense of Harbor Finance Tender Offer Suit Continues
---------------------------------------------------------------
Harbor Finance Partners, a shareholder of Grow Biz International,
Inc., commenced a shareholder class action against Grow Biz and
the members of its Board of Directors, arising out of the non-
binding proposal by Jeff Dahlberg and Ron Olson, officers,
directors and majority shareholders of Grow Biz, to exchange,
through a newly formed entity, all of the shares of Grow Biz that
they do not already own, for $14 per share in cash. The plaintiff
alleges, among other things, that the proposed price for the
shares is substantially below the fair value of those shares,
that the defendants failed to maximize stockholder value through
an adequate auction or market check process, and that the
defendants have breached their fiduciary duties and otherwise
unfairly dealt with the plaintiff and the other minority
shareholders. The plaintiff seeks, among other things: (1)
injunctive relief to enjoin any proposed transaction; (2)
creation of a committee of shareholders to help protect the
interests of the minority shareholders in any proposed
transaction; and (3) damages in an unstated amount, pre-judgment
interest, and costs and attorneys' fees incurred in this action.
The action was filed in the Hennepin County, Minnesota District
Court. Grow Biz and the Board of Directors deny the plaintiff's
allegations and intend to defend the action vigorously.
H&R BLOCK: Indemnifies WorldCom & CompuServe for 80.1% of Losses
----------------------------------------------------------------
CompuServe, Inc., certain current and former officers and
directors of CompuServe and the registrant have been named as
defendants in six lawsuits pending before the state and Federal
courts in Columbus, Ohio. All suits allege similar violations of
the Securities Act of 1933 based on assertions of omissions and
misstatements of fact in connection with CompuServe's public
filings related to its initial public offering in April 1996.
One state lawsuit also alleges certain oral omissions and
misstatements in connection with such offering. Relief sought in
the lawsuits is unspecified, but includes pleas for rescission
and damages.
One Federal lawsuit names the lead underwriters of CompuServe's
initial public offering as additional defendants and as
representatives of a defendant class consisting of all
underwriters who participated in such offering.
The Federal suits were consolidated, the defendants filed a
motion to dismiss the consolidated suits, the district court
stayed all proceedings pending the outcome of the state court
suits, and the United States Court of Appeals for the Sixth
Circuit affirmed such stay. The four state court lawsuits
also allege violations of various state statutes and common law
of negligent misrepresentation in addition to the 1933 Act
claims. The state lawsuits were consolidated for discovery
purposes and defendants filed a motion for summary judgment
covering all four state lawsuits. In the state lawsuits, the
court entered an order in July 1998 that the suits entitled
Harvey Greenfield v. CompuServe Corporation, et al., Jeffrey
Schnipper v. CompuServe Corporation, and Philip Silverglate v.
CompuServe Corporation, et al. be maintained as a class action on
behalf of the following class:
"All persons and entities who purchased shares of common
stock of CompuServe Corporation between April 18, 1996
pursuant to the CompuServe's initial public offering or on
the open market and July 16, 1996, and who were damaged
thereby. All named defendants to these consolidated actions,
members of their immediate families, any entity in which they
have a controlling interest, and their legal representatives,
heirs, successors or assigns are excluded from the class."
Plaintiffs Greenfield, Schnipper and Silverglate were designated
as class representatives.
The Florida State Board of Administration v. CompuServe
Corporation, et al. case pending in state court was not included
in the class certification order as the plaintiff in such case
did not seek class certification of its action.
As a part of the sale of its interest in CompuServe, the Company
agreed to indemnify WorldCom and CompuServe against 80.1% of any
losses and expenses incurred by them with respect to these
lawsuits. The defendants are vigorously defending these
lawsuits.
HENRY SCHEIN: Discloses Filing of Easy Dental Class Action Suit
---------------------------------------------------------------
Henry Schein, Inc., discloses in its latest annual report that,
in Texas District Court, Travis County, Henry Schein, Inc., and
one of its subsidiaries, are defendants in a matter entitiled
Shelly E. Stromboe & Jeanne N. Taylor, on Behalf of Themselves
and All Other Similarly Situated vs. Henry Schein, Inc., Easy
Dental Systems, Inc. and Dentisoft, Inc., Cause No. 98-00886. The
complaint, filed in January 1998, requests the court to grant
class action certification, alleges, among other things,
negligence and breach of contract involving the sale of
software products under the Easy Dental name.
HOST MARRIOTT: Class Action Settlement Warrants Have Expired
----------------------------------------------------------------
In connection with a class action settlement, HOST MARRIOTT CORP.
issued warrants to purchase up to 7.7 million shares of the
Company's common stock at $8.00 per share through October 8, 1996
and $10.00 per share thereafter. During 1996, 6.8 million
warrants were exercised at $8.00 per share and an equivalent
number of shares of Company common stock were issued. During 1997
and 1998, 60,000 and 98,000 warrants were exercised at $10.00 per
share. In its year-end financial statements, released last week,
the Company advises that, on October 8, 1998, the remaining
warrants expired.
INTERACTIVE NETWORK: Believes Shareholder Settlement Imminent
-------------------------------------------------------------
On January 4, 1995, Baker Trading Partners, Eric Lofgren and Russ
Van Wormer, as representatives of a class of plaintiffs who
purchased common stock in INTERACTIVE NETWORK, INC., commenced a
securities class action lawsuit against the Company and certain
other defendants (including David Lockton), alleging that the
Company, aided by the other defendants, made materially false
statements during the period January 19, 1994, through March 31,
1995, concerning its plans to expand nationally when the Company
knew that it did not have the resources or market acceptance of
its product to support national expansion.
The securities class action plaintiffs failed to file a proof of
claim in the Company's bankruptcy proceedings by January 19,
1999. Since the Company had scheduled these alleged claims as
disputed, contingent and unliquidated, the Company expects these
claims will be disallowed under applicable bankruptcy law and
rules.
Although this action is still pending, the Company believes a
settlement of the suit will be negotiated with the defendants'
obligations being covered by the Company's directors and
officers' insurance policy. Any settlement is conditional upon
bankruptcy court approval. The Company's insurance carrier has
agreed to advance defense costs, including the $500,000
deductible under the policy in return for the Company's promise
to repay the $500,000 deductible amount out of a $10 million
settlement the Company is slated to receive.
KIMBERLY CLARK: Discovery Proceeds in Tissue Price Fixing Suits
---------------------------------------------------------------
On May 13, 1997, the State of Florida, acting through its
attorney general, filed a complaint in the Gainesville Division
of the United States District Court for the Northern District of
Florida, alleging that manufacturers of tissue products for away-
from-home use, including KIMBERLY CLARK CORP. and Scott Paper
Company, agreed to fix prices by coordinating price increases for
such products. Following Florida's complaint, an action by the
states of Maryland, New York and West Virginia, as well as
approximately 45 class action complaints, have been filed in
various federal and state courts around the United States. These
actions contain allegations similar to those made by the State of
Florida in its complaint. The actions in federal courts have
been consolidated for pretrial proceedings in the Florida
District Court. Class certification was granted in the federal
proceedings in July 1998 and will be contested in the state
cases. The foregoing actions seek an unspecified amount of
actual and treble damages. Kimberly Clark has answered the
complaints in these actions and has denied the allegations
contained therein as well as any liability. Discovery is
proceeding.
Kimberly Clark intends to contest these claims vigorously.
Management does not expect these actions to have a material
adverse effect on the Corporation's business or results of
operations.
LET'S TALK: Company Continues Defense of Shareholder Suit
---------------------------------------------------------
LET'S TALK CELLULAR & WIRELESS, INC., and one of its directors
and officers and a former director and officer are named as
defendants in several class action lawsuits for alleged
violations of section 10(b) and 20(a) of the Securities and
Exchange Act and SEC Rule 10b-5, which are pending in the U.S.
District Court for the Southern District of Florida. The
Plaintiffs maintain the Company and the individual defendants
committed a fraud on the securities market by artificially
inflating the price of the Company's stock. Plaintiffs propose a
class period of March 11, 1998 through July 2, 1998, and November
25, 1997 through July 2, 1998 and seek an unspecified amount of
damages. "The Company will vigorously defend these claims,"
Let's Talk tells investors in its latest quarterly report.
LYCOS, INC.: Vowing to Contest Shareholder Complaints Vigorously
----------------------------------------------------------------
Eight purported class action lawsuits were filed in the Court of
Chancery for the State of Delaware in and for New Castle County,
by shareholders of the Company allegedly on behalf of all common
stockholders of LYCOS, INC., (except defendants and their
affiliates), entitled Jacob Horowitz v. David S. Wetherell et
al., Civil Action No. 16933-NC (filed Feb. 9, 1999); Robert
Johnson v. Robert J. Davis et al., Civil Action No. 16937-NC
(filed Feb. 9, 1999); Debra Mayer v. David S. Wetherell et al.,
Civil Action No. 16947-NC (filed Feb. 11, 1999); Ellis Investment
Co., Ltd v. David S. Wetherell et al., Civil Action No.. 16951-NC
(filed Feb. 11, 1999); Frederick Sheehan v. David S. Wetherell et
al., Civil Action No. 16952-NC (filed Feb. 11, 1999); Yorkshire
Group, Inc. v. David S. Wetherell et al., Civil Action No. 16955-
NC (filed Feb. 12, 1999); Warren Ciafardini v. David S. Wetherell
et al., Civil Action No. 16956-NC (filed Feb. 12, 1999); Martin
Lewkowicz, on behalf of himself and all others similarly situated
v. Lycos, Inc. et al., Civil Action No. 16976-NC (filed Feb. 23,
1999). The complaints name as defendants the directors of the
Company individually, as well as the Company and, in the
Horowitz, Mayer, Ellis Investment, Sheehan, Yorkshire Group and
Ciafardini complaints, USA Networks, Inc. The complaints allege
that the directors of the Company violated their state law
fiduciary duties owed to plaintiffs and the purported class by
agreeing to enter into the announced transaction with USA
Networks, Inc. The complaints request that the Court declare
them to be proper class actions, enjoin the announced
transaction, rescind the announced transaction if it is
consummated prior to a final judgment or award rescissionary
damages to the purported class, direct the Company to make an
accounting to plaintiffs and the purported class for all damages
and for all profits or special benefits obtained by the
defendants, and award to plaintiffs all costs and fees, including
attorneys' fees. The Company believes that the allegations in
the complaints are without merit and intends to contest them
vigorously.
Between February 22, 1999 and March 10, 1999, a series of
purported securities class action lawsuits were filed in the
United States District Court for the District of Massachusetts,
entitled Kenneth R. Levine v. Lycos, Inc., et al., CA No. 99-
10394(EFH), Thomas Lynch v. Lycos, Inc., et al., CA No. 99-
10426(EFH), Mary Jane Crescente v. Lycos, Inc., et al., CA No.
99-10467(EFH), Arnold Silverstein v. Lycos, Inc., et al., CA No.
99-10476(EFH), Warren Ciafardini v. Lycos, Inc., et al., CA No.
99-10494(EFH), Michelle Penfold v. Lycos, Inc., et al., CA No.
99-10495(EFH), Carol Lewkowicz v. Lycos, Inc., et al., CA. No.
99-10501(EFH), Joel Kofsky v. Lycos, Inc., et al., CA No. 99-
10502(EFH), Mark Zito v. Lycos, Inc., et al., CA No. 99-
10518(EFH), Marc Berger v. Lycos, Inc., et al., CA No. 99-
10519(EFH) and Salvatore Bendetto v. Lycos, Inc., et al., CA No.
99-10524(EFH). Each suit names as defendants the Company and
Robert J. Davis, the Company's Chief Executive Officer and
President. The Lewkowicz complaint also names as a defendant
Edward M. Philip, the Company's Chief Operating Officer and Chief
Financial Officer. The complaints allege, among other claims,
violations of United States federal securities law through
alleged misrepresentations and omissions relating to the
Company's agreement to enter into an announced transaction with
USA Networks, Inc. and certain affiliated companies. Each
complaint seeks an unspecified award of damages. The plaintiffs
in the Levine, Lynch, Silverstein, and Berger actions purport to
represent a class of all persons who purchased the Company's
common stock between January 25, 1999 and February 9, 1999. The
plaintiff in the Zito action purports to represent a class of all
persons who purchased the Company's common stock between January
21, 1999 and February 9, 1999. The plaintiffs in the Crescente,
Ciafardini, Penfold, Kofsky and Bendetto actions purport to
represent a class of all persons who purchased the Company's
common stock between January 8, 1999 and February 9, 1999. The
plaintiff in the Lewkowicz action purports to represent a class
of all persons who purchased the Company's common stock between
January 7, 1999 and February 9, 1999. The Company believes that
the allegations in the complaints are without merit and intends
to contest them vigorously.
NCR CORP.: Discovery Proceeds in Ultra-High Speed Printer Suit
--------------------------------------------------------------
NCR Corp. was named as one of the defendants in a purported
class-action suit filed in November 1996 in Florida. The
complaint seeks, among other things, damages from the defendants
in the aggregate amount of $200 million, trebled, plus attorneys'
fees, based on state antitrust and common-law claims of unlawful
restraints of trade, monopolization, and unfair business
practices. The portions of the complaint pertinent to NCR, among
other things, assert a purported agreement between Siemens-
Nixdorf entities and NCR regarding the servicing of certain
"ultra-high speed printers" manufactured by Siemens and
the agreement's impact upon independent service organizations,
brokers and end-users of such printers. The case is still in the
discovery stage on class certification issues. The amount of any
liabilities or other costs, if any, that may be incurred in
connection with this matter cannot currently be determined but,
at this time, NCR does not believe they will be material.
OWENS CORNING: Expects Supreme Court Decision in 2nd Quarter 1999
----------------------------------------------------------------
Prior to 1972, Fibreboard (acquired by OWENS CORNING)
manufactured insulation products containing asbestos.
Fibreboard has since been named as a defendant in many
thousands of personal injury claims for injuries allegedly
caused by asbestos exposure.
As of September 30, 1998, approximately 128,000 asbestos
personal injury claims were pending against Fibreboard.
These claims and most of the pending claims are made against
the Fibreboard Global Settlement Trust and are subject to
the Global Settlement injunction discussed below.
Fibreboard is a participant in the NSP and is a party to
most of the NSP Agreements discussed in Item A. As
discussed above, if the Global Settlement is overturned by
the U.S. Supreme Court and the Insurance Settlement
therefore becomes effective, Fibreboard anticipates that in
excess of 100,000 asbestos personal injury claims pending
against it will be resolved under the NSP. Settlement
payments for such claims will be made over a period of five
years, with most payments occurring in 1999 and 2000. Such
payments will be made from the approximately $2.0 billion in
funds available under the Insurance Settlement. Fibreboard
expects that average per-claim settlement payments for both
pending and future claims will be substantially lower than
those experienced by Fibreboard during the 1996-1998 period.
Global Settlement
During 1993, Fibreboard, its insurers and representatives of
a class of future asbestos plaintiffs who have claims
arising from asbestos prior to August 27, 1993, entered into
the Global Settlement. Under the Global Settlement,
Fibreboard would be protected by an injunction from asbestos
personal injury claims, and should have no further asbestos
personal injury liabilities. On July 26, 1996, the U.S.
Fifth Circuit Court of Appeals affirmed the Global
Settlement by a majority decision.
The parties opposing the Global Settlement filed petitions
seeking review with the U.S. Supreme Court. On June 27,
1997, the Supreme Court granted the petition, vacated the
judgment and remanded the case to the Fifth Circuit for
further consideration in light of the Supreme Court's
decision in the Amchem Products, Inc. v. Windsor case.
Amchem involved a proposed nationwide class action
settlement of future asbestos personal injury claims against
the members of the Center for Claims Resolution. The Supreme
Court, affirming the intermediate appellate court,
disapproved and vacated the Amchem class action settlement,
determining that the Amchem class action failed to meet the
class action certification requirements of Federal Rule of
Civil Procedure 23. On January 27, 1998, a panel of the
Fifth Circuit reaffirmed, by majority vote, its prior
decision, and again approved the Global Settlement. In June,
the United States Supreme Court granted certiorari, agreeing
to review the decision by the Fifth Circuit. The Supreme
Court heard oral argument on the case in December 1998, and
a decision is expected in the second quarter of 1999.
If the Global Settlement becomes effective, all asbestos-
related personal injury liabilities of Fibreboard will be
resolved through insurance funds and existing corporate
reserves and a permanent injunction would bar the filing of
any further claims against Fibreboard or its insurers by
class members. Upon final approval, Fibreboard's insurers
are required to pay existing settlements and assume full
responsibility for any claims filed before August 27, 1993,
the date the settling parties reached agreement on the terms
of the Global Settlement. A court-supervised claims
processing trust ("Settlement Trust") will be responsible
for resolving claims which were not filed against Fibreboard
before August 27, 1993, and any further claims that might
otherwise be asserted against Fibreboard in the future by
members of the class.
The Settlement Trust will be funded principally by
Fibreboard's insurers, Continental Casualty Company
("Continental") and Pacific Indemnity Company ("Pacific").
These insurers placed $1.525 billion in an interest-bearing
escrow account pending court approval of the settlements.
Fibreboard is responsible for contributing $10 million plus
accrued interest toward the Settlement Trust, which it will
obtain from other remaining insurance sources and existing
reserves. The Home Insurance Company has already paid $9.9
million into the escrow account on behalf of Fibreboard, in
satisfaction of an earlier settlement agreement. The balance
of the escrow account was $1.7 billion at December 31, 1998
after payment of interim expenses and exigent claims
associated with the Global Settlement.
PHARMERICA, INC.: Continues Defense of Shareholder Litigation
-------------------------------------------------------------
In November 1998, a putative securities class action was filed
against PharMerica, Inc., C. Arnold Renschler, M.D. (the
Company's Chief Executive Officer), Robert Della Valle, Pharm.D
(the Company's former Chief Operating Officer) and James D.
Shelton (the Company's former Chief Financial Officer) in the
United States District Court for the Middle District of Florida.
The proposed class consists of all persons who purchased or
acquired stock of PharMerica between January 7, 1998 and July 24,
1998. The complaint seeks monetary damages but does not specify
an amount. In general, the complaint alleges that the defendants
made material omissions by withholding from the market
information related to the costs associated with certain
acquisitions. The complaint alleges claims under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934. PharMerica
believes the complaint is without merit and intends to defend the
case vigorously. "The potential outcome of the litigation cannot
be predicted with certainty, however, management believes the
litigation will not have a material impact on the financial
position or results of operations of the Company given a
preliminary investigation and its existing insurance coverages,"
the Company says in its latest annual report.
POLYCOM, INC.: Believes it is Free of Videoconferencing Liability
-----------------------------------------------------------------
On October 2, 1997, Datapoint Corporation filed a complaint
against Intel Corporation for infringement of two U.S. patents
related to videoconferencing network technology in the U.S.
District Court in Dallas, Texas. On November 25, 1997, the
complaint was amended to include several additional defendants,
and Datapoint also filed a motion for certification of the action
as a class action. No ruling occurred relative to the motion for
class action certification. Although neither Polycom nor its
subsidiary ViaVideo had been served as a defendant in any
Datapoint complaints, both Polycom and ViaVideo were named as
putative class members in the Datapoint motion for class action
certification along with over 500 other companies. During the
third quarter of 1998, the Company was notified that this case
was dismissed by stipulation and an order entered by the court to
that effect.
SALOMON SMITH: Continues Defense of Refunding Mark-Up Litigation
----------------------------------------------------------------
In its latest annual report, SALOMON SMITH BARNEY HOLDINGS, INC.,
describes for investors the major pending legal proceedings to
which the Company or its subsidiaries is a party, including a
November 1998, purported class action complaint filed in the
United States District Court for the Middle District of Florida
(Dwight Brock as Clerk for Collier County v. Merrill Lynch, et
al.). The complaint alleges that, pursuant to a nationwide
conspiracy, 17 broker-dealer defendants, including SSB, charged
excessive mark-ups in connection with advanced refunding
transactions. SSBH says it intends to contest this complaint
vigorously.
SOLUTIA, INC: Defending Monsanto Claims; New RCRA/TSCA Complaint
----------------------------------------------------------------
As the result of a spin-off from Monsanto, Solutia, Inc., assumed
from Monsanto liabilities related to specified legal proceedings.
As a result, although Monsanto remains the named defendant, the
Company will manage the litigation and indemnify Monsanto for
costs, expenses and judgments arising from such litigation:
(A) On April 12, 1985, Monsanto was named as a defendant in
Alanis et al. v. Farm & Home Savings, et al., filed in the
District Court in Harris County, Texas, the first of a number of
lawsuits in which plaintiffs claim injuries resulting from
alleged exposure to substances present at or emanating from the
Brio Superfund site near Houston, Texas. Monsanto is one of a
number of companies that sold materials to the chemical
reprocessor at that site. Currently pending are the following
matters:
(1) Monsanto is one of a number of defendants in five
cases brought in Harris County District Court or the
United States District Court for the Southern
District of Texas on behalf of 120 plaintiffs who
owned homes or lived in subdivisions near the Brio
site, attended school near the site or used nearby
recreational baseball fields. Plaintiffs claim to
have suffered various personal injuries and fear
future disease; they assert the need for medical
monitoring, and, in the case of the homeowners,
claim property damage. In addition to their claims
of personal injury, four plaintiffs in one of these
cases allege business losses. Plaintiffs seek
compensatory and punitive damages in an unspecified
amount.
(2) Monsanto is one of a number of defendants in two
actions brought in Harris County District Court on
behalf of 396 plaintiffs, who are former employees
of the owners/operators of the Brio site, and
members of the employees' families or persons who
worked near the Brio site. Plaintiffs in one of
these actions also owned homes or lived in
subdivisions near the site, attended schools near
the site or used nearby recreational ball fields.
Plaintiffs claim physical and emotional injury and
seek compensatory and punitive damages in an
unspecified amount.
The Company believes that there are meritorious defenses to all
of these lawsuits including lack of proximate cause, lack of
negligent or other improper conduct on the part of Monsanto or
Solutia, and negligence of plaintiffs (or their parents) and/or
of builders and developers of the Southbend subdivision. These
actions are being vigorously defended.
(B) On November 15, 1993, Monsanto was named as a defendant
in Dyer et al. v. Monsanto Company, et al., filed in the Circuit
Court in St. Clair County, Alabama, the first of a number of
lawsuits in which plaintiffs claim to have sustained personal
injuries or property damage as a result of the discharge of
hazardous substances, including polychlorinated biphenyls
("PCBs"), from its Anniston, Alabama plant site. The following
matters are currently pending:
(1) Monsanto is a defendant in two cases pending in
Circuit Court in St. Clair County, Alabama which
have been consolidated and certified as a class
action on behalf of all property owners in a
specified area along waterways near the plant.
Monsanto is a defendant in an additional action
filed in Circuit Court in Shelby County, Alabama on
behalf of a purported class of property owners
farther downstream along this waterway. Plaintiffs
in both actions claim loss in the value of their
property. Plaintiffs in the Shelby County action
additionally claim increased risk of illness,
emotional distress and the need for medical
monitoring. Plaintiffs seek compensatory and
punitive damages in an unspecified amount.
(2) Monsanto is a defendant in 12 additional cases
brought in Circuit Court in Calhoun County, Circuit
Court in St. Clair County, Circuit Court in Taladega
County or in U.S. District Court in the Northern
District of Alabama on behalf of 4,575 individual
plaintiffs who own or rent homes or own or operate
businesses near the plant or along waterways near
the plant or who attend churches near the plant.
Plaintiffs claim to have suffered various personal
injuries and fear future disease; they assert the
need for medical monitoring and claim to have
suffered loss in the value of their property or
commercial injury. They seek compensatory and
punitive damages of $3 million or in unspecified
amounts for each plaintiff.
(3) The Company received a letter dated March 12, 1998,
giving notice of intention to file a Citizens' Suit
pursuant to the Resource Conservation and Recovery
Act, 42 U.S.C. Sections 6972(a)(1)(B) and (b)(2)(A)
and the Toxic Substances Control Act, 15 U.S.C.
Sections 2619(a)(1) and (b)(1)(A) on behalf of four
named individuals who are also plaintiffs in other
pending litigation relating to the Anniston plant.
The notice claims that solid or hazardous wastes
have been released from the Anniston plant and pose
an imminent and substantial threat to health or the
environment. Plaintiffs seek statutory penalties of
$25,000 per day for a period of more than 5 years,
for a total of $46 million, plus attorneys' fees and
expenses.
The Company believes that there are meritorious defenses to all
these matters, including lack of any physical injury or property
damage to plaintiffs, lack of any imminent or substantial
endangerment to health or the environment and lack of negligence
or improper conduct on the part of the Company or Monsanto. These
actions are being vigorously defended.
SYNOVUS FINANCIAL: Bank Doesn't Fare Well with Alabama Juries
-------------------------------------------------------------
In its latest annual report filed with the Securities and
Exchange Commission, SYNOVUS FINANCIAL CORP. says that,
currently, multiple lawsuits seeking class action treatment are
pending against one of Synovus' Alabama banking subsidiaries that
involve:
(1) payment of service fees or interest rebates to
automobile dealers in connection with the assignment of
automobile credit sales contracts to that Synovus
subsidiary;
(2) the forced placement of insurance to protect that
Synovus subsidiary's interest in collateral for which
consumer credit customers have failed to obtain or
maintain insurance; and
(3) the receipt of commissions by that Synovus subsidiary in
connection with the sale of credit life insurance to its
consumer credit customers and the charging of an
interest surcharge and a processing fee in connection
with consumer loans made by that subsidiary.
These lawsuits seek unspecified damages, including punitive
damages. Synovus intends to vigorously contest these lawsuits
and all other litigation to which Synovus and its subsidiaries
are parties. Based upon information presently available, and in
light of legal, equitable, and factual defenses available to
Synovus and its subsidiaries, contingent liabilities arising from
the threatened and pending litigation are not considered
material. It should be noted, however, that large punitive damage
awards bearing little relation to the actual damages sustained by
plaintiffs have been awarded in Alabama.
UNOCAL CORP.: Royalty & Working Rights Settlement Next Month
------------------------------------------------------------
In October 1995, the State of Texas and several individuals filed
a class action lawsuit in the District Court of Lee County, Texas
(State of Texas, et al. v. Amerada Hess Corporation, et al.),
alleging that the defendants, including UNOCAL CORP., had engaged
in a conspiracy to fix posted prices for crude oil at
artificially low levels and had also discriminated against the
class of Texas royalty owners by purchasing oil "attributable" to
the plaintiff class at prices lower than the prices realized by
the defendants for their own production from the same fields.
Since that time, the company has been named a defendant in ten
additional class action lawsuits alleging oil royalty and working
interest underpayments. Eight of these cases were filed in
federal courts in Alabama, Louisiana, Mississippi, and Texas and
subsequently were transferred by The Multi-District Panel to the
U.S. District Court for the Southern District of Texas, Corpus
Christi Division, as MDL-1206. The other three cases remain on
file in state courts in Alabama and Texas.
As a group, the lawsuits allege that crude oil postings have been
lower than true value and assert claims of breach of contract,
fraud, conversion, and violations of federal and state antitrust
laws and the federal Racketeer Influenced and Corrupt
Organizations (RICO) statute. Putative state-wide and nation-
wide class representatives seek recovery of unspecified actual
and punitive damages, including treble damages for antitrust and
RICO violations from 1986 forward, as well as attorneys' fees and
costs.
In December 1998, UNOCAL CORP. and twenty-five other oil
companies signed a supplement to a previously announced
settlement agreement in one of the above-described federal
lawsuits (The McMahon Foundation, et al. v. Amerada Hess
Corporation, et al., in the U.S. District Court for the Southern
District of Texas). Under this supplemental agreement, the
defendants agreed to pay $164 million to settle all private non-
state-wide-entity oil royalty and working interest claims nation-
wide. In December 1998, the settlement was given preliminary
approval by the court. Final approval is scheduled for
consideration in April 1999. Except as noted below, if finally
approved, the settlement will bring to an end all of the class
action litigation described above. The company is aware,
however, that some royalty and working interest owners could
elect to opt out of the settlement.
One of the lawsuits (The State of Texas et al v. Amerada Hess
Corporation, et al., in the 53rd District Court of Travis County,
Texas), alleges that the underpayment of royalties constituted a
violation of the Texas Common Purchaser Act and seeks recovery of
monetary penalties in an unspecified amount on behalf of the
State of Texas and a state-wide class of private royalty owners.
These claims have been excluded from the claims settled in the
McMahon action. The company is vigorously contesting these
claims.
UNOCAL CORP.: Gasoline Supply Limitation and Price Fixing Suits
---------------------------------------------------------------
In June 1996, the case captioned Aguilar, et al. v. Atlantic
Richfield, et al. (Civil No. 00700810), was filed in the
California Superior Court for San Diego County against nine
California oil companies, including UNOCAL CORP., which refined
and marketed Phase 2 gasoline mandated by the California Air
Resources Board (CARB). The plaintiffs allege that the
defendants conspired to limit the supply and increase the price
of CARB gasoline in violation of California antitrust and unfair
competition laws. The plaintiffs seek treble damages and
injunctive relief on behalf of all purchasers of CARB gasoline at
retail since March 1, 1996. In May 1997, the court certified the
case as a class action. In October 1997, the court granted the
defendants' motion for summary judgment. However in January
1998, the court granted the plaintiffs' motion for a new trial,
effectively reversing the earlier grant of summary judgment. The
company and its co-defendants have appealed to the California
Court of Appeals the court's orders which certified the class and
granted a new trial. In February 1998, Unocal and the co-
defendants in Aguilar were served with a new action in the U.S.
District Court for the Southern District of California (Gilley,
et al. v. Atlantic Richfield, et al., Case No. 98 CV 0123 BTM
(RRB). This case was filed on behalf of a purported class
consisting of lessee gasoline dealers who purchased gasoline at
the wholesale level from the defendants during the period from
January 1, 1996 to the present. The complaint alleges that
Unocal and the co-defendants conspired to restrict the supply of
CARB gasoline in violation of the Sherman Act, 15 U.S.C. Section
1. This case is also being vigorously defended.
In October 1998, the Attorney General of Hawaii filed an action
(Bronster (State of Hawaii) v. Unocal, et al., in the U.S.
District Court for the District of Hawaii) on behalf of both the
people of Hawaii and the state itself against the company and six
other major Hawaii oil refiners. The complaint alleges that the
defendants conspired to restrict the production and fix the price
of gasoline in violation of the federal Sherman Act and various
state laws. The state seeks damages in an amount exceeding $150
million covering a period starting in 1995, together with civil
penalties in excess of $70 million. If liability were
established, the company would be jointly and severally liable
for any damages awarded. If a Sherman Act violation were found,
any damages awarded would be trebled and attorneys' fees and
costs would also be awarded. Any such damages would be allocated
among the defendants according to their respective market shares.
The company and its co-defendants believe that there is no merit
to the Attorney General's claim that there was a conspiracy to
fix prices or restrict the supply of gasoline. Moreover, even if
such an agreement did exist among some of the defendants, the
company believes that there is no evidence linking it to such an
agreement. Further, the company believes that the sale of its
marketing and refining assets to Tosco Corporation in March 1997
would be deemed to constitute an effective withdrawal from any
alleged conspiracy. Pretrial discovery has commenced.
In October 1998, a purported class action was filed by direct and
indirect purchasers of diesel fuel in the state of California
from March 19, 1996, through December 1997, against the company
and eight other major California oil refiners (Cal-Tex Citrus
Juice, et al. v. Unocal, et al., in the California Superior Court
for Sacramento County). The complaint alleges that the
defendants conspired to restrict the production and fix the price
of CARB diesel fuel in violation of the California Cartwright and
Unfair Competition Acts. The total amount of damages sought by
the plaintiffs is unknown. If liability were established, the
company would be jointly and severally liable for any damages
awarded. Any such damages would be trebled if a Cartwright Act
violation were found and attorneys' fees and costs would also be
recoverable. Fluid recovery and cy pres [sic.] restitution would
be available under the Unfair Competition Act if a violation of
that act were found. Any damages awarded would be allocated among
the defendants according to their market shares. The company and
its co-defendants believe that there is no merit to the
plaintiffs' claim that there was a conspiracy to fix prices or
restrict the supply of CARB diesel fuel. Moreover, even if such
an agreement did exist among some of the defendants, the company
believes that there is no evidence linking it to such an
agreement. Further, the company believes that the sale of its
marketing and refining assets to Tosco Corporation in March 1997
would be deemed to constitute an effective withdrawal from any
alleged conspiracy. Pretrial discovery has commenced.
UNOCAL CORP.: Yadana Pipeline Workers' Cases Survive & Press On
---------------------------------------------------------------
The company is a defendant in a lawsuit, filed in October 1996,
by anonymous representatives purportedly on behalf of an alleged
class of plaintiffs consisting of all residents of the Tenasserim
region of Myanmar allegedly affected by alleged acts of
mistreatment and forced labor by the government of Myanmar
allegedly in connection with the construction of the Yadana
natural gas pipeline, which transports natural gas from fields in
the Andaman Sea to Thailand through a pipeline crossing Myanmar
(John Doe I, et al. v. Unocal Corp., et al., in the U.S. District
Court for the Central District of California, Civil No. 96-6959-
RAP). Other named defendants included the French oil company
Total S.A., John F. Imle and Roger C. Beach.
The complaint contains numerous counts and alleges violations of
several U.S. and California laws and U.S. treaties. The
plaintiffs seek compensatory and punitive damages on behalf of
the named plaintiffs, as well as disgorgement of profits.
Injunctive and declaratory relief is also requested on behalf of
the named plaintiffs and the alleged class to direct the
defendants to cease payments to the Myanmar government and to
cease participation in the Yadana project.
In March and April 1997, the court granted in part and denied in
part the company's motion to dismiss the action. In its answer
to an amended complaint, the company denied that it was either
properly named as a party or subject to joint venture,
partnership or other liability with respect to the Yadana
pipeline. In January 1998, the court heard argument on the class
certification question and took the matter under advisement. In
February 1998, the court denied the plaintiffs' motion for a
preliminary injunction. In November 1998, the court dismissed
Total as a defendant, finding that it lacked jurisdiction over
that company.
The company has also been served with a lawsuit, filed in
September 1996, making similar claims but without the class
action allegations (National Coalition Government of the Union of
Burma, et al. v. Unocal Inc. and the Yadana Natural Gas Project,
in the U.S. District Court for the Central District of
California, Civil No. 96-6112-RAP).
The court, in November 1997, granted in part and denied in part
the company's motion to dismiss the action. Among other things,
the court's order dismissed the National Coalition Government of
the Union of Burma as a plaintiff in the action. The remaining
plaintiffs thereafter filed a second amended complaint. In its
answer, the company denied that it was either properly named as a
party or subject to joint venture, partnership or other liability
with respect to the Yadana pipeline. In March 1998, the court
entered an order dismissing the Federation of Trade Unions of
Burma as a plaintiff. The remaining plaintiffs have recently
filed a motion to amend further their complaint, seeking to
dismiss certain individual plaintiffs, add other individual
plaintiffs and allege with greater detail the relationship
between Unocal and certain of its subsidiaries.
UNOCAL CORP.: Highly Confident Lockheed Judgment Will Be Reduced
----------------------------------------------------------------
In August 1998, a jury hearing the Group 5 trial in Judicial
Council Coordination Proceedings No. 2967 (Lockheed Litigation
Cases, in the California Superior Court for Los Angeles County)
awarded approximately $760 million in punitive damages against
five defendants, including UNOCAL, INC. The company's share of
the award was $81.3 million. The defendants supplied
petrochemicals to the former Lockheed Corporation "Skunkworks"
plant in Burbank, California. The Group 5 trial involved 42
current and former employees of Lockheed who claimed personal
injuries as the result of exposure to these chemicals. In the
compensatory damage phase of the trial, the company was found
liable to eight plaintiffs for a total of approximately $750,000
as a consequence of its delivery of two drums of naphtha to the
plant in 1984. In November 1998, the court reduced the punitive
damages award by 50 percent. The company and the other
defendants are appealing the judgment to the California Court of
Appeal. The company is highly confident that the punitive damage
award will be substantially reduced or completely reversed.
USG CORP.: Reports Status of Asbestos-Related Litigation
--------------------------------------------------------
In its latest annual report, USG CORP. provides investors with a
status report about on-going asbestos-related litigation:
One of the Corporation's subsidiaries, U.S. Gypsum (or "the
Company"), is among many defendants in lawsuits arising out
of the manufacture and sale of asbestos-containing
materials. U.S. Gypsum sold certain asbestos-containing
products beginning in the 1930s; in most cases, the products
were discontinued or asbestos was removed from the formula by
1972, and no asbestos-containing products were produced
after 1977. Some of these lawsuits seek to recover
compensatory and in many cases punitive damages for costs
associated with the maintenance or removal and replacement of
asbestos-containing products in buildings (the "Property
Damage Cases"). Others seek compensatory and in many cases
punitive damages for personal injury allegedly resulting from
exposure to asbestos-containing products (the "Personal Injury
Cases").
(A) Property Damage Cases:
U.S. Gypsum is a defendant in 12 Property Damage Cases, most of
which involve multiple buildings. One of the cases is a
conditionally certified class action comprised of all colleges
and universities in the United
States, which certification is presently limited to the
resolution of certain allegedly "common" liability issues
(Central Wesleyan College v. W.R. Grace & Co., et al., U.S.D.C.
S.C.). Fourteen additional property damage claims have
been threatened against U.S. Gypsum. The Company anticipates that
few additional Property Damage Cases will be filed as a result
of the operation of statutes of limitations and the impact of
certain other factors, although if the class action referred
to above is decertified, it is likely that some colleges and
universities will file individual Property Damage Cases against
U.S. Gypsum. It is possible that any cases that are filed will
seek substantial damages.
In total, U.S. Gypsum has settled approximately 114 Property
Damage Cases involving 244 plaintiffs, in addition to four class
action settlements. Twenty-four cases have been tried to
verdict, 16 of which were won by U.S. Gypsum and five lost;
three other cases, one won at the trial level and two lost,
were settled during appeals. In the cases lost, compensatory
damage awards against U.S. Gypsum totaled $11.5 million.
Punitive damages totaling $5.5 million were entered against U.S.
Gypsum in four trials. Two of the punitive damage awards,
totaling $1.45 million, were paid, and two were settled
during the appellate process.
In 1998, two Property Damage Cases were filed against U.S.
Gypsum, two cases were dismissed before trial, four were settled,
and 12 were pending at year end. U.S. Gypsum expended $29.5
million for the defense and resolution of Property Damage Cases
(most of which consisted of payments for settlements agreed to
in the prior year) and received insurance payments of $22.0
million in 1998. In 1997, one Property Damage Case was filed
against U.S. Gypsum, three cases were dismissed before trial, six
were settled, one closed case was reopened, and 16 were pending
at year end. U.S. Gypsum expended $7.8 million for the defense
and resolution of Property Damage Cases and received insurance
payments of $15.5 million in 1997. During 1996, two Property
Damage Cases were filed against U.S. Gypsum, three cases were
dismissed before trial, eight were settled, and 23 were pending
at year end; U.S. Gypsum expended $33.4 million for the
defense and resolution of Property Damage Cases in 1996 and
received insurance payments of $84 million. A substantial
portion of the insurance payments received during the years 1996-
1997 constituted reimbursement for amounts expended in
connection with Property Damage Cases in prior years.
(B) Personal Injury Cases:
U.S. Gypsum is also a defendant in approximately 98,000 Personal
Injury Cases pending at December 31, 1998, as well as an
additional approximately 43,000 cases that have been settled but
will be closed over time. Filings of new Personal Injury
Cases increased to 80,000 claims in 1998, compared to 23,500
claims in 1997 and 28,000 claims in 1996. The higher rate of
personal injury case filings in 1998 is believed to have
resulted, at least in part, from the Supreme Court ruling
striking down the Georgine settlement described below. It is
anticipated that Personal Injury Cases will continue to be filed
in substantial numbers for the foreseeable future, although
the percentage of such cases filed by claimants with
little or no physical impairment is expected to remain high.
U.S. Gypsum's average settlement cost for Personal Injury
Cases over the past several years has been approximately
$1,600 per claim, exclusive of defense costs. In 1998, U.S.
Gypsum (through the Center for Claims Resolution, discussed
below) agreed to settlements of approximately 60,000 Personal
Injury Cases, including 39,000 cases that will be closed in
future years at an average cost of approximately $1,600 per
case, and 21,000 claims closed during 1998 for an average
settlement of approximately $2,600 per case. The higher
cost of settlements of those cases actually closed in 1998 was
due primarily to more costly settlements in particular
jurisdictions, and an increase in the number of such claims that
came from individuals alleging serious illness, due in part to
the courts' accelerated treatment of such claims. Management
anticipates that the average settlement cost for most
pending claims will continue to be moderated by opportunities
for block settlements of large numbers of claims and the
apparently high percentage of claims that appear to have been
brought by individuals with little or no physical impairment.
However, other factors, including the litigation strategies of
certain co-defendants and an increasingly adverse litigation
environment in particular jurisdictions, are expected to have
an adverse impact on settlement costs for some pending and
future cases and, therefore, on U.S. Gypsum's overall settlement
costs.
U.S. Gypsum is a member, together with 18 other former
producers of asbestos-containing products, of the Center
for Claims Resolution (the "Center"), which has assumed the
handling of all Personal Injury Cases pending against U.S.
Gypsum and the other members of the Center. Costs of defense
and settlement are shared among the members of the Center
pursuant to predetermined sharing formulae. Most of U.S.
Gypsum's personal injury liability and defense costs have been
paid by those of its insurance carriers that in 1985 signed an
Agreement Concerning Asbestos-Related Claims (the "Wellington
Agreement"), obligating them to provide coverage for the defense
and indemnity costs incurred by U.S. Gypsum in Personal Injury
Cases. Punitive damages have never been awarded against U.S.
Gypsum in a Personal Injury Case; whether such an award would
be covered by insurance under the Wellington Agreement would
depend on state law and the terms of the individual policies.
U.S. Gypsum and the Center were parties to a class action
settlement known as Georgine that would have required most
future Personal Injury Cases to be resolved through an
administrative system and provided prescribed levels of
benefits based on the nature of the claimants' physical
impairment. However, on June 25, 1997, the Supreme Court
affirmed a May 1996 ruling by a federal appellate court
finding that class certification in Georgine was improper
(Amchem Products, Inc. v. Windsor, Case No. 96-270). Since the
invalidation of the Georgine settlement, U.S. Gypsum and the
other Center members have been named in a substantial number
of additional Personal Injury Cases. A number of defendants in
asbestos personal injury claims, including U.S. Gypsum,
have stated their intention to continue pursuit of an alternative
to the current tort system, including possible federal
legislation that would impose objective disease criteria on
asbestos cases, although there can be no assurance that such an
alternative can be implemented. In addition, some settlements
negotiated by the Center during 1998 included agreements by
plaintiffs' firms to recommend to their future clients that they
defer filing personal injury claims unless and until they meet
established disease criteria. The Center will continue to
attempt to negotiate similar agreements in the future. The
impact of such agreements cannot be determined at this time.
During 1998, approximately 80,000 Personal Injury Cases were
filed against U.S. Gypsum, and 21,000 were settled or dismissed.
U.S. Gypsum incurred expenses of $61.1 million in 1998 with
respect to the resolution and defense of Personal Injury
Cases, of which $45.5 million was paid by insurance. During
1997, approximately 23,500 Personal Injury Cases were filed
against U.S. Gypsum, approximately 5,000 claims were
refiled or amended to add U.S. Gypsum as a defendant, and
approximately 14,000 were settled or dismissed. U.S. Gypsum
incurred expenses of $31.6 million in 1997 with respect to
Personal Injury Cases, of which $27.2 million was paid by
insurance. During 1996, approximately 28,000 Personal Injury
Cases were filed against U.S. Gypsum, and approximately 20,000
were settled or dismissed. U.S. Gypsum incurred expenses of $28.6
million in 1996 with respect to Personal Injury Cases, of which
$21.6 million was paid by insurance.
(C) Insurance Coverage Action:
U.S. Gypsum sued its insurance carriers in 1983 to obtain
coverage for asbestos cases (the "Coverage Action") and has
settled all disputes with most of its solvent carriers. As of
December 31, 1998, after deducting insolvent coverage and
insurance paid out to date, approximately $262 million of
potential insurance remained, including approximately $217
million of insurance from six carriers that have agreed, subject
to certain limitations and conditions, to cover asbestos-related
costs, and approximately $45 million from three carriers that
have not yet agreed to make their coverage available on
acceptable terms. A minimum of $10 million of the disputed
coverage is expected to be available regardless of the outcome of
further proceedings. U.S. Gypsum is attempting to resolve its
disputes with the nonsettling carriers through either a
negotiated resolution or further litigation in the Coverage
Action.
U.S. Gypsum's total expenditures for all asbestos-related
matters, including property damage, personal injury,
insurance coverage litigation and related expenses, exceeded
aggregate insurance payments by $24 million in 1998, but
insurance payments exceeded asbestos-related expenses by $0.7
million in 1997 and $41 million in 1996, due primarily to
nonrecurring reimbursement for amounts expended in prior years.
(D) Insolvent Carriers: Four of U.S. Gypsum's domestic
insurance carriers, as well as underwriters of portions of
various policies issued by Lloyds and other London market
companies, providing a total of approximately $106 million of
coverage, are insolvent. Because these policies would already
have been consumed by U.S. Gypsum's asbestos expenses to date if
the carriers had been solvent, the insolvencies will not
adversely affect U.S. Gypsum's coverage for future
asbestos-related costs. However, U.S. Gypsum is
pursuing claims for reimbursement from the insolvent
estates and other sources and expects to recover a presently
indeterminable portion of the policy amounts from these
sources.
*********
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
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re-mailing and photocopying) is strictly prohibited without prior
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herein is obtained from sources believed to be reliable, but is
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