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/raid1/www/Hosts/bankrupt/CAR_Public/990421.MBX C L A S S A C T I O N R E P O R T E R Wednesday, April 21, 1999, Vol. 1, No. 54 Headlines AMERICAN STORES: Egg Price Fixing Trial to Start in July 1999 BASSETT FURNITURE: Mattress Plaintiffs Appeal Dismissal of Suit BURLINGTON NORTHERN: 1980 Wheat & Barley Rate Case Ends BURLINGTON NORTHERN: Shareholder Litigation Rolls on Slow Track CARNIVAL CORP.: Anticipates 2 Years to Resolve Settlement Appeal CHS ELECTRONICS: Schubert & Reed File Complaint in Florida CRIIMI MAE: Maryland Dist. Ct. Consolidates Shareholder Actions CURATIVE HEALTH: Wolf Popper Files Complaint in New York ELBIT MEDICAL: Shareholders Seek Distribution or Redemption ENGINEERING ANIMATION: Weiss & Yourman Files Securities Suit FEDERAL EXPRESS: One Customer Excise Tax Suit Remains in Alabama FVC.COM: Weiss & Yourman File Securities Complaint ILLINOIS SCHOOLS: East St.Louis Kids & ACLU Win Some Lose Some NETWORK ASSOCIATES: Bernstein Liebhard Files Suit in California NETWORK ASSOCIATES: Cohen Milstein Files Complaint in California OHIO JUDGES: Federal Court Rejects Voting Discrimination Claim ORACLE CORP.: Defense of California Shareholder Suits Continues PARACELSUS HEALTHCARE: Shareholder Settlement Revamps Management SECURE COMPUTING: Weiss & Yourman File Complaint in California STAFFMARK INC.: Finkelstein & Krinsk File Complaint in Arkansas TRISTAR CORP.: IRS Balks at Class Action Settlement Deductions ********* AMERICAN STORES: Egg Price Fixing Trial to Start in July 1999 ------------------------------------------------------------- On September 13, 1996, a class action lawsuit captioned McCampbell et al. v. Ralphs Grocery Company, et al. was filed in the San Diego Superior Court of the State of California against the Company and two other grocery chains operating in southern California. The complaint alleges, among other things, that AMERICAN STORES CO. and others conspired to fix the retail price of eggs in southern California. The plaintiffs claim that the defendants' actions violate provisions of the California Cartwright Act and constitute unfair competition. Plaintiffs seek damages in an unspecified amount purportedly sustained by the class and have produced a damages study which purports to support damages of approximately $56 million attributable to the Company. If damages were to be awarded, they may be trebled under the applicable statute. Plaintiffs also seek an injunction against future actions in restraint of trade or unfair competition. The Company has filed an answer denying plaintiffs' allegations and setting forth several defenses. On October 3, 1997, the Court issued an order certifying a class of retail purchasers of white chicken eggs sold in the one-dozen pack from defendants' stores within Los Angeles, Riverside, San Bernadino, San Diego, Imperial and Orange Counties during the period from September 13, 1992 to the present. It is currently expected that trial will commence during July 1999. The Company believes it has meritorious defenses to plaintiffs' claims, disputes the accuracy of plaintiffs' damages study, and plans to vigorously defend the lawsuit. BASSETT FURNITURE: Mattress Plaintiffs Appeal Dismissal of Suit --------------------------------------------------------------- A suit was filed in June, 1997, in the Superior Court of the State of California for the County of Los Angeles against BASSETT FURNITURE INDUSTRIES INC., two major retailers and certain current and former employees of the Company. The suit sought certification of a class consisting of all consumers who purchased certain mattresses and box springs from the major retailers that were manufactured by a subsidiary of the Company, E.B. Malone Corporation, with different specifications than those originally manufactured for sale by these retailers. The suit alleged various causes of action, including negligent misrepresentation, breach of warranty, violations of deceptive practices laws and fraud. Plaintiffs sought compensatory damages of $100 million and punitive damages. In 1997, the Superior Court twice sustained the Company's demurrers to several of plaintiffs' causes of action, but granted the plaintiffs leave to amend. In February, 1998, the Superior Court sustained the Company's demurrers to many of the individual claims, this time without granting plaintiffs leave to amend. The Superior Court also sustained the Company's demurrer to the class action allegations in plaintiffs' Third Amended Complaint, without granting leave to amend, and transferred the entire action out of the class action department. Plaintiffs have filed a notice of appeal from the class action ruling. Plaintiffs also filed a petition for a writ of mandamus or other extraordinary relief seeking immediate review of the other demurrer rulings, which petition was denied. The suit was subsequently transferred from the Superior Court for the County of Los Angeles to the Superior Court for Orange County. After the case was transferred to Orange County, the plaintiffs stipulated to a dismissal with prejudice of all individual defendants. Additionally, all remaining claims against the Company were stayed by the Court pending Plaintiffs' appeal of the dismissal of their class action allegations. Although it is impossible to predict the ultimate outcome of this litigation, the Company intends to vigorously defend this suit because it believes that the damages sought are unjustified and because this case is inappropriate for class action treatment. Because the Company believes that the two major retailers were unaware of the changes in specifications, the Company has agreed to indemnify the two major retailers with respect to the above. BURLINGTON NORTHERN: 1980 Wheat & Barley Rate Case Ends ------------------------------------------------------- In September 1980, a class action lawsuit was filed against BNSF Railway in United States District Court for the District of Montana challenging the reasonableness of BNSF Railway's export wheat and barley rates. The class consisted of Montana grain producers and elevators. The plaintiffs sought a finding that BNSF Railway single car export wheat and barley rates for shipments moving from Montana to the Pacific Northwest were unreasonably high and requested damages in the amount of $64 million. In March 1981, the Montana District Court referred the rate reasonableness issue to the ICC. Subsequently, the State of Montana filed a complaint at the ICC challenging BNSF Railway's multiple car rates for Montana wheat and barley movements occurring after October 1, 1980. The ICC issued a series of decisions in this case from 1988 to 1991. Under these decisions, the ICC applied a revenue to variable cost test to the rates and determined that BNSF Railway owed $9,685,918 in reparations plus interest. In its last decision, dated November 26, 1991, the ICC found BNSF Railway's total reparations exposure to be $16,559,012 through July 1, 1991. The ICC also found that BNSF Railway's current rates were below a reasonable maximum and vacated its earlier rate prescription order. BNSF Railway appealed to the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") those portions of the ICC's decisions concerning the post-October 1, 1980 rate levels. BNSF Railway's primary contention on appeal was that the ICC erred in using the revenue to variable cost rate standard to judge the rates instead of Constrained Market Pricing/Stand Alone Cost principles. The limited portions of decisions that cover pre-October 1, 1980 rates were appealed to the Montana District Court. On March 24, 1992, the Montana District Court dismissed plaintiffs' case as to all aspects other than those relating to pre-October 1, 1980 rates. On February 9, 1993, the D.C. Circuit served its decision regarding the appeal of the several ICC decisions in this case. The court held that the ICC did not adequately justify its use of the revenue to variable cost standard as BNSF Railway had argued and remanded the case to the ICC for further administrative proceedings. On July 22, 1993, the ICC served an order in response to the D.C. Circuit's February 9, 1993 decision. In its order, the ICC stated it would use the Constrained Market Pricing/Stand-Alone Cost principles in assessing the reasonableness of BNSF Railway wheat and barley rates moving from Montana to Pacific Coast ports from 1978 forward. The ICC assigned the case to the Office of Hearings to develop a procedural schedule. On October 28, 1994, plaintiffs filed their opening evidence arguing that the revenue received by BNSF Railway exceeded the stand alone costs of transporting that traffic and that BNSF Railway rates were unreasonably high. BNSF Railway filed its evidence March 29, 1995, showing that the stand alone costs of transporting the traffic exceeded the revenue derived by BNSF Railway on that traffic and that consequently, its rates were not unreasonably high. The parties filed briefs simultaneously on August 16, 1995. In a decision served August 14, 1997, in McCarty Farms, Inc. et al. v. Burlington Northern Inc., No. 37808, the STB, successor to the ICC, ruled that the plaintiffs had failed to demonstrate that BNSF Railway rates charged to transport export wheat and barley from Montana to West Coast ports were unreasonable. The STB dismissed the proceeding in its entirety. The plaintiffs filed petitions to review the STB's decision before the D.C. Circuit and the Montana District Court. In an October 20, 1998 decision, McCarty Farms, Inc. et al. v. Surface Transportation Board (No. 97-1632), the D.C. Circuit affirmed the STB's decision in all respects for those claims as to which it had jurisdiction (i.e., all claims except those relating to single-car wheat shipments moving before September 12, 1980). The plaintiffs' appeal of the STB decision as to single-car wheat shipments moving before September 12, 1980 was dismissed by the Montana District Court on November 23, 1998. BURLINGTON NORTHERN: Shareholder Litigation Rolls on Slow Track --------------------------------------------------------------- Numerous complaints were filed arising out of the Agreement and Plan of Merger dated June 29, 1994, as amended, between BURLINGTON NORTHERN RAILROAD CO. and Santa Fe Pacific. On June 30, 1994, shortly after announcement of the proposed BNI-SFP merger, two purported stockholder class action suits were filed in the Court of Chancery of the State of Delaware (Miller v. Santa Fe Pacific Corporation, C.A. No. 13587; Cosentino v. Santa Fe Pacific Corporation, C.A. No. 13588). On July 1, 1994, two additional purported stockholder class action suits were filed in the Court of Chancery of the State of Delaware (Fielding v. Santa Fe Pacific Corporation, C.A. No. 13591; Wadsworth v. Santa Fe Pacific Corporation, C.A. No. 13597). The actions named as defendants SFP, the individual members of the SFP Board of Directors, and BNI. In general, the actions variously alleged that SFP's directors breached their fiduciary duties to the stockholders by agreeing to the proposed merger for allegedly "grossly inadequate" consideration in light of recent operating results of SFP, recent trading prices of SFP's common stock and other alleged factors, by allegedly failing to take all necessary steps to ensure that stockholders will receive the maximum value realizable for their shares (including allegedly failing to actively pursue the acquisition of SFP by other companies or conducting an adequate "market check"), and by allegedly failing to disclose to stockholders the full extent of the future earnings potential of SFP, as well as the current value of its assets. The Miller and Fielding cases further alleged that the proposed Merger was unfairly timed and structured and, if consummated, would allegedly unfairly deprive the stockholders of standing to pursue certain pending stockholder derivative litigation. Plaintiffs also alleged that BNI was responsible for aiding and abetting the alleged breach of fiduciary duty committed by the SFP Board. The actions sought certification of a class action on behalf of SFP's stockholders. In addition, the actions sought injunctive relief against consummation of the Merger and, in the event that the Merger was consummated, the rescission of the Merger, an award of compensatory or rescisionary damages and other damages, including court costs and attorneys' fees, an accounting by defendants of all profits realized by them as a result of the Merger, and various other forms of relief. On October 6, 1994, shortly after Union Pacific Corporation (UPC) issued a press release in which it announced a proposal for UPC to acquire SFP (the UPC Proposal), plaintiffs in the four lawsuits described above filed in the Court of Chancery of the State of Delaware a Consolidated Amended Complaint (Miller v. Santa Fe Pacific Corporation, C.A. No. 13587). In their Consolidated Amended Complaint, plaintiffs repeated the allegations contained in their earlier lawsuits and further alleged that, in light of the UPC Proposal, SFP's directors had breached their fiduciary duties by failing to fully inform themselves about and to adequately explore available alternatives to the merger with BNI, including the alternative of a merger transaction with UPC, and by failing to fully inform themselves about the value of SFP. The Consolidated Amended Complaint sought the same relief sought in plaintiffs' earlier lawsuits and, in addition, requested that SFP's directors be ordered to explore alternative transactions and to negotiate in good faith with all interested persons, including UPC. Also, on October 6, 1994, five additional purported stockholder class action suits relating to SFP's proposed participation in the Merger with BNI were filed in the Court of Chancery of the State of Delaware (Weiss v. Santa Fe Pacific Corporation, C.A. No. 13779; Lifshitz v. Krebs, C.A. No. 13780; Stein v. Santa Fe Pacific Corporation, Lewis v. Santa Fe Pacific Corporation, C.A. No. 13783; Abramson v. Lindig, C.A. No. 13784). On October 7, 1994, three more purported stockholder class action suits relating to SFP's proposed participation in the Merger with BNI were filed in the Court of Chancery of the State of Delaware (Graulich v. Santa Fe Pacific Corporation, C.A. No. 13786; Anderson v. Santa Fe Pacific Corporation, C.A. No. 13787; Green v. Santa Fe Pacific Corporation, C.A. No. 13788). All of these lawsuits named as defendants SFP and the individual members of the SFP Board of Directors; the Lifshitz case further named BNI as a defendant. In general, these actions variously alleged that, in light of SFP's recent operating results and the UPC Proposal, SFP's directors breached their fiduciary duties to stockholders by purportedly not taking the necessary steps to ensure that SFP's stockholders would receive "maximum value" for their shares of SFP stock, including purportedly refusing to negotiate with UPC or to "seriously consider" the UPC Proposal and failing to announce any active auction or open bidding procedures. The actions generally sought relief that is materially identical to the relief sought in the Miller case, and in addition sought entry of an order requiring SFP's directors to immediately undertake an evaluation of SFP's worth as a merger/acquisition candidate and to establish a process designed to obtain the highest possible price for SFP, including taking steps to "effectively expose" SFP to the marketplace in an effort to create an "active auction" in SFP. The Weiss case further sought entry of an order enjoining SFP's directors from implementing any poison pill or other device designed to thwart the UPC Proposal or any other person's proposal to acquire SFP. The Anderson lawsuit was subsequently withdrawn. On October 14, 1994, the Chancery Court entered an order consolidating the remaining 11 purported stockholder class action suits under the heading In Re Santa Fe Pacific Corporation Shareholder Litigation, C.A. No. 13587 (the Shareholder Litigation). On October 26, 1994, BNI filed a Motion to Dismiss the Consolidated and Amended Complaint. On March 6, 1995, plaintiffs in the Shareholder Litigation filed a Revised Second Consolidated and Amended Complaint, which superseded their previously filed complaints. The Revised Second Consolidated and Amended Complaint generally repeated many of the same allegations, and requested relief similar to that requested in plaintiffs' earlier complaints. In addition, the Revised Second Consolidated and Amended Complaint alleged that SFP's directors breached their fiduciary duties: by proceeding with and completing the joint SFP-BNI Tender Offer; by approving and implementing the Shareholder Rights Plan, which purportedly resulted in a "premature ending" of the "bidding process" by allegedly deterring and defeating UPC's acquisition overtures, exempting BNI from its provisions, and "coercing" SFP stockholders to vote in favor of the Merger; by approving the termination fee and expense reimbursement provisions of the Merger Agreement by authorizing the stock repurchase provisions of the Merger Agreement, which allegedly were designed to "lock- up" the Merger by providing stockholders with an "illusory promise" that the Merger Agreement exchange ratio would increase, while reserving SFP's right not to repurchase such stock; and by purportedly failing to disclose all material facts necessary for SFP's stockholders to evaluate in an informed manner and vote on the Merger, including purportedly failing to fully disclose the risks that the ICC would not approve the Merger and purportedly failing to fully disclose SFP's intentions with respect to the repurchase of SFP stock, as permitted by the Merger Agreement, as well as whether there will be a fair opportunity for all SFP stockholders to "participate" in any SFP stock repurchases, and on what basis. As additional relief to that requested in the earlier complaints, plaintiffs requested injunctive and other relief: enjoining consummation of the Merger; ordering SFP, SFP's directors, and BNI to make unspecified supplemental disclosures to stockholders; requiring SFP to conduct a new vote on the Merger subsequent to such disclosures; enjoining SFP from improperly or discriminatorily implementing the Shareholder Rights Plan or any other "defensive" tactic; ordering SFP's directors to take all appropriate steps to enhance SFP's value and attractiveness as a merger or acquisition candidate, including "effectively exposing" SFP to the marketplace by means of an active auction on a "level playing field"; and declaring the termination fee and expense reimbursement provisions of the Merger Agreement invalid and unenforceable. On March 13, 1995, SFP and SFP's directors filed a motion to dismiss the Shareholder Litigation on the grounds that the Plaintiffs failed to state a cause of action upon which relief may be granted. BNI also filed a motion to dismiss the Revised Second Consolidated and Amended Complaint. On May 31, 1995, the Delaware Chancery Court rendered its decision granting the motion to dismiss that was filed by SFP and SFP's directors on March 13, 1995 and the motion to dismiss filed by BNI. The plaintiffs appealed the dismissal to the Delaware Supreme Court. On November 22, 1995, the Delaware Supreme Court issued an opinion that affirmed in part and reversed in part the May 31, 1995 decision of the Delaware Chancery Court. The Delaware Supreme Court reversed the Chancery Court's dismissal of plaintiffs' claims that, in taking the alleged "defensive" actions identified in the Revised Second Consolidated and Amended Complaint, including approval and implementation of the Shareholder Rights Plan, SFP's directors violated their fiduciary duties to stockholders. The Delaware Supreme Court affirmed the Chancery Court's dismissal of all other claims asserted by plaintiffs in the litigation, including all claims against BNI. On December 11, 1995, the SFP defendants filed with the Delaware Chancery Court a motion for summary judgment against plaintiffs' remaining claims in the Shareholder Litigation, which motion is pending. On December 29, 1995, the SFP defendants filed their Answer to plaintiffs' Revised Second Consolidated and Amended Complaint. In its annual report, BNSF Railway tells investors that it believes this lawsuit is meritless and continues to oppose it vigorously. CARNIVAL CORP.: Anticipates 2 Years to Resolve Settlement Appeal ---------------------------------------------------------------- Several Passenger Complaints have been filed against Carnival Cruise Lines or Holland America Westours on behalf of purported classes of persons who paid port charges to Carnival or Holland America Line, alleging that statements made in advertising and promotional materials concerning port charges were false and misleading. The Passenger Complaints allege violations of the various state consumer protection acts and claims of fraud, conversion, breach of fiduciary duties and unjust enrichment. Plaintiffs seek compensatory damages or, alternatively, refunds of portions of port charges paid, attorneys' fees, costs, prejudgment interest, punitive damages and injunctive and declaratory relief. These actions are in various stages of progress and are proceeding. Holland America Westours has entered into a settlement agreement for the one Passenger Complaint filed against it. The settlement agreement was approved by the court on September 28, 1998. Five members of the settlement class have appealed the court's approval of the settlement. The appeal is likely to take between one and two years to be resolved. Unless the appeal is successful, Holland America will issue travel vouchers with a face value of $10-$50 depending on specified criteria, to certain of its passengers who are U.S. residents and who sailed between April 1992 and April 1996, and will pay a portion of the plaintiffs' legal fees. The amount and timing of the travel vouchers to be redeemed and the effects of the travel voucher redemption on revenues is not reasonably determinable, Holland America says. Accordingly, the Company has not established a liability for the travel voucher portion of the settlements and will account for the redemption of the vouchers as a reduction of future revenues. In 1998 the Company established a liability for the estimated distribution costs of the settlement notices and plaintiffs' legal costs. Several complaints were filed against Carnival and/or Holland America Westours on behalf of purported classes of travel agencies who had booked a cruise with Carnival or Holland America, claiming that advertising practices regarding port charges resulted in an improper commission bypass. These actions, filed in California, Alabama, Washington and Florida, allege violations of state consumer protection laws, claims of breach of contract, negligent misrepresentation, unjust enrichment, unlawful business practices and common law fraud, and they seek unspecified compensatory damages (or alternatively, the payment of usual and customary commissions on port charges paid by passengers in excess of certain charges levied by government authorities), an accounting, attorneys' fees and costs, punitive damages and injunctive relief. These actions are in various stages of progress and are proceeding. CHS ELECTRONICS: Schubert & Reed File Complaint in Florida ---------------------------------------------------------- On April 15, 1999, Schubert & Reed LLP filed a class action in the United States District Court for the Southern District of Florida, on behalf of a class of purchasers of CHS Electronics, Inc. common stock (NYSE: HS) during the period 6/19/98 through 3/22/99. The suit names as defendants CHS Electronics, Inc., its CEO and Chairman Claudio Osorio, CFO Craig Toll and Pasquale Giordano, head of the company's European operations, for violations of the federal securities laws. On March 22, 1999, CHS Electronics, Inc. announced that financial results for the fourth fiscal quarter of 1998 would be lower than previously announced just February 24, 1999, and that the company had overstated vendor rebates for the second, third and fourth quarters of 1998. The company admitted that some of the overstated vendor rebates were supported by "invalid documentation" and that all overstated rebates had been reversed. The company stated that "as a consequence" a senior executive of the company's European headquarters had resigned. Claudio Osorio, Chairman and CEO, said that "the restatement shows a reduced level of profitability of which we had not previously been aware." The company's stock price fell 34.3% on the news, closing at $3.938 down from its prior day's close of $6, and down 79.2% from its class period high of $19. On April 15, 1999, the company's stock closed at $2-7/8. To learn more, call Robert C. Schubert or Juden Justice Reed at 415-788-4220 or write mail@schubert-reed.com via email. CRIIMI MAE: Maryland Dist. Ct. Consolidates Shareholder Actions --------------------------------------------------------------- Plaintiffs have filed 20 separate class action civil lawsuits in the United States District Court for the District of Maryland against certain officers and directors of CRIIMI MAE, INC., between October 7, 1998 and November 30, 1998. Two additional complaints filed in other Federal Courts have been dismissed without prejudice. The Complaints name as defendants William B. Dockser, as Chairman of the Board of Directors of CRIIMI MAE, and H. William Willoughby as a member of the Board of Directors and/or an officer of CRIIMI MAE. In addition, a majority of the Complaints name Cynthia O. Azzara as a defendant as an officer of CRIIMI MAE. Several of the Complaints also name Garrett G. Carlson, Sr., G. Richard Dunnells and Robert J. Merrick as defendants as members of both the Board of Directors and the Audit Committee of CRIIMI MAE. Although CRIIMI MAE and CM Management -- reorganizing under chapter 11 -- have not been named as defendants, both companies are subject to indemnity obligations to the defendants under the provisions of their respective constituent documents and applicable state law and, with respect to Messrs. Dockser and Willoughby and Ms. Azzara, their employment contracts. CRIIMI MAE has directors and officers liability insurance policies that have a combined coverage limit of $20 million. Each Complaint alleges generally that the named defendants violated Section 10(b) of the Securities and Exchange Act of 1934, as amended by, among other things, making false statements of material facts and failing to disclose certain material facts concerning, among other things, CRIIMI MAE's ability to meet the earnings estimates of analysts and to meet collateral calls from lenders. The Complaints also generally allege that the named defendants violated Section 20(a) of the Exchange Act because each named defendant was allegedly a "controlling person" as that term is defined under Section 20(a). The relief sought in each Complaint includes all or substantially all of the following: (i) certification of a class under Rule 23 of the Federal Rules of Civil Procedure; (ii) certification of the named plaintiff as a class representative and/or as lead plaintiff and its counsel as lead counsel and/or class counsel; (iii) entry of a finding that the defendants violated federal law, including federal securities laws; (iv) award of monetary damages, including compensatory and rescissionary damages against all defendants jointly and severally, including punitive damages where appropriate, and pre-judgment and post-judgment interest running from the date of the wrongs alleged to the date of judgment; (v) award to the plaintiff of costs, expenses and disbursements incurred in the action, including reasonable attorneys' fees and experts' fees; (vi) award to the plaintiff of extraordinary, equitable and/or injunctive relief as permitted by law, equity, and federal statutory provisions and state law remedies to attach, impound or otherwise restrict the defendants' assets; (vii) award to the plaintiff of such other relief as the District Court deems just and proper or as the District Court otherwise requires; and (viii) trial by jury. A group of putative members of the class of individuals who allegedly suffered damages, as described in the Complaints, filed a motion requesting the District Court to appoint a group of 13 individual Plaintiffs as lead plaintiffs under the Private Securities Litigation Reform Act of 1995. The Motion also requests the District Court, to approve, among other things, certain law firms as counsel to the lead plaintiffs and the consolidation of the twenty (20) pending law suits into a single action. Defendants Dockser, Willoughby and Azzara have opposed the Motion to the extent that it seeks appointment of lead plaintiffs and approval of their selection of counsel. On March 9, 1999, the District Court ordered the consolidation of the Complaints. The District Court deferred a decision on the Motion, to the extent that it seeks the appointment of lead plaintiffs and approval of their selection of counsel, until a later date. CRIIMI MAE and the defendants are continuing to investigate the allegations in the Complaints. The defendants intend to defend vigorously the claims asserted in the Complaints. CRIIMI MAE cannot predict with any degree of certainty the ultimate outcome of such litigation. CURATIVE HEALTH: Wolf Popper Files Complaint in New York -------------------------------------------------------- A class action lawsuit has been filed against Curative Health Services, Inc. (Nasdaq: CURE) in the United States District Court for the Eastern District of New York. The lawsuit was filed by the law firm of Wolf Popper LLP on behalf of persons who purchased Curative securities in the open market during the period June 28, 1996 through April 9, 1999. The Complaint charges that defendants violated the U.S. securities laws by issuing materially false and misleading statements and by omitting material facts required to be disclosed so as to make the statements issued not materially false and misleading. Specifically, the complaint alleges that Curative created the materially false and misleading impression that the Company was in substantial compliance with applicable laws, rules and regulations when in fact Curative has been engaged in a systematic scheme to violate numerous Medicare regulations by: (i) improperly billing medical services at inflated prices; (ii) improperly shifting costs from Medicare non-allowable services to allowable services, including charges for advertising costs that were not allowable to hospitals claiming reimbursements from the Medicare program; and (iii) receiving kickbacks of approximately $400 per patient for referrals to Columbia/HCA. Plaintiffs further allege that defendants misconduct caused the price of Curative securities to become and remain artificially inflated and that class members were damaged when they purchased such securities without knowledge of defendants' wrongdoing. To learn more, call Paul 0. Paradis, Esq. or Michael A. Schwartz, Esq. at 212-451-9676 or 877-370-7703, or write pparadis@wolfpopper.com or mschwart@wolfpopper.com via email. ELBIT MEDICAL: Shareholders Seek Distribution or Redemption ----------------------------------------------------------- Elbit Medical Imaging Ltd. (NASDAQ: EMITF) received a notice on April 14th, 1999 that a lawsuit was filed against the Company and nine directors and former directors alleging discrimination against the Company's minority shareholders. The plaintiffs also proposed that the lawsuit be treated as a Class Action. The remedies sought by the plaintiffs include a distribution of additional cash dividends to shareholders or, alternatively, either redemption by the Company of all shares held by the plaintiffs or a tender offer of all the shares held by the public. In addition, the plaintiffs asked the court to restrain the Company's directors from using the Company's funds in any way not connected directly in the field of medical imaging. The Company cannot at this stage assess the results of the lawsuit and its effects on the Company, if any. Mr. Oded Tamir, Vice President Finance and Company Secretary, said: "The Company believes that the claims raised in this suit are without merit, and we will vigorously oppose them". To learn more, contact Dr. Kobi Vortman, President at kobi@emitf.com via email. ENGINEERING ANIMATION: Weiss & Yourman Files Securities Suit ------------------------------------------------------------ Weiss & Yourman filed a class action lawsuit on behalf of purchasers of Engineering Animation, Inc. (Nasdaq: EAII) securities between February 19, 1998 through April 6, 1999 for violations of federal securities laws. Defendants include Engineering Animation, Inc. and certain of its officers and directors. The Complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10- b(5) by, among other things: issuing false misleading statements regarding Engineering Animation's financial condition as well as its present and future business prospects. To learn more, contact Mark Levine at wyinfo@wyca.com or call 800-437-7918. FEDERAL EXPRESS: One Customer Excise Tax Suit Remains in Alabama ---------------------------------------------------------------- FedEx customers have filed four separate class-action lawsuits against FEDERAL EXPRESS CORP. generally alleging that FedEx has breached its contract with the plaintiffs in transporting packages shipped by them. These lawsuits allege that FedEx continued to collect a 6.25% federal excise tax on the transportation of property shipped by air after the tax expired on December 31, 1995, until it was reinstated in August 1996. The plaintiffs seek certification as a class action, damages, an injunction to enjoin FedEx from continuing to collect the excise tax referred to above, and an award of attorneys' fees and costs. Three of those cases were consolidated in Minnesota Federal District Court. That court stayed the consolidated cases in favor of a case filed in Circuit Court of Greene County, Alabama. The stay was lifted in July 1998. Summary judgment was granted to FedEx dismissing all claims in all three consolidated cases in Minnesota. The plaintiffs did not appeal the dismissal, which is now final. The complaint in the Alabama case also alleges that FedEx continued to collect the excise tax on the transportation of property shipped by air after the tax expired on December 31, 1996. A fifth case, filed in the Supreme Court of New York, New York County, containing allegations and requests for relief substantially similar to the other four cases was dismissed with prejudice on FedEx's motion on October 7, 1997. The court found that there was no breach of contract and that the other causes of action were preempted by federal law. The plaintiffs appealed the dismissal. This case originally alleged that FedEx continued to collect the excise tax on the transportation of property shipped by air after the tax expired on December 31, 1996. The New York complaint was later amended to cover the first expiration period of the tax (December 31, 1995 through August 27, 1996) covered in the original Alabama complaint. The dismissal was affirmed by the appellate court on March 2, 1999 and is now a final decision. The air transportation excise tax expired on December 31, 1995, was reenacted by Congress effective August 27, 1996, and expired again on December 31, 1996. The excise tax was then reenacted by Congress effective March 7, 1997. The expiration of the tax relieved FedEx of its obligation to pay the tax during the periods of expiration. The Taxpayer Relief Act of 1997, signed by President Clinton in August 1997, extended the tax for 10 years through September 30, 2007. FedEx intends to vigorously defend itself in the remaining Alabama case, which is still pending. No amount has been reserved for this contingency. FVC.COM: Weiss & Yourman File Securities Complaint -------------------------------------------------- Weiss & Yourman has filed a class action lawsuit on behalf of purchasers of FVC.COM, Inc. (Nasdaq: FVCX) securities between January 21, 1999 and April 6, 1999 for violations of federal securities laws. Defendants include FVC and certain of its officers and directors. The Complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10- b(5) by, among other things: issuing false misleading statements regarding FVC's financial condition as well as its present and future business prospects and engaging in trading FVC securities while in possession of material inside information. For additional details, contact Behram V. Parekh via email at wyinfo@wyca.com or call 1-800-437-7918. ILLINOIS SCHOOLS: East St.Louis Kids & ACLU Win Some Lose Some -------------------------------------------------------------- The Illinois Supreme Court recognized the right of school children to secure the basic components of education provided by the Illinois School Code, although it rejected the claim that Illinois children have the right to a minimally adequate education under the Illinois and U.S. Constitutions. The decision was issued in Lewis E. v. Spagnolo, a class action brought by the American Civil Liberties Union of Illinois on behalf of students at the East St. Louis schools, considered among the worst in the nation. Some of the specific allegations in the case include: -- Students lack instructional equipment and textbooks. -- The school district is chronically short staffed, with teachers often absent or disengaged from students. Some students have no permanent teacher. -- In winter, students sit through classes wearing heavy coats because broken windows and faulty boilers go unrepaired. -- Some school libraries are locked; others have been destroyed by fire. -- Fire alarms malfunction and firefighters have found emergency exits chained shut as they have attempted to rescue children from burning schools. -- Classrooms have been sealed because of asbestos and dangerous structural flaws. -- Backed-up sewers flood school kitchens, boilers, and electrical systems resulting in student evacuations and canceled classes. -- Bathrooms are unsanitary and water fountains are dry or spew brown water. The Illinois Supreme Court agreed with the ACLU that school children can enforce their right to the "rudimental elements of education" provided in the Illinois School Code, including the right to certified teachers, basic instructional materials and reasonably safe buildings. But the court, with two justices dissenting, rejected the children's argument that the Illinois Constitution's guarantee of a free public education requires state and local school officials to provide at least a minimally adequate education and safe conditions in public schools. The court also rejected the children's challenge under the federal constitution to safe and adequate conditions and educational services when students are forced by law to attend school. "We are pleased that the Illinois Supreme Court affirmed the right of school children to enforce the School Code, providing a vital weapon in the battle for improving educational conditions in substandard schools," said Benjamin Wolf of the ACLU, who argued the case before the Court. "We are disappointed, however, that the Court did not also acknowledge that the constitutional right to free public education requires schools to meet minimum standards as well." The Illinois Supreme Court decision permits the children to go back to the trial court and pursue their claims involving specific violations of the School Code. The trial court had dismissed the case in its entirety with prejudice, but the Illinois Appellate Court in 1997 ruled that the children should have the right to assert possible claims involving violations of the state and federal constitutions and the school code. NETWORK ASSOCIATES: Bernstein Liebhard Files Suit in California --------------------------------------------------------------- A securities class action lawsuit was commenced by Bernstein Liebhard & Lifshitz, LLP on behalf of purchasers of the common stock of Network Associates, Inc. (Nasdaq: NETA) between January 20, 1998 and April 6,1999 in the United States District Court for the Northern District of California. The complaint charges Network Associates and certain officers and directors with violations of the Securities Exchange Act and Rule 10b- 5. The complaint alleges that the defendants issued materially false and misleading statements and failed to disclose material facts in the Company's public filings and public statements. As a result of these misrepresentations and omissions, the price of Network Associates' common stock was artificially inflated. To learn more, call Sandy A. Liebhard, Esq., or Michael S. Egan, Esq., at 800-217-1522 or 212-779-1414 or write to them at egan@bernlieb.com via email. NETWORK ASSOCIATES: Cohen Milstein Files Complaint in California ---------------------------------------------------------------- The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. on April 15, 1999, filed a lawsuit in the United States District Court for the Northern District of California on behalf of purchasers of the common stock of Network Associates Inc. (Nasdaq: NETA) between Jan. 20, 1998, and April 6, 1999. The complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10- b(5) by, among other things: misrepresenting the financial condition of Network Associates by issuing false and misleading financial statements for the 1997 and 1998 fiscal reporting periods. Because of the issuance of these false and misleading statements, among other things, the price of Network Associates common stock was artificially inflated. On April 6, 1999, Network Associates shocked the market by announcing that first quarter profits would fall short of estimates as a result of a slowdown in demand and concerns that it would have to restate fourth quarter earnings downward after a review by the U.S. Securities and Exchange Commission of write-offs taken by Network Associates in connection with its 1997 and 1998 acquisitions. These acquisitions include: Trustee Information Systems Inc., Secure Networks Inc., Dr. Solomon's Group PLC, and Cybermedia. As a result of the SEC review, Network Associates decreased its write-offs for acquired in- process research and development by $169 million in 1998 and $45 million in 1997. For additional details, call Steven J. Toll or Emma Larson at 888-240-1238 or 206-521-0080 or write stoll@cmht.com or elarson@cmht.com via email. OHIO JUDGES: Federal Court Rejects Voting Discrimination Claim -------------------------------------------------------------- The Cincinnati Post reported that a federal appeals court has rejected a class action suit that claimed that Ohio's at-large system of electing judges in urban counties is unfair to African Americans, is unconstitutional and violates the Voting Rights Act. A three-judge panel of the U.S. Court of Appeals for the 6th Circuit in Cincinnati said in a published opinion that the state's at-large system does not unfairly prevent blacks from getting elected to judicial posts. The Cincinnati Post reported that the appeals court judges, Ronald Gilman, Eugene Siler Jr. and Martha Craig Daughtrey, upheld a 1997 decision by U.S. District Court Judge George C. Smith in Columbus. Smith ruled that African Americans failed to prove that they were denied the equal opportunity to elect judges of their choice. The suit dates back five years, to 1994, when it was filed by Cincinnati's former State Rep. William Mallory Sr. and 11 other black voters who wanted elections by districts. Their suit also questioned the constitutionality of the at-large system. According to The Cincinnati Post, the suit challenged the at- large system of electing appellate and trial court judges in eight of Ohio's most populous counties. The suit charged that the system unfairly dilutes the voting strength of African- Americans. The Cincinnati Post noted that Hamilton County municipal judges are now elected by district, rather than countywide, the result of a similar lawsuit brought by Mallory and other black voters in the late 1980s. In Hamilton County, the 1st District Court of Appeals has no African Americans among six white judges, and only one black judge holds a Common Pleas Court seat, compared to 19 whites. James Hardiman, a Cleveland lawyer representing the class action, told The Cincinnati Post that he would consider appealing to the full appeals court or the U.S. Supreme Court. "There still is no question in my mind that race is a significant factor," Hardiman said. "Apparently, the appeals court did not accept that truism. They apparently feel that the playing field is level." ORACLE CORP.: Defense of California Shareholder Suits Continues --------------------------------------------------------------- Oracle Corp. reminds investors in its latest annual report that three related lawsuits arising out of the same events are currently pending. Shareholder class actions were filed in the California Superior Court for the County of San Mateo against the Company and its Chief Financial Officer and Chief Operating Officer on and after December 18, 1997. The same law firms that filed these actions also filed a nearly identical action against the same defendants in the United States District Court for the Central District of California on December 7, 1998. The class actions are all brought on behalf of purchasers of the stock of the Company during the period April 29, 1997 through December 9, 1997. Plaintiffs allege that the defendants made false and misleading statements about the Company's actual and expected financial performance, while selling Company stock, in violation of federal and state securities laws. Plaintiffs further allege that the individual defendants sold Company stock while in possession of material non-public information. The Company believes that it has meritorious defenses to these actions and intends to vigorously defend them. The Company is seeking a stay of the state court class actions pending resolution of the federal action. A shareholder derivative lawsuit was filed in the Superior Court of the State of California, County of San Mateo on November 17, 1998. The derivative suit was brought by Company stockholders, allegedly on behalf of the Company, against certain of the Company's officers and directors. The derivative plaintiffs allege that these officers and directors breached their fiduciary duties to the Company by making or causing to be made alleged misstatements about the Company's revenue, growth, and financial status while certain officers and directors sold Company stock and by allowing the Company to be sued in the shareholder class actions. The derivative plaintiffs seek compensatory and other damages, disgorgement of compensation received, and temporary and permanent injunctions requiring the defendants to relinquish their directorships. On January 15, 1999, the Court entered a stipulation and order staying the action until further notice. PARACELSUS HEALTHCARE: Shareholder Settlement Revamps Management ---------------------------------------------------------------- As previously reported, PARACELSUS HEALTHCARE CORP. is a defendant in multiple class and derivative actions arising out of or related to the August 1996 Merger between the Company and Champion Healthcare Corporation: * In re Paracelsus Corp. Securities Litigation, Master File No. H-96-3464 (S. D. Tex.) (EW); * Essex Imports v. Paracelsus Healthcare Corp. et al., No. 96-51864 (Dist. Ct. Harris Cty. Texas); * Caven v. Miller et al., No. H-96-4291 (S.D. Tex.) (EW); * Orovitz v. Miller, No. H-97-2752 (S.D. Tex.) (EW); * Caven v. Ernst & Young, LLP et al., No. 98-38338 (Dist. Ct. Harris Cty. Texas); and * Molinari v. Miller et al., No. 14945 (Del. Ch. Ct.). With the exception of the two Caven cases, Orovitz, and Molinari, these complaints assert putative class actions on behalf of current and former holders of the Company's securities for claims under federal and state statutes and the common law relating to the exchange offer for Champion stock in connection with the Merger, the August 1996 public offerings by the Company of common stock and subordinated notes, and trading in the Company's securities in the period between the Merger and October 9, 1996. In summary, the complaints allege that the Merger and public offerings proceeded on the basis of materially misleading disclosures and omissions by the Company and Champion, as well as certain of the Company's and Champion's officers, directors, and underwriters. The claims asserted include claims under section 11 of the Securities Act of 1933 and under section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In March 1998, the federal district court dismissed claims relating to the subordinated notes. The Caven, Orovitz, and Molinari cases assert claims derivatively on behalf of the Company or Champion against the Company, Champion, various current or former officers and directors of the Company and Champion, Park-Hospital GmbH (the "Majority Shareholder"), and the Company's independent auditors. On March 24, 1999, the Company, the affected current and former officers and directors, the underwriters, the Majority Shareholder, the representatives of the plaintiff class, the derivative plaintiffs, and a number of separately represented former Champion shareholders that received the Company's stock in connection with the Merger entered into three separate but interrelated agreements providing for a proposed global settlement of substantially all claims in these class and derivative actions. These former Champion shareholders could be deemed to be a group for purposes of Section 13(d) of the Securities Exchange Act of 1934. The settlement agreements require the parties to draft certain settlement documents for submission to the Court. Once completed, and after the Court grants preliminary approval of these documents, notice of the settlements will be given to class members and shareholders to enable putative class members to opt out of the class and to allow all others to comment on or object to the terms of the proposed settlements. Depending on the number of opt-outs, the Court then will hold a hearing to consider the settlements, which will not be final until a Court order granting approval of the settlements becomes final and not subject to appeal. The Company currently is not aware of a reason to indicate that the Court will not approve the settlements; however there can be no assurance that the Court will do so. The terms of the settlements will be set forth fully in the notice provided to class members and shareholders after the Court has preliminarily approved the settlement documents. Based on the agreements, the Company will be required to pay in cash $14.0 million and issue approximately 1.5 million new shares of the Company's common stock to a class settlement fund for purposes of the class action settlement. Additionally, the Company will pay expenses and legal fees incurred by the separately represented former Champion shareholders and by the lawyers for the derivative plaintiffs. The Company expects all or nearly all of these cash contributions to be covered by directors and officers liability insurance. The agreements also require the Majority Shareholder to transfer approximately 1.2 million shares of the Company's common stock that it currently owns to the class members and approximately 8.7 million shares to the former Champion shareholders. The lead underwriter in the Company's equity offering completed at the time of the Merger will make a $1.0 million cash contribution to the class settlement fund. In addition, the Company will be required to make a payment of $1.0 million in cash and 1.0 million newly issued shares of common stock to terminate a contract with Dr. Manfred G. Krukemeyer, who is the ultimate legal owner of the parent of the Majority Shareholder and a former Chairman of the Board of Directors of the Company, (the "Former Chairman"). The settlement agreement also provides for the recommencement of payment of principal in accordance with the stated terms of a note payable by the Company to the Majority Shareholder. The agreements include terms reducing the Company's existing and future obligations to certain former officers and directors by approximately $12.0 million and terminating options held by certain current and former officers and directors to purchase approximately 1.3 million shares at $0.01 per share granted in connection with the Merger (the "Value Options"). The proposed global settlement modifies the Executive Agreement with the Company's three senior executives (Mr. Charles R. Miller, Mr. James G. VanDevender, and Mr. Ronald R. Patterson). The senior executives have agreed to remain in their current management positions with the Company at least until June 30, 1999 and have waived their rights to certain additional payments under the Executive Agreement upon the settlement of the Shareholder Litigation. Mr. Miller will resign his position as a director shortly and is the only executive who has expressed an intent to leave the Company immediately after June 30, 1999. Mr. VanDevender will be designated as interim CEO effective July 1, 1999. The proposed global settlement also gives the Majority Shareholder and the former Champion shareholders each the right to designate three members of the Company's Board of Directors. As part of that arrangement, on March 24, 1999, the current directors elected Mr. Peter Schnitzler as director. His appointment will become effective on the earlier of the Board of Directors meeting on May 13, 1999 or the resignation of a current director. The Company has entered into a new shareholder agreement, to become effective upon the final settlement of the Shareholder Litigation, containing provisions governing restrictions on the Majority Shareholder's transfer of shares, limiting the Majority Shareholder's response to acquisition proposals, governing the composition of the Board of Directors and outlining the Majority Shareholder's registration rights with respect to its shares. The Company will terminate the Shareholder Protection Rights Agreement, an anti-takeover device adopted at the time of the Merger and the current shareholder agreement with the Majority Shareholder, as of the date that all the settlements become effective. When the proposed global settlement is approved by the Court and becomes final, the Company, all class members who do not opt out, the derivative plaintiffs, the separately represented former Champion shareholders, the Majority Shareholder, the underwriter, and the affected current and former officers and directors will provide mutual releases of all claims arising out of or related to the Merger and the related public offerings. All pending actions against all released parties will be dismissed. Additionally, the released parties have agreed to assign any claims they have against the Company's independent auditors to the Majority Shareholder. The settlement requires the Company to indemnify current and former officers and directors, the Majority Shareholder, and certain separately represented former Champion shareholders against (i) liability, costs and expenses arising from any Merger-related claims brought by current or former Company security holders who are not parties to the settlement or members of a class certified for settlement purposes and (ii) reasonable costs and expenses, excluding monetary sanctions, incurred in connection with any ongoing or future governmental investigation relating to the Merger and public offerings. The Company's current Board of Directors unanimously approved the settlement agreements. All five of the directors remaining after the recent resignation of two independent directors could be deemed to be interested in the settlement agreements because they are direct participants in the settlement or because they have a relationship with one of the settling parties. SECURE COMPUTING: Weiss & Yourman File Complaint in California -------------------------------------------------------------- A class action has been commenced by Weiss & Yourman in the United States District Court for the Northern District of California on behalf of all those who purchased the common stock of Secure Computing Corp. (Nasdaq: SCUR) between November 10, 1998 and March 31, 1999. The Complaint alleges that the defendants, consisting of Secure Computing and certain of its officers and directors, violated the federal securities laws by issuing false and misleading statements which caused Secure Computing's stock price to be artificially inflated. The Complaint alleges that, in order to allow the Company's top insiders to dispose of their stock valued at more than $6 million, the defendants artificially inflated Secure Computing's stock price to a high of $28 in January 1999 before the true facts about Secure Computing's dismal operating results and diminishing prospects became known to the public and the stock plummeted to as low as $5 9/16 per share. For additional details, call Elizabeth P. Lin, Esq. at 800-437- 7918, or write wyinfo@wyca.com via email. STAFFMARK INC.: Finkelstein & Krinsk File Complaint in Arkansas --------------------------------------------------------------- StaffMark Inc. (Nasdaq: STAF) was accused in a class action lawsuit of fraudulently misrepresenting the Company's expansion capacity and business success. Misleading the investment community caused StaffMark stock to collapse and decimated shareholders investment. Moreover, before the true facts surfaced and just one month prior to the stock's collapse, insiders at StaffMark sold more than $4 million of stock. The complaint, filed in the United States District Court for the Eastern District Arkansas Western Division, represents all persons and institutional investors who acquired the securities of StaffMark Inc. between October 8, 1998 and March 2, 1999. According to the complaint, filed by Finkelstein & Krinsk, during 1998 executives of StaffMark reported record revenues, a strong pipeline of acquisitions and portrayed the stock as undervalued. In reality, StaffMark eventually revealed that its key Intellimark division had zero growth and that StaffMark's earnings for the first quarter and for the full year of 1999 would be well below expectations. StaffMark common stock traded as high as over $42.00 per share. In the days following the March 2, 1999 announcement of the Company's predicament the price of StaffMark stock plunged to $8.50 a share, losing approximately 80 percent of its value. StaffMark Inc. was incorporated in 1996 and is an international provider of diversified staffing and information technology sold along with consulting and solution services for businesses and governmental agencies. The company offers its services through over 300 branches located in 31 states and 12 countries. To learn more, contact Jeffrey R. Krinsk at 1-877-493-5366 or write fk@class-action-law.com via email. TRISTAR CORP.: IRS Balks at Class Action Settlement Deductions -------------------------------------------------------------- In February 1997 the Internal Revenue Service concluded their examination of tax returns submitted for fiscal years 1993, 1994 and 1995, by Tristar Corp. The IRS proposed adjustments disallowing the deductions of payments made in the settlement of the class action litigation and certain related legal and professional fees. In April 1998, the Company filed a protest letter with the IRS. In a letter dated August 17, 1998, the IRS rejected the Company's response. The Company has raised this issue with the Dallas Appeals office and has scheduled a hearing for later this year. If the Company is unsuccessful in its discussions or ultimately in an appeal, it could be required to pay taxes from prior years and related interest thereon exceeding $1,800,000, and it could lose a significant amount of its existing net operating loss carryforward benefits. ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Peter A. Chapman, Editor. Copyright 1999. All rights reserved. ISSN XXXX-XXXX. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *