/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990519.MBX C L A S S A C T I O N R E P O R T E R Wednesday, May 19, 1999, Vol. 1, No. 74 Headlines 3COM CORP.: Stull Stull Files Complaint in California AMERICAN BANK: Consolidated Complaint Filed In New York CANDIE'S INC.: Kaplan Kilsheimer Files Complaint in New York CENDANT CORP.: Updates Calpers, PRIDES, ABI Actions and More CORRECTIONS CORP.: Cauley Firm Files Complaint in Tennessee CSB FINANCIAL: Reinhardt & Anderson File Complaint in Delaware HCB BANCSHARES: Intends Vigorous Contest of Texas Allegations HITSGALORE.COM: Stull Stull Files Complaint After Disclosure MICROSOFT CORP.: Seeks Review of Appeal Granting Temps Options NATIONWIDE LIFE: Updates Contract Owners and Investors Complaint PHOENIX LEASING: Investors' Complaints Proceed in Marin County PSS WORLD: Reinhardt & Anderson File Complaint in Florida SEARS ROEBUCK: Agrees to Pay to Settle Child Labor Allegations TEXACO INC: Royalty and Severance Tax Claims Settled in Texas TOBACCO LITIGATION: Supreme Court Declines PA Smokers' Class TOWNE BANCORP: Account Frozen, Suing Casualty Insurer for Breach WELFARE BENEFITS: Supreme Court Prohibits CA Residency Period ********* 3COM CORP.: Stull Stull Files Complaint in California ----------------------------------------------------- Stull, Stull & Brody filed a class action lawsuit in the United States District Court for the Northern District of California on behalf of all persons who purchased the common stock of 3Com Corp. (NASDAQ:COMS) during the period from September 22, 1998 through March 2, 1999. The Complaint charges 3Com and certain of its officers and directors with violation of the Securities Exchange Act of 1934. The Complaint alleges that beginning in September, 1998, the defendants embarked on a scheme to artificially inflate the stock price of the Company in order to enable them to amass insider trading proceeds in excess of $189 million. The Complaint further alleges the defendants artificially inflated the price of 3Com stock by making false and misleading statements concerning the demand for 3Com's Systems Products and Client Access Products and the Company's financial condition, operational efficiencies, results of operations and improved channel inventory controls. Moreover, the Complaint alleges that 3Com insiders further artificially inflated 3Com stock by using $130.4 million of 3Com's cash to repurchase 4.3 million 3Com shares in the open market allowing them to unload their own shares at higher prices for greater personal gain. For more information, contact Patrice L. Bishop at 888-388-4605 or at secfraud@secfraud.com via email. AMERICAN BANK: Consolidated Complaint Filed In New York ------------------------------------------------------- American Bank Note Holographics, Inc. (NYSE:ABH) announced that all of the class-action lawsuits that were commenced on behalf of purchasers of the common stock of the Company during the stated period from July 15, 1998 through February 1, 1999 were consolidated into a single class action complaint filed in the US District Court for the Southern District of New York. The consolidated complaint alleges violations of the federal securities laws and names as defendants the Company, certain former officers and directors of the Company, American Banknote Corporation (the Company's prior parent) and other parties. The lawsuit relates to the Company's previously announced issues concerning restatement of its financial statements and related matters. The Company is reviewing the consolidated complaint and intends to respond to the lawsuit in a timely manner. As previously reported, the Securities and Exchange Commission has initiated a formal investigation into the Company's previously disclosed issues concerning its financial statements. In addition, the US Attorney for the Southern District of New York is also conducting an inquiry with respect to the same matters. American Bank Note Holographics is a world leader in the origination, production, and marketing of mass-produced secure holograms, based on its significant market share. The Company's holograms are used for security applications, such as counterfeiting protection for credit and other transaction cards, identification cards and documents of value; as well as for tamper resistance and authentication of high-value consumer and industrial products. CANDIE'S INC.: Kaplan Kilsheimer Files Complaint in New York ------------------------------------------------------------ Kaplan, Kilsheimer & Fox LLP has filed a Class Action lawsuit against CANDIE'S INC. (NASDAQ: CAND) and certain of its officers and directors in the United States District Court for the Southern District of New York. The suit is brought on behalf of all persons or entities who purchased or otherwise acquired the common stock of Candie's between May 28, 1997 and May 12, 1999. The complaint charges Candie's and certain officers and directors with violations of the securities laws and regulations of the United States. The complaint alleges, among other things, that defendants falsely reported Candie's financial results and for the first, second, third and fourth fiscal quarters of 1998, fiscal year 1998 ended January 31, 1998, and the first, second, and third fiscal quarters of 1999 causing Candie's common stock to trade at artificially inflated prices. Following defendants' disclosure that Candie's may be required to restate its financial results, NASDAQ halted trading of the Company's common stock. To learn more, contact Fred S. Fox, Esq. or Donald R. Hall, Esq. at 800-290-1952 or 212-687-1980 or at lawkkf@aol.com via email. CENDANT CORP.: Updates Calpers, PRIDES, ABI Actions and More ------------------------------------------------------------ Since the April 15, 1998 announcement by CENDANT CORP. of the discovery of accounting irregularities in the former CUC business units, more than 70 lawsuits claiming to be class actions, two lawsuits claiming to be brought derivatively on the company's behalf and several individual lawsuits have been filed in various courts against CENDANT CORP. and other defendants. In re: Cendant Corporation Litigation, Master File No. 98-1664 (WHW) (D.N.J.) (the "Calpers Action"), is a consolidated action consisting of over sixty constituent class action lawsuits, and several individual lawsuits, that were originally filed in the District of New Jersey, the District of Connecticut, and the Eastern District of Pennsylvania. The Calpers Action is brought on behalf of all persons who acquired securities of the Company and CUC, except our PRIDES securities, between May 31, 1995 and August 28, 1998. The Court granted the plaintiffs' unopposed motion for class certification on January 27, 1999. Named as defendants are the Company; twenty-eight current and former officers and directors of the Company, CUC and HFS Incorporated ("HFS"); and Ernst & Young LLP, CUC's former independent accounting firm. The Amended and Consolidated Class Action Complaint in the Calpers Action alleges that, among other things, the plaintiffs were damaged when they acquired securities of the Company and CUC because, as a result of accounting irregularities, the Company's and CUC's previously issued financial statements were materially false and misleading, and the allegedly false and misleading financial statements caused the prices of the Company's and CUC's securities to be inflated artificially. The Amended and Consolidated Complaint alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the "Securities Act") and Sections 10(b), 14(a), 20(a), and 20A of the Securities Exchange Act of 1934 (the "Exchange Act"). The Calpers Action seeks damages in unspecified amounts. Actions making substantially similar allegations have been filed in the United States District Courts for the Eastern and Central Districts of California, the Southern District of Florida, the Eastern District of Louisiana, and the District of Connecticut. The Company has filed a motion before the Judicial Panel on Multidistrict Litigation to transfer these actions to the District of New Jersey for consolidation with the Calpers Action. On December 14, 1998, the plaintiffs in the Calpers Action moved for partial summary judgment, on liability only, against the Company on the claims under Section 11 of the Securities Act. The plaintiffs adjourned this motion sine die, however, without prejudice to the plaintiffs' right to re-notice the motion. In connection with the plaintiffs' agreement to withdraw their summary judgment motion, the Company agreed not to assert any automatic stay of discovery that would otherwise apply to the Calpers Action if any defendant were to file a motion to dismiss the Calpers Action. On January 25, 1999, the Company answered the Amended Consolidated Complaint and asserted Cross-Claims against Ernst & Young LLP ("Ernst & Young"). The Company's Cross-Claims allege that Ernst & Young failed to follow professional standards to discover, and recklessly disregarded, the accounting irregularities, and is therefore liable to the Company for damages. The Cross-Claims assert breaches of Ernst & Young's audit agreements with the Company, negligence, breaches of fiduciary duty, fraud, and contribution. On March 26, 1999, Ernst & Young filed Cross-Claims against Cendant and certain of the Company's present and former officers and directors, alleging that any failure to discover the accounting irregularities was caused by misrepresentations and omissions made to Ernst & Young in the course of its audits and other reviews of the Company's financial statements. Ernst & Young's Cross-Claims assert claims for breach of contract, fraud, fraudulent inducement, negligent misrepresentation and contribution. Damages in unspecified amounts are sought for the costs to Ernst & Young associated with defending the various shareholder lawsuits and for harm to Ernst & Young's reputation. Welch & Forbes, Inc. v. Cendant Corp., et al., No. 98-2819 (WHW) (the "PRIDES Action") is a class action brought on behalf of purchasers of the Company's PRIDES securities between February 24 and July 15, 1998. Named as defendants are the Company; Cendant Capital I, a statutory business trust formed by the Company to participate in the offering of PRIDES securities; seventeen current and former officers and directors of the company, CUC and HFS; Ernst & Young; and the underwriters for the PRIDES offering, Merrill Lynch & Co.; Merrill Lynch, Pierce, Fenner & Smith Incorporated; and Chase Securities Inc. A substantially similar action filed in the Superior Court of New Jersey, entitled First Trust Corp. IRA of Gloria Rosenberg v. Cendant Corp., et al., No. L-1406-98 (Law Div.), was dismissed on August 7, 1998, without prejudice to the plaintiff's right to re-file the case in the United States District Court for the District of New Jersey. The allegations in the Amended Consolidated Complaint in the PRIDES Action are substantially similar to those in the Calpers Action, and violations of Sections 11, 12(a)(2) and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act are asserted. Damages in unspecified amounts are sought. On November 11, 1998, the plaintiffs in the PRIDES Action brought motions for (i) certification of a proposed class of PRIDES purchasers; (ii) summary judgment against the Company under Section 11 of the Securities Act; and (iii) an injunction requiring the Company to place $300 million in a trust account for the benefit of the PRIDES investors pending final resolution of their claims. These motions were withdrawn in connection with a partial settlement of the PRIDES Action. On April 27, 1998, a purported shareholder derivative action, Deutch v. Silverman, et al., No. 98-1998 (WHW), was filed in the District of New Jersey against certain of the Company's current or former directors and officers; The Bear Stearns Companies, Inc.; Bear Stearns & Co., Inc.; and, as a nominal party, the Company. The complaint in the Deutch action, as amended on December 7, 1998, alleges that certain individual officers and directors of the Company breached their fiduciary duties by selling shares of the Company's stock while in possession of non-public material information concerning the accounting irregularities. The complaint also alleges various other breaches of fiduciary duty and gross negligence in connection with, among other things, the accounting irregularities discussed above. Damages are sought on behalf of Cendant in unspecified amounts. The Company and the other defendants have each moved to dismiss the Deutch Action, which motions are scheduled to be heard by the Court on June 7, 1999. Semerenko v. Cendant Corp., et al., Civ. Action No. 98-5384 (D. N.J.) and P. Schoenfeld Asset Management LLC v. Cendant Corp., et al., (Civ. Action No. 98-4734) (D. N.J) (the "ABI Actions") were initially commenced in October and November of 1998, respectively, on behalf of a putative class of persons who purchased securities of American Bankers Insurance Group, Inc. ("ABI") between March 23, 1998 and October 13, 1998. Named as defendants are the Company, four former CUC officers and directors, and Ernst & Young. The complaints in the ABI Actions, as amended on February 8, 1999, assert violations of Sections 10(b), 14(e) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, relating to the accounting irregularities discussed above. Plaintiffs allege, among other things, that the Company made misrepresentations and omissions regarding its ability and intent to complete a tender offer and subsequent merger with ABI. Plaintiffs allege that such misrepresentations and omissions caused the price of ABI securities to be artificially inflated. Plaintiffs seek, among other things, unspecified compensatory damages. The Company filed a motion to dismiss the ABI Actions on March 10, 1999. The other defendants had also moved to dismiss. The United States District Court for the District of New Jersey found that the class action failed to state a claim upon which relief could be granted and, accordingly, dismissed the class action by order dated April 30, 1999. Kennilworth Partners, L.P., et al. v. Cendant Corp., et al., 98 Civ. 8939 (DC) (the "Kennilworth Action") was filed on December 18, 1998 in the Southern District of New York on behalf of three investment companies. Named as defendants are the Company; thirty of its present and former officers and directors; HFS; and Ernst & Young. The complaint in the Kennilworth Action, as amended on January 26, 1999, alleges that the plaintiffs purchased convertible notes issued by HFS pursuant to an indenture dated February 28, 1996 and were damaged because they converted their notes into shares of common stock in the Company in the weeks prior to the Company's April 15, 1998 announcement. The amended complaint also alleges that plaintiffs were damaged by purchasing in March 1998 additional notes issued by the Company, whose market value declined as a result of the April 15, 1998 announcement and the subsequent events described above. The amended complaint asserts violations of Sections 11, 12 and 15 of the Securities Act and Sections 10(b) and 20 of the Exchange Act; a common-law breach of contract claim is also asserted. Damages are sought in an amount estimated to be in excess of $13.6 million. On February 4, 1999, the Court ordered the Kennilworth Action transferred to the District of New Jersey, with the consent of the plaintiff and the Company. On April 29, 1999, the Company moved to dismiss the Securities Act claims brought against it, which motion is scheduled to be heard by the Court on June 7, 1999. Another action, entitled Corwin v. Silverman, et al., No. 16347- NC (the "Corwin Action"), was filed on April 29, 1998 in the Court of Chancery for the State of Delaware. The Corwin Action is purportedly brought derivatively, on behalf of the Company, and as a class action, on behalf of all shareholders of HFS who exchanged their HFS shares for CUC shares in connection with the Merger. The Corwin Action names as defendants HFS and twenty- eight individuals who are or were directors of the Company and HFS. The complaint in the Corwin Action, as amended on July 28, 1998, alleges that HFS and its directors breached their fiduciary duties of loyalty, good faith, care and candor in connection with the Cendant Merger, in that they failed to properly investigate the operations and financial statements of CUC before approving the Merger at an allegedly inadequate price. The amended complaint also alleges that the Company's directors breached their fiduciary duties by entering into an employment agreement with our former Chairman, Walter A. Forbes, in connection with the Merger that purportedly amounted to corporate waste. The Corwin Action seeks, among other things, rescission of the Merger and compensation for all losses and damages allegedly suffered in connection therewith. On October 7, 1998, Cendant filed a motion to dismiss the Corwin Action or, in the alternative, for a stay of the Corwin Action pending determination of the Calpers Action and the Deutch Action. The plaintiffs in the Corwin Action have moved for leave to file a second amended complaint, which motion Cendant has opposed. A decision by the Court is pending. Kevlin, et al. v. Cendant Corp., No. C-98-12602-B (the "Kevlin Action"), was commenced in December 1998 in the County Court of Dallas County, Texas. According to the complaint, plaintiffs are former shareholders of an entity known as Kevlin Services, Inc. In 1996, a subsidiary of Cendant acquired all of the assets of the Kevlin Services, Inc. in exchange for approximately 1,155,733 shares of common stock of CUC International, Inc. According to the plaintiffs' complaint, plaintiffs were to receive CUC shares worth $26,370,000 and instead received shares worth substantially less than that amount. Plaintiffs have asserted claims against Cendant, its subsidiary and Ernst & Young LLP for fraud, negligent misrepresentation, breach of duty of good faith and fair dealing, breach of contract, conspiracy, negligence and gross negligence. Plaintiffs seek compensatory and exemplary damages in unspecified amounts. Cendant and its subsidiary has filed a general denial to the allegations in the complaint. On March 17, 1999, the company entered into a stipulation of settlement with plaintiff's counsel representing the class of holders of our PRIDES securities who purchased their securities on or prior to April 15, 1998 ("eligible persons") to settle their class action lawsuit against us. Under the stipulation of settlement, eligible persons will receive a new security -- a Right -- for each PRIDES security held on April 15, 1998. Current holders of PRIDES will not receive any Rights (unless they also held PRIDES on April 15, 1998). We had originally announced a preliminary agreement in principle to settle such lawsuit on January 7, 1999. The final agreement maintained the basic structure and accounting treatment as the preliminary agreement. Based on the settlement agreement, we recorded an after tax charge of approximately $228 million, or $0.26 per share ($351 million pre-tax), in the fourth quarter of 1998 associated with the settlement agreement in principle to settle the PRIDES securities class action. We recorded an increase in additional paid-in capital of $350 million offset by a decrease in retained earnings of $228 million resulting in a net increase in stockholders' equity of $122 million as a result of the prospective issuance of the Rights. As a result, the settlement should not reduce net book value. In addition the settlement is not expected to reduce 1999 earnings per share unless our common stock price materially appreciates. At any time during the life of the Rights, holders may (a) sell them or (b) exercise them by delivering to us three Rights together with two PRIDES in exchange for two new PRIDES (the "New PRIDES"). The terms of the New PRIDES will be the same as the currently outstanding PRIDES, except that the conversion rate will be revised so that, at the time the Rights are distributed, each of the New PRIDES will have a value equal to $17.57 more than each original PRIDES, based upon a generally accepted valuation model. Based upon the closing price per share of $16.6875 of our Common Stock on March 17, 1999, the effect of the issuance of the New PRIDES will be to distribute approximately 19 million more shares of our common stock when the mandatory purchase of our common stock associated with the PRIDES occurs in February of 2001. This represents approximately 2% more shares of common stock than are currently outstanding. The settlement agreement also requires the company to offer to sell 4 million additional PRIDES (having identical terms to currently outstanding PRIDES) (the "Additional PRIDES") at "theoretical value" to holders of Rights for cash. Theoretical value will be based on the same valuation model utilized to set the conversion rate of the New PRIDES. Based on that valuation model, the currently outstanding PRIDES have a theoretical value of $28.07 based on the closing price for our common stock on March 17, 1999, which is less than their current trading price. The offering of Additional PRIDES will be made only pursuant to a prospectus filed with the SEC. We currently expect to use the proceeds of such an offering to repurchase our common stock and for other general corporate purposes. The arrangement to offer Additional PRIDES is designed to enhance the trading value of the Rights by removing up to 6 million Rights from circulation via exchanges associated with the offering and to enhance the open market liquidity of New PRIDES by creating 4 million New PRIDES via exchanges associated with the offering. If holders of Rights do not acquire all such PRIDES, they will be offered to the public. Under the settlement agreement, the company has agreed to file a shelf registration statement for an additional 15 million PRIDES, which could be issued by us at any time for cash. However, during the last 30 days prior to the expiration of the Rights in February 2001, we will be required to make these additional PRIDES available to holders of Rights at a price in cash equal to 105% of the theoretical value of the additional PRIDES as of a specified date. The PRIDES, if issued, would have the same terms as the currently outstanding PRIDES and could be used to exercise Rights. The Rights will be distributed following final court approval of the settlement and after the effectiveness of the registration statement filed with the SEC covering the New PRIDES. It is presently expected that if the court approves the settlement and such conditions are fulfilled, the Rights will be distributed in August or September 1999. CORRECTIONS CORP.: Cauley Firm Files Complaint in Tennessee ----------------------------------------------------------- A securities fraud lawsuit has been filed by the Law Offices of Steven E. Cauley, P.A. in the Chancery Court of Davidson County in Nashville, Tennessee on behalf of all purchasers of the common stock and other securities of Corrections Corporation of America (NYSE: PZN) (formerly NYSE: CCA) between April 24, 1997 and April 20, 1998. The lawsuit alleges that Corrections and certain of its officers and directors issued false and misleading statements regarding Corrections, which caused the price of Corrections' common stock and securities to trade at artificially inflated prices. The lawsuit alleges that the defendants stated that the formation of CCA Prison Realty Trust would be "accretive" to Corrections's near-term earnings, that Corrections would benefit by that transaction and that Corrections would be able to continue to grow its earnings at 40-50 percent annually. After these statements inflated Corrections's stock price, the defendants sold $19.1 million in Corrections common stock, at prices ranging from $35-$44 per share. However, on April 20, 1998, the defendants announced that Corrections would merge into CCA Prison Realty Trust, thereby becoming PZN, and as a result, that Corrections's earnings would only grow at 17-25 percent. Upon this revelation, Corrections stock and securities collapsed in price, and currently trade at approximately $15 per share. Analysts stated: "(a)nalysts thought Corrections Corp. was growing at 50 percent, and now growth is diluted to 25 percent," and Corrections was "not a growth story anymore." For more information, contact Steven E. Cauley, Scott E. Poynter, or Gina M. Cothern at CauleyPA@aol.com or 888-551-9944. CSB FINANCIAL: Reinhardt & Anderson File Complaint in Delaware -------------------------------------------------------------- A derivative and class action has been commenced in the Court of Chancery in the State of Delaware on behalf of all stockholders of CSB Financial Group (Nasdaq:CSBF) common stock. The complaint charges the defendants with breach of fiduciary alleging that the defendants failed to act in good faith in maximizing stockholder value in the sale of CSB and neglecting and summarily rejecting an offer from an acquirer. The complaint alleges that in March of 1999, the defendant directors received a written acquisition offer from a third- party at a price of $14.75 per share to acquire the shares of CSB. The offer described in the complaint represented a premium of approximately 64% over CSB's closing price the preceding trading day and a premium above any price CSB's stock had ever traded. Despite the offer and the premium its stockholders would reap, the defendants are alleged to have concealed the offer from the stockholders and to date have failed to disclose the offer. The complaint charges that the defendants failed to act in good faith in maximizing stockholder value in the sale of CSB and neglecting and summarily rejecting the offer from the acquirer without taking the time or effort to discuss it with an investment banker or to give informed consideration or any negotiation despite the fact that the offer was a cash offer, a friendly offer and was at a 64% premium. To learn more, contact Randall H. Steinmeyer at 888-253-5139 or write to r.steinmeyer@ralawfirm.com via email. HCB BANCSHARES: Intends Vigorous Contest of Texas Allegations ------------------------------------------------------------- On May 13, 1999, HCB Bancshares, Inc. announced that a complaint against it has been filed in the United States District Court for the Eastern District of Texas, Texarkana Division. Also named as defendants were Vida H. Lampkin, the Chairman of the Board, President and Chief Executive Officer of the Company, Cameron D. McKeel, the Executive Vice President and a Director of the Company, and Marcie Ainsworth, the former Vice President and Chief Financial Officer of the Company. The plaintiff, James E. Keever, filed the case on April 28, 1999 as a class action on behalf of himself and all other persons who purchased or otherwise acquired the Company's common stock between September 28, 1997 and February 2, 1999. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, and that the defendants defrauded the plaintiff and the other class members, in connection with various public statements and reports disseminated by the defendants with respect to the Company during the period described above. The complaint alleges that these acts and statements artificially inflated the market price of the Company's common stock, thereby causing the plaintiff and other class members to purchase the Company's common stock at inflated prices. The plaintiff seeks damages suffered in connection with the purchase of Company common stock during the specified period by the plaintiff and other class members. The plaintiff also asked the court to determine that the suit is properly maintainable as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure and to certify the plaintiff as the class representative and his counsel as class counsel. The Company is reviewing the complaint and intends to contest the allegations vigorously. HITSGALORE.COM: Stull Stull Files Complaint After Disclosure ------------------------------------------------------------ Stull, Stull & Brody filed a securities fraud class action complaint against Hitsgalore.com Inc. (OTC:HITT) on behalf of shareholders who purchased or otherwise acquired shares of HITT between February 17, 1999 and May 13, 1999. The complaint names as defendants Hitsgalore and its CEO and president, and alleges that the company knew and failed to disclose that its founder, Dorian Reed, along with two other individuals, had been ordered to pay over $600,000 to 100 customers for "false claims made by Internet Business Broadcasting, a failed online advertising company they worked for." As a result of this disclosure, the company's stock price, which had recently skyrocketed from $1.88 a share to a high of $20.69, tumbled to $9.38 a share, for a loss of over 50% of its value in one day. Recently, Reed tendered his resignation as a director of the company. To learn more, contact Patrice L. Bishop at 888-388-4605 or at secfraud@secfraud.com via email. MICROSOFT CORP.: Seeks Review of Appeal Granting Temps Options -------------------------------------------------------------- The Roanoke Times & World News reported that Microsoft Corp. will ask an appeals court in San Francisco to review a ruling by a panel of appellate judges that expanded the number of temporary workers who can participate in a class-action lawsuit against the software giant. The lawsuit seeks millions of dollars in gains from plans that offer workers - but not temps - a 15 percent discount on stock purchases. NATIONWIDE LIFE: Updates Contract Owners and Investors Complaint ---------------------------------------------------------------- In November 1997, two plaintiffs, one who was the owner of a variable life insurance contract and the other who was the owner of a variable annuity contract, commenced a lawsuit in a federal court in Texas against Nationwide Life and the American Century group of defendants (Robert Young and David D. Distad v. Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs sought to represent a class of variable life insurance contract owners and variable annuity contract owners whom they claim were allegedly misled when purchasing these variable contracts into believing that the performance of their underlying mutual fund option managed by American Century, whose shares may only be purchased by insurance companies, would track the performance of a mutual fund, also managed by American Century, whose shares are publicly traded. The amended complaint seeks unspecified compensatory and punitive damages. On April 27, 1998, the district court denied, in part, and granted, in part, motions to dismiss the complaint filed by Nationwide Life and American Century. The remaining claims against Nationwide Life allege securities fraud, common law fraud, civil conspiracy, and breach of contract. On December 2, 1998, the district court issued an order denying plaintiffs' motion for class certification. On December 10, 1998, the district court stayed the lawsuit pending plaintiffs' petition to the federal appeals court for interlocutory review of the order denying class certification. On March 26, 1999, the appeals court denied plaintiffs' petition for interlocutory review of the order. On April 28, 1999, the court denied plaintiffs' motion for reconsideration of the denial of interlocutory review. Nationwide Life intends to defend the case vigorously. On October 29, 1998, the Company was named in a lawsuit filed in Ohio state court related to the sale of deferred annuity products for use as investments in tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company). The plaintiff in such lawsuit seeks to represent a national class of the Company's customers and seeks unspecified compensatory and punitive damages. The Company is currently evaluating this lawsuit, which has not been certified as a class. The Company intends to defend this lawsuit vigorously. PHOENIX LEASING: Investors' Complaints Proceed in Marin County -------------------------------------------------------------- On October 28, 1997, a Class Action Complaint was filed against Phoenix Leasing Incorporated, Phoenix Leasing Associates, II and III LP., Phoenix Securities Inc. and Phoenix American Incorporated (the "Companies") in California Superior Court for the County of Sacramento by eleven individuals on behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the "Partnerships"). The Companies were served with the Complaint on December 9, 1997. The Complaint sought declaratory and other relief including accounting, receivership, imposition of a constructive trust and judicial dissolution and winding up of the Partnerships, and damages based on fraud, breach of fiduciary duty and breach of contract by the Companies as general partners of the Partnerships. Plaintiffs severed one cause of action from the Complaint, a claim related to the marketing and sale of CDF V, and transferred it to Marin County Superior Court (the "Marin Action"). Plaintiffs then dismissed the remaining claims in Sacramento Superior Court and refiled them in a separate lawsuit making similar allegations (the "Sacramento Action"). Plaintiffs have amended the Marin Action twice. Defendants have not yet answered the complaint and may file a demurrer to dismiss the claims. Discovery has not commenced. The Companies intend to vigorously defend the Complaint. In February 1999, plaintiffs requested a transfer of the Sacramento Action to Marin County. The Court granted that request, and the case was transferred in March 1999. Defendants have not yet responded to the Complaint. Discovery has not commenced. The Companies intend to vigorously defend the Complaint. During the three months ended March 31, 1999, the Partnership recorded legal expenses of approximately $25,000 in connection with the above litigation as indemnification to the General Partner. PSS WORLD: Reinhardt & Anderson File Complaint in Florida --------------------------------------------------------- Reinhardt & Anderson filed a class action lawsuit alleging violations of the federal securities laws in the United States District Court for the Middle District of Florida, Jacksonville Division, by a shareholder against PSS World Medical Inc. (Nasdaq:PSSI) , Patrick C. Kelly and David A. Smith. The action is brought on behalf persons who purchased the common stock of PSSI during the period from June 16, 1998 through March 10, 1999. The Complaint in this action alleges that purchasers of PSSI common stock were damaged by reason of the defendants' conduct in violation of Sections 10(b) and 20(a) of the Exchange Act. Specifically, the Complaint alleges that the company, under the direction of the individual defendants, issued financial statements that overstated revenues from acquired entities by improperly using the pooling of interest method of accounting. The complaint further alleges that this resulted in overstated earnings. To learn more, call Randall H. Steinmeyer at 888-253-5139 or 651-227-9990 or write A.hogan@ralawfirm.com via email. SEARS ROEBUCK: Agrees to Pay to Settle Child Labor Allegations -------------------------------------------------------------- The Roanoke Times & World News reports that Sears, Roebuck & Co. has agreed to pay a $325,000 penalty to settle allegations it violated child labor laws by letting teen-agers operate heavy machinery or work too many hours. A U.S. Labor Department investigation found 227 children working at Sears in violation of child labor law, according to department spokeswoman Susan King. Sears also agreed to audit its more than 800 major stores for problems each year. According to The Roanoke Times & World News, Sears did not admit any wrongdoing. TEXACO INC: Royalty and Severance Tax Claims Settled in Texas ------------------------------------------------------------- On April 7, 1999, the federal court in Texas approved a settlement agreement with most of the plaintiffs in the seventeen purported class actions pending in Texas and six other states. The plaintiffs alleged that Texaco and approximately fifty other oil companies underpaid royalties and severance taxes to them. Similar claims by the federal and various state governments remain unresolved. TOBACCO LITIGATION: Supreme Court Declines PA Smokers' Class ------------------------------------------------------------ The Associated Press reports that the Supreme Court refused to revive a lawsuit against the tobacco industry by six smokers from Pennsylvania. The court, without comment, turned away the smokers' argument that their case should be certified as a class action on behalf of all smokers in the state. A federal judge threw out the case and an appeals court upheld the dismissal. According to AP, the 1996 lawsuit had sought to represent the claims of about 1 million Pennsylvania smokers who began lighting up as teen-agers. Instead of asking for money, the lawsuit demanded that the tobacco companies provide medical monitoring for the smokers. Although U.S. District Judge Clarence Newcomer certified the case as a class action in August 1997, AP reports that just weeks before the trial was to begin the following October, the judge decertified the class action on grounds there were too many individual issues. He also granted judgment to the tobacco companies against five of the plaintiffs, saying they missed the deadline to sue because they smoked for years despite knowledge of the danger. AP wrote that the judge also barred the claims of the sixth, younger plaintiff on grounds she would not need any more medical monitoring than a non-smoker. The 3rd U.S. Circuit Court of Appeals upheld the ruling last November. In the current appeal, the smokers' lawyers said the case should be made a class action. They said the six smokers had legal standing to appeal the denial of class certification even though they were dismissed from the case. The Associated Press reported that the lawyers said a seventh plaintiff had not been dismissed from the case and therefore had legal standing to appeal. However, a 1997 ruling by Newcomer said the smokers' group had decided to withdraw that man as a plaintiff. According to AP, the case is Barnes vs. American Tobacco Co., 98-1489. TOWNE BANCORP: Account Frozen, Suing Casualty Insurer for Breach ---------------------------------------------------------------- Two class action lawsuits, filed in the U.S. District Court for the Northern District of Ohio, Western Division, exist against TOWNE BANCORP INC, its directors, its corporate stock transfer agent, and (in one suit) its Directors' and Officers' insurer. The suits allege violation of various Federal and State laws in connection with the Company's offering of common stock. The suits request unspecified damages and costs. In one of the class action lawsuits, the presiding judge ordered the freezing of the Company's bank account, with $125,000 allocated to Huntington Trust Co., N.A. (a defendant in the suit), on an indicated claim. After obtaining court approval, monies from the frozen account can be withdrawn to pay current operating expenses. Also in connection with one of the class action lawsuits, the Company filed a cross claim against its casualty insurance carries for breach of contract for denying the voiding directors' and officers' liability insurance and tail coverage. The Company seeks reinstatement of coverage, and compensatory and punitive damages of $100,000 and $10,000,000, respectively. The insurance carrier refunded the Company approximately $100,000 of premiums paid to it by the Company, however, the Company returned the money to the insurance carrier and intends to vigorously pursue the cross claim. The Company has agreed to indemnify its directors and officers for costs assumed by them in connection with such lawsuits. The Company intends to vigorously defend itself in connection with these lawsuits. WELFARE BENEFITS: Supreme Court Prohibits CA Residency Period ------------------------------------------------------------- The United Press International reports that the US Supreme Court decided a California law limiting welfare payments for new residents is unconstitutional. The challenge to the California welfare law came in a class action suit by two women identified by pseudonyms. According to UPI, "Brenda Roe" and her husband moved from Oklahoma, where welfare recipients get 307 dollars a month to Long Beach, California, where recipients receive 565 dollars a month. "Anna Doe" moved from Washington, D-C, where she received 330 dollars a month to Los Angeles, where the payment for pregnant mothers is 456 dollars a month. The UPI story explained that California wanted to keep people from coming to the state just to enjoy the higher welfare payments. Its law limited those payments to the amount people received in their former states - until they'd lived in California for a year. By a 7-2 vote, the justices affirmed a lower-court ruling that says the welfare regulation unconstitutionally limits travel from state to state. UPI reports that Justice David Souter wrote the opinion for the court majority and cited the 14th Amendment saying that US citizens "whether rich or poor, have the right to choose to be citizens of the state wherein they reside." He added "the states, however, do not have the right to select their citizens." He continued: "The 14th Amendment, like the Constitution itself, was, as (the late) Justice (Benjamin Nathan) Cardozo put it, 'framed upon the theory that the peoples of the several states must sink or swim together, and that in the long run prosperity and salvation are in the union and not division.'" According to the United Press International, Chief Justice William Rehnquist and Justice Clarence Thomas dissented separately, both saying the majority overreached itself. ********* 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. 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