/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990830.MBX C L A S S A C T I O N R E P O R T E R Monday, August 30, 1999, Vol. 1, No. 146 Headlines AHP: Wyeth-Ayerst Settlement Could End NJ Suits, The Record(NJ) Says ALDILA INC.: Not a Target of Carbon Fiber Price-Fixing Despite Subpoena CHAMPION ENTERPRISES: Lionel Z. Glancy Files Securities Suit In Mich. FEN-PHEN: Diet Drug Is Subject of More Than 25 Lawsuits in Kansas City FEN-PHEN: MA Judge Orders Spoliation Sanction in Fen-Phen Case FEN-PHEN: Philadelphia Fd. Judge Certifies Class For Medical Check-Ups FEN-PHEN: Plaintiff Differences Preclude Class Cert, Ark. Sp. Ct. Rules FEN-PHEN: The Legal Intelligencer Relates Conditional Cert. Of Class FRUIT OF: Subject To Claims For Hazardous Wastes At Superfund Sites GENERAL DYNAMICS: Contests Verdict By CA Ap. Ct. Over Plan Concealment GENERAL DYNAMICS: May Settle For Some Claims Over Water Contamination GENERAL DYNAMICS: May Settle Suit Re Soil And Groundwater Contamination GENERAL MOTORS: CNN Coverage On Settlement For Gas Tank Explosion GENERAL MOTORS: Dealers Battling Against Regional Advertising GENERAL MOTORS: Investor's Business Daily Talks About Jury Award GENERAL MOTORS: Rejects Burned Plaintiffs' Offer To Settle Damages HOLOCAUST VICTIMS: Jews Urge Schroeder To Intervene To Speed Deal HOLOCAUST VICTIMS: Nazi Slave Britons In Battle For Payment HOLOCAUST VICTIMS: Russia Nazi-Era Slaves Sue German Companies PROVOST UMPHREY: Former Non-Equity Partner Sues Over Fee Disbursement SABRATEK CORP.: Milberg Weiss Will File Second Amended Securities Suit SUGARMAN AUCTIONEERS: Pleads Guilty In Miami Ct To Embezzling From FDIC U.S. NAVY: Ap. Ct. Remands Case Over Default Termination of Contract YASHIN: Senators Fans Threaten To Sue Yashin, Alleging Greediness ********* AHP: Wyeth-Ayerst Settlement Could End NJ Suits, The Record(NJ) Says -------------------------------------------------------------------- A proposed settlement between American Home Products and thousands of women who used the Norplant contraceptive could end several lawsuits in New Jersey involving women who claim injury from the birth-control device. Norplant, which remains on the market and is considered safe by the Food and Drug Administration, consists of six thin capsules injected into women's arms to prevent pregnancy. The device has been implanted in 4.5 million women worldwide, including 1 million in the United States. "After months of negotiations with American Home Products Corp., we feel that it is in the best interest of the vast majority of our clients to accept this settlement," said Turner Branch, an Albuquerque, N.M., lawyer and co-chairman of a committee of attorneys representing Norplant plaintiffs. The company's stock fell $ 1.81 1/4 to $ 46 a share on the New York Stock Exchange. The settlement is expected to cover the claims of more than 36,000 women who experienced irregular menstrual bleeding, nausea, depression, or other problems associated with Norplant. Terms were not disclosed, but The Dallas Morning News reported that the company could pay more than $ 50 million including lawyers' fees, or about $ 1,500 per plaintiff. "Settling these cases was purely a business decision," said Joseph M. Mahady, president of American Home's North American pharmaceuticals division, in a statement. "Our legal success has come at a steep price because lawsuits are time-consuming, expensive, and have a chilling effect on research." The pact comes as American Home defends itself in thousands of much costlier lawsuits by people who say they were injured using the fen-phen diet-drug combination. American Home's Pondimin comprised one-half of fen-phen, a combination taken by millions of Americans but which was never sanctioned by the FDA. American Home also distributed Redux, a drug similar to Pondimin that also was withdrawn from the market over concerns that the drugs could damage heart valves and cause a rare but often fatal lung disorder. The first U.S. trial of a class-action lawsuit by still-healthy users of Pondimin and Redux is now under way in New Brunswick. Lawyers representing an estimated 94,000 New Jersey residents want the company to pay for regular medical tests that would detect heart or lung problems. One analyst said it's a good thing that the company is putting Norplant behind it, but that the settlement is almost infinitesimal compared to the cost of fen-phen. Some experts have said the much larger diet-drug litigation could cost the company several billion dollars over 10 years or more. "Norplant is certainly a lot less bothersome than fen-phen," said securities analyst Richard Stover, of Arnhold and S. Bleichroeder in New York. Norplant lawsuits charge that the device was defective because the company failed to adequately convey the extent of the side effects. Plaintiffs also said Norplant was inappropriately marketed as a mainstream contraceptive without strong enough labeling. But American Home, based in Madison, insists the device is safe when used as directed under the auspices of a doctor. The company admits no wrongdoing in the settlement. "Wyeth-Ayerst will continue to make [Norplant] available to doctors for their patients," said Dr. Philip de Vane, vice president of clinical affairs for Wyeth-Ayerst, American Home's pharmaceuticals division. American Home embarked on a massive advertising campaign for Norplant in the early Nineties. The drug was heavily advertised in Glamour, Mademoiselle, and Cosmopolitan magazines. That marketing was scrutinized by the New Jersey Supreme Court in a recent decision that denied American Home's motion to dismiss several Norplant cases. Many of the New Jersey Norplant cases are being handled by East Brunswick lawyer Richard Galex. He said Thursday he's unfamiliar with the specifics of the settlement and has not advised clients whether to accept the offer. Galex represents 60 women who used Norplant, all of whom will be eligible for the settlement. An unknown number of other women in New Jersey will be eligible, he said. "Right now, I don't have any specifics. If there's a settlement proposal on the table that would affect my clients, we will certainly consider an offer," Galex said. According to The Dallas Morning News, each plaintiff who filed a case before March 1 can obtain a $ 1,500 settlement. Plaintiffs have 120 days to accept the terms once they are notified. If they refuse, their cases will proceed in court, where American Home already has sought to have them dismissed. The settlement doesn't address claims from several hundred women who developed serious injuries while the device was implanted. Those claims will be handled individually. The company says its Norplant defense team has won three jury verdicts, more than 20 summary judgments before trial, and the dismissal of thousands of Norplant-related claims. "The company will defend any and all new lawsuits aggressively," Wyeth-Ayerst spokeswoman Audrey Ashby said. Norplant, Ashby said, "is not a major portion of the company's portfolio at this stage." The settlement, she added, "will not have a material impact on the company." (The Record (New Jersey) 8-27-1999) ALDILA INC.: Not a Target of Carbon Fiber Price-Fixing Despite Subpoena ----------------------------------------------------------------------- Aldila, Inc. said it had received verbal assurance from the U.S. Department of Justice that the company is not at this time a target of the grand jury investigation into alleged price fixing by certain producers of carbon fiber and prepreg material, although it has been subpoenaed as a subject of the investigation. The company also stated that it is not a defendant in any class action lawsuits and that none of its manufacturing facilities have been "raided" by the federal government. "Aldila was to a substantial extent a purchaser of carbon fiber and graphite prepreg material for its core golf shaft operations, rather than a seller of these products, during the period we understand is covered by the investigation," said Gary T. Barbera, Chairman and Chief Executive Officer, Aldila, Inc. "Although Aldila has sold graphite prepreg to outside customers since 1997, the majority of the company's prepreg material has been consumed in our core golf shaft operations since prepreg production began in 1994." "Aldila's production of carbon fiber began in Evanston, Wyoming in 1998 and the company has sold limited amounts of carbon fiber to outside customers mostly in 1999," Mr. Barbera said. "Until recently, however, the majority of our carbon fiber production has been used in the production of graphite golf shafts." (The News and Observer (Raleigh, NC) 8-25-1999) CHAMPION ENTERPRISES: Lionel Z. Glancy Files Securities Suit In Mich. --------------------------------------------------------------------- Pursuant to Section 21(D)(A)(3)(a)(i) of the Securities Exchange Act of 1934, Notice is hereby given that a Class Action has been commenced in the United States District Court for the Eastern District of Michigan on behalf of a class (the "Class") consisting of all persons who purchased the common stock of Champion Enterprises Inc. (NYSE:CHB) between March 30, 1999 and July 29, 1999, inclusive. The Complaint charges Champion and its Chief Executive Officer with violations of federal securities laws. Among other things, plaintiff claims that defendants' material omissions and the dissemination of materially false and misleading statements regarding the nature of Champion's inventory problems drove Champion's stock price to a Class Period high of $ 21.0625 per share and low of $ 13.50 per share, inflicting enormous damages on investors. Plaintiff seeks to recover damages on behalf of Class members and is represented by the Law Offices of Lionel Z. Glancy which has significant experience in prosecuting class actions, and substantial expertise in actions involving corporate fraud. Members of the Class described above may move the Court, not later than 60 days from August 26, 1999, to serve as lead plaintiff, however, they must meet certain legal requirements. Contact Lionel Z. Glancy, Esquire, of the Law Offices of Lionel Z. Glancy, 1801 Avenue of the Stars, Suite 311, Los Angeles, Calif. 90067, by telephone, toll-free, at 888/773-9224 or by e-mail at info@glancylaw.com or mgoldberg@glancylaw.com FEN-PHEN: Diet Drug Is Subject of More Than 25 Lawsuits in Kansas City ---------------------------------------------------------------------- More than 25 lawsuits involving the combination of diet pills known as fen-phen and a closely related drug have been filed in the Kansas City area, and more are expected. In these actions and thousands of other lawsuits around the country, consumers say they have experienced significant health problems from using the diet drugs. Millions of prescriptions were written for the drugs from 1995 until September 1997, when they were pulled off the market voluntarily at the request of the Food and Drug Administration. In the Kansas City area and around the country, most of the lawsuits have involved allegations related to heart valve damage and a condition known as primary pulmonary hypertension, a deadly lung disease. In one lawsuit, Maria Ubaldo of Independence said she suffered heart valve damage from taking a combination of Pondimin and phentermine. In another lawsuit, Edna Ewing said she suffered heart valve damage from taking the drug known as Redux. The lawsuits were filed against American Home Products Corp. and its subsidiary, Wyeth-Ayerst Laboratories, and A.H. Robins Co., which was acquired by American Home Products. In their lawsuits, Ewing and Ubaldo allege negligence and fraudulent misrepresentation, among other charges. Both seek jury trials. Doug Petkus, a Wyeth-Ayerst spokesman in Pennsylvania, said that he could not confirm that the lawsuits had been served and that he could not comment on them. James W. Jeans, one of the Kansas City lawyers representing Ubaldo and Ewing, said the two lawsuits were among 26 such actions that he and two colleagues have filed since June 1998. Jeans said he and lawyers J. Scott Bertram and William Dirk Vandever would probably have 40 such lawsuits on file by the end of September. Also pending are related class-action lawsuits around the country. The lawsuits here and elsewhere "have the potential to last for many years," Bertram said. Bertram said most or all of the lawsuits might someday be resolved in a global settlement, "but nobody on the planet knows if or when that will happen." (The Kansas City Star 8-26-1999) FEN-PHEN: MA Judge Orders Spoliation Sanction in Fen-Phen Case -------------------------------------------------------------- After determining that Wyeth-Ayerst Laboratories Division of American Home Products willingly destroyed e-mail evidence in a fen-phen wrongful death suit, a Massachusetts state judge ruled that the drug maker will have to face potentially damaging sanctions when the case goes to trial. Linnen v. A.H. Robins Co. Inc. (Pharmaceutical Reporter, August 1999) FEN-PHEN: Philadelphia Fd. Judge Certifies Class For Medical Check-Ups ---------------------------------------------------------------------- A federal judge has certified a class-action suit by users of the ''fen-phen'' diet drug combination seeking payments to have medical checkups for potential heart and lung problems. The decision by U.S. District Judge Louis C. Bechtle allows the federal suit filed last year against American Home Products to proceed to trial. Pondimin and Redux, two prescription diet drugs often taken in combination, were taken off the market in 1997 at the request of the Food and Drug Administration after some users developed heart-valve damage. The combination was popularly known as ''fen-phen,'' a reference to the first syllables of the chemicals used to make the drugs. An estimated 6 million people took the drugs, though AHP contends the majority used them for less than 30 days. More than 4,000 lawsuits nationwide have been filed against the company by people who say they suffer heart and lung problems because of the pills. The Philadelphia class-action seeks to have AHP pay for checkups for people who used the drugs for 30 days or more between 1992 and 1997. Residents in six other states are excluded from the Philadelphia-based suit because similar suits are pending in those states, Bechtle ruled. News of the ruling weighed heavily on AHP's stock, which fell more than 7 percent in today's trading. The stock was down $3.50 at $42.50 a share just before noon on the New York Stock Exchange. The ruling comes just as AHP has agreed to pay more than 36,000 women to settle claims that the implantable contraceptive device Norplant caused headaches, irregular menstrual bleeding, nausea and depression. AHP, the parent of Norplant maker Wyeth-Ayerst Laboratories, did not admit any wrongdoing in the settlement, saying Thursday it was ''purely a business decision.'' (AP Online 8-27-1999) FEN-PHEN: Plaintiff Differences Preclude Class Cert, Ark. Sp. Ct. Rules ----------------------------------------------------------------------- Baker v. Wyeth-Ayerst Laboratories Class certification in a diet drug suit was improper because the common questions of law or fact did not predominate over the questions affecting only individual members, the Arkansas Supreme Court has ruled. Baker et al. v. Wyeth-Ayerst Laboratories et al., No. 98-1479 (AR Sup. Ct., June 24, 1999). The panel, in an opinion by Justice Anabelle Clinton Imber, refuted the appellants' contention that the trial court erred in denying their request for class certification of their tort action. Jeanne Baker, Maria Valencia, Tina Thomas and Mirtha Breslin took the prescription drugs fenfluramine, dexfenfluramine and phentermine for weight-loss purposes. In 1998, after these drugs were removed from the market, the plaintiffs filed a class action against numerous manufacturers, suppliers and distributors. Alleging theories of negligence and products liability, the plaintiffs proposed that the class be divided into a subclass of asymptomatic plaintiffs who need to undergo medical monitoring, and a subclass of plaintiffs who have suffered serious physical injuries. The trial court denied the plaintiffs' motion for class certification in October 1998, holding that they had failed to satisfy the predominance and superiority factors found in Ark. R. Civ. P. 23(b). In particular, the court ruled that a class action would not be the superior way to litigate this matter because the plaintiffs had different medical conditions and family histories at the time the diet drugs were prescribed and that these drugs were prescribed by different doctors who had different degrees of knowledge regarding the risks posed by the drugs. In addition, the court said a class action was improper because the plaintiffs took different combinations of the three diet drugs for different durations. In upholding the trial court's conclusions, the state supreme court noted that the numerous and complex individual issues "predominate" over the individual issues. As in Georgine v. Amchem Products Inc., 83 F.3d 610 (3rd Cir. 1996), this case presents numerous individual issues that "go to the heart of the defendants' conduct, causation, injury, and damages such that the defendants' liability as to each plaintiff will have to be resolved on a case-by-case basis," Justice Imber wrote. The only thing the plaintiffs have in common, she added, is that they all took one or a combination of the diet drugs listed in the complaint. Moreover, Justice Imber continued, the case cannot be bifurcated into certified and decertified proceedings because there are few global or common issues that can be resolved in the certified stage. While the plaintiffs argue that issues concerning the defendants' conduct could be resolved on a class-wide basis, the resolution of these "seemingly common issues" will depend upon individual differences among the plaintiffs such as when they took the drug and the duration of use. Damages, the court concluded, also cannot be resolved in a class action because some of the plaintiffs are asymptomatic while others have manifested physical injuries. (Mass Tort Litigation Reporter, August 1999) FEN-PHEN: The Legal Intelligencer Relates Conditional Cert. Of Class -------------------------------------------------------------------- A federal judge has conditionally certified a nationwide class action for medical monitoring on behalf of consumers who took the fen-phen diet drug combination for at least 30 days and now fear an increased risk of heart valve disease. In a 41-page opinion handed down, Senior U.S. District Judge Louis C. Bechtle rejected the argument that such a massive class action would be impossible to manage due to factors that make each individual plaintiff's claim unique or the need to apply the laws of all 50 states. The class is actually quite "cohesive," Bechtle said, and the court can create subclasses to deal with the few individual issues or variations in state law. Residents of states that don't recognize medical monitoring will simply be excluded from the federal class, as well as residents of the six states that already have pending class actions of their own. Lawyers for American Home Products insisted that Bechtle should refuse to certify a national class based on the 3rd U.S. Circuit Court of Appeals' decision in Barnes v. American Tobacco which upheld the decision by Senior U.S. District Judge Clarence C. Newcomer not to certify a medical monitoring class of Pennsylvania smokers. The Barnes court found that smokers' claims present too many individual issues since the focus was on addiction and since each smoker's history of use would be relevant to the defenses of comparative and contributory negligence. But Bechtle found that the fen-phen consumers were legally different. Unlike smokers, who use hundreds of different brands that contained different ingredients at different times which were allegedly altered to induce addiction the fen-phen class members used only two related chemical compounds, fenfluramine and dexfenfluramine, which were sold as only two brands, Pondimin and Redux. AHP's lawyers insisted there would still be a host of individual issues, including the duration of each class member's use of the drugs and the method used to combine them. But Bechtle found that such differences between class members "are more susceptible to subclass treatment than the claims relating to tobacco use. "Courts have rejected class actions involving tobacco and asbestos, Bechtle said, in part because "exposure is often difficult to quantify and confirm as the exposure levels could vary greatly from claimant to claimant and, in many cases, exposure extended over decades. "In the asbestos cases, he said, there were several possible forms of exposure with varying degrees of danger, and many class members were not even aware they had been exposed. But for fen-phen users, Bechtle said, the ingestion of the drugs was "discrete and ascertainable" since their prescription records will reflect the dates, duration and amounts of ingestion, as well as the combination of drugs ingested. In their class action complaint, the plaintiffs are seeking medical monitoring for anyone who took fen-phen but has not yet manifested any symptoms of injury. They are seeking: * The creation of a medical "registry" in which relevant demographic, medical and scientific information concerning class members is recorded; * State-of-the-art echocardiograms; * Full cardiopulmonary examinations including a chest x-ray and electrocardiograms; * The gathering and analyzing of relevant medical demographic information from class members; * Court-ordered medical research on the incidence, prevalence, natural course and history, diagnosis and treatment of diet-drug induced valvular heart disease; * Publishing of the research findings to members of the class and their physicians. AHP's lawyers argued that not all states have explicitly recognized an asymptomatic plaintiff's claim for medical monitoring and that those states which recognize such a cause of action have varying legal elements. Such variance of state law makes the class claims unmanageable, they argued. The plaintiffs argued that the law of Pennsylvania should be applied to the class as a whole because Pennsylvania has the greatest interest in applying its law to the claims at issue. Bechtle disagreed with both arguments. "Essentially, Plaintiffs request that Federal Rule of Civil Procedure 23 act as the conduit through which Pennsylvania's medical monitoring cause of action extend to all class members, regardless of whether a given class member's claim arises in a jurisdiction which does not recognize such a legal theory absent injury. Such an action would violate the Rules Enabling Act," he wrote. Instead, Bechtle said, each state's laws must be applied because "those states which recognize a medical monitoring claim have a governmental interest in protecting its citizens from exposure to toxic substances.... Conversely, those states which do not recognize a claim for medical monitoring also have a governmental interest for doing so, whether it be to encourage the development of new pharmaceutical products or to avoid the burden of increased litigation state courts would face in abandoning the traditional tort requirement that plaintiffs demonstrate a physical injury. "But the court's task of applying the laws of each of the states "does not necessarily render class treatment unmanageable," Bechtle said. Instead, he said, it requires the establishment of subclasses dependent on whether the elements of medical monitoring or the underlying legal action significantly differ. As a result, Bechtle said, the conditional class will include a subclass of persons with known injury who have not filed a personal injury claim, but class members who are asymptomatic and whose home states require an injury for a medical monitoring claim would have to be excluded from the class entirely. Also excluded will be residents of the six states that currently have fen-phen medical monitoring class actions already certified and underway Texas, Washington, Illinois, New Jersey, West Virginia and Pennsylvania. In closing, Bechtle said he recognized that there are "individual issues which will be a challenge to the court and the parties in resolving the class claims," including individual factual issues and variance of applicable state law. But, he said, "rather than turn its back on these challenges, the court will conditionally certify the class as outlined above and will continue to review the class and redefine it as necessary until it can be said with some certainty that class treatment is unacceptable under Barnes, Rule 23 or the parties' constitutional rights." (The Legal Intelligencer 8-27-1999) FRUIT OF: Subject To Claims For Hazardous Wastes At Superfund Sites ------------------------------------------------------------------- Fruit of The Loom Ltd.'s generators of hazardous wastes which were disposed of at offsite locations which are now superfund sites are subject to claims brought by state and Federal regulatory agencies under Superfund Legislation and by private citizens under Superfund Legislation and common law theories. Since 1982, the United States Environmental Protection Agency (the "EPA") has actively sought compensation for response costs and remedial action at offsite disposal locations from waste generators under the Superfund Legislation, which authorizes such action by the EPA regardless of fault, legality of original disposal or ownership of a disposal site. The EPA's activities under the Superfund Legislation can be expected to continue during the remainder of 1999 and future years. The Company and its subsidiaries are involved in certain legal proceedings and have retained liabilities, including certain environmental liabilities, such as those under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), its regulations and similar state statutes ("Superfund Legislation"), in connection with the sale of certain discontinued operations, some of which were significant generators of hazardous waste. The Company and its subsidiaries have also retained certain liabilities related to the sale of products in connection with the sale of certain discontinued operations. The Company's retained liability reserves at July 3, 1999 related to discontinued operations consist primarily of certain environmental reserves of approximately $29,000,000 and product liability reserves of approximately $4,000,000. During 1998, the Company purchased insurance coverage for potential cleanup cost expenditures from approximately the level of current environmental reserves up to $100,000,000 for certain sites with on-going remediation, pollution liability coverage for claims arising out of pollution conditions at owned locations including continuing operations, sold facilities and non-owned sites and product liability coverage for claims arising out of products manufactured by the sold operations. Management believes that adequate reserves have been established to cover potential claims based on facts currently available and current Superfund and CERCLA Legislation. GENERAL DYNAMICS: Contests Verdict By CA Ap. Ct. Over Plan Concealment ---------------------------------------------------------------------- On April 19, 1995, 101 then-current and former employees of General Dynamics Corp.'s Convair Division in San Diego, California filed a six-count complaint in the Superior Court of California, County of San Diego, titled Argo, et al. v. General Dynamics, et al. In addition to General Dynamics, four of Convair's then-current or former managers were also named as defendants. The plaintiffs alleged that the company interfered with their right to join an earlier class action lawsuit by, among other things, concealing its plans to close the Convair Division. On May 1, 1997, a jury rendered a verdict of $101 against the company and one of the defendants in favor of 97 of the plaintiffs. The jury awarded the plaintiffs a total of $1.8 in actual damages and $99 in punitive damages. The company and one of the defendants have appealed the judgment to the Court of Appeals of the State of California, Fourth Appellate District, Division One. On appeal, the company is seeking to have the judgment overturned in its entirety or, alternatively, a substantial reduction in the jury's punitive damage award. The company believes it has substantial legal defenses, but in any case, it believes the punitive damage award is excessive as a matter of law. Management currently believes the ultimate outcome will not have a material impact on the company's results of operations or financial condition. GENERAL DYNAMICS: May Settle For Some Claims Over Water Contamination --------------------------------------------------------------------- The company is either a named defendant or a third-party defendant in certain multi-plaintiff tort cases pending in state or federal court in Arizona, captioned: Cordova, et al. v. Hughes Aircraft Co.; Lanier, et al. v. Hughes Aircraft Co., et al.; Yslava, et al. v. Hughes Aircraft Co.; and Arellano, et al. v. Hughes Aircraft Co. In these cases the plaintiffs allege that they suffered personal injuries and/or property damage from chronic exposure to drinking water alleged to be contaminated with trace amounts of the industrial solvent trichloroethylene. The alleged source of the contamination was industrial facilities in and around the site now occupied by the Tucson International Airport (TIA) and U.S. Air Force Plant #44. In addition to the company, defendants are Hughes Aircraft Co. (now Raytheon), the Tucson Airport authority (TAA), the City of Tucson, (the City) and McDonnell Douglas Corp. (MDC). In Cordova, the company negotiated a settlement with all but four defendants, who have appealed the summary judgement entered against them. The company has reached an agreement to settle all the remaining cases and is negotiating the final terms of the settlement agreements. Court approval is required for the settlement of these cases. The company does not believe that these lawsuits will have a material impact on the company's results of operations or financial condition. GENERAL DYNAMICS: May Settle Suit Re Soil And Groundwater Contamination ----------------------------------------------------------------------- In other litigation concerning the Tucson site, the company is a defendant in two cases brought in federal district court in Arizona by TAA and the City under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). Plaintiffs seek reimbursement of CERCLA response costs and a declaration of the company's alleged liability with respect to soil and groundwater contamination at portions of the Tucson site. On September 30, 1998, the U.S. Environmental Protection Agency (U.S. EPA) issued a Special Notice Letter notifying the company that it was a potentially responsible party (PRP) with respect to contamination of soil and shallow groundwater on and near property currently occupied by the TIA. Other PRPs receiving a similar notice were the U.S. Air Force, TAA, MDC and the City. The company has reached an agreement to settle the litigation brought by TAA and the City and is awaiting court approval of a consent decree negotiated with the U.S. EPA in response to the Special Notice Letter. The company does not believe that these lawsuits or the pending consent decree will have a material impact on the company's results of operations or financial condition. The company is also a defendant in other lawsuits and claims and in other investigations of varying nature. The company believes its liabilities in these proceedings, in the aggregate, are not material to the company's results of operations or financial condition. The company is directly or indirectly involved in certain Superfund sites in which the company, along with other major U.S. corporations, has been designated a PRP by the U.S. EPA or a state environmental agency with respect to past shipments of hazardous waste to sites now requiring environmental cleanup. Based on a site by site analysis of the estimated quantity of waste contributed by the company relative to the estimated total quantity of waste, the company believes its liability at any individual site is not material. The company is also involved in the investigation, cleanup and remediation of various conditions at sites it currently or formerly owned or operated. The company measures its environmental exposure based on enacted laws and existing regulations and on the technology expected to be approved to complete the remediation effort. The estimated cost to perform each of the elements of the remediation effort is based on when those elements are expected to be performed. Where a reasonable basis for apportionment exists with other PRPs, the company estimates only its allowable share of the joint and several remediation liability for a site, taking into consideration the solvency of other participating PRPs. Based on a site by site analysis, the company believes it has adequate accruals for any liability it may incur arising from sites currently or formerly owned or operated at which there is a known environmental condition, or Superfund sites at which the company is a PRP. GENERAL MOTORS: CNN Coverage On Settlement For Gas Tank Explosion ----------------------------------------------------------------- Broadcast On Cable News Network On August 27, 1999 Transcript # 99082707V07 GUESTS: David Garrity HIGHLIGHT: David Garrity discusses the GM lawsuit, saying that GM will appeal the readjusted settlement and that it is still way too high. Garrity also discusses Ford looking to spin off their parts division and the reaction by UAW. THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. BILL TUCKER, CNN ANCHOR: Something of a bittersweet victory for General Motors. A judge in Los Angeles has slashed GM's $4.9 billion liability payment to $1.2 billion. The record-high award was handed out last month by a California jury in a lawsuit involving a Chevrolet gas tank explosion, but GM isn't satisfied with the reduced payment. It plans to appeal the verdict instead. GM share gained more than a dollar to just above $67 ahead of the ruling, as you saw coming back from the break. To discuss the latest development in the General Motors settlement case, we're joined now by Dave Garrity, auto analyst from Dresdner, Kleinwort and Benson. And Dave, thanks for coming in early on this Friday morning. DAVID GARRITY, AUTO ANALYST, DRESDNER KLEINWORT BENSON: Thank you. TUCKER: What GM really wanted was a new trial, and the judge said I'm not giving you a new trial, but I'll reduce the damage awards. GM says it will appeal it. Does GM still have any hope of getting a new trial? GARRITY: Well, the important distinction here is the fact that this case actually took case -- took place in a state court as opposed to a federal court. GM on appeal within the state system in California; the Appeals Court has far more flexibility with respect to judging the facts of the case. GM was concerned here about the fact that the reason why this happened it was an accident; a car traveling from behind the vehicle was coming -- operating at about 70 miles an hour. The operator was intoxicated. The issue here for GM is to say, fine, this was a vehicle that was built to the applicable safety standards in effect by the federal government at that time, but what the court has said is that those standards themselves were insufficient. TUCKER: Yes, and that's interesting. I mean, how do you write a law that then goes back and tries to correct the "mistakes," in quotes, of the past. It creates something of a double jeopardy for all of the auto makers and probably, well, for all manufacturers, period, doesn't it? GARRITY: Very much so, and I would argue that, you know, even though the Clinton administration may have been well supported by attorneys and particularly the class action attorneys when they campaigned, I mean, something like this, this is, in and of itself, on a reduced basis, a very large damage award, $1.2 billion, almost works out to $2 a share for GM. Will they appeal it? Of course. Is it likely to pay this year? Likely not, but this is something that's going to drag on. And it does cry out for legal reform in the United States. TUCKER: All right, terrific. I'm going to move on to another issue within the auto industry, because the UAW is getting ready to sit down and talk contracts with the auto makers, and everyone likes to position themselves to be the pattern after which everybody else has to follow. Ford has succeeded in doing so for the past couple of contracts. They may not do so this time around because of the decision to spin off a parts unit. It's angered the union. What are your thoughts on the -- what's going on within the auto industry right now? GARRITY: Well, if you look amongst the three major U.S. auto manufacturers, and I still consider Daimler-Chrysler a U.S. auto manufacturer, Ford arguably is still in the best financial position. So much it's like Willie Sutton (ph) liked to rob banks because that's where the money was... (LAUGHTER) ... the UAW more than likely will still go back to the company that's in the best financial position. At the same time, the UAW has particular concerns with respect to Ford, because Ford intends to take their own captive auto parts business, Visteon (ph), into becoming a separately-traded public entity at some point in time probably over the course of the next contract. GM, as we're all well aware, has already taken the Adelphi parts subsidiary public earlier this year. So, the UAW wants to make sure that those UAW workers that are in the Viseton operations are well protected in the event that that company is separated from Ford. TUCKER: Does it hurt Ford ultimately or is that -- their decision to move ahead and spin off Visteon a smart move both strategically and economically? GARRITY: It's a smart move strategically and economically from the standpoint that you're reducing your fixed costs, you're becoming less vertically integrated, it's -- less vertically integrated. It's a very competitive market in the auto parts industry. And from the standpoint that Visteon as an organization outside of Ford can bid more aggressively for business from other manufacturers away from Ford, it allows that business itself to grow more rapidly. TUCKER: All right, terrific. Thanks, David Garrity, auto analyst at Kleinwort -- Dresdner, Kleinwort, Benson, excuse. Thanks for coming in this morning. GARRITY: Thank you. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com GENERAL MOTORS: Dealers Battling Against Regional Advertising ------------------------------------------------------------- General Motors Corp. thought it had a better idea last winter when it unilaterally introduced a revolutionary new advertising strategy for the auto industry. Changing a long-standing practice, GM decided to give executives more power by having them oversee regional advertising campaigns, and the company cut off funding for traditional ad campaigns usually put together across America by local car dealers. But the automaker, the nation's largest, now finds that it has touched off a high-stakes, closely watched legal battle with some of its Midwest dealers, who have been contributing a large portion of the company's $ 2.2 billion annual advertising budget. The dealers insist that GM had no right to shift gears in its advertising game plan without their approval. What's at stake are hundreds of millions of dollars and the right to control a significant portion of GM's advertising. The first lawsuit, filed on Jan. 26 by Illinois GM dealers in a Cook County courtroom, could be repeated elsewhere because it is based on an Illinois law that is similar to laws in more than two dozen other states, say franchise law experts. All of the laws, they suggest, were designed to equalize the balance of power between America's giant automakers and their individual franchisees. In April, a similar suit was filed against GM by Indiana GM dealers. The plaintiffs' lawyers and experts in the field say that dealers in other states are watching the Illinois and Indiana cases closely and that more suits may be filed down the road. In addition, the experts say, the GM litigation is of interest to other franchise-based industries that are thinking of shifting to more regional advertising campaigns with the help of local franchisee contributions. They say that every state except Alaska in recent years has enacted some kind of generic franchisee rights law, usually prohibiting any "unfair" or "unconscionable" conduct by a franchisor. "Those doing business in the more strictly regulated states will closely watch" the GM case for how "reasonable" the court views the auto company's actions, explains George J. Tzanetopoulos, a partner at Chicago's Mayer Brown & Platt and a specialist in franchise litigation. What's at stake At stake in the GM case, says University of Michigan Professor Gerald C. Meyers, is nothing less than "who gets to control the company's advertising message." Prof. Meyers, a former chairman of American Motors Co., notes that control is a particularly sore spot with both GM executives and GM dealers who have watched their national market share plummet from 35% in 1990 to 29% today. It all started in December when GM announced that effective April 1, it would no longer "rebate" the $ 500 million advertising assessments it had been collecting from its hundreds of dealers so that they could arrange for advertisements on local television and radio as well as in their hometown newspapers. Instead, the advertising assessments would be retained and spent by GM's hand-picked regional advertising executives over wider geographic areas so as to cull consumer brand loyalty more effectively, a la food industry titan Procter & Gamble. But as many as 69 Illinois GM dealers and six dealer advertising associations viewed the new marketing strategy as a possible lemon that shelved what they claim hadbeen a successful local marketing approach. In the Chicago area last year, for instance, GM dealers boasted a 38% market share, far greater than the company's national average. The Illinois car dealers and advertising groups hired Samuel K. Skinner, former secretary of the U.S. Department of Transportation and one-time chief of staff for President Bush. He filed a class action accusing GM of violating the Illinois Motor Vehicle Franchise Act, a state law requiring local dealer "participation" in advertising campaigns at the dealers' expense. Anthony Pontiac GMC Buick v. General Motors Corp. No. 99 CH 1189 (Cir. Ct., Cook Co.). GM denied any wrongdoing and retaliated with a countersuit accusing its Illinois dealers of conspiring to foil the company's legitimate business plans by paying Mr. Skinner's legal fees with advertising assessments contractually owed to GM. But GM's hardball response did not confine the litigation to the Windy City. The Hoosier State GM dealers' class action, filed on April 8 by local attorneys in an Indianapolis federal court, not only asks for injunctive relief under an Indiana franchisee rights law, but also demands treble monetary damages. Moreover, unlike Mr. Skinner's suit, the Indiana dealers' suit alleges "criminal conversion" of "their" advertising monies. Hubler Chevrolet Inc. v. GMC, No. IP 99-0485 C B/S (S.D. Ind.). The Indiana dealers have not been countersued, explains GM in-house lawyer Michael J. Robinson, because they are financing their lawsuit without using "GM's rebated advertising money." Long-running spat What these cases are going to come down to is who owns those advertising dollars, says Mr. Skinner, now a partner at Chicago's Hopkins & Sutter. "If the judge decides that the advertising assessments belong to the GM dealers, then those dealers will be entitled to damages under the auto franchise acts. If he decides those assessments belong to GM," then the automaker can do whatever it wants with them. In the 1960s and 1970s, says Ronald C. Smith, the lead plaintiffs' lawyer in the Indiana suit and a partner at Indianapolis' Stewart & Irwin P.C., many Illinois and Indiana GM dealers were "encouraged" to form associations, called dealer marketing groups (DMGs), to advertise GM products locally. The DMGs, he says, were funded by "voluntary" assessments that member dealers agreed to pay when purchasing new autos from GM for resale to consumers. Initially, the dealers paid these assessments to their associations. Subsequently, and at the dealers' request, says Mr. Smith, GM agreed to collect the assessments -- about 1% of the manufacturer's suggested retail price from the dealers and to "remit" them to the DMGs. "GM has always accounted for this money in separate 'liability' accounts and has never paid income tax on it -- and rightfully so," he insists. GM attorneys do not concede that this arrangement was the dealers' idea or that the assessments were accounted for as other people's money. But they do not deny that, in the late 1980s, encouraged by the success of this Midwest marketing approach, GM established new, companywide local advertising programs based on it. GM referred to these new programs as "dealer marketing initiative programs" and began referring to the dealers' 1% payment as the "GM Marketing Adjustment" which was added as a line item to the cost of a GM auto. For years, the company continued to remit this money to the dealers and their assorted advertising associations, regardless of who technically "owned" it. But then, in December, GM announced that it would radically alter its marketing approach. The agreements According to GM's attorneys in court, it's clear that when GM took the Chicago-area incentive program national, tied the local dealer assessment to 1% of the MSRP and made this amount a line item on a GM auto's invoice, it made the 1% part of the selling price of each car. And under the typical GM franchise agreement, as well as other written documents, they have reasoned, those sales proceeds belong to GM, not to its dealers, who are generally entitled only to commissions and other financial incentives. Even Mr. Skinner and Mr. Smith concede that any automaker has a great deal of leverage in such revenue-sharing disputes because it knows it had its lawyers write its standard franchising agreement -- and any related documents -- to make it so. "These aren't true franchise agreements, as in the case of a fast-food scenario like McDonald's," notes William A. Newman, chief operating officer for the McClean, Va.-based National Automobile Dealers Association. "These are contracts of adhesion. The 30 car and truck manufacturers call all the shots and award their franchises on a 'take it or leave it' basis." If the local marketing assessments therefore are not owned by the GM dealers, defense lawyers have concluded, GM's new "marketing strategy" cannot be recharacterized now as a disguised dealer-funded "advertising campaign" that violates state law. According to Mayer, Brown & Platt's Mr. Tzanetopoulos, the franchise litigation expert, this "strategic price increase vs. advertising campaign" issue has been litigated once before, although with the issues reversed. In 1994, he explains, a federal judge ruled that it was up to the jury to decide whether GM had violated Pennsylvania's auto dealer franchisee rights law when, ironically, it took what is now the "old" Midwest marketing approach nationwide. And in that one instance, the jury found in favor of GM. Videon Chevrolet Inc. v. GMC, No. 91-4202 (E.D. Pa.). But neither side in the current GM litigation says that outcome is necessarily indicative of what might happen in the cases now pending. Vow to fight on In the current battle, the first test of each side's relative strength now looms in the Illinois suit. Extensive expert testimony in Mr. Skinner's motion for a preliminary injunction has already been heard before Cook County Circuit Court Judge Stephen Schiller, although the court's decision is not expected to be rendered until later this summer. GM has found little moral support from other automakers. Business Week reported in February, for instance, that Ford's brass is openly calling GM's Procter & Gamble-style approach "inappropriate" for the auto industry. The more important question, of course, is whether the complaining dealers have the stomach for test-driving a drawn-out legal battle. Lead outside defense lawyers declined to be interviewed, including Kirkland & Ellis' J. Andrew Langan and Michael H. Carpenter, a name partner at Columbus, Ohio's Zeiger & Carpenter. But, says GM's Mr. Robinson, "Counting the litigating dealers in Illinois and Indiana, 85% of GM's dealers nationwide have signed up" for its new marketing program. As a result, he anticipates no additional lawsuits, the plaintiffs' lawyers' claims notwithstanding. Mr. Smith says that such numbers do not reflect true dealer sentiment. The dealers may be signing up, he explains, but only because, under the auto industry's one-sided franchise agreement, "they have no choice but to do so if they want to stay in business." Mr. Smith promises a fight to the finish. "If Sam obtains his restraining order and we are successful in proving a conversion of dealer money in our lawsuit," he concludes, "I can see a significant hiccup in GM's marketing plans nationwide." (The National Law Journal 8-16-1999) GENERAL MOTORS: Investor's Business Daily Talks About Jury Award ---------------------------------------------------------------- Six Los Angelenos hit it big last month when a jury awarded them $ 4.9 billion in compensatory and punitive damages. Their target? General Motors, for allegedly unsafe vehicle design. More accurately, GM's deep pockets enticed trial lawyers to play the lottery, truth be damned. According to a Los Angeles jury (and judge), GM is a company that ''puts profits over safety.'' That's why it, in their view, purposely installed unsafe fuel tanks in its 1979 Malibu. One of those cars was involved in a 1993 accident at issue in the case Anderson vs. General Motors. The refrain is familiar: Corporations are greedy and out to get the little guy. Indeed, this image is so ingrained in the culture that it's taken as gospel, no matter what the facts of a case may be. The jury believed it so much that it granted the plaintiffs the largest damage award in history. But in this case, the facts paint a far different picture of GM. Briefly, Patricia Anderson and five passengers were burned after her Malibu's fuel tank ruptured as a result of being struck in the rear by a car going around 70 mph. Anderson's entrepreneurial lawyers, Brian Panish and Christine Spagnoli, wanted to dive into GM's deep pockets and sued on her behalf. But rather than contest the case on factual grounds, the lawyers pulled out the old class-envy arguments to sway the jury. It worked. There's more to the case, though, than just the lawyers' sophistry and the jurors' gullibility. The judge seems to have decided, almost before the case started, that GM should go down. Semiretired Judge Ernest Williams was assigned the case because it was expected to take a while, and he had the time. In the course of the trial, Williams gave Panish and Spagnoli every break. He let them make the same profits-over-safety argument with witness after witness. He let them badger other witnesses. He let the attorneys suggest that GM was suborning perjury, without offering supporting evidence. He also let the plaintiffs' attorneys introduce two documents that supposedly proved that GM ''put a price tag on human lives.'' The problem? Neither GM document had anything to do with the design of the 1979 Malibu. Written at least five years before that model came out, neither had anything to do with the model's design. Perhaps most importantly, the judge agreed with the plaintiffs' motion to exclude the fact that the driver of the car that hit Anderson's Malibu was drunk. Daniel Moreno's blood was tested several hours after the accident. The alcohol in his bloodstream was twice the legal limit. Then, when GM's attorneys presented their case, the judge excluded data that showed the Malibu's record in crashes with fires was safer than most every other car on the road. He OK'd the plaintiffs' motion to include a claim for punitive damages made a week before the trial's end. That, despite the fact that Panish and Spagnoli had not followed court procedures. GM lawyers today are back in court to argue in pre-appeal motions that the trial was full of egregious errors. They'd like a reversal of the judgment. But they'll take a new trial. Unfortunately, they have to make these arguments before the same judge who seems to have botched the case in the first place. It's unlikely Williams will admit to any mistakes. That means GM will have to appeal the case and spend more money. GM estimates the costs of defending this case to date are nearing $ 1 million. The plaintiffs' attorneys are spending similar amounts. But they've got an incentive: pocketing a third of the $ 4.9 billion judgment. If they lose, that all disappears. California does not have caps on punitive damages. Trial lawyers have made sure to block any such legislation in the state legislature. Fifteen states have passed some sort of limit on punitive damages - even once lawsuit-happy Texas. California and the other 34 should follow suit. Until they do, trial attorneys will continue to play the litigation lottery, hoping for judges like Williams. (Investor's Business Daily 8-26-1999) GENERAL MOTORS: Rejects Burned Plaintiffs' Offer To Settle Damages ------------------------------------------------------------------ General Motors has rejected a settlement offer from plaintiffs severely burned when their Chevrolet Malibu exploded in a crash, and the automaker today continued to seek a reduction in the $ 4.9 billion a jury awarded the victims. The two sides were in court on GM's request for a new trial or reduced damages. GM told Superior Court Judge Ernest Williams that critical information on the vehicle's safety record, the cause of the crash and other evidence were excluded at the trial. "The fact is it was not a fair fight," said GM attorney David Heilbron. "We really didn't get our side of the story told to the jury." The six plaintiffs, driver Patricia Anderson of Los Angeles, her four children and a family friend, offered to settle for about $ 400 million if GM recalled similar vehicles and replaced what they said were faulty gas tanks. A jury last month awarded the plaintiffs $ 107 million in compensatory damages and $ 4.8 billion in punitive damages for injuries from the 1993 accident, the largest product-liability award in U.S. history. Legal experts have said the punitive damages probably would be reduced on appeal. While the accident was caused by a drunken driver who rear-ended Ms. Anderson's 1979 Malibu, the explosion resulted from a poorly designed fuel system, said Brian Panish, the plaintiffs' attorney. The settlement offer would require GM to recall all vehicles from 1978 to 1983 with the same gas-tank design. During the 10-week trial, GM said, it was not allowed to introduce evidence on the Malibu's safety record or present information about the drunken driver that would have cleared the automaker. "As we tried to show during the trial - but were not permitted to - there is nothing wrong with the fuel systems of these vehicles," GM spokesman Terry Rhadigan said in a statement GM issued rejecting the settlement offer. "This is another effort on the part of the trial lawyers to avoid dealing with this case on the merits, which is what we intend to do during the post-trial process," Rhadigan said. Panish made the settlement offer in a letter Aug. 20 to GM Chairman Jack Smith. The plaintiffs offered to reduce the punitive damages by $ 4.5 billion. Millions of the vehicles remain on the roads, and the plaintiffs want to "protect people in the future," Panish said. "Our clients have been through so much tragedy, they don't want this to happen to anybody else." GM attorneys said the accident was solely the fault of the driver who hit Ms. Anderson's car and that the Malibu was among the safest vehicles on the road from that time. "This vehicle saved the lives of those six people," said GM attorney Richard Shapiro. In the letter to Smith, Panish said the plaintiffs would fight any reduction in punitive damages if GM does not accept the settlement. "You will have made it clear to everyone, including the court, that even $ 4.8 billion is not quite enough to get a corporation of your wealth to change its conduct," Panish wrote. The gas tank in the 1979 Malibu and similar vehicles was too close to the rear bumper and could have been placed in a safer position over the axle or protected by a shield at minimal cost, the plaintiffs said. GM attorneys said the engineers who designed the vehicle determined that putting the gas tank behind the axle, as it was on the Malibu, was a safer design. (The Associated Press 8-26-1999) HOLOCAUST VICTIMS: Jews Urge Schroeder To Intervene To Speed Deal ----------------------------------------------------------------- A Jewish organization urged German Chancellor Gerhard Schroeder on Thursday to intervene in talks on German firms' compensation for Nazi-era slave laborers. The Jewish Claims Conference, which administers various compensation payments to Holocaust victims, said its chief negotiators requested Schroeder's help to speed a deal on a fund for slave and forced laborers. The German government had hoped to have details of the fund worked out by Sept. 1, the 60th anniversary of the start of World War II. But all sides have acknowledged the deadline would be missed because of the difficulty of the negotiations. ''We need somebody to intervene to help push it forward,'' said Alissa Kaplan, spokeswoman for the Claims Conference. ''Survivors are dying every day. The longer we wait, the people who deserve some form of compensation the most won't be around to see it.'' Thursday's talks were the last before the proposed deadline lapses, but Schroeder is to meet with industry representatives Sept. 6. ''I hope that will be the day the chancellor will take his promise to deal with the matter seriously,'' said Israel Singer, chief negotiator for the Claims Conference. The demand for Schroeder's involvement came ahead of a session bringing together more than 90 representatives met from the myriad sides to the dispute: Jewish groups, class-action lawyers, the companies and government representatives. The U.S. and German governments are mediating the talks. Also at the table were the governments of Israel and central European nations where former slave and forced laborers now live: Belarus, the Czech Republic, Poland, Russia and Ukraine. Negotiators trying to reach agreement on who would be eligible for compensation and for what amount were cautious on predicting any breakthrough heading into the session, held around an immense oval table at a Foreign Ministry building in Bonn. ''The group is too large to expect to find solutions for the salient problems,'' said Wolfgang Gibowski, spokesman for the planned industry fund. The 16 companies in the talks including leading German firms such as BMW, Siemens, Volkswagen and Deutsche Bank want to be guaranteed immunity from future lawsuits over the slave labor issue. The companies proposed the idea of the fund last year under pressure of class-action lawsuits in the United States. Gibowski said despite some progress, there still was no agreement on how an immunity agreement would proceed. This round of talks is the first to open discussion of how much money claimants would be eligible to receive. No figures have been disclosed, but New York lawyer Ed Fagan, representing former slave laborers, said numbers were being floated. Germany has already paid more than dlrs 54 billion to Holocaust victims for their suffering, but said the question of compensation for slave laborers was up to the companies. (AP Worldstream 8-26-1999) HOLOCAUST VICTIMS: Nazi Slave Britons In Battle For Payment ----------------------------------------------------------- British Jews who worked as slave labourers in Nazi Germany have condemned the behaviour of German negotiators at this week's compensation talks in Bonn. "They don't seem to feel they owe us anything," said Rudy Kennedy, from London, who attended the latest round of talks which ended yesterday with the two sides still far apart. Mr Kennedy, who spent two years in the Second World War as a slave labourer with I G Farben at Auschwitz and later worked in the V2 rocket works at Dora, represents more than 200 members of a British group called Claims for Jewish Slave-Labour Compensation. He was appalled by the German negotiators' attitude. "[They] behaved to my mind in a most terrible way," he said. "They feel they're doing us a big favour in offering us anything at all." Seventeen of Germany's biggest firms are jointly trying to negotiate an out-of-court settlement with their former forced labourers, of whom up to 2.3 million are thought to be still alive out of an original total of 10 million. The firms, including BASF, Bayer, BMW, Daimler Chrysler, Krupp, Siemens and Volkswagen, as well as the Deutsche and Dresdner banks, have come under intense pressure to reach a deal because of class actions begun by ex-slave labourers in American courts. These could lead to huge awards unless an out-of-court settlement is reached. Lothar Evers, a German campaigner, accused the firms of showing "an entire lack of sensitivity towards the victims", and of wanting to limit payments to those who lived in guarded camps or closed ghettoes. The average age of the former forced labourers is nearly 80, with many of them older than that, and the fear is that, if the companies continue to put off a settlement, many more of them will have died before any resolution. The companies consider they have a duty to their present shareholders and to the workers who built them up after the war to avoid entering into open-ended financial commitments for crimes committed generations ago. Negotiations are likely to resume in Washington in early October. (The Daily Telegraph(London) 8-27-1999) HOLOCAUST VICTIMS: Russia Nazi-Era Slaves Sue German Companies -------------------------------------------------------------- Russians enslaved by the Nazis filed what was believed to be the first class-action suit from that country seeking damages from the German and Austrian firms they worked for, lawyers said. The lawsuit joins a number of other actions filed against German companies by former slave and forced laborers who live in the United States and European countries, which seek about $18 billion in damages. The new lawsuit was filed during the middle of negotiations in Bonn which aim to put an end to future suits. The talks are trying to resolve a way for German companies to pay compensation through a new fund and in return get a guarantee they will not face any new suits like the one filed Wednesday. The latest class action was filed in the U.S. District Court for the District of New Jersey, by Kenneth McCallion, a New York-based attorney, who has filed other such actions. The Russian Holocaust survivors want reparations for their own suffering as well as that of children, from infants to 16 years old, who were allowed to live only as long as they could work. "If these children showed the slightest resistance or any signs of illness and exhaustion at their tasks, they were killed with a blunt object, as Nazi practices dictated that children were not worth the expenditure of any army supplies, even a bullet," the lawsuit charged. No specific dollar amount was sought in damages. "We're looking for an accounting," McCallion said. The sorts of companies where the so-called name plaintiffs -- the individual Holocaust survivors who are suing the German and Austrian companies -- were compelled to toil ranged from aircraft and munitions plants to a brewery and and a food processing firm, according to the copy of the lawsuit provided Reuters by McCallion. There had been considerable speculation that a class-action suit from Russia soon would be filed. It was expected to be one of the biggest because so many people from the former Soviet Union were forced to work as slave and forced laborers. Slave laborers were meant to be worked to death and forced laborers were not. Asked how big the potential class of former slave and forced laborers was, McCallion, replied: "Certainly in the tens of thousands. We have one thousand people in St Petersburg who have signed agreements (to be represented by his firm.)" "Upwards of two million Russians were used in (forced) labor," he added, in a telephone interview with Reuters. "By the end of October, 1941, over 660,000 Soviet POWs were used in Germany's slave labor programs in the most appalling, oppressive and degrading of conditions," he said, in a prepared statement. (Reuters) PROVOST UMPHREY: Former Non-Equity Partner Sues Over Fee Disbursement --------------------------------------------------------------------- former non-equity partner with Beaumont's Provost Umphrey wants a cut of the $ 3.3 billion in fees that Walter Umphrey is sharing with four other lawyers who represented the state in its suit against the tobacco industry. Sonya Coffman, who worked in the firm's asbestos department, also alleges in a suit filed July 1 in federal court that she was sexually harassed and that the environment at the firm made it clear that compensation and advancement "were dependent upon quid pro quo of a sexual nature." Coffman contends the firm breached its fiduciary duty to her and other non-equity partners by forming a separate firm, Provost Umphrey Tobacco, to disburse the tobacco fees. An equity partner at Provost Umphrey has said the fees were distributed among the equity partners based on their financial stake in the firm, but that other members of the firm are getting bonuses based on their work. [See "Share and Share Alike," Texas Lawyer, March 15, 1999, page 28.] According to Coffman's lawyer, Keith Verges, of Dallas' Figari & Davenport, Coffman is also alleging that the firm's profits may have been improperly calculated, but he would not give further details. Umphrey declines comment, referring questions to the firm's lawyer, Larry Germer, of Beaumont's Germer & Gertz, who could not be reached. Verges says he and Germer are scheduled to meet and talk potential settlement soon. The suit is pending before U.S. District Judge Richard Schell of Beaumont, Verges says. (Texas Lawyer 8-16-1999) SABRATEK CORP.: Milberg Weiss Will File Second Amended Securities Suit ---------------------------------------------------------------------- The following was released by Milberg Weiss Bershad Hynes & Lerach LLP: At a court hearing on August 25, 1999, Lead Counsel Milberg Weiss Bershad Hynes & Lerach LLP in the original pending securities fraud class action (No. 99-C-0351) filed earlier this year against Sabratek Corporation (NASDAQ: SBTKE) was granted leave by the United States District Court for the Northern District of Illinois to file a Second Amended Complaint for violations of the federal securities laws against Sabratek. The action was commenced in January 1999 and an amended complaint was filed on June 7, 1999, which alleged that Sabratek and certain of its officers and directors had committed securities fraud by, inter alia, improperly reporting artificially inflated revenue in violation of GAAP and by failing to disclose other improprieties relating to its sales practices. The second amended complaint will allege a common, continuous course of misconduct during the extended class period, which will include all class periods in all pending related actions, and will constitute the most inclusive such class period. Contact Steven G. Schulman, William C. Fredericks or Michael A. Swick at Milberg Weiss at One Pennsylvania Plaza, 49th Floor, New York, New York 10119-0165, or by telephone 1-800-320-5081, or via e-mail: endfraudmwbhl.com or visit the firm's website at http://www.milberg.com TICKERS: NASDAQ:SB SUGARMAN AUCTIONEERS: Pleads Guilty In Miami Ct To Embezzling From FDIC ----------------------------------------------------------------------- Jay Sugarman and Jay Sugarman Auctioneers of North Miami Beach last week pleaded guilty in federal court in Miami to charges of embezzling a total of $118,130 from the proceeds of auctions the firm conducted for the Federal Deposit Insurance Corp. in the early 1990s, the FDIC said. The FDIC, as receiver of FDIC-insured banks, manages and sells the banks' assets, including furniture, fixtures and equipment, through actions and other means. The FDIC said it had contracted with Sugarman and Jay Sugarman Auctioneers to organize and conduct various auctions and sales in the Miami area and elsewhere from September 1990 through February 1992. Sugarman pleaded guilty to a misdemeanor charge that he embezzled less than $1,000 from proceeds of an auction in February 1992. He entered a plea on behalf of Jay Sugarman Auctioneers, a division of American Auctioneers of North Miami Beach, to a felony charge that the company embezzled $118,130 from the proceeds of a series of auctions the firm conducted for the FDIC from September 1990 through February 1992. The FDIC said that that Sugarman and the firm submitted fraudulent recaps of the auctions, substantially misrepresenting and underreporting the total proceed received from each auction and sale. Jay Sugarman was on vacation in Switzerland and could not be reached for comment. Sentencing is scheduled for Nov. 2, in Miami. (Newshound) U.S. NAVY: Ap. Ct. Remands Case Over Default Termination of Contract -------------------------------------------------------------------- The A-12 contract was a fixed-price incentive contract for the full-scale development and initial production of the Navy's new carrier-based Advanced Tactical Aircraft. The Navy terminated the company's A-12 aircraft contract for default. Both the company and McDonnell Douglas, now owned by the Boeing Company, (the contractors) were parties to the contract with the Navy, each had full responsibility to the Navy for performance under the contract, and both are jointly and severally liable for potential liabilities arising from the termination. As a consequence of the termination for default, the Navy demanded that the contractors repay $1,352 in unliquidated progress payments, but agreed to defer collection of the amount pending a decision by the U.S. Court of Federal Claims on the contractors' challenge to the termination for default, or a negotiated settlement. The contractors filed a complaint on June 7, 1991, in the U.S. Court of Federal Claims contesting the default termination. The suit, in effect, seeks to convert the termination for default to a termination for convenience of the U.S. government and seeks other legal relief. A trial on Count XVII of the complaint, which relates to the propriety of the process used in terminating the contract for default, was concluded in October 1993. In December 1994, the court issued an order vacating the termination for default. On December 19, 1995, following further proceedings, the court issued an order converting the termination for default to a termination for convenience. On March 31, 1998, a final judgment was entered in favor of the contractors for $1,200 plus interest. The U.S. government filed an appeal from the trial court's ruling in the U.S. Court of Appeals for the Federal Circuit. On July 1, 1999, the Court of Appeals found that the trial court erred in converting the termination for default to a termination for convenience without first determining whether a default existed. The Court of Appeals remanded the case for determination of whether the government's default termination was justified. The Court of Appeals stated that it was expressing no view on that issue, and it left the parties the opportunity to fully litigate that issue on remand. The company continues to believe that the government's default termination was improper, both as to process (the basis relied upon by the trial court) and because the contractors were not in default. The company continues to believe that at a full trial it will be able to demonstrate that the default termination was not justified and that the termination for default will be converted to a termination for convenience. If the company is successful in such a new trial, it could result in the same, a lesser or a greater award to the contractors. The company has fully reserved the contracts in process balance associated with the A-12 program and has accrued the company's estimated termination liabilities and the liability associated with pursuing the litigation through the appeals process and remand proceedings. In the event that the contractors are ultimately found to have been in default under the A-12 contract and are required to repay all unliquidated progress payments, additional losses of approximately $675, plus interest, may be recognized by the company. The company believes the possibility of this result is remote. YASHIN: Senators Fans Threaten To Sue Yashin, Alleging Greediness ----------------------------------------------------------------- An Ottawa businessman has issued an ultimatum to Senators captain Alexei Yashin on behalf of season ticket-holders -- play hockey or we sue. "We think it's wrong what he's doing," said Len Potechin. Hockey fans have been patient in two previous contract disputes between Yashin and the Senators, said Potechin. "The third time, there's no understanding. He's just greedy." So Potechin, aided by friend and lawyer Arthur Cogan, has set the wheels in motion for a lawsuit against Yashin for breach of contract. After hearing from Yashin's agent that the star forward won't play this season because he is unhappy with his $3.6-million contract, the disgruntled fans moved into action. "Bingo, we said," said Potechin, a Senators season ticket-holder since the team's first season in 1992. "If he's not available, we won't sit back and take it. We put out money in good faith." On Wednesday, Cogan sent a letter to Yashin stating that his holdout will put him in breach of contract with the season ticket-holders. "You have been quoted to have stated that you only must think about yourself. However, let me remind you that there are thousands of season ticket-holder who have committed serious funds in contemplation of your fulfilling your contract," the letter said. If Yashin doesn't show up for the first game, Cogan says he will file for a certification of the class action. Yashin might then be served with an action. The player would have to file a defense and answer questions under oath. "I think this might serve as a wakeup call for other athletes in a similar position who refuse to honor their contract," said Cogan. Yashin, training in Florida with a some other Russian players, said he wasn't worried. "Whatever they do, it's fine with me. It's a free country, they can do whatever they want to do," he said. (From Ottawa (AP) Delivered By Newshound) ********* 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. 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