/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/990930.MBX C L A S S A C T I O N R E P O R T E R Thursday, September 30, 1999, Vol. 1, No. 167 Headlines ANTS SOFTWARE: Cleared Of Suit By Shareholders Short-Selling Illegally ASBESTOS LITIGATION: Hyde Issues Statement on Legislation ASSOCIATES CONSUMER: Penn Ct Dismisses Suit; Usury Law Can’t Be Used CARNEGIE INT’L: Replaces Accounting Firm; Securities Suit Pending CASINO DATA: Final Ct Approves Of Settlement For Securities Suits COCA-COLA: Submits Some Documents In Employees Racial Bias Suit CORPORATE EXPRESS: Pursues Settlement For Shareholders Suit In Colorado HEALTH MANAGEMENT: Will Continue To Contest Securities Suit In NY HEALTH MGT: HHL Promissory Note Holders Sue In NY Over Fiduciary Breach HMOs: ABC News Coverage On New Law In CA For Patients To Sue HOLOCAUST VICTIMS: German Official Denies Report On Slave Labor Fund HUDSON TECHNOLOGIES: NY Ct Dismisses Securities Suit INNISFIL COUNCIL: Canadian Resident Wages Class Suit Over Waste Plant KUTAK ROCK: Law Firm Sued By Schools In Penn Over Fraud In Investments OSICOM TECHNOLOGIES: Will Defend Vigorously Securities Suit In CA PETSMART INC: Arizona Ct Grants Motion To Dismiss Securities Suit PETSMART INC: Trial On FLSA Case In Florida Scheduled For Dec 1, 1999 PRUDENTIAL INSURANCE: Judge Sanctions Attorney In Sales Practices Suit STEWART ENTERPRISES: Kohn, Swift Files Securities Suit In Louisiana SYSTEM SOFTWARE: Illinois Appellate Ct Affirms Settlement For Suits * How Local Congress Members Voted On Gun Suits And Tobacco Suits ********* ANTS SOFTWARE: Cleared Of Suit By Shareholders Short-Selling Illegally ---------------------------------------------------------------------- On May 9, 1986 the Company (formerly Chopp Computer Corp/De/) was advised that a class action suit had been filed against the company for $400,000,000.00 by a shareholder. Subsequent events determined that the action had been initiated by the accountant of an ex-IRS attorney by the name of Alexandr Laurins. Mr. Laurins in association with Lawrence Merryman, an attorney from Orange, California and Nash Dowdle, an oil promoter from Midland, Texas had decided that the plans of Chopp to build a new supercomputer were a pipe dream and in fact part of a stock scam. Unknown to the company Mr. Laurins was already under investigation by the FBI and the SEC for among other things, selling $150,000,000.00 of non-existent shipping containers as tax shelters. The class action mentioned above became the center-piece of an Investment Advisory Letter, called the Durant Livermore Cutten & Bliss Report which was mailed to all of the shareholders of the company whose names had been listed with the SEC when the company had filed its SEC 12(g) exemption, as well as brokers all over Canada and the U.S. The newsletter was in fact prepared and distributed by Laurins from his office on Union Street in San Francisco, and was filled with lies and mis-information about the Company. Laurins printed 10 or 11 issues up to June 30, 1986. Laurins, Merryman & Dowdle had made illegal short sales of approximately 100,000 shares of the company for approximately $ 1.25 million, without borrowing the shares to offset their short position. The stock price did not go down as they had anticipated so they manufactured the bogus newsletter to help things along. This all became apparent when the Secretary-Treasurer of the company was approached and was advised by Mr. Dowdle that the matter could be resolved if a meeting could be arranged between the Secretary-Treasurer and the three conspirators. It took about three weeks to arrange for a meeting in San Francisco to take place on June 26, 1986. Once the meeting had been arranged the Company's attorney contacted the FBI and arranged for the Secretary-Treasurer to be wired, but only after convincing the FBI that the only purpose of the meeting was to attempt to extort the 100,000 shares that the three were illegally short. The meeting took place in the Presidio where Laurins, Merryman and Dowdle did, in fact do exactly that. The entire conversation was recorded and was the basis for the Company being awarded a $30,000,000.00 RICO award, jointly and severally against the three conspirators. Unfortunately the court system moved very slowly as the case did not come to court to be resolved until September, 1990. The victory saved the reputation of the Company, but legal fees ate up everything recovered to date. During the years waiting to resolve this legal issue the Company struggled through on two Government Grants, developing potential products for the U.S. Navy. Nothing commercial was developed from this work. While the Company’s work was on hold the computer industry, particularly the personal computer industry was expanding rapidly, driven by Intel with its faster chips and Microsoft providing the software which further fueled the growth. During this period nobody was giving any thought to parallel computers, the basis of the Company’s patents and existence. The company was able to maintain its patent and in fact was granted U.S. Patent 4,707,781 on November 17, 1987 on Shared Memory Computer Method and Apparatus. Another U.S. patent Number 5,438,680 was issued on August 1, 1995 entitled Method and Apparatus for Enhancing Concurrency in a Parallel Digital Computer. In January, 1993 the Company sold a license to develop and market a software product to Mosaic Multisoft Corp. a Nevada Corporation based in San Diego. The payment schedule was not met and the license was cancelled in 1995. ASBESTOS LITIGATION: Hyde Issues Statement on Legislation --------------------------------------------------------- House Judiciary Committee Chairman Henry Hyde issued the following statement regarding his ongoing efforts to resolve the national judicial crisis stemming from the backlog of Asbestos personal injury claims: "The liability created by asbestos litigation has transcended any other mass tort in the history of the United States. More than twenty billion dollars in compensation has already been paid to victims by various companies, and more than 200,000 claims are still pending. Furthermore, over fifteen companies have filed for bankruptcy and over 400,000 additional claims are pending against the Manville Trust. Meanwhile, the victims who are being compensated are still paying contingency fees, although almost all asbestos claims are being settled out of court. "Unsuccessful, massive class action settlements which would have resolved both the enormous backlog of asbestos claims, as well as future asbestos claims, have led the Supreme Court to repeatedly call for congressional action. In the private sector, Owens Corning has led the way with an innovative private settlement plan to manage its asbestos responsibility and compensate over 200,000 victims. Future claims are being resolved administratively without litigation. A program such as this will allow industry to continue to grow, supporting our nation by employing American workers and continuing to make an important contribution to our communities. "I am committed to resolving this litigation crisis once and for all. Private solutions, like the one established by Owens Corning, will not be adversely affected by any legislation. The Committee will be holding meetings with the interested parties to redraft a bill which will be ready for mark up in the near future. This bill will provide a fair and an efficient compensation program for victims, and create a predictable and manageable financial future for defendant companies. I believe the bill will receive bipartisan support which is essential to its passage." (Source: U.S. House of Representatives Committee on the Judiciary; Contact: Sam Stratman or Michael Connolly, 202-225-2492, for the U.S. House of Representatives Committee on the Judiciary) ASSOCIATES CONSUMER: Penn Ct Dismisses Suit; Usury Law Can’t Be Used -------------------------------------------------------------------- Philadelphia lawyers defending a finance company used an affidavit from the drafter of the state's 1974 usury law to help persuade a judge to dismiss a plaintiff's lawsuit. The result, according to lawyers at Reed Smith Shaw & McClay, was the first written opinion in Pennsylvania holding that a class action may not be brought under the commonwealth's usury statute. "As the defendants clearly show, through their recounting of the usury statute's legislative history, class actions are not authorized," wrote Judge William R. Carpenter of the Montgomery County Common Pleas Court. The plaintiff in Sees v. Associates Consumer Discount Co. had obtained a personal loan and credit insurance from the defendant and its affiliate insurance company. The money went to purchase a truck and enroll in a truck-driving job-placement program. After becoming unhappy with the job-placement program, the plaintiff sought legal advice. His attorneys then turned their attention to the loan agreement, according to the judge's opinion. Subsequently, the plaintiff sought class certification, alleging, inter alia, that the loan charges were improperly calculated in violation of the usury statute, commonly known as Act 6 or the Loan Interest Protection Law. To help convince the court that the 25-year-old legislation was not intended to provide class action relief, Reed Smith partners Robert A. Nicholas and Leonard A. Bernstein enlisted the aid of Lawrence J. Beaser. Beaser, a partner at Blank Rome Comisky & McCauley, drafted the law while serving as counsel to then-Gov. Milton J. Shapp. Beaser's affidavit explained that the bill, as originally proposed by the Shapp administration, provided the right to bring a class action. This provision, however, was quickly and expressly rejected by the state Senate, he stated. Neither was this revision restored when the bill underwent three more revisions, Beaser stated. The Legislature, Beaser's affidavit concluded, "has specified that actions brought under Act 6 may be brought only as individual actions and may not be brought as class actions." The judge found that, although Beaser's affidavit was "not binding on this court," its explanation of the bill's history "is instructive of the legislative intent behind the usury statute." An affidavit from the legislation's author "is not readily available from traditional legal research sources," acknowledged Nicholas. Beaser's affidavit provided "an insight which the court couldn't ignore," Bernstein said. The affidavit, as well as the plain language of the usury statute, was relied upon by Reed Smith associate Sean M. Halpin in briefing the argument against class certification. Plaintiff's attorneys Mark R. Cuker and Jay S. Cohen declined comment. (The Legal Intelligencer 9-29-1999) CARNEGIE INT’L: Replaces Accounting Firm; Securities Suit Pending ----------------------------------------------------------------- Carnegie International disclosed that it has fired its accounting firm, Grant Thornton, LLP, and has replaced them with Merdinger, Fruchter, Rosen & Corso, PC, which has begun auditing Carnegie's prior financial statements for the fiscal years 1997 and 1998; the audit is expected to also cover Carnegie's 1999 financial statements. Carnegie's President and CEO Lowell Farkas had previously stated that the company would restate its financial results for 1997 and 1998 upon completion of the Securities and Exchange Commission's review of its financial statement filings. Pomerantz Haudek Block Grossman & Gross LLP was recently named co-lead counsel, along with Wolf Haldenstein Adler Freeman & Herz, LLP, in a class action suit against Carnegie International Corp. (Amex: CGY) and certain of its officers and directors. The complaint alleges that Carnegie issued materially false and misleading financial statements, as well as false and misleading statements about the Company's operations and business prospects. It is also alleged that Carnegie was in violation of generally accepted accounting principles ("GAAP") in accounting for its acquisitions in 1997 and 1998. The Complaint alleges that, as a result of these and other false and misleading statements, the market price of Carnegie stock was artificially inflated during the Class Period, October 28, 1998 through April 30, 1999 (inclusive). If you wish to discuss this action or have any questions or relevant information, please contact Andrew G. Tolan, Esq. of the Pomerantz firm at 888-476-6529 (or 888-4-POMLAW), toll free, or at agtolan@pomlaw.com by e-mail. Those who inquire by e-mail are encouraged to include their mailing address and phone number. CASINO DATA: Final Ct Approves Of Settlement For Securities Suits ----------------------------------------------------------------- Casino Data Systems (Nasdaq: CSDS) announced that the Nevada Federal District Court in Gary Edwards v. Casino Data Systems gave its final approval to the settlement of the securities class action lawsuits, as previously reported by the Company. The Court will enter a final judgement that will have the effect of terminating all pending securities litigation actions filed against the Company. Those actions are styled Gary Edwards v. Casino Data Systems, et al.; Jo Ann Giovannoni v. NationsBank Montgomery Securities, et al; James Grant v. Casino Data Systems, et al, and Barry Schwartz as Trustee of the Barry Schwartz Pension Plan v. Casino Data Systems, Inc. et al. Settlement proceeds will be distributed to qualified applicants pursuant to the terms of the settlement. Casino Data Systems is a Las Vegas-based designer, manufacturer and distributor of state-of-the-art technology-driven products for the gaming industry. The Company's diversified product line reaches into virtually all facets of the casino floor, including slot management systems, games and meters, multiple site progressive systems and casino signage. SOURCE Casino Data Systems CONTACT: Lee Lemas, Chief Operating and Financial Officer, 702-269-5000, or Bruce W. Benson, Esq., General Counsel, 702-269-5000, both of Casino Data Systems COCA-COLA: Submits Some Documents In Employees Racial Bias Suit --------------------------------------------------------------- Coca-Cola Co. has turned over nearly 37,000 pages of documents to the plaintiffs in a racial discrimination lawsuit but has a legal right to withhold 93 disputed documents, company attorneys said. The Atlanta-based beverage giant also said it has offered to make available more than a million additional pages of relevant documents for the plaintiffs' attorneys to review if they choose to. Coca-Cola made the calculations in its formal challenge to the plaintiffs' effort to see the 93 documents. The plaintiffs said they are seeking the documents because they are potentially incriminating to the company. "The documents defendant is withholding likely contain evidence that senior company officials had knowledge of and failed to prevent ... barriers to equal employment opportunity," the plaintiffs alleged in their motion to obtain the documents. That motion was filed last month. The plaintiffs said Coca-Cola has engaged in the "selective production" of favorable documents, while incorrectly withholding unfavorable ones. But Coca-Cola denied this, saying the company is legally entitled to withhold the disputed documents. "An uninformed reader might conclude from plaintiffs' motion that Coca-Cola has been unreasonably stingy in its (document) production, jealously guarding even the most fundamentally discoverable documents. ... Nothing could be further from the truth," the company said. U.S. District Judge Richard Story will decide the issue after considering several legal principles, including whether the company can keep certain communications with its lawyers confidential. Four current and former employees filed a federal suit in April, alleging that the company discriminated against African-American workers in pay, promotions and performance evaluations. The company has denied those allegations. The plaintiffs are seeking class-action status so they can represent 1,500 other black salaried employees in the United States. (The Atlanta Journal and Constitution 9-28-1999) CORPORATE EXPRESS: Pursues Settlement For Shareholders Suit In Colorado ----------------------------------------------------------------------- On or about July 20, 1999 and subsequently thereto, Corporate Express Inc. and each of the members of its Board of Directors were sued by certain individual shareholders in four separate class action lawsuits which are being consolidated in Colorado State Court, Boulder County. The shareholders have alleged that the Company's merger with Buhrmann is unfair and a breach of fiduciary duty of the Company's Board of Directors, which will result in damages to the shareholders. The Company believes the claims are without merit and is pursuing a prompt settlement which it does not expect to be material. Additionally, the Company is subject to certain legal proceedings in the normal course of business. In the opinion of management, the outcome of such litigation will not have a material adverse effect on the Company's financial position or operating results. HEALTH MANAGEMENT: Will Continue To Contest Securities Suit In NY ----------------------------------------------------------------- In April and May 1997, five purported class action lawsuits were commenced in the United States District Court for the Southern District of New York against Health Management Systems Inc. and certain of its present and former officers and directors alleging violations of the Securities Exchange Act of 1934 in connection with certain allegedly false and misleading statements. These lawsuits, which sought damages in an unspecified amount, were consolidated into a single proceeding captioned In re Health Management Systems, Inc., Securities Litigation (97 CIV-1965 (HB) and a Consolidated Amended Complaint was filed. Defendants made a motion to dismiss the Consolidated Amended Complaint, which was submitted to the Court on December 18, 1997 following oral argument. On May 27, 1998, the Consolidated Amended Complaint was dismissed by the Court for failure to state a claim under the federal securities laws, with leave for the plaintiffs to replead. On July 17, 1998, a Second Consolidated Amended Complaint was filed in the United States District Court of the Southern District of New York, which reiterates plaintiffs' allegations in their prior Complaint. On September 11, 1998, the Company and the other defendants filed a motion to dismiss the second Complaint. The motion was fully briefed in late November 1998, at which time the motion was submitted to the Court. The consolidated proceeding has been reassigned to another judge. Oral argument was heard by the Court on the motion to dismiss on June 11, 1999 and the motion is now sub judice. Prior to rendering its decision on the motion to dismiss, the Court has ordered the parties to attempt settlement of the case. In the event no settlement is reached and the motion to dismiss is denied, the Company intends to continue its vigorous defense of this lawsuit. HEALTH MGT: HHL Promissory Note Holders Sue In NY Over Fiduciary Breach ----------------------------------------------------------------------- On June 28, 1998, eight holders of promissory notes of HHL Financial Services, Inc. commenced a lawsuit against the Company and others in the Supreme Court of the State of New York, County of Nassau, alleging various breaches of fiduciary duty on the part of the defendants against HHL. The complaint alleges that, as a result of these breaches of duty, HHL was caused to make substantial unjustified payments to the Company which, ultimately, led to defaults on the Notes and to HHL's filing for Chapter 11 bankruptcy protection. On June 30, 1998, the same Note holders commenced a virtually identical action (the "Adversary Proceeding") in the United States Bankruptcy Court for the District of Delaware, where HHL's Chapter 11 proceeding is pending. The Adversary Proceeding alleges the same wrongdoing as the New York State Court proceeding and seeks the same damages, i.e., $2,300,000 (the unpaid amount of the Notes) plus interest. Plaintiffs have moved in the Bankruptcy Court to have the Court abstain from hearing the Adversary Proceeding in deference to the New York State Court action. The Company has opposed plaintiffs' motion for abstention and on September 15, 1998, filed a motion in the Bankruptcy Court to dismiss the Adversary Proceeding. This motion was briefed in December 1998. Oral argument on the motions was heard by the Court on April 22, 1999 and the motions are now sub judice. The Company intends to continue its vigorous defense of this lawsuit. HMOs: ABC News Coverage On New Law In CA For Patients To Sue ------------------------------------------------------------ Broadcast September 28, 1999 On ABC News PETER JENNINGS: The governor of California just signed into law one of the most comprehensive health care reform packages in the country. It gives HMO patients the right to sue their provider. A right the vast majority of people in managed care elsewhere do not have yet. Here's ABC's Brian Rooney. BRIAN ROONEY, ABC News: (voice-over) When California Governor Gray Davis signed the bundle of 20 health care reform laws, he said his intent was to give doctors and patients more power. Gov. GRAY DAVIS, (R), California: No longer will a "no" from a nameless, faceless bureaucrat on the other end of the phone line be the final word on medical care in California. BRIAN ROONEY: (voice-over) The new laws establish a system of independent review for patients denied care they believe is necessary. But most importantly, California has given 23 million of its residents the right to sue their HMO as a last recourse. MARK HIEPLER, Attorney: That's the ultimate hope of even people who do trial work like myself is that this will cause reform from within, so that the person who is dying and needing care will not be denied because an HMO is putting profits above their patients. BRIAN ROONEY: (voice-over) The laws were designed to help people like Nick Parrino, whose HMO delayed cancer treatments prescribed for his son, Steve, who later died. NICK PARRINO: It would make our lives easier knowing that he got every possible treatment that was available. And if he would have got it, maybe he would still be here. BRIAN ROONEY: (voice-over) California becomes only the third state to pass such HMO reform laws, behind Georgia and Texas. And some advocates point to Texas as a big success, because its insurance rates have not gone up and most disputes have been settled in arbitration. But with five lawsuits pending, the industry says don't celebrate yet. JERRY PATTERSON, Texas Association of Health Plans: It doesn't take much to have one of those lawsuits reach a $100 million plaintiff award, which would have a very negative effect on premiums and increase the number of uninsured. BRIAN ROONEY: (voice-over) Other legislatures may not wait to find out what happens in Texas. Thirty-three states are considering HMO reform. Brian Rooney, ABC News, Los Angeles. PETER JENNINGS: "On the Money" tonight -- a volatile day on Wall Street. At one point, the Dow Jones Industrial was down more than 200 points. It recovered to finish down more than 27 points, closing at 10,275. On the NASDAQ, stocks were down 5 1/2 points. HOLOCAUST VICTIMS: German Official Denies Report On Slave Labor Fund -------------------------------------------------------------------- A German official involved in forming an industry fund to compensate Nazi-era slave laborers denied a report that said business leaders had agreed to offer a total 5 billion marks ($ 2.7 billion/2.5 billion euros) when talks resume next week in Washington. ''That's pure invention,'' Michael Geier, chief aide to the German government envoy to the talks, Otto Lambsdorff, said of the report in the business daily Handelsblatt. Geier, who accompanied Lambsdorff on a preparatory trip earlier this week to Washington, said no figures were discussed and none would be until the next round of talks begins Oct. 6-7. Handelsblatt, citing unidentified sources with the German negotiators, said the 5 billion mark sum would be paid by German businesses and the federal government. The government so far has not said it would pay into the industry fund. The German firms have previously talked about paying less than $ 1.7 billion into the fund, far below the $ 20 billion that class-action lawyers reportedly have demanded. The latest round of negotiations ended without agreement last month in Bonn. Participants in the talks include the German and U.S. governments, German industry, Jewish groups, attorneys for former slave laborers and several East European countries. (AP Worldstream 9-29-1999) HUDSON TECHNOLOGIES: NY Ct Dismisses Securities Suit ---------------------------------------------------- United States District Court for the Southern District of New York Dismisses Claims Filed Against Hudson In 1998. Hudson Technologies, Inc., (NASDAQ: HDSN), a service provider to the comfort cooling and refrigeration industry, announced that the Federal Securities Law class action lawsuit filed in April 1998 by eight shareholders has been dismissed by the United States District Court for the Southern District of New York. The Company said that three of the five claims in the complaint were dismissed with prejudice and the remaining two were dismissed with leave to amend in 30 days. The Company, however, believes that the Court's reasoning in dismissing these two claims will make it difficult for the plaintiff to amend successfully. The complaints alleged, among other things, that the Company and certain of its officers misrepresented material information about the Company's financial results and prospects and its customer relationships. Founded in 1991, Hudson has proprietary technology that greatly reduces the downtime associated with maintaining, operating and repairing large chiller and reciprocating systems for comfort and process cooling. Contact Coltrin & Associates Troy McCombs or Eric Anderson 212/221-1616 INNISFIL COUNCIL: Canadian Resident Wages Class Suit Over Waste Plant --------------------------------------------------------------------- As shouts of ''Shame!'' filled the chamber last night, council voted 5-4 in favour of a waste plant to burn Toronto's garbage. Councillor Bill Pring, who put forward the motion to approve the $300 million plant, said Innisfil couldn't afford to miss the economic benefits the plant would bring. The town south of Barrie will need an extra $10 million for roads and other services in the next 10 years and ''it would be irresponsible to force a doubling of residential taxes'' by turning down the potential tax revenue from the plant, Pring said. ''I'm terribly disappointed. I think we had an obligation to listen to the public and that didn't happen,'' said Deputy Mayor Barbara Baguley. Mayor Brian Jackson objected to the vote taking place before the results of a telephone poll of residents on the issue are released Oct. 15. ''The process wasn't to my liking,'' said Jackson, who voted against the proposal. Pring's motion allows council to reconsider its decision should the poll indicate strong opposition to the plant, which would burn up to 550,000 tonnes of garbage a year - about 470,000 shipped from Toronto and 80,000 produced locally. Toronto recently approved a plan to seek ways to dispose of its waste after the Keele Valley landfill site closes in 2002. The council will report the town's support at Simcoe County Council's meeting when Agra Birwelco, the company that proposed the plant, makes a presentation. Agra needs the county's approval to proceed. The decision outraged resident Euan Ferguson. ''We will not stand still and let them do this to us; the procedure was incorrect. We'll go the OMB, and the county and start a class-action suit.'' (The Toronto Star 9-28-1999) KUTAK ROCK: Law Firm Sued By Schools In Penn Over Fraud In Investments ---------------------------------------------------------------------- A former junior associate at a national law firm, along with the firm's more than 100 partners, are defendants in a $ 70 million class action filed by a Philadelphia law firm on behalf of dozens of Pennsylvania school districts. The lawsuit, filed by by Fox Rothschild O'Brien & Frankel, alleges that the firm of Kutak Rock participated with a Pennsylvania investment adviser in victimizing school districts and municipalities through a massive Ponzi scheme. The investment adviser, John Gardner Black, had retained the Washington, D.C., office of Kutak Rock to act as legal counsel and to draft investment agreements and other documents used in the alleged fraud, according to the lawsuit. "I found out that the Kutak Rock attorney doing the primary work and supplying the legal advice was only a couple years out of law school," said David A. Gradwohl of Fox Rothschild. "The documents do not indicate that he was being supervised, although perhaps he was being orally supervised," said Gradwohl, a commercial litigator at Fox Rothschild's Lansdale office. The junior associate is no longer employed with Kutak Rock. Gradwohl filed the class action last Friday on behalf of named class representative Daniel Boone Area School District in Berks County. Both the law firm and the investment adviser received compensation based on a percentage of the amounts invested by the school districts and municipalities. The Berks County School District alone invested $ 18 million with Black. "They lost $ 10 million of the $ 70 million that is the subject matter of this lawsuit," said Gradwohl, whose firm serves as the school district's solicitor. The lawsuit does not name Black as a defendant. Black, who was based in Tyrone, Pa., already faces several lawsuits, including a separate class action. The Fox Rothschild lawsuit is the first class action filed against Kutak Rock. Toni Allen, administrative manager of human resources at Kutak Rock's Washington, D.C., office, was unavailable for comment. The 57-page complaint alleges that Kutak Rock was either aware of or consciously disregarded misrepresentations of facts when preparing paperwork for Black. Specifically, the class action's allegations against Kutak Rock include counts of negligent misrepresentation, fraud, aiding and abetting a fraud, aiding and abetting a breach of fiduciary duty, civil conspiracy and violation of the Pennsylvania Securities Act. Black solicited business through his companies, Devon Capital Management and Financial Management Services. "He invested the money the school districts gave to him in investments that he selected," said Gradwohl. "He was supposed to only invest in investments authorized by the Pennsylvania School Code, but he did not do that." Kutak Rock's involvement was that Kutak Rock advised him of the legality of what he was doing and also prepared all the documents, including the agreements which Daniel Boone School District signed with" Black's companies, Gradwohl said. The action was filed last Friday in Blair County, where there are a number of other lawsuits pending against Black, MidState Bank and others involved in the allegedly illegal investments. Kutak Rock, according to its Web site, has more than 250 lawyers in 13 offices, including New York and Pittsburgh. The complaint alleges that the firm's partners are liable for the work of the junior associate "under the doctrines of respondent superior and principal-agent and under the law of partnerships." OSICOM TECHNOLOGIES: Will Defend Vigorously Securities Suit In CA ----------------------------------------------------------------- The nine purported shareholder class action cases filed in the United States District Court for the Central District of California against the Company and certain present and former officers and directors have been consolidated by the court into a single case, and a consolidated complaint was filed on August 20, 1999. The consolidated complaint generally alleges that, during the purported class period, the defendants made false or misleading public statements related to a contract entered into by our Wireless Products division with a Japanese customer which caused the price of our common stock to be artificially inflated. The consolidated complaint asserts that the defendants' conduct violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5 promulgated thereunder. The consolidated complaint does not specify an amount of damages. We intend to defend the consolidated complaint and any other similar lawsuits vigorously. An unfavorable outcome in such litigation could have a material adverse affect on our financial condition and results of operations. PETSMART INC: Arizona Ct Grants Motion To Dismiss Securities Suit ----------------------------------------------------------------- On January 6, 1998, the Company was served with a complaint entitled Miller v. Parker, et al in the Federal District Court for the District of Arizona, Phoenix Division by a putative class of investors in PETsMART, Inc. securities. The lawsuit alleges, among other things, that the Company and its officers and directors issued materially false financial statements about the Company's flea and tick product inventory, financial condition, sales and use tax obligations, and results of operations. Several additional complaints by putative class representatives alleging substantially the same allegations have been filed in the District of Arizona. On May 18, 1998, the District Court entered an order consolidating the securities class action litigation into a single action entitled In Re PETsMART, Inc. Securities Litigation, CIV-98-20-PHX-ROS (JBM), and appointing lead counsel. On July 21, 1998, Plaintiff filed a consolidated amended complaint in the District Court. The Company and the individual defendants filed a motion to dismiss the consolidated amended complaint, and on June 3, 1999, the Court entered an order granting the motion to dismiss. Plaintiff's were given 60 days to amend the complaint but did not do so. The Company filed a request that the case be dismissed and an order dismissing the case with prejudice was entered on September 3, 1999. The Plaintiffs will have 30 days to file a notice of appeal. In the event of an appeal, the Company intends to oppose it vigorously. PETsMART operates superstores specializing in pet food, supplies and services in North America and the United Kingdom. At August 1, 1999, the Company operated 571 superstores, consisting of 456 superstores in the United States, 95 superstores in the United Kingdom, and 20 superstores in Canada. PETsMART's store base has grown rapidly since the Company's inception in 1986 through the opening of new stores and through the acquisitions of PETZAZZ in March 1994, Petstuff in June 1995, Pet Food Giant in September 1995, and Pet City in December 1996. Certain former Pet City affiliates have retained counsel and made allegations claiming that the Company misled the shareholders of Pet City at the time of the acquisition of Pet City concerning PETsMART's business, finances and prospects. On September 30, 1997, shortly after the receipt of the allegations by PETsMART, Richard Northcott, the former Chairman of Pet City, resigned as a director of the Company. No litigation has been filed with respect to this matter, and the Company believes that the allegations are without merit. Nevertheless, there can be no assurance that one or more former Pet City affiliates will not initiate litigation seeking monetary damages or an equitable remedy. PETSMART INC: Trial On FLSA Case In Florida Scheduled For Dec 1, 1999 --------------------------------------------------------------------- On March 28, 1998, a lawsuit was filed in Federal District Court in the Middle District of Florida entitled Cavucci et al v PETsMART, Inc. (Case No 98-CV-340). This class-action complaint alleges unspecified damages based on various alleged violations of the Fair Labor Standards Act (FLSA), including alleged failures to pay overtime premiums. On May 12, 1998, the Company answered the complaint denying all material allegations. The court entered an order of procedure and schedule for trial on July 20, 1998, which outlines all discovery and trial dates. On November 30, 1998, PETsMART filed four motions for partial summary judgment on Plaintiffs claim that four in-store management positions were improperly classified as exempt under FLSA. These motions were denied. On or about July 30, 1999, Plaintiffs filed a motion seeking Class Certification and Court-Supervised Notice to Potential Collective Action Members. The Company opposed the motion and the Court has the matter under review. Trial on this matter is currently scheduled for December 1, 1999, and the Company intends to continue to defend itself vigorously. PRUDENTIAL INSURANCE: Judge Sanctions Attorney In Sales Practices Suit ---------------------------------------------------------------------- A federal judge in Newark has approved sanctions against a Pittsburgh attorney whose efforts on behalf of a small number of plaintiffs delayed settlement of the mammoth sales-practices litigation against Prudential Insurance Co. Calling the lawyer's behavior "impracticable, hyper- technical and unreasonable," U.S. District Judge William Walls said that Michael Malakoff had "abused the privileges of practicing before this court." "His behavior since his arrival on the scene in this litigation has been deplorable," Walls wrote in a Sept. 14 opinion, affirming an earlier ruling by U.S. Magistrate Judge Joel Pisano. "Examples of this conduct are numerous and not a one-time lapse of judgment." Malakoff, of Pittsburgh's Malakoff Doyle & Finberg, represented plaintiffs in the Prudential Insurance Company of America Sales Practices Litigation, 95-4704 MDL No. 1061. Under an agreement forged last year, 8 million policyholders, who engaged in 10.7 million transactions during a 14-year period, were eligible for cash awards or reimbursement in the form of enhanced policies. The settlement, which Prudential says will cost $2.5 billion, was fashioned by U.S. District Judge Alfred Wolin and affirmed by the Third U.S. Circuit Court of Appeals and the U.S. Supreme Court over Malakoff's objections, including an unsuccessful recusal motion against Wolin. In his certiorari petition to the U.S. Supreme Court, Malakoff argued that the class created by Wolin did not adequately represent all policyholders who might have been defrauded. He further asserted that the settlement violated the principles of Amchem Products Inc. v. Windsor, 117 S. Ct. 2231 (1997), in which the Supreme Court frowned on the certification of overbroad national class actions. But on Jan. 11, the U.S. Supreme Court refused to grant certiorari. Pisano had recommended that Malakoff pay $100,000 in sanctions under 28 U.S.C. 1927 to lead plaintiffs' counsel Melvin Weiss for frivolous claims that delayed the case. Walls noted Pisano had failed to itemize the fees and costs associated with those claims and remanded for that purpose, though he observed that the $100,000 probably "falls short of the value of the work" Malakoff caused for Weiss, of New York's Milberg Weiss Bershad Hynes & Lerach. Walls also approved Pisano's recommendation that Malakoff be barred from being admitted pro hac vice in New Jersey if he is sanctioned again in the next five years. Malakoff says he will appeal to the Third Circuit. In July, when Pisano recommended the sanctions, Malakoff called the fine excessive, considering that Prudential was sanctioned only $1 million for allowing documents to be destroyed in the case. "To fine me 10 percent of what an $18 billion corporation is fined is grossly out of line," Malakoff said. Malakoff says the objections for which he was sanctioned were made to get as much money as he could for as many people as possible, in particular 9 million policyholders who did not submit claims but were affected by Prudential's illegal sales practices from 1982 to 1995. The settlement ended up covering 1.8 million plaintiffs in federal court. Malakoff first lodged his opposition to the way the case was handled when all the suits were consolidated in Wolin's court in 1996. Malakoff, who says the cases should have been handled in individual state courts, represented 20 plaintiffs who filed suits in state courts in West Virginia and Ohio. Malakoff also objected when Weiss began to arrange the settlement with Wolin and Prudential in 1996. Malakoff, who was not included in the discussions, filed a motion to recuse Wolin because, he alleged, the judge engaged in unauthorized ex parte communications with Weiss. Wolin denied the motion in December 1996, and the Third Circuit later agreed. Weiss then filed for sanctions against Malakoff under 28 U.S.C. 1927, which calls for penalties if an attorney causes unnecessary work for an adversary. In March 1997, Malakoff filed a similar motion against Weiss, arguing that Weiss' petition for sanctions against him were frivolous. A month later, Malakoff filed a second petition for sanctions against Weiss, this one under Rule 11. The Third Circuit denied both petitions. Malakoff didn't stop there. When Weiss moved for a $48 million fee award in November 1998, Malakoff opposed the request. Weiss moved for Rule 11 sanctions; in response, Malakoff moved for Rule 11 sanctions against Weiss. Weiss withdrew his motion for sanctions in January because he said he didn't want to hold up the settlement. But Malakoff filed his fourth request for sanctions against Weiss, alleging that the lead counsel violated 28 U.S.C. 1927 in his response brief to Malakoff's previous request for sanctions. In July, Pisano recommended sanctions under the federal statute against Malakoff, who argued that his motions had "a colorable basis in fact" and were not filed in bad faith. Pisano found that Malakoff's complaints against Weiss had no basis and were nothing more than sour grapes. He also said that any reasonable attorney would have understood that Wolin could engage in ex parte communications in a complex class action. Pisano also concluded that Malakoff's conduct showed a "pattern of obfuscation and mean-spiritedness." As an example, Pisano said, Malakoff moved in January 1997 for the disqualification of a fee examiner after having approved the examiner three months earlier. When Wolin denied the petition, Malakoff took his objection to the Third Circuit, which also denied it. Pisano said Malakoff repeatedly hurt Wolin's management of the case. In February 1997, Malakoff sought to review documents in the case and, instead of going to another attorney's office to read through the papers, demanded that parties give him charts summarizing the evidence. Pisano said, "Mr. Malakoff's incessant struggle with attorneys and this Court caused colossal time delays and monumental obstacles to the orderly settlement of the action." Walls stepped in to decide Malakoff's appeal of Pisano's decision when Wolin was conflicted out because some of the objections were directed at him. He said Malakoff's resistance to discovery delayed the case and warranted sanctions. Malakoff's conduct shows "evidence of vexatious litigation tactics and bad faith," Walls said. It is clear, he concluded, that Malakoff "takes an impracticable, hyper-technical and unreasonable approach to litigation." STEWART ENTERPRISES: Kohn, Swift Files Securities Suit In Louisiana ------------------------------------------------------------------- The following is an announcement by the law firm of Kohn, Swift & Graf, P.C. Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Eastern District of Louisiana on behalf of purchasers of Stewart Enterprises, Inc. (Nasdaq: STEI) common stock between December 15, 1998 and August 12, 1999. The complaint charges Stewart and certain of its officers and directors with violations of the federal securities laws. Among other things, plaintiff claims that the defendants issued materially false and misleading statements regarding the impact that negative trends in the death care industry were having on Stewart. If you purchased Stewart common stock between December 15, 1998 and August 12, 1999, and are a member of the class described above, you may, not later than October 22, 1999, move the court to serve as lead plaintiff of the class, if you so choose. In order to serve as lead plaintiff, however, you must meet certain legal requirements. If you wish to discuss this action, or have any questions concerning this notice or your rights or interests, please Contact Michael J. Boni, Esq. Kohn, Swift & Graf, P.C. 1101 Market Street Suite 2400 Philadelphia, PA 19107 (800) 275-4014 or (215) 238-1700 Email: mboni@kohnswift.com TICKERS: NASDAQ:STEI with your telephone number and mailing address included. SYSTEM SOFTWARE: Illinois Appellate Ct Affirms Settlement For Suits ------------------------------------------------------------------- In January 1997, class actions lawsuits against System Software Associates Inc. and certain of its officers were filed in state court in Illinois and in the federal court in Chicago, Illinois. The Company executed a settlement agreement with the class plaintiffs in the Illinois state court action. The presiding judge in the Illinois case approved the settlement on September 30, 1997. Certain individual objectors to the Settlement appealed the fairness of the settlement. On June 18, 1999, the Illinois Appellate Court affirmed the settlement of the state court class action. Plaintiffs did not seek leave to appeal to the Illinois Supreme Court. Accordingly, the state court action has concluded. The Company has filed a motion to dismiss in the Federal action, arguing that the claims in Federal court have already been settled in state court and are barred by the doctrine of res judicata. That motion is pending. * How Local Congress Members Voted On Gun Suits And Tobacco Suits Here's how some major bills fared recently in Congress and how local Congress members voted, as provided by Thomas' Roll Call Report Syndicate. NV means Not Voting. GUN SUITS For: 152 / Against: 277 The House rejected an amendment that sought to exempt suits against gun and ammunition manufacturers from a bill that shifts most class-action suits to federal courts. A yes vote was to keep existing class-action rules for gun suits. MARYLAND Yes No NV Bartlett (R) * Cardin (D) * Ehrlich (R) * Gilchrest (R) * Hoyer (D) * Cummings (D) * Morella (R) * Wynn (D) * VIRGINIA Yes No NV Davis (R) * Moran (D) * Wolf (R) * Bateman (R) * Bliley (R) * TOBACCO SUITS For: 162 / Against: 266 The House rejected an amendment to exempt cases against tobacco companies from a bill that would give federal courts jurisdiction over most future class-action suits. A yes vote was to retain state courts as the main venue for class actions against tobacco firms. MARYLAND Yes No NV Bartlett (R) * Cardin (D) * Ehrlich (R) * Gilchrest (R) * Hoyer (D) * Cummings (D) * Morella (R) * Wynn (D) * VIRGINIA Yes No NV Davis (R) * Moran (D) * Wolf (R) * Bateman (R) * Bliley (R) * ********* 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. Theresa Cheuk and Peter A. Chapman, editors. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *