/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/991201.MBX C L A S S A C T I O N R E P O R T E R Wednesday, December 1, 1999, Vol. 1, No. 211 Headlines ALEXEI YASHIN: Lawsuit by Season-ticket Holder Is ALive and Kicking AUTOZONE INC: Agrees to Settle with CA Hourly Workers over Rest Periods AUTOZONE INC: Vigorously Defending CA Workers' Suit over OT Pay BABY FORMULA: Sp Ct to Study Prices in Louisiana Case against 3 Cos. ECO SOIL: Denies Allegations in Securities Lawsuit FEN-PHEN: New Studies Show Fewer Problems HCA HEALTHCARE: DOJ Tries Consolidating Cases To Facilitate Settlement HOLOCAUST VICTIMS: Dutch Companies; Lawyers’ Fees – Reports from London HOLOCAUST VICTIMS: Survivors & Organizations Ok Swiss Bank Settlement JEFFERSON PILOT: Intends to Vigorously Defend Carol. Suits Re Policies LEAD PAINT: Maryland Homeowners' & Children's Suits Filed V. Industry MICROSOFT CORP: Journal Cites New Incentives To Settle Antitrust Suit MICROSOFT CORP: Journal Opins stiff Hurdles on Appeal against Antitrust MONSANTO CO: Lawyers Plan to Sue over Plant Patents & Marketing ONEOK INC: Reports on Contest with Southern Union over Southwest Merger PESTICIDE MAKERS: Seller Asks CA Sp Ct to Hear Dispute over Settlement SUMMIT TECHNOLOGY: Faces Fed & State Antitrust Suits Re Price-Fixing SUMMIT TECHNOLOGY: Faces Shareholders' Class & Derivative Suits in MA SUMMIT TECHNOLOGY: Fla. Suit over RICO Violations Dismissed & Amended TOBACCO LITIGATION: Makers Plan to Say Products Are Too Deadly for FDA WILLIAM SWEET: MA Jury Awards $ 8 Mil In Radiation Experiment Case * CCAA Court Approves Philip Services' Financial Reorganization * The Danger Of Misclassifying Workers ********* ALEXEI YASHIN: Lawsuit by Season-ticket Holder Is ALive and Kicking ------------------------------------------------------------------- Like the Simple Minds song, a breach of contract lawsuit launched by an Ottawa businessman against Alexei Yashin is Alive and Kicking. The delay in the class action suit filed by lawyer Arthur Cogan on behalf of season-ticket holder Len Potechin was largely due to the fact that it can be difficult to serve a person who is hiding out in Switzerland. At last, he has been found -- and served. The statement of claim names as defendants Alexei Yashin, Mark Gandler and International Sports Advisors Co. and seeks total damages, against all parties, in the amount of $ 27.5 million. According to the claim, Yashin now has 60 days to file a statement of defence. Should the Senators holdout continue his laissez-faire attitude and choose to ignore the summons, he runs the risk of having a judgment made against him in his absence "without further notice." Expect that to be the case, since Yashin never was one much for defence. (The Ottawa Sun Nov-30-1999) AUTOZONE INC: Agrees to Settle with CA Hourly Workers over Rest Periods ----------------------------------------------------------------------- Chief Auto Parts Inc. is a defendant in a class action lawsuit entitled "Doug Winfrey, et al. on their own behalf and on behalf of a class and all others similarly situated, v. Chief Auto Parts Inc. et al.," filed in the Superior Court of California, County of San Joaquin in August 1995 and then transferred to The Superior Court of California, County of San Francisco, in October 1995. In the complaint, the plaintiffs allege that Chief had a policy and practice of denying hourly employees in California mandated rest periods during their scheduled hours of work. The plaintiffs are seeking damages, restitution, disgorgement of profits, statutory penalties, declaratory relief, injunctive relief, prejudgment interest, and reasonable attorneys' fees, expenses and costs. On November 1998, the Superior Court certified the class as to all persons considered by Chief to be non-exempt hourly employees who, from August 1991, to the present, either work or did work in one of Chief's California retail stores, in excess of total work time of three and one-half (3.5) hours in any one work day and who were denied an off-duty rest break. In September 1999, the parties agreed to settle the suit. The settlement is subject to approval of the court and grants an option to each class member to exclude himself or herself from the class and allows each of them to file an independent action. AUTOZONE INC: Vigorously Defending CA Workers' Suit over OT Pay --------------------------------------------------------------- AutoZone, Inc., is a defendant in a purported class action lawsuit entitled "Melvin Quinnie on behalf of all others similarly situated v. AutoZone, Inc., and DOES 1 through 100, inclusive" filed in the Superior Court of California, County of Los Angeles, in November 1998. The plaintiff claims that the defendants failed to pay overtime to store managers as required by California law and failed to pay terminated managers in a timely manner as required by California law. The plaintiff is seeking injunctive relief, restitution, statutory penalties, prejudgment interest, and reasonable attorneys' fees, expenses and costs. The case is in early stages of pre-class certification discovery and therefore we are unable to predict the outcome of this lawsuit at this time. We are vigorously defending against this action. AutoZone, Inc., and Chief Auto Parts Inc. are defendants in a purported class action lawsuit entitled "Paul D. Rusch, on behalf of all other similarly situated, v. Chief Auto Parts Inc. and AutoZone, Inc." filed in the Superior Court of California, County of Los Angeles, in May 1999. The plaintiffs claim that the defendants have failed to pay their store managers overtime pay from March 1997 to the present. The plaintiffs are seeking back overtime pay, interest, an injunction against the defendants committing such practices in the future, costs, and attorneys' fees. In September 1999, the Court denied our motion to strike the complaint's request for class certification based on a prior case of Chief based on similar facts in which the class certification was denied. We appealed the Court's decision and the decision of the trial court was sustained and has been returned to the trial court. We are unable to predict the outcome of this lawsuit at this time, but believe that the potential damages recoverable by any single plaintiff against us are minimal. However, if the plaintiff class were to be certified and to prevail on all of its claims, the aggregate amount of damages could be substantial. We are vigorously defending against this action. BABY FORMULA: Sp Ct to Study Prices in Louisiana Case against 3 Cos. -------------------------------------------------------------------- The Supreme Court agreed on November 29 to study a lawsuit that accuses three companies of illegally conspiring to raise the price of baby formula. The justices said they will use the Louisiana case to clarify when some lawsuits filed in a state court can be moved to a federal court. Those who filed the Louisiana case in a state court say it wrongly was transferred to a federal court, where it then was dismissed. Robin and Renee Free sued in Louisiana court in 1993, accusing Abbott Laboratories, Bristol-Myers Squibb and Mead Johnson & Co. of conspiring to raise the price of baby formula. The lawsuit was filed as a class action and sought up to $20,000 in damages for each person affected by the higher prices. The three companies had the case moved to federal court, but the Frees argued that the amount of their claim did not meet the $50,000 minimum required at the time for federal court jurisdiction in such cases. The minimum has since been raised to $75,000. The 5th U.S. Circuit Court of Appeals ruled in 1995 that the case belonged in federal court. Because the Frees would be entitled under Louisiana law to collect any attorneys' fees awarded in the case, they could recover more than $50,000, the appeals court ruled. A 1990 federal law lets federal courts rule on the other class members' claims even though they did not meet the $50,000 minimum, the appeals court added. Both sides later reached a $4.3 million settlement, but a federal judge threw it out on grounds the settlement had not been proven fair to most class members. The federal trial judge then dismissed the case, saying Louisiana antitrust law did not allow price-fixing lawsuits by people who only indirectly bought a product from a manufacturer. The 5th Circuit court earlier this year upheld that ruling. In the appeal acted on November 29, the Frees' lawyers argued that the 5th Circuit court's 1995 ruling would shift many cases from state courts to federal courts even though they do not meet the minimum dollar figure. The appeal said the 1990 federal law did not change a longstanding requirement that each person meet the minimum before cases involving parties from different states can be handled in federal court. The baby formula companies' lawyers said the 5th Circuit court correctly ruled that the 1990 law allows federal courts to rule in such cases even when some claims do not meet the minimum. The case is Free vs. Abbott Laboratories, 99-391. (AP Online Nov-29-1999) ECO SOIL: Denies Allegations in Securities Lawsuit -------------------------------------------------- Eco Soil Systems Inc. (Nasdaq:ESSI) announced on November 29 that it categorically denies the material allegations in the purported securities class action filed last week against it and three of its officers by Edward Wissinger. The lawsuit states that Wissinger purchased 800 shares of Eco Soil common stock on July 15, 1999, at $8.125 a share and sold such shares on Sept. 14, 1999, at $7.687 a share, thereby incurring approximately $350 of investment loss. The suit is allegedly brought by Wissinger on behalf of all purchasers of Eco Soil common stock during the period from April 13, 1999 (the date Eco Soil filed its Annual Report on Form 10-K with the Securities and Exchange Commission), and Nov. 3, 1999 (the date on which Eco Soil issued its quarterly earnings release for the three months ended Sept. 30, 1999). During this period, none of the three officers named in the complaint sold any Eco Soil common stock, and instead collectively acquired 235,500 shares in open market transactions and upon exercises of options and warrants. Eco Soil believes the case is without merit and will vigorously defend itself and its officers against the suit. Eco Soil develops, markets and sells proprietary biological and traditional chemical products that provide solutions for a wide variety of turf and crop maintenance problems in the golf and agricultural industries. Its proprietary products are distributed through the BioJect(R), a patented and EPA-approved device that cultures and dispenses biological products through irrigation systems. These products, along with standard turf maintenance products, are sold to nearly 40 percent of America's golf courses through Eco Soil's Turf Partners subsidiary, and are sold to the agricultural market, along with irrigation products, through its Agricultural Supply subsidiary. FEN-PHEN: New Studies Show Fewer Problems ----------------------------------------- A popular diet drug that was withdrawn from the market after being linked to serious heart problems may cause less significant damage than health officials first suspected--and in some cases the damage may be reversible, according to a study published last week. Researchers at 15 medical centers around the country tracked 223 patients who took dexfenfluramine, also known as Redux. Redux was pulled from the market in 1997, along with its chemical cousin fenfluramine, a drug sold under the brand name Pondimin. Pondimin was typically taken along with phentermine, a combination known as fen/phen. Two years ago the Food and Drug Administration, which approved Redux in 1996, reported that about 30 percent of 290 patients who took the drugs showed signs of heart valve problems. Several of these patients died after taking the drugs. But the latest study, published last week in the journal Circulation and funded by Redux's Massachusetts-based manufacturer, Interneuron, found that 7.6 percent of 223 Redux users had valve problems compared with 2.1 percent of women who did not take the drug. The study also found that none of the cases of heart valve disease in the patients who took Redux was serious. In addition, echocardiograms taken less than eight months after patients stopped taking Redux were twice as likely to reveal valve problems than were tests conducted eight months or more after discontinuation of the drug. This finding suggests that in some patients, valve damage may be reversible, said Bruce K. Shively, a cardiologist at Oregon Health Sciences University and the lead author of the study. But Shively cautioned that no study has examined the long-term effects of Redux. Patients in Shively's study, who were matched with a control group of people who had not taken any diet drug for the previous five years, were moderately obese middle-aged women. One-third of them had hypertension and one-quarter were diabetic. The characteristic that seemed clearly associated with valve problems was age, the researchers noted. Women over 60 were more likely to have a valve problem, while none of those under 60 did so. This is not the first study to suggest that the risk posed by Redux and fenfluramine may be less severe and less common than previously believed. More than 18 million prescriptions for the drugs were written before they were withdrawn. Last year Massachusetts researchers reported that two of 46 patients taking the drugs developed valve problems, but neither case was life-threatening. A study of 1,000 patients by researchers at the University of California at Irvine found only mild valve damage among patients who took Redux or fen/phen. It is not clear why these recent results are at variance with the 1997 report of cardiologists from the Mayo Clinic, whose finding of heart valve damage in 24 fen/phen patients triggered withdrawal of the drugs. A spokesman for Mayo, based in Rochester, Minn., said its cardiologists were "not available" to discuss their findings or subsequent studies. Shively said that he suspects that one reason for the difference may be selection bias in the Mayo patients--18 of whom were first treated at a clinic in Fargo, N.D. "I think there is a tendency to over-report these things unless you take a random sample of the population," Shively said. "When you have millions of people who have taken these drugs, then anyone in that population who has a valve problem may be attributed to it." "There is a definite risk to taking these drugs," Shively added, "but I think it's small and that serious problems are rare." A little-noticed study by researchers at the University of Pennsylvania published in the August issue of the American Journal of Cardiology may shed some light on the Fargo cases. Stephen E. Kimmel and his colleagues examined the records of the 18 patients and found that seven of them had taken other drugs, such as a popular class of antidepressants, that could cause or contribute to heart valve problems. Four of the 18 had clinically documented heart murmurs before they began taking fen/phen, Kimmel wrote. Since the withdrawal of the drugs, Redux and fen/phen have been the subject of frenzied litigation. Several months ago a Texas jury awarded $ 23 million to a woman who suffered serious heart problems after taking fen/phen; the case was settled for $ 2 million. Recently American Home Products, which marketed Redux and Pondimin, agreed to pay $ 3.75 billion to settle class-action lawsuits brought by dieters who took the drugs. That settlement, which would be a record for the pharmaceutical industry if it is approved, is now pending. Last week a federal judge in Philadelphia gave preliminary approval to the class-action settlement. (The Washington Post Nov-30-1999) HCA HEALTHCARE: DOJ Tries Consolidating Cases To Facilitate Settlement ---------------------------------------------------------------------- The Department of Justice is once again trying to consolidate the approximately two dozen False Claims Act suits pending against Columbia/HCA Healthcare Corp., in what appears to be an effort to hasten the settlement of the litigation. Arguments are scheduled for Nov. 19 in federal court in Miami before seven judges assigned to the Judicial Panel on Multidistrict Litigation. An earlier DOJ motion to consolidate the cases was denied on procedural grounds. "Our goal is to streamline the process by providing a single judicial forum in which to resolve multiple cases and sort out problems posed by overlapping claims made by whistleblowers," says Chris Watney, a Justice Department spokeswoman. She does not go as far as some of the lawyers in the case, who say that consolidation would facilitate settlement. "Getting this motion resolved is the first major step towards beginning the settlement process, at least in a global sense, because it would allow both Columbia and the Justice Department to get its arms around what are the real claims and what are the real dollars," says Marlan Wilbanks, of Atlanta's Harmon, Smith, Bridges & Wilbanks, who represents a client suing Columbia for Medicare fraud in federal court in Atlanta. Nashville, Tenn.-based Columbia -- the largest U.S. health care provider, with 215 hospitals and 185,000 employees -- is the target of what some say is the largest health care fraud investigation in the country's history. This includes a federal criminal investigation and a probe by the Securities and Exchange Commission. The potential damages have been estimated to be as high as $ 1 billion. So far, nine suits claiming that Columbia defrauded the government by submitting false claims have been unsealed; the government has chosen to intervene as a plaintiff in five. At least another 17 whistleblower suits against Columbia, filed around the country, remain sealed as the government tries to decide whether to intervene, according to lawyers familiar with the cases. A majority of the whistleblowers support the motion, as does Columbia. "We believe it's a positive step in getting the suits in a process that will help resolve them in a more straightforward fashion," says company spokesman Jeff Prescott. Although the cases against Columbia are not of the kind that are typically consolidated -- class actions involving products liability, securities fraud, antitrust, copyright and plane crash suits are more common -- lawyers involved say that consolidation makes sense. The attorneys point to overlapping issues that give the cases common threads. Although highly complex, the 26 or so lawsuits primarily deal with five broad allegations of fraud against Columbia. They involve overcharging Medicare and other federal programs for patient treatment, known as "upcoding"; overcharging for patient laboratory tests; submitting fraudulent cost reports; violating anti-kickback laws through arrangements with doctors; and illegally billing for home health care services. Attorneys say that consolidation would help the parties sift through the overlapping issues, simplifying discovery and allowing resources to be used more efficiently. Doing this in one court before one judge, they say, would increase settlement chances. "If there's going to be a global settlement, there's a lot of sorting out to do," says Ralph Mello, a Brentwood, Tenn., solo practitioner who represents a whistleblower suing Columbia. "The value of all the cases out there might be 100 times more than what Columbia's willing to pay, so what do you do? How do you settle that?" There is precedent. Six false claims cases against SmithKline Beecham Clinical Laboratories were consolidated before a Philadelphia federal judge (although not through a multidistrict litigation). They settled in 1997 for $ 325 million. Marc Raspanti, of Philadelphia's Miller, Alfano & Raspanti, who represented one of the whistleblowers in that case, says that consolidation "worked out very efficiently, and it did facilitate settlement." But Professor Thomas Rowe, of Duke University Law School, who studies complex civil litigation, cautions that the court will analyze whether the cases have enough in common, adding that the court could decide to create subgroups or consolidate only some of the cases. Consolidation will not be granted, he says, simply because most of the participants support consolidating a large number of the cases. But both he and Roger Trangsrud, associate dean of George Washington University Law School, who also specializes in complex litigation, say that if the Columbia cases are consolidated, settlement chances increase, because most consolidated cases settle. The Justice Department's first attempt to consolidate, in February, was rejected because of a procedural quirk: Because many of the cases are sealed, the government was unable to serve all of the parties. The government apparently has fixed that problem in the pending motion, which seeks consolidation in federal court in Washington, D.C. But that motion remains sealed, as do most of the related documents. The one document that has been unsealed is DOJ's request that the motion for consolidation be conducted under seal. The secrecy is tied to the False Claims Act, which requires whistleblowers to file suits under seal; the suits must remain sealed until the government decides whether it will intervene. The fact that these are False Claims Act cases provides another reason, lawyers say, to consolidate the suits. False claims cases involve potentially huge payouts: the damages paid to the government and the share of those damages paid to the whistleblower. With at least 26 whistleblowers -- or relators, as they are formally known -- vying for a piece of a potentially huge pie, each will want to convince the government and a judge that he or she was the first to bring the allegation to light and played an important role in the success of the case. If the litigation is resolved and Columbia pays a settlement to the government, at least some of the whistleblowers will get a share. But which ones, and how much they receive, would need to be resolved. Under the law, when the government intervenes, a whistleblower is entitled to 15% to 25% of the settlement, "depending upon the extent to which the person substantially contributed to the prosecution of the action." But the court may award considerably less, or nothing, if it finds that the whistleblower was not one of the original sources of information on which any settlement is based. (The National Law Journal Nov-15-1999) HOLOCAUST VICTIMS: Dutch Companies; Lawyers’ Fees – Reports from London ----------------------------------------------------------------------- Within the next two weeks, Aegon, the Dutch insurance group, will be taking a stand on its record during the second world war that has far-reaching implications for the future of its worldwide business. Unless it signs up by mid-December to a voluntary, US-based commission on insurance claims from the Holocaust era, Aegon faces the threat of a boycott by the World Jewish Congress (WJC). The commission, which was set up last year to investigate policies left unpaid, often because entire families had perished, is headed by Lawrence Eagleburger, a former US secretary of state. Among the European companies that have joined - anxious to make their peace, and avoid the threat of multi-billion-dollar class action suits - are Allianz of Germany and Generali of Italy. Aegon, however, refuses to have its second world war record judged alongside that of its German counterparts. It says it is willing to join the commission, but only if it is granted a special category of membership based on two provisos: that "Dutch people were victims of the Nazi regime" and recognition of "the role of the Dutch government and insurance industry in dealing fairly with the issue of Holocaust claims for over 50 years". "Our country suffered," says Kees Storm, Aegon's chairman. "We are in a totally different position from other insurers." Given that Mr Eagleburger's commission already includes Axa of France - another country occupied by the Nazis - it is unlikely that he will grant Aegon special status. The Dutch group says it will stick to its principles. Aegon, one of the world's top 10 insurers, derives well over half its profits from the Americas, primarily the US, where it has just spent $ 10.8 bil in acquiring Transamerica, an insurer based in San Francisco. If Aegon refuses to co-operate with the commission, it might soon face a boycott similar to the one imposed on Swiss banks last year, which ended in a $ 1.25 bil settlement. "In the case of the Swiss banks, we reduced their business activities (in the US) within two months by 22 per cent," Elan Steinberg, WJC executive director, says. "The insurance companies will be even easier (to target)." Mr Steinberg says the importance of Aegon's US interests makes it particularly vulnerable. "This is where the leverage is clearest," he says. Mr Steinberg claims that, compared with other countries that came under Nazi occupation, the Netherlands did not restore a large amount of seized assets to the families of Holocaust victims. There was a reason for this: more than three-quarters of Dutch Jews did not survive the Nazi occupation - a much higher proportion than elsewhere in western Europe. "Where a large part of the community came back, there was an element of restitution," he says. "The record of Holland was the worst." Should Aegon refuse to join Mr Eagleburger's commission, the WJC plans to send 1m letters to its members by January, and is drafting a resolution to urge public finance officials to stop using the services of the Dutch group and "ultimately divest Aegon stock", he says. The boycott is to be "both broad and incremental". US state authorities, represented on the commission, are also investigating the war records of European insurers. California's state insurance regulator has summoned Aegon and other insurance groups this week to give evidence on insurance policies sold between 1929 and 1945 in Europe. The information is required by California's Holocaust registry law, which comes into force next April, and unlike Mr Eagleburger's commission, attendance before the state insurance regulator is compulsory. Aegon will tell the California hearing that it knows of no outstanding obligations from that period. To which Mr Steinberg retorts: "If they have no unpaid claims, why are they afraid of joining the international commission?" Commission members have to accept Mr Eagleburger's findings on how to value policies from that era - at about 10 times their nominal worth - and to whom they should be paid out. In return, the insurers are to be protected from class action suits and sanctions, such as the withdrawal of operating licences, that could be imposed by industry regulators in states like California. Aegon's stance, however, does not mean the issue has been resolved within the Netherlands. Only this month, the Dutch association of insurers reached agreement with local Jewish groups on a Fl 50m (Euros 22.7m) settlement to cover any outstanding unpaid claims, and to create a Jewish foundation. Aegon is funding a quarter of the total, based on the previous market share of the five companies that formed the group. Aegon's Mr Storm says: "We are confident that, with the support of the Dutch Jewish organisations, we can convince the American interest groups that we have done justice in a rightful way." Mr Steinberg says he has no objection to national settlements but adds: "If Aegon believes it can settle this with a payoff to any of our affiliates, it has severely miscalculated." The Nazi occupiers in 1941 commandeered Lippmann Rosenthal (Liro), a Jewish- owned Amsterdam bank, and turned it into the collection point for the valuables of Dutch Jews. There the Jewish population had to surrender savings, shares, property documents, precious metals, jewellery, artworks and other collections. They were required to cash in their life assurance policies and hand the proceeds over to the bank. Insurance companies were then ordered to pay Liro the value of the estimated 22,000 Jewish policies remaining on their books. After the war, the Dutch government sought to restore the seized assets, and the intervening years brought a steady trickle of insurance claims. Joop Sanders, secretary of the CJO, the Dutch Jewish grouping which reached this month's accord with the industry, says the country's pre-war community was relatively poor, adding: "We are absolutely sure it is enough for all claims that might come." Their lack of wealth also meant few could flee abroad. That, rather than any Dutch collaboration, was a main reason a high percentage died, says Mr Sanders. "And it was difficult to hide. We do not have mountains." But a country that brought the world Anne Frank's Diary - the chronicle of an Amsterdam family first sheltered and then betrayed - is still having to come to terms with the aftermath of occupation. Only two years ago, for example, it was revealed that finance ministry officials in the late 1960s had been allowed to buy unclaimed valuables in the Liro vaults at knock-down prices. In New York, Mr Steinberg promises to release next month "reams of documents of what we believe is owed" by Aegon. "I think they are getting bad advice, certainly from a moral point of view," he says. The Dutch insurer says it is sure of its moral ground. The question is whether, in refusing to join the commission, it is putting principles before prudence. Lawyers Criticised for Fees in Swiss Bank Settlement Holocaust survivors on November 29 criticised in court several of the class action lawyers behind last year's historic $ 1.25 bn settlement with Swiss banks. Citing several lawyers' requests for up to $ 25 m in fees, the survivors' groups repeated their long-standing arguments that the attorneys had no moral right to a portion of the compensation for dormant accounts and laundered Nazi gold. However, all sides voiced their public support for the settlement, which was reached last year after a bitter dispute between Jewish groups, US lawyers and three Swiss banks - Credit Suisse, Union Bank of Switzerland and Swiss Bank Corporation. The US government on November 29 backed the deal as fair and equitable, as well as in the interests of US foreign policy. (Financial Times (London) Nov-30-1999) HOLOCAUST VICTIMS: Survivors & Organizations Ok Swiss Bank Settlement --------------------------------------------------------------------- Attorneys for Holocaust survivors and Jewish organizations around the world on Monday urged a federal judge to approve a $ 1.25 billion settlement between their clients and Swiss banks. An overwhelming majority of the roughly half million plaintiffs in the class-action lawsuit against the banks support the settlement, the attorneys told U.S. District Judge Edward Korman. Hundreds of people, including Holocaust victims and their heirs, packed the Brooklyn courtroom for the so-called fairness hearing on the suit, which claims that the banks withheld money deposited by Holocaust victims for safekeeping from Nazis during World War II. ''The moral question is going to be dealt with outside this courtroom,'' said attorney Burt Neuborne. ''We did the best we could with the legal claims.'' The hearing expected to last into Monday evening and possibly continue Tuesday was called by Korman to allow plaintiffs to comment on whether they think the settlement is fair. ''A billion sounds like a lot to me,'' testified Greta Beer, daughter of a Romanian businessman. ''But how is it going to be distributed? Who is going to think of us human beings? ... I hope some justice will be done. We have fought for a long time.'' If Korman rules that the settlement is fair, the next step will be for the court-appointed special master, Judah Gribetz, to circulate a draft plan for the distribution of the funds to claimants responding to a massive global campaign in 29 languages. The date expected for that proposal to be made public is Dec. 28. Claimants will be able to comment on the proposal in writing, and then Gribetz is to present a proposed distribution plan to Korman around the end of February. Two months after that, Gribetz is to present his final proposal to the judge. Korman is to hold a final hearing on May 30, and officials hope to begin distributing money in the second half of next year, more than 55 years after the end of World War II. At the same time the panel headed by Paul A. Volcker, former chairman of the U.S. Federal Reserve, is in the final days of wrapping up a search for missing assets of Holocaust victims in Swiss banks. Its report will be released Monday in Zurich, the committee said. The report is to disclose what 420 international accountants found in 63 Swiss banks. Tens of thousands of additional unclaimed accounts from the Nazi era have been turned up, commission insiders say. It has yet to be revealed how much money has been found and what percentage belonged to victims of the Nazis in neighboring Germany. The campaign for sharing the $ 1.25 billion settlement, reached in August 1998, began last June. Full-page advertisements were taken out in 500 newspapers in 40 countries. The money covers Jews and other Holocaust victims who deposited assets in Switzerland during the Nazi era and never got them back, as well as those whose belongings were plundered by the Nazis and apparently wound up in Switzerland, a wartime depository for gold and other treasures. Hundreds of thousands of Holocaust survivors around the world, plus their relatives, are potential beneficiaries, according to Elan Steinberg, executive director of the World Jewish Congress. In addition to the newspaper ads appearing this week, Jewish organizations sent out claims packages to as many as 400,000 survivors. The fund was established in a deal with the two biggest Swiss banks, Credit Suisse and UBS AG. Holocaust victims deposited money in Swiss banks as the Nazis gained power in Europe, expecting to retrieve it later. But after the war, many of the heirs ran into a stone wall in trying to claim the assets. They lacked detailed account information, and some bankers even demanded impossible-to-obtain death certificates of people killed in Nazi concentration camps. (AP Worldstream Nov-29-1999) JEFFERSON PILOT: Intends to Vigorously Defend Carol. Suits Re Policies----------------------------------------------------------------------JP Life is a defendant in a proposed class action suit, Romig v. Jefferson-Pilot Life Insurance Company, filed on November 6, 1995 in the Superior Court of Guilford County, NC. AH Life is a defendant in a separate proposed class action suit, Hallabrin et al vs. Alexander Hamilton Life Insurance Company et al, filed on November 10, 1998 in the Circuit Court for Wayne County, MI. Both suits allege deceptive practices, fraudulent and negligent misrepresentation and breach of contract in the sale of certain life insurance policies using policy performance illustrations which used then current interest or dividend rates and insurance charges and illustrated that some or all of the future premiums might be paid from policy values rather than directly by the insured. The claimant's actual policy values exceeded those illustrated on a guaranteed basis, but were less than those illustrated on a then current basis due primarily to the interest crediting rates having declined along with the overall decline in interest rates in recent years. The Hallabrin suit also alleges a conspiracy among our subsidiary and three unaffiliated insurance companies. Unspecified compensatory and punitive damages, costs and equitable relief are sought. While management is unable to make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome, management believes that it has made appropriate disclosures to policyholders as a matter of practice, and intends to vigorously defend its position. LEAD PAINT: Maryland Homeowners' & Children's Suits Filed V. Industry --------------------------------------------------------------------- A pair of multi-count Maryland class action suits seek compensatory damages from 17 white lead pigment and paint manufactures and industry trade groups on behalf of homeowners and children who have suffered physical injury and monetary losses due to what the plaintiffs say is a decades-old conspiracy among the defendants to promote the use of lead-based paint despite knowledge of its fatal flaws since at least the 1920s. Smith et al. v. Lead Industries Assoc. et al.; Cofield et al. v. Lead Industries Assoc. et al. , Nos. 24-C-99-004490 and 24-C-99-004491 (MD Cir. Ct., Baltimore Cty., Sept. 20, 1999). The first of the suits is a 12-count action by six homeowners on behalf of all Maryland homeowners alleging that three lead and paint industry trade associations and 14 current or former paint manufacturers "acted in concert and aided and abetted each other to promote, market and place toxic lead products into the stream of commerce." Despite possessing knowledge of the dangers of lead to humans, especially women and children, as early as shortly after the turn of the century, the trade associations allegedly conspired to "promote and maintain a market for toxic lead paint products when safe and lead-free alternatives were available." The homeowners say that, to that end, the defendants: "a) falsely denied and knowingly concealed the inherent dangers of their own, and each other's lead pigments and lead paint products; b) promulgated arbitrary, ineffective and dangerous standards for allegedly 'safe' lead pigments and paint products; c) sponsored biased scientific research designed to support the promotion and marketing of each other's processed lead and lead pigments, concealing their knowledge of the true hazards of these lead paint products; and d) combined, conspired, aided and abetted each other and/or acted in concert to engage in a common scheme or plan which caused the toxic lead contamination of housing in Maryland." Children's Suit The companion action was filed on behalf of six Baltimore-area children alleged to have tested positive for high blood lead content due to exposure to the lead pigments, lead paints, and tetraethyl lead (TeL) gasoline additive manufactured by the defendants, as well as TeL exhaust lead dust. The children's suit argues, in a fashion similar to the wording found in the homeowners' complaint, that the defendants, knowing that safer substitutes were available, campaigned and marketed for the public's continued use of their products for nothing "other than their own economic gain." "To create, promote and maintain a market for their inherently dangerous lead products, they practiced a continuing campaign of deception cozenage and prevarication, creating the belief that their products could be used safely in motor vehicles and in and around residential settings, and that there were 'safe' levels for lead in their lead products, although they were well aware of the inherently dangerous nature of their lead products and that thousands of children, were and would continue to be injured by their inexcusable conduct." Both suits name as defendants Atlantic Richfield Co., Sherwin-Williams Co., SCM Corp., Glidden Corp., Eagle-Picher Industries Inc., E.I. DuPont de Nemours & Co., Fuller-O'Brien, American Cyanamid Co., Asarco Inc., Ethyl Corp., The Anaconda Co., St. Joe Minerals Corp., PPG Industries Inc., Bruning Paint Corp., plus three trade organizations: Lead Industries Association Inc., NL Industries Inc., and National Paint and Coatings Association. The causes of action alleged in the suits include negligent product design, negligent failure to warn, supplier negligence, strict products liability/defective design, strict products liability/failure to warn, nuisance, indemnification, fraud and deceit, conspiracy, concert of action, aiding and abetting, and enterprise liability. "The purpose of the two actions is to hold accountable and obtain maximum legal and equitable relief from the industry that is responsible for the catastrophic insult to the health of our children and the contamination of our private housing stock," said attorney Peter G. Angelos, whose Baltimore law firm filed the actions. Angelos says that in 1996, with only 13 percent of Maryland's children aged six and under being tested for blood lead levels, 1,830 children were diagnosed as "lead poisoned." "That number in and of itself is outrageous, but is no more than the tip of the iceberg," says Angelos. "There is no doubt that tens of thousands of children in this state are being afflicted on an annual basis." Ted Flerlage, who assisted Angelos in the preparation of the suits, says he would like the Baltimore Circuit Court to "fast track" the children's suit and hopes that the class certification procedures in the homeowners' action will proceed quickly. Replies from the defendants, many of which are located out of state, are not expected to be filed until late November. (Toxic Chemicals Litigation Reporter, Vol. 17; No. 10; Pg. 3, Oct-18-1999) MICROSOFT CORP: Journal Cites New Incentives To Settle Antitrust Suit --------------------------------------------------------------------- The Microsoft antitrust case is quietly slipping into Chicago on Tuesday. Lawyers from Microsoft Corp. and the government are expected to meet with Richard Posner, chief judge of the U.S. Court of Appeals in Chicago who was appointed recently as a mediator, to restart negotiations for an out-of-court settlement of the software giant's case. Judge Thomas Penfield Jackson of U.S. District Court in Washington, who is hearing the Microsoft case, pushed the parties to resolve matters raised by his recent findings of fact, which said Microsoft is a monopoly and its actions have harmed consumers. A string of potential class-action lawsuits against Microsoft were filed in the wake of Jackson's findings. Those civil suits "certainly increase Microsoft's incentive to settle," said Randy Picker, a professor at the University of Chicago Law School. Whether Microsoft--or the Justice Department and states suing it--is considering a settlement is unknown. The parties have periodically met to discuss ways to end the case, without success. Tuesday's meeting has been arranged very quietly, with representatives from Microsoft and the government declining to say who will represent their sides at the meeting, when it will occur and if the discussions will take place in Posner's 27th-floor chambers in the Dirksen Federal Building in the Loop. A government spokeswoman declined to confirm that any discussions were even scheduled to take place Tuesday. Another unanswered question is what impact a settlement would have on suits seeking class-action status that have been filed in Ohio, Florida, California, Alabama and Louisiana. These suits claim Microsoft took advantage of monopoly power and overcharged for its Windows operating system. Stanley Chesley, a prominent product-liability attorney in Cincinnati, filed a suit in Ohio, alleging that Microsoft charged consumers an extra $40 for each copy of Windows. Chesley said the overcharges cost consumers a total of $10 billion. To win his case, Chesley will have to prove that Microsoft is a monopoly and took advantage of that position to harm consumers. A verdict against Microsoft in the antitrust case would provide a major boost to the plantiffs' attorneys in a class-action suit, while a settlement at this point would leave those lawyers with a less-desirable position. As part of the settlement, the parties and judge could decide to dismiss the findings of fact, leaving in doubt their use in future hearings. "The legal status of such an order is less than clear," Picker said. Judgments have been dismissed in previous cases, including disputes in which insurance companies could have been opened up to more claims if a legal decision stood. Chesley said he believes, though, that any Microsoft settlement wouldn't include the dismissal of Jackson's findings. "When the public is injured, as we have here, it's very seldom that a court will withdraw its opinion," Chesley said. "The toothpaste is out of the tube, and I would be very surprised if Judge Jackson would be willing to do that." Jim Cullinan, a Microsoft spokesman, said his company's decision about whether to settle the antitrust case will not be affected by the civil suits. "These lawsuits are driven by plaintiffs' attorneys and driven by one thing, and it's not helping consumers," Cullinan said. Chesley said even if the present findings are disregarded, he will be able to follow the same trail paved by the government to show Microsoft is a monopoly by asking the company to produce the same reports and e-mails. "They'd be a little hard-pressed to claim they don't have these documents," Chesley said. (Chicago Tribune Nov-30-1999) MICROSOFT CORP: Journal Opins stiff Hurdles on Appeal against Antitrust ----------------------------------------------------------------------- Mammoth litigation often works like a war of attrition, with combatants wearing each other down until a victor eventually emerges. But the landmark antitrust case against Microsoft Corp. may be more like a war played on a computer -- one whose screen says, "Game Over." U.S. District Judge Thomas Penfield Jackson tilted the game for the government when he labeled Microsoft a predatory monopolist in his Nov. 5 findings of fact. He used his 207-page findings to steer past obstacles raised in a June 1998 decision by the U.S. Court of Appeals for the District of Columbia Circuit that all but directed him not to meddle in Microsoft's technological decisions. Judge Jackson's findings seem to have been crafted to bulletproof his decision on appeal. He wrote in the last paragraph, "Through its conduct toward Netscape, IBM, Compaq, Intel, and others, Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products." The language signals that, when he issues his conclusions of law next year, the judge will find that Microsoft has wielded its monopoly power broadly and relentlessly for the better part of the past decade. Among antitrust lawyers, this type of "pattern and practice" case is considered the mother lode of Sherman Act violations. Breakup Talk The findings have set off a frenzy of speculation about the potential breakup of Microsoft -- a scenario that seemed inconceivable during the trial. Since Judge Jackson's findings were made public, a suit has been filed seeking class action status to recover antitrust damages on behalf of Microsoft's customers. Filed on Nov. 9 in New York state court, it is the first in an expected torrent of private antitrust suits seeking to capitalize on the judge's finding that Microsoft possesses monopoly power. Microsoft's legal team, led by its general counsel, William H. Neukom, and John L. Warden, of New York's Sullivan & Cromwell, went underground after Judge Jackson's decision. The company's public position has not budged from the comments Mr. Neukom made at a press conference in Redmond, Wash., an hour or so after Judge Jackson issued his findings in the case. "There's a fundamental principle here, which we do not think we can compromise," Mr. Neukom said. "It's not just in Microsoft's interest; it's in all of the technology industry's interests that we continue to be able to meet consumer demand by innovating our product." That has been the company's position since 1997, a fact that may render settlement impossible even though both sides have powerful incentives to deal. Judge Jackson's stunning findings make it hard to remember that the Justice Department's original case against Microsoft amounted to a simple tie-in claim. Its May 18, 1998, complaint accused the company of illegally bundling its Internet Explorer Web browser with its monopoly product, the Windows operating system, to crush Netscape Communications Corp.'s Navigator, the rival browser that Microsoft viewed as a threat to its monopoly. The claim might never have been brought had Microsoft been able to resolve its in-your-face dispute with the Justice Department over the meaning of a single term -- "integrated products" -- in a 1995 settlement with Justice. At the outset of the 76-day trial, when Judge Jackson took the bench on Oct. 19, 1998, to hear opening statements, it seemed that Microsoft was already well on its way to winning its endgame with the government. The appeals court decision, issued on June 23, 1998, found that Judge Jackson had been wrong to issue a preliminary injunction ordering Microsoft to stop forcing computer manufacturers to take Internet Explorer along with its Windows 95 operating system. Judge Jackson had issued the order without a hearing or notice to Microsoft, and the judges who heard Microsoft's appeal could have simply noted this basic lack of due process in overturning him. But D.C. Circuit Judge Stephen F. Williams, the author of the 2-1 panel ruling, didn't stop there. Judge Williams, a 1986 Reagan appointee, embarked on an extensive review of the relevant antitrust case law and treatises, noting the "institutional incompetence" of the courts to assess technological tying cases. Then he issued an ultimatum to be heeded if Judge Jackson entertained any further consideration of whether Microsoft violated the law by bundling Internet Explorer into Windows. "The question is not whether the integration is a net plus but merely whether there is a plausible claim that brings some advantage," Judge Williams wrote. He concluded that Microsoft had "clearly met the burden" on the facts presented. Judge Williams had signaled a win for Microsoft, with a standard caveat: "The ultimate sorting out of any factual disputes is a different question, and one we of course cannot resolve on the limited record before us," he wrote. Judge Jackson will forward his ample factual findings to the appeals court, should the dispute ever get there. In paragraph after paragraph, the judge found "no technical justification" for Microsoft's refusal to "meet consumer demand for a browser-less version" of Windows. "What the findings demonstrate is that this is not a case about technology," says David Boies, the outside lawyer hired by the Justice Department to lead the case. "This is about the abuse of monopoly power...entirely done to prevent consumer choice." Who doesn't want a browser? In the findings, Judge Jackson granted the possibility that integrating the browser into Windows is beneficial. "As an abstract and general proposition, many -- if not most -- consumers can be said to benefit from Microsoft's provision of Web-browsing functionality with its Windows operating system at no additional charge," he acknowledged. He then laid into Microsoft's actual conduct, finding "no consumer benefit" in the company's refusal to offer Windows 95 or Windows 98 without Internet Explorer. "There is no technical justification for Microsoft's refusal to meet consumer demand for a browser-less version of Windows 98," he wrote. That such a consumer demand exists seems to strain reality. But Judge Jackson found that it's out there. He cited corporate users as one example: "[If] a consumer has no desire to browse the Web, he may not want a browser taking up memory on his hard drive or slowing his system's performance." Trying too Hard? William E. Kovacic, an antitrust professor at George Washington University Law School, says that Judge Jackson's effort to bulletproof his decision may have failed. In effect, he says, the judge might have tried too hard. "It's the consistency with which he says, 'no justification, no justification, no justification,' " Prof. Kovacic says. "He has to say that to get around the appeals court." The appeals court, he says, could well find Judge Jackson's logic to be strained. The findings on consumer demand for browserless operating systems "contradicts other evidence in the case that is far more persuasive," he says, adding that the appeals court may be tempted to overturn this part of Judge Jackson's findings as clearly erroneous. Throughout his findings, Judge Jackson ignored or discounted the explanations Microsoft offered. A telling example involves restrictions Microsoft placed on PC makers to prevent them from customizing the first screen consumers see when they boot up Windows. Microsoft asserted that the restrictions were meant to prevent computer makers "from compromising the quality and consistency of Windows." But Judge Jackson focused on an e-mail from Microsoft Chairman Bill Gates to Joachim Kempin, complaining that some PC makers were featuring non-Microsoft browsers in "a FAR more prominent way" than Microsoft's. Three weeks later, Mr. Kempin put "control over start-up screens" on his list of neglected tasks. The restrictions raised hackles among Microsoft's PC customers. The judge quoted at length from an angry letter by a Hewlett-Packard executive that he found "emblematic" of the reaction among PC makers. "If we had a choice of another supplier," the executive wrote, "I assure you [that you] would not be our supplier of choice." Judge Jackson accepted the government's explanation for Microsoft's actions. They were "necessary to ostracize Netscape." Mr. Gates seemed to defy Judge Jackson's findings on the screen restrictions in comments to shareholders at Microsoft's Nov. 10 annual meeting. "If we can't define the user interface of Windows so all Windows machines operate the same way, then the Windows brand becomes absolutely meaningless," he said, according to a Wall Street Journal account. Mr. Gates' hardball comments strike Microsoft's opponents as familiar. "Microsoft tries to characterize conduct that, in fact, restricts others as being innovation. If they continue with warped definition, it's hard to imagine how any settlement would occur," says Kevin J. Arquit, of New York's Rogers & Wells L.L.P., a legal consultant to ProComp, an anti-Microsoft group. Microsoft's lawyers are preparing for a long fight, and they may not get the chance to present their case to the sympathetic Washington, D.C., appeals court. A little-known law, the Antitrust Expediting Act, would allow Judge Jackson to certify the case for immediate review by the U.S. Supreme Court at the Justice Department's request. When Judge Williams issued his decision, it seemed to spell doom for the Justice Department. But that may have been the government's luckiest break. It scrambled to find witnesses from Apple, Intel and IBM Corp. to testify about Microsoft's bullying tactics, testimony Judge Jackson found credible. Meanwhile, Microsoft has failed to persuade another court to adopt Judge Williams' approach. Allowing Caldera Inc.'s claims against Microsoft to proceed, U.S. District Judge Dee Benson, of Salt Lake City, observed that "innovation can be stifled" if a company can "escape antitrust liability simply by claiming a 'plausible' technological advancement." Microsoft's lawyers could well be in for a long fight.(The National Law Journal Nov-22-1999) MONSANTO CO: Lawyers Plan to Sue over Plant Patents & Marketing --------------------------------------------------------------- If anyone symbolizes the growing battle over patenting plant life, it's Palo Alto's Loren Miller. Twenty-five years ago, Miller traveled into the Amazon rain forest looking for plants with medicinal value. An Ecuadorean acquaintance gave him a cutting from the ayahuasca vine, and several years later Miller obtained a patent for the plant. Though Miller never used ayahuasca for commercial purposes, indigenous groups saw it as a blatant act of theft. For centuries, ayahuasca has been an ingredient in a hallucinogenic brew used by indigenous peoples of South America in religious and healing ceremonies. When an organization of Amazon tribes learned of Miller's patent, they filed a petition with the U.S. Patent and Trademark Office to get it revoked. "It's like getting a patent on the Christian cross or the Eucharist. They interpret it as an assault on the core of their culture," said Glenn Wiser, an attorney at the Washington, D.C.-based Center for International Environmental Law who represented the indigenous group. Miller and others like him are at the center of a war being waged over the patentability of plants. It's a multifaceted problem that ranges from cases of "biopiracy" such as Miller's, to seed companies forcing farmers to adhere to stringent growing practices to protect their intellectual property. Representatives at this week's World Trade Organization meeting in Seattle are likely to tussle over plant patent and IP issues. Developing countries want to protect native plants from being patented by foreigners. Meanwhile, corporations advocate strong IP rights as a way to ensure their investments in plants for food and drug development. The matter is also making its way to the courts. Ten U.S. law firms are preparing a class action against Monsanto Co. over its marketing practices and requirements it has placed on farmers who purchase the company's seeds. Joseph Saveri, a partner at San Francisco's Lieff, Cabraser, Heimann & Bernstein, said the suit against Monsanto may assert claims of misrepresentation and antitrust violations. "There are concerns about competition and whether companies have too much market power or are abusing market power," said Saveri, one of the attorneys involved in preparing the suit. Disputes over patenting plant life are nothing new. A few years ago, the PTO pulled the plug on a patent for the turmeric root. But the conflict has escalated as IP rights have become a focus of international trade negotiations and as science has allowed companies to genetically modify plant life. Rewriting The Rules As an international trade matter, the conflict over plant patents is far from being resolved. The Trade-Related Aspects of Intellectual Property Rights agreement of 1994, part of the General Agreement on Tariffs and Trade, sets parameters for patenting life-forms, but provisions of the treaty are under dispute. At issue is whether alternatives to U.S.-style patents for plant life will be acceptable. The discussion is focusing on a provision in the so-called TRIPS agreement that says WTO member countries must protect plant varieties either by patents or their own "effective" sui generis system, or a combination of the two. Some developing countries are advocating for the right to create their own systems of intellectual property protection. But they worry the United States and others won't allow them to do so. "The question is 'effective for whom?'" said Pat Mooney, executive director of Rural Advancement Foundation International. "Does the system help farmers in Ethiopia or Monsanto?" According to Mooney, U.S. officials have said the only acceptable _sui generis_ standard is that set forth in the 1991 convention of the Union for the Protection of New Varieties of Plants. An intergovernmental organization in Geneva, UPOV has adopted rules to protect plant breeders but which fall short of actually issuing a patent to the breeder. Under the TRIPS agreement, developing countries must adopt legislation to implement the accord by 2000; the deadline for least developed countries is 2006. While the Clinton administration has said the text of the agreement is not open for discussion, numerous proposals have been introduced by developing countries. Included in draft ministerial text to be taken up at the Seattle WTO meeting, the proposals are to be hammered out in negotiations over the next three years. Participants in Seattle may also take up a 1992 international treaty -- the Convention on Biological Diversity -- which says IP rights shouldn't be in conflict with the protection of natural resources. A proposal to the WTO says TRIPS should ensure that "all living organisms and their parts cannot be patented; and those natural processes that produce living organisms should not be patentable." The United States, however, is unlikely to agree to the proposal. It did not sign the 1992 biological diversity treaty. WTO ministers also may examine the scope of IP protection for so-called " traditional knowledge" of indigenous peoples. Kristin Dawkins, a director at the Institute for Agriculture & Trade Policy based in Minneapolis, said the Organization of African Unity has drafted model legislation that would guarantee community control over resources -- including plants. India, Thailand and the Philippines have drafted similar measures, she said. Such legislation may have prevented Loren Miller from winning a patent on ayahuasca and could stand in the way of pharmaceutical and life sciences companies. These industries want to take a "public resource that belongs to and is used by people in developing countries, privatize it, and make it a monopoly- controlled commodity" that the people will have to pay to use, Dawkins said. Monsanto's Fight Another issue on the WTO's agenda is already a source of controversy in the United States: agribusiness efforts to control farmers' use of seeds. Developing countries are proposing that the TRIPS agreement ensures that farmers have the right to save and exchange seeds. They say the agreement also should be amended to "prevent anti-competitive practices which will threaten food sovereignty of people in developing countries." At least one U.S. multinational -- Monsanto -- requires farmers that purchase any of the company's genetically modified seeds to sign a contract stating the seeds will not be saved or reused. The policy has infuriated farmers. "Farmers feel like they are becoming serfs on their own land because they can't use crops as they wish," said Elizabeth Cronise, an associate at Washington, D.C.'s Cohen, Milstein, Hausfeld & Toll. Cohen, Milstein is the lead firm preparing a class action against Monsanto and other manufacturers of genetically modified seeds on behalf of farmers. Nine other firms are involved in the suit, including San Francisco's Lieff, Cabraser; Boies & Schiller in Washington; the Philadelphia firms Spector Gadon & Rosen and Meredith Cohen Greenfogel & Skirnick; and New York's Pomerantz Haudek Block & Grossman. They plan to file a complaint by the end of the year. "We see the suit as a signal that there is serious concern over the monopoly control of the food supply" by multinationals and life science companies, said Kathy Ozer, director of the National Family Farm Coalition, which initiated the suit with the Foundation on Economic Trends, a Washington, D.C.- based group led by Jeremy Rifkin. Monsanto provides an enticing target for a class action. The giant life sciences company had more than $8 billion in revenues last year. Cronise said the class action may include claims that the St. Louis company has attempted to gain control over the market for both genetically modified and non-genetically modified seeds, committed misrepresentation and fraud, and caused potential harm to farmers from "genetic drift" of their seeds onto bordering fields. Farmers contend that Monsanto falsely promised them an increased crop yield and a reduction in the amount of pesticide needed if they used the company's genetically-modified seeds. But Monsanto spokeswoman Lori Fisher said that farmers using the company's seeds have had a 40 to 80 percent reduction in pesticide use for potatoes and about a 40 percent drop in use of cotton insecticide. As to the issue of genetic drift, Cronise said farmers whose crops are cross- pollinated with Monsanto seeds growing in neighboring fields can be accused of stealing the seeds. Monsanto's Karen Marshall said such a situation would be very rare. She added that since pollen generally is blown a short distance, farmers wouldn't get much seed from cross-pollination anyway. To date, the company has filed a handful of suits against farmers, primarily for saving seeds or selling it to their neighbors as new seed. Marshall said the company has investigated 100 to 250 reports of seed piracy and usually either found that growers were not at fault or negotiated a settlement with them. The 'Terminator' Seed Farmers and environmentalists won a major battle against Monsanto when the company announced in October that it would not market the so-called " Terminator" technology. The technology, which consists of a gene that prevents seeds from germinating, was jointly developed and patented by Delta & Pine Land and the U.S. Department of Agriculture. Monsanto signed a merger agreement with Delta & Pine Land last year under which it will acquire the technology. Farmers and a variety of consumer organizations contended that the technology could be disastrous for food supplies and could undermine traditional methods of farming. The Rockefeller Foundation also threw its weight behind the anti- Terminator movement. In a speech to Monsanto's board of directors in June, Gordon Conway, the president of the foundation, urged Monsanto to drop the technology. While Monsanto conceded to this pressure, the company said it may pursue other "gene protection" technology. For example, the company holds patents on technology that potentially could enable Monsanto to shut off genes for a particular crop trait; farmers would have to buy a Monsanto chemical to activate a specific gene. Mooney, of Rural Advancement Foundation International, said this technology would give the United States an ultimate weapon in trade negotiations. If a country had to import a herbicide to turn on a gene vital to the survival of a crop, the U.S. could threaten to block exports as a way of enforcing its rules, he said. "It's a form of trait, or trade, sanction," Mooney said. "It's a fast way to bring a country to its knees." Under TRIPS discussions, countries are saying they should be able to ban this technology, he added. Loren Miller's case over ayahuasca pales in comparison to the potential free- for-all over Monsanto. Though it's unlikely to change PTO policy, efforts to overturn Miller's patent have the potential to stand as a landmark purely for symbolic reasons. Miller's patent "symbolizes for indigenous people the problem of northern companies coming in and expropriating their traditional knowledge," said the Center for International Environmental Law's Wiser. Wiser represented the Coordinating Body for the Indigenous Organizations of the Amazon Basin in its petition for re-examination of the ayahuasca patent to the PTO. The group, which Wiser said represents about 400 different tribes in 11 countries, won an initial victory earlier this month when the PTO issued a "first office opinion" on the patent saying Miller's variety of ayahuasca is not new and distinct. Miller, who runs International Plant Medicine Corp., a Palo Alto-based research and development company, declined to say if he would respond to the PTO decision. A reluctant personification of the plant patent controversy, Miller said he doesn't understand what all the fuss is about. "If this patent was causing any harm to the indigenous people I would have cancelled it myself," he said. "I don't care about the patent. It's worthless. It's useless. It's just sitting in a drawer." (The Recorder Nov-29-1999) ONEOK INC: Reports on Contest with Southern Union over Southwest Merger ----------------------------------------------------------------------- The following is the report by Oneok Inc. filed with the Securities and Exchange Commission as of November 23, 1999: On December 14, 1998, the Company entered into a merger agreement with Southwest Gas Corporation subject to shareholder and regulatory approvals. The Company agreed to pay $28.50 per share of common stock in cash. On February 1, 1999, Southern Union Company (Southern Union) made an unsolicited offer to purchase the Southwest shares for $32.00 in cash. Southern Union then signed a Confidentiality and Standstill Agreement with Southwest and completed its due diligence investigation. On April 25, 1999, the Board of Directors of Southwest rejected Southern Union's proposal as not being a superior proposal. Thereafter, the Company increased its price to $30.00 per share and the merger agreement was amended. Southern Union then increased its offer to $33.50 per share and intervened in a shareholders lawsuit in California state court in an effort to block the holding of a meeting of the Southwest shareholders to consider the merger with the Company. Southern Union brought an action in Nevada federal court to block the meeting and to block proceedings before the Arizona regulatory commission. Southern Union also intervened in the regulatory proceedings in California and Nevada. After Southern Union made statements in the public press that it intended to solicit proxies in opposition to the Company/Southwest merger in breach of the Confidentiality and Standstill Agreement, the Company (as third party beneficiary) filed an action in the Oklahoma federal courts. The court entered a temporary restraining order against Southern Union. It was later converted to a preliminary injunction requiring Southern Union to abide by terms of the Agreement. The issuance of the injunction is on appeal and efforts of Southern Union to have it lifted have been unsuccessful. On July 19, 1999, Southern Union filed an action in the federal district court of Arizona in its further effort to block regulatory approval of the merger. Named as defendants in the case are the Company, Southwest, certain officers of the companies (including the Company's Eugene N. Dubay and John A. Gaberino, Jr.), a member of the Arizona Corporation Commission and a former employee of the Commissioner's staff. Southern Union alleges a scheme of "fraud and racketeering" by the companies and the individual defendants to block Southwest shareholders from voting on the Southern Union proposal and ensuring that only the merger with the Company would be considered. It also alleges a "secret campaign of deception, corruption and misrepresentation" by the defendants to influence the vote of the Arizona regulatory commission on the merger and to "mislead" the Board of Directors of Southwest. Southern Union further alleged that it was "fraudulently induced" to enter into the Confidentiality and Standstill Agreement. The complaint asks for $750 million to be trebled for racketeering and unlawful violations, compensatory damages of not less than $750 million and rescission of the Confidentiality and Standstill Agreement. On October 12, 1999, Southern Union filed an amended complaint asserting essentially the same claims as in the earlier complaint and named additional individual defendants (including the Company's Larry W. Brummett and James C. Kneale). The Company intends to file a motion to dismiss. On August 5, 1999, both the California state court and the Arizona federal court denied Southern Union's motions for temporary restraining orders. On August 10, 1999 the shareholders of Southwest approved the merger. On July 1, 1999, the Public Utility Commission of Nevada issued an order approving the merger transaction. On July 30, 1000, a settlement conference was held and a settlement document filed in the merger approval proceeding before the Public Utility Commission of California. No comments were received during the 30-day comment period. The Company anticipates the California settlement will be considered for approval by year end. Upon approval by the California Commission, the only remaining regulatory commission required to approve the merger is the Arizona Corporation Commission where Southern Union is now directing its primary efforts to block the merger. At the Arizona Corporation Commission, consideration of the merger is in the procedural and discovery stage. Testimony has been filed and the staff is reviewing materials. At staff's request, the Arizona Corporation Commission ("ACC") issued a procedural schedule on October 22, 1999 setting the application for merger approval for hearing on February 11, 2000. ONEOK, Southwest, the ACC staff and Arizona's consumer advocate have filed a stipulation and agreement recommending that the transaction be approved. Initially operating on the theory that the Company had funneled money through an Arizona law firm to a member of the Arizona Commission in order to influence improperly the Arizona regulatory proceedings, Southern Union attempted through discovery and other means to support their theory. Being unable to substantiate such claim, it was withdrawn in the Arizona federal court case. Southern Union has now shifted to a new theory that the Company intended to enter into an arrangement with a large national investment banking firm to funnel money to an individual who was formerly on the Commission's staff. The Company has denied that it has done anything illegal or improper in its efforts to obtain approval of the merger. It has categorically denied all substantive allegations against the Company in the complaint filed in the federal district court in Arizona. The Company intends to continue to defend vigorously the Company and its good reputation and continues to pursue regulatory approval for the merger. It is possible that Southern Union will continue its litigation against the Company, Southwest and the individual defendants claiming substantial damages. The merger cannot be consummated without all regulatory approvals. If such approvals are not obtained, or if not obtained in a timely manner, the merger agreement could be terminated by either the Company or Southwest which could result in further litigation. If, at the time of consummation of the merger, there are still outstanding claims against Southwest, those claims will become claims against the Company, as successor in the merger. If any of the plaintiffs should be successful in any of their claims against the Company or Southwest and substantial damages are awarded, it could have a material adverse effect on the Company's operations, cash flow and financial position. The Company believes the Southern Union allegations are without merit and is defending itself vigorously against all claims. PESTICIDE MAKERS: Seller Asks CA Sp Ct to Hear Dispute over Settlement ---------------------------------------------------------------------- The California Supreme Court has been asked to review a trial court's finding that a pesticide seller was bound by the terms of a settlement reached by three former codefendants, all pesticide manufacturers, in a groundwater contamination suit and barred from independently seeking indemnity from the manufacturers for the amount it had previously paid to settle. Britz Inc. v. Dow Chemical Co. et al., No. S081159 (CA Sup. Ct., respondent's joint answer to petition for review filed Aug. 23, 1999; petition for review filed Aug. 4, 1999). Britz Inc. challenges a ruling by a Fresno County Superior Court judge, affirmed in June by a state appellate court, that said that it could not pursue fraud claims against the manufacturers because the company had received notice of and had an opportunity to challenge the good faith settlement separately reached a year later between the manufacturers and four cities who said their drinking water had been contaminated by pesticides. "That Britz was not a party at the time of the determination is irrelevant so long as it was given notice and an opportunity to challenge the determination," said the state's Fifth Appellate District in an opinion written by Judge James F. Thaxter. In its petition for California Supreme Court review, Britz maintains that because it had already reached a $1.3 million settlement with the plaintiff cities in 1994, it had become a non-party by the time those cities reached a joint settlement with defendants Dow Chemical Co., Shell Oil Co., and Occidental Chemical Corp. in 1995. The good faith settlement by the defendants with the California cities Fresno, Clovis, Dinuba and Reedley, argues Britz, did not bind it, nor prevent it from filing its own fraud and negligent misrepresentation indemnification action against the manufacturers. In their joint answer to the Britz petition for review, the manufacturers have told the supreme court that the appellate panel's ruling was consistent with state law (C.C.P. Sec. 877.6 c ), which provides that "a good faith settlement determination bars 'any further claims' by 'any other joint tortfeasor,' not 'any other party.'" The manufactures say that if Britz's position were to be adopted, it would mean that only the first party to settle a lawsuit could achieve the finality which is essential to encouraging settlements. "All other parties would be faced with relitigating the good faith of their settlements again and again against parties who settled and were dismissed earlier," the manufacturers maintain. Ted R. Frame of Frame & Matsumoto of Coalinga, CA, represents Britz. Dow is represented by Gennaro A. Filice III and Nicholas D. Kayhan of Hardin, Cook, Loper, Engel & Bergez of Oakland, CA. Occidental is represented by Stephen C. Lewis of Landels, Ripley & Diamond in San Francisco. Shell is represented by Stephen W. Jones, Kirk C. Jenkins, and Anthony J. Anscombe of Sedgwick, Detert, Moran & Arnold in San Francisco. (Hazardous Waste Litigation Reporter, Vol. 19; No. 21; Pg. 12, Oct-15-1999) SUMMIT TECHNOLOGY: Faces Fed & State Antitrust Suits Re Price-Fixing -------------------------------------------------------------------- Summit Technology Inc., VISX, and certain of their affiliates (including Pillar Point Partners, a partnership between affiliates of the Company and VISX) are involved in a number of antitrust lawsuits which, among other things, allege price-fixing in connection with per-procedure patent royalties charged by the Company and VISX. These suits are pending in both federal and state court, on behalf of both direct purchasers from the Company and VISX and patients/consumers, and include both purported class actions and individual actions. Most of the federal lawsuits have been transferred for pretrial purposes to the U.S. District Court for the District of Arizona by the Judicial Panel on Multidistrict Litigation as In re: Pillar Point Partners Antitrust and Patent Litigation. Federal Antitrust Cases Consolidated for Pre-Trial Proceedings In April 1998, The Eye Professionals, P.A. commenced an action in the U.S. District Court for the District of New Jersey against the Company and VISX. The case purported to be a class action on behalf of all individuals or entities that have paid a per-procedure fee directly to either defendant for use of a Summit or VISX laser to perform laser vision correction surgery at any time after November 1, 1995. The complaint alleged, inter alia, price-fixing in violation of Section 1 of the Sherman Act. The action sought treble damages, costs of suit, attorneys' fees, and various forms of declaratory and injunctive relief. Similar actions were also filed in May 1998 by Metropolitan Eye Center and Outpatient Surgical Facility, Inc. in the U.S. District Court for the Northern District of California against the Company, VISX, Summit Partner and VISX Partner and by New England Laser Vision, Inc. in the U.S. District Court for the District of New Jersey against the Company and VISX. In August 1998, David R. Shapiro, M.D., filed another similar purported class action against the Company and VISX in the U.S. District Court for the District of Arizona. Plaintiffs in these cases have agreed to consolidation of the four purported class actions and filed a single consolidated amended complaint in the U.S. District Court for the District of Arizona. It purports to be a class action on behalf of all persons and entities (excluding governmental entities, defendants, subsidiaries and affiliates of defendants) in the United States who paid a per-procedure royalty to any defendant or any alleged co-conspirator or any subsidiary or affiliate thereof, at any time after September 1995. The Consolidated Amended Class Action Complaint seeks, among other things, unspecified treble damages on behalf of plaintiffs and the alleged class, along with attorneys' fees, costs, and injunctive and declaratory relief. In September 1998, Laser Eye Center of Texas, L.L.P. and Warren D. Cross, M.D., filed a purported class action against the Company, Summit Partner, VISX, VISX Partner and Pillar Point Partners in the U.S. District Court for the Southern District of Texas. The suit purports to be a class action on behalf of all persons and entities who have paid money to defendants, or any of their subsidiaries, on a per-procedure basis for the ability to use defendants' laser equipment or technology to perform laser vision correction surgery. Plaintiffs allege, among other things, price-fixing and monopolization in violation of Sections 1 and 2 of the Sherman Act. They seek, among other things, treble damages on behalf of the alleged class, costs of suit, including attorneys' fees, and declaratory and injunctive relief. This case was transferred to the District of Arizona for consolidated pre-trial proceedings. In February 1999, Carolina Eye Associates, P.A. and Carolina-South Eye Associates filed suit against VISX and the Company in the U.S. District Court for the District of New Jersey. This action, like the consolidated federal actions described above, purports to be a class action on behalf of all persons and entities (excluding governmental entities, defendants, subsidiaries and affiliates of defendants) in the United States who paid a per-procedure royalty to any defendant or any alleged co-conspirator or any subsidiary or affiliate thereof, at any time after September 1995. The complaint alleges, among other things, price-fixing in violation of Section 1 of the Sherman Act and seeks, among other things, compensatory damages of at least $100,000 plus $8,300 per month from the filing of the complaint until the date of judgment, trebling of those damages, attorneys' fees, costs, and declaratory and injunctive relief. This case was transferred to the District of Arizona for consolidated pre-trial proceedings. In June 1996, a Texas ophthalmologist, Robert G. Burlingame, sued the Company, Summit Partner, VISX, VISX Partner and Pillar Point Partners in U.S. District Court for the Northern District of California alleging price-fixing in violation of Section 1 of the Sherman Act and state antitrust laws and fraud and deceit in connection with certain of the Company's sales and marketing activities. The plaintiff seeks, among other things, compensatory damages of at least $30 plus $2 to $3 per month until the date of judgment, trebling of those damages, compensatory and punitive damages on the fraud claim against the Company of at least $500 plus $2 to $3 per month until the date of judgment, attorneys' fees, costs and declaratory and injunctive relief. This case was transferred to the District of Arizona for consolidated pre-trial proceedings. In September 1996, a Nevada ophthalmologist, John R. Shepherd, through his professional corporation, commenced a similar lawsuit against the same parties, in the same court, alleging substantially similar antitrust claims and seeking substantially similar relief, including damages before trebling of at least $125 plus $13 per month until the date of judgment. Plaintiff's counsel in the Shepherd case has indicated that he intends to seek certification of the case as a class action. This case was transferred to the District of Arizona for consolidated pre-trial proceedings. In November 1997, Antoine L. Garabet, M.D., Inc. and Abraham V. Shammas, M.D., Inc., d/b/a The Laser Eye Center, sued the Company, Summit Partner, VISX, VISX Partner and Pillar Point Partners in the U.S. District Court for the Northern District of California seeking a declaratory judgment that the patents held by Pillar Point are invalid and unenforceable on account of alleged antitrust violations and alleging fraudulent inducement and deceit in connection with certain of the Company's sales and marketing activities. The plaintiffs sought, among other things, compensatory damages on the fraud claim against the Company of at least $49 plus prejudgment interest, disgorgement of revenues and profits, a constructive trust on defendants' revenues and profits, punitive damages of an unspecified amount, injunctions against enforcement of the Pillar Point patents and against alleged continuing violations of the antitrust laws, declaratory relief, attorneys' fees and costs. This case was transferred to the District of Arizona for consolidated pre-trial proceedings. The court has granted a motion to dismiss. The Company had earlier filed a counterclaim for patent infringement against the plaintiffs and Antoine L. Garabet, M.D. and Abraham V. Shammas, M.D., individually. The counterclaim alleges that counterclaim-defendants have infringed certain of the Company's patents by using excimer laser systems manufactured by the Company without having a license to do so, and seeks treble damages and injunctive relief. The parties have stipulated to consolidate this counterclaim with the Robert T. Lin litigation discussed below under "PATENT LITIGATION." In May 1999, Freedom Vision Laser Center, L.P. filed suit in the United States District Court for the Central District of California against the Company, Autonomous, Summit Partner, VISX, VISX Partner and Pillar Point Partners. The complaint alleges, among other things, price-fixing, monopolization, attempted monopolization, and conspiracy to monopolize, in violation of Sections 1 and 2 of the Sherman Act, as well as violations of the California Business and Professions Code. Plaintiff seeks, among other things, damages that are alleged to be more than $1,000 before trebling, disgorgement of alleged illegal and ill-gotten gains, declaratory and injunctive relief, and attorneys' fees and costs. This case has been transferred to the District of Arizona for consolidated pre-trial proceedings. Cases Not Consolidated for Pre-Trial Proceedings In April 1999, Antoine L. Garabet, M.D., Inc. and Abraham V. Shammas, M.D., Inc., d/b/a The Laser Eye Center, filed suit in the U.S. District Court for the Central District of California against the Company and Autonomous. The suit alleges, among other things, that the Company's acquisition of Autonomous may substantially lessen competition or tend to create a monopoly in violation of Section 7 of the Clayton Act, Section 1 of the Sherman Act, and the California Business and Professions Code. The complaint seeks, among other things, unspecified compensatory damages, trebling of those damages, declaratory and injunctive relief, divestiture in the event that the acquisition of Autonomous is consummated, restitutionary relief, including disgorgement of alleged unlawful profits and the imposition of a constructive trust over alleged ill-gotten gains, and attorneys' fees and costs. Plaintiffs also threatened to seek a temporary restraining order, preliminary injunction, and other unspecified preliminary injunctive relief directed at the acquisition. The Company has filed a counterclaim for copyright infringement and unfair competition against the plaintiffs and Antoine L. Garabet, M.D. and Abraham V. Shammas, M.D., individually. Counterclaims The Company is the subject of additional Federal antitrust litigation as a result of counterclaims to patent litigation initiated by Pillar Point Partners. A discussion of those counterclaims is presented below under "Patent Litigation." State Antitrust Litigation Beginning in March 1998, a number of actions brought by individuals under the Cartwright Act and the California Business and Professions Code were commenced against the Company, Summit Partner, VISX and VISX Partner in Superior Court of Santa Clara County. In May 1998, these actions were consolidated as In re PRK/LASIK Consumer Litigation. In June 1998, plaintiffs B.J. Snyder, Donna McMahan, Paula Mobsby, Helen Thomas, Carmen Ocariz, Martin Hermans, Ken Bartlett, Jackie Kirk, Grace Geniusz, Jocelyn Joseph, Andrew Stoddard, and Cynthia Brubecker filed an Amended Consolidated Master Complaint for Damages ("Amended Complaint") in this matter against the Company, Summit Partner, VISX, and VISX Partner. The Amended Complaint purports to be filed on behalf of all natural persons in the United States who underwent excimer laser surgery with a laser manufactured by the Company or VISX during the period beginning October 1995, and paid a per-procedure fee indirectly to a defendant, excluding defendants, any unnamed co-conspirators of defendants, defendants' predecessors, successors, parents, subsidiaries, affiliates, officers and directors, governmental entities, and any and all judges and justices assigned to hear any aspect of the litigation. The Amended Complaint seeks unspecified compensatory damages, restitution and/or disgorgement of alleged ill-gotten gains, prejudgment and postjudgment interest, costs of suit, and attorneys' fees, as well as various forms of declaratory and injunctive relief, including an order permitting any person or entity with which the Company or VISX or both have entered into any agreement since June 3, 1992, for the purchase, license, or use of any of the Pillar Point Patents to withdraw from such agreement without penalty or obligation. James Ballard filed a similar suit against the Company, Summit Partner, VISX, VISX Partner, Pillar Point Partners, and other individual defendants in Superior Court of San Diego County. This suit has been transferred to Santa Clara County and consolidated as part of In re PRK/LASIK Consumer Litigation. The parties have stipulated to the conditional certification of a class of natural persons in California, Alabama, Arizona, the District of Columbia, Florida, Kansas, Maine, Michigan, Minnesota, Mississippi, New Mexico, New York, North Carolina, North Dakota, South Dakota, Tennessee, West Virginia, and Wisconsin who have undergone ophthalmic refractive surgery with an excimer laser manufactured by the Company or VISX. In April 1998, Penny S. Marks, an individual who allegedly has had laser vision correction surgery performed, commenced an action in Florida state court against the Company and VISX. The case purports to be a class action on behalf of all persons who have had a PRK procedure in the State of Florida from October 20, 1995 up to and including the date the class certification hearing begins. The complaint alleges various violations of the Florida Deceptive and Unfair Trade Practices Act, the Florida Antitrust Act and Section 5 of the Federal Trade Commission Act. The complaint seeks unspecified compensatory damages, costs and attorneys' fees, as well as declaratory and injunctive relief. Plaintiff has filed a motion seeking class certification. In June 1998, Barbara Worcester, an individual who allegedly has had laser vision correction surgery performed, filed an action in Wisconsin state court against the Company, Summit Partner, VISX, VISX Partner and Pillar Point Partners. The case purports to be a class action on behalf of all Wisconsin purchasers of refractive laser surgery procedures. The complaint alleges violations of the antitrust laws of the State of Wisconsin. The complaint seeks unspecified damages, trebling of those damages, attorneys' fees and costs, and declaratory and injunctive relief. Defendants removed this action to federal court, and it has been transferred to the District of Arizona. Plaintiff has filed a motion seeking class certification. In January 1999, Karen Frankson, Virginia Harmes, and Beth Luetschwager, three individuals who allegedly have had laser vision correction surgery performed, filed a similar purported class action in Wisconsin state court. Defendants removed this action to federal district court in Wisconsin, and it has been transferred to the District of Arizona. Plaintiffs' counsel has indicated that plaintiffs may attempt to dismiss this case, without prejudice. In May 1999, Linda Brisson, an individual who allegedly has had laser vision correction surgery performed, commenced an action in Minnesota state court against the Company, Summit Partner, VISX, VISX Partner and Pillar Point Partners. The case purports to be a class action on behalf of all Minnesota purchasers of refractive laser surgery procedures. The complaint alleges, among other things, price-fixing in violation of Minnesota antitrust law. The complaint seeks, among other things, compensatory damages alleged to be at least in the millions of dollars, trebling of those damages, attorneys' fees and costs, and injunctive and other relief. SUMMIT TECHNOLOGY: Faces Shareholders' Class & Derivative Suits in MA --------------------------------------------------------------------- Between August 1996 and February 1997 various shareholder actions were commenced against Summit Technology Inc. and certain of its officers in the U.S. District Court for the District of Massachusetts (the "District of Massachusetts") claiming, among other things, violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 arising out of public statements made by defendants and violations of Section 20A of the Securities Exchange Act of 1934, arising out of alleged insider trading by certain defendants. The actions were consolidated, by order of the Court entered December 2, 1996, as In re Summit Technology Securities Litigation. Plaintiffs seek certification of the action as a class action on behalf of all purchasers of Summit common stock, other than defendants and certain affiliated persons and entities, between March 31, 1995 and July 3, 1996. They seek unspecified damages, interest, costs and expenses, attorneys' fees and extraordinary and/or injunctive relief. In October 1996, an additional class action was commenced in the U.S. District Court for the District of Massachusetts against the Company, its directors, certain of the Company's officers and the four underwriters of the Company's October 1995 common stock offering claiming violations of Sections 11, 12(2) and 15 of the Securities Act of 1933 arising out of alleged material misstatements of fact in the Registration Statement issued in connection with the offering. The action was coordinated with the securities litigation by order of the court dated December 2, 1996. It also seeks unspecified compensatory damages, interest, costs and expenses, attorneys' fees and extraordinary and/or injunctive relief. In December 1996, one of the Company's shareholders filed in the U.S. District Court for the District of Massachusetts a derivative action, purportedly on behalf of the Company, against the Company as nominal defendant, directors of the Company and certain present or former officers of the Company. This action was consolidated with the securities litigation by order of the Court entered July 22, 1997. The complaint alleges that the conduct of the individual defendants has exposed the Company to the expense and inconvenience of defending the Securities Litigation and has harmed the Company's reputation, thereby limiting its access to capital markets. It also alleges breach of fiduciary duty, gross negligence and insider trading against individual defendants. It seeks damages, interest, costs and expenses and attorneys' fees. SUMMIT TECHNOLOGY: Fla. Suit over RICO Violations Dismissed & Amended --------------------------------------------------------------------- In October 1992, Joseph Seriani brought suit against Summit Technology's wholly-owned subsidiary Lens Express and certain of its former shareholders in the Florida Circuit Court. The suit alleged violations of the Florida Civil Remedies for Criminal Practices Act -- the Florida civil RICO statute -- based on events which allegedly occurred in the mid-1980s. Seriani's claims against Lens Express were dismissed several times for failure to state a viable claim, but in each instance with leave to amend and refile. On May 15, 1996, the date of the Company's acquisition of Lens Express, Seriani and his wife Rhonda Seriani filed an amended complaint which included the Company as an additional defendant. On November 25, 1996, the Serianis voluntarily dismissed their action against the Company and on March 7, 1997 voluntarily dismissed their action against the remaining defendants, in each case without prejudice. On March 24, 1997, the Serianis commenced a new lawsuit against Lens Express and others in the U.S. District Court for the Southern District of Illinois, alleging substantially similar claims. On October 7, 1999, the Court issued an Order to Show Cause why the case should not be dismissed for lack of prosecution. TOBACCO LITIGATION: Makers Plan to Say Products Are Too Deadly for FDA ---------------------------------------------------------------------- After decades of downplaying smoking's dangers, cigarette makers plan to argue before the Supreme Court this week that the Food and Drug Administration has no right to police the industry because tobacco products are too deadly for the FDA to regulate. In a landmark case with sweeping public health implications, the $50 billion industry is keeping its Marlboro Man image out of the courtroom and expressing a new corporate motto that is emblazoned on Philip Morris's Web site: "There is no 'safe' cigarette." The turnabout is pivotal to the industry's attempt to thwart the FDA, which claimed jurisdiction over tobacco products in 1996 after concluding that nicotine is a drug and cigarettes are drug-delivery devices. With the FDA poised to alter the way cigarettes are marketed and sold in the 21st century, the court is weighing the industry's complaint that the Clinton administration exceeded its legal authority in permitting the FDA to assert control over tobacco products. Both sides are scheduled to present oral arguments Wednesday, and the court is expected to issue a ruling early next year. Industry lawyers plan to argue that if the FDA prevails in court the agency will have no choice but to ban the sale of cigarettes because the law requires the FDA to regulate only drugs that are "safe and effective." "It all comes back to whether we are safe and effective," an industry official said last week in a briefing with reporters on the condition that he not be identified. "We are not safe and effective." The industry contends that only Congress has the power to abridge the rights of adults to buy dangerous tobacco products and has chosen instead to require safety warnings and other restrictions short of FDA intervention. "This is a significant issue, whether an unelected bureaucrat of the federal government can ban a legal product of a major American industry," said Scott Williams, a spokesman for the five largest tobacco manufacturers. As a sign of the industry's disdain for the FDA's proposed regulations, Williams derided the agency's finding that cigarettes are drug-delivery devices. "Saying a cigarette is a delivery device is like saying ketchup is a vegetable," he said. "It doesn't make sense." In court papers, the FDA argues that the law provides exceptions for the agency to regulate unsafe products such as tobacco rather than ban them if it is in the public interest. And the FDA says it has no intention of outlawing tobacco because "the sudden withdrawal from the market of products to which so many millions of people are addicted would be dangerous." Under proposed regulations that President Clinton announced in 1996, the FDA has chiefly targeted the marketing and sales of tobacco products to minors. Studies have shown that more than 90 percent of adult smokers started as minors, and more than 400,000 adults die each year of smoking-related illnesses. Antitobacco advocates said the FDA's proposed campaign against youth smoking is crucial to stemming what John R. Seffrin, head of the American Cancer Society, called "the 20th century's single largest public health disaster." He and other advocates portrayed the industry's talk of a possible ban on cigarettes as a scare tactic. "The industry's argument is designed to frighten the court into saying the FDA can't act," said Matthew Myers, executive vice president of the National Center for Tobacco-Free Kids. "Without FDA jurisdiction, we will still not have a nationwide set of rules to make it difficult for children to purchase and obtain tobacco products illegally." The only FDA tobacco regulation that has taken effect requires retailers to ask cigarette buyers who appear to be 27 or younger to show identification proving they are at least 18. The agency's other proposed rules would ban cigarette vending machines and self-service displays except in adults-only locations. In addition, the FDA has proposed broad advertising, marketing, and promotional restrictions on tobacco products, such as bans on outdoor ads near schools and on sponsorship of sports events. A federal district court in Greensboro, N.C., ruled in 1997 that the Food, Drug and Cosmetic Act of 1938 empowered the FDA to regulate cigarettes and smokeless tobacco because nicotine is addictive. But the US Court of Appeals for the Fourth Circuit in Richmond reversed the finding last year in a 2-1 decision. "We do not dispute that Congress has charged the FDA with protecting the public health and that tobacco products present serious health risks for the public," the court wrote in the majority opinion. But the appeals court accepted the industry's argument that Congress effectively has reserved the right to oversee cigarette makers and did not intend for the FDA to regulate tobacco. "Simply put, the FDA has appropriated Congress's constitutional authority to make major national policy," tobacco lawyers argued in their written brief to the Supreme Court, citing the appeals court ruling. The Supreme Court challenge will take place a year after cigarette makers agreed to pay 46 states more than $200 billion over 25 years to cover smoking-related health costs. The industry also faces a $20 billion civil lawsuit by the Justice Department and numerous class-action cases across the country. If the Supreme Court upholds the Fourth Circuit ruling, "the case is over and there is nothing the FDA can do," an industry official said. Although both sides expect to take their cases to Congress if they lose in the Supreme Court, antitobacco groups said a defeat for the FDA could be crushing, particularly with little chance of major action on Capitol Hill in the 2000 election year. "As a result," Myers said, "you will not have seen the type of fundamental change that will dramatically reduce the number of Americans who die from tobacco." (The Boston Globe Nov-29-1999) WILLIAM SWEET: MA Jury Awards $ 8 Mil In Radiation Experiment Case ------------------------------------------------------------------ A Massachusetts jury on Oct. 15 awarded two plaintiffs a total of $ 8 million in compensatory and punitive damages for injuries allegedly caused by an experimental radiation procedure on terminally ill patients (Evelyn Heinrich, et al. v. William H. Sweet, M.D., et al., No. 97-12134-WGY, D. Mass.). (Text of Verdict Sheet in Section D. Mealey's Document # 15-991020-107.) Named defendants include Associated Universities Inc., which operated Brookhaven National Laboratory in New York; the Estate of Dr. Lee Farr, the former medical director of Brookhaven; Massachusetts General Hospital (MGH); Dr. William Sweet, the MGH neurosurgeon who, together with Dr. Lee, helped pioneer Boron Neutron Capture Therapy (BNCT); and the Massachusetts Institute of Technology (MIT). The three defendants at trial were Sweet, MGH and MIT. This case originates out of experiments conducted on people under the care of MGH and Brookhaven in the 1950s and 1960s. In the second amended complaint, plaintiffs alleged that various doctors, institutions and the U.S. government conspired to conduct extensive, unproven and dangerous medical experiments on more than 140 terminally ill brain cancer patients without their knowledge or consent. The Procedures Sources told Mealey Publications that the experimental procedures involved injecting patients with boron, which was expected to concentrate in the tumor. Certain patients were exposed to neutrons from a nuclear reactor. The sources said that when the boron captured a neutron, a nuclear reaction occurred that resulted in a short burst of radiation that was intended to kill the tumor. Sources said that all of the more than 60 patients who received the BNCT died, and the trials were called off in 1961. According to sources, in 1995 the family members of some of these patients filed a punitive class action, claiming that BNCT was a form of human experimentation that injured or caused the deaths of the decedents. According to sources, the court agreed to try the claims of the class representatives first, and if a plaintiffs' verdict was secured, then the court would address class certification issues. Sources told Mealey's that Evelyn Heinrich's husband and Henry M. Sienkewicz's mother received injections and radiation exposure. According to sources, not all plaintiffs received both the injections and the radiation exposure. Sources added that plaintiffs maintained that the decedents in this case were not informed of the risks associated with the procedures. Sources further said that plaintiffs argued that the defendants knew that the benefits did not outweigh the risks associated with the procedure. Prior Decisions In an Aug. 16 order, the U.S. District Court for the District of Massachusetts denied the United States' motion to dismiss. The court granted MIT's motion for partial summary judgment. The court further granted in part and denied in part Brookhaven, Sweet, MGH, and MIT's motions for summary judgment or dismissal. In that order, the court noted that the remaining claims include: (1) Bivens' constitutional claim against all private defendants, (2) state law claims for fraud, failure to obtain informed consent, wrongful death, negligence, and negligent misrepresentation premised upon conduct that occurred in Massachusetts involving radiation treatments and (3) Federal Tort Claims Act claims against the United States premised on all of the conduct alleged in the complaint. On Sept. 9, sources said that District Judge William G. Young granted summary judgment in favor of Associated Universities and the Estate of Dr. Farr on claims brought on behalf of the patients who were treated at the Brookhaven reactor. Later, sources said that the trial court directed a verdict in favor of Associated Universities and the Estate of Dr. Farr on the remaining claim that they had conspired with MGH, Dr. Sweet and MIT to commit fraud on patients who received BNCT at the MIT reactor. Sources added that certain claims against the U.S. government are still pending at the trial court level. The sources said that the claims of two other proposed class representatives were ruled to be time-barred by New York law. Verdict Evelyn Heinrich was awarded $ 250,000 in compensatory damages for negligence, $ 250,000 compensatory damages for wrongful death, $ 750,000 in punitive damages against Sweet for wrongful death, and $ 1.25 million in punitive damages against MGH. Sienkewicz was awarded $ 500,000 in compensatory damages for negligence, $ 2 million in compensatory damages for wrongful death, $ 1 million in punitive damages against Sweet for wrongful death, and $ 2 million in punitive damages against MGH for wrongful death. No punitive damages were awarded against MIT. Sources said that the defense argued during trial that the doctors hoped that the experiments would provide some therapeutic benefits and the risks would be outweighed by those benefits. According to sources, the defense argued that the patients knew of the risks associated with the procedures and accepted the risk because of their terminal illnesses. Plaintiff experts include Michael Grodin, M.D., co-director of The Center for Medical Ethics at Boston University; Dr. Robert Veatch, Ph.D., director of the Center for Medical Ethics at Georgetown University; Dr. Jonathan Moreno, Ph.D., head of the Center For Medical Ethics at the University of Virginia Medical School; and Dr. Larry Junck, M.D., professor of Neurology at the University of Michigan. Plaintiffs are represented by Raymond J. Heslin of Gold, Farrell & Marks in New York, Anthony Z. Roisman of Cohen, Milstein, Hausfeld & Toll in Washington, D.C., John K. McGuire Jr. of McGuire & McGuire in Worcester, Mass., Anthony Z. Roisman in Lyme, N.H., Martin Freeman of Freeman & Jenner in Rockville, Md., and John Clifford of Clifford, Lyons and Garde in Washington, D.C. Sweet and MGH are represented by Raymond J. Kenny, Mark Newcity and Chris J. Maley of Martin, Magnuson, McCarthy & Kenny in Boston and Gail A. Anderson of Martin, Magnuson, McCarthy & Kenney in Boston. MIT is represented by Francis C. Lynch, Lori B. Silver and Constantine Athanas of Palmer & Dodge in Boston and Owen Gallagher, Garrett Harris and Sally A. Vanderweele of Gallagher & Gallagher in Charleston, Mass. Farr and Associated Universities are represented by William Shields and Sarah G. Hunt of Day, Berry & Howard in Boston and Kevin T. Van Wart, Jerome A. Karnick and Mark J. Zwillinger of Kirkland & Ellis in Chicago. The United States is represented by Burke M. Wong of the U.S. Department of Justice in Washington, D.C. (Mealey's Litigation Report: Emerging Toxic Torts, October 20, 1999) * CCAA Court Approves Philip Services' Financial Reorganization --------------------------------------------------------------- Philip Services Corp. (TSE:PHV.) (ME:PHV.) announced on November 26 that Mr. Justice Blair of the Ontario Superior Court of Justice has sanctioned the Company's Amended and Restated Plan of Compromise and Arrangement ("the Canadian Plan") under the Companies Creditors' Arrangement Act ("CCAA"). The implementation of Philip's Canadian Plan will occur shortly after its U.S. Plan of Reorganization (the "U.S. Plan") is confirmed under Chapter 11 of the U.S. Bankruptcy Code. The Company is finalizing the terms of its exit working capital facility, which is the last step before seeking confirmation of its U.S. Plan. Upon implementation of its Canadian Plan, Philip will transfer ownership of its Canadian subsidiaries as a going concern to two new Canadian companies, Philip Services Inc. and Philip Analytical Services Inc. Philip will continue to operate and grow its Canadian businesses under these new legal entities. "This is an important step for our Company and our Canadian operations," said Anthony Fernandes, President and Chief Executive Officer. "We have delivered on our commitment to provide consistent quality and service to our clients throughout this process, due to the skill and dedication of our employees. Our new Canadian companies will be supported by a strong balance sheet, working capital, and our steadfast commitment to their growth." Through the financial reorganization, Philip will reduce its secured debt from US $1 billion to US $250 million and US $100 million in convertible payment-in-kind notes. The Company will also eliminate over US $140 million in unsecured debt in return for US $48 million in payment-in-kind notes and US $18 million in convertible payment-in-kind notes. Upon final Plan implementation, 24 million shares will be issued by Philip Services (Delaware), Inc. on a pro rata basis to its secured lenders, unsecured creditors, existing shareholders, class action claimants, and other equity claimants, as set forth in the Company's Plan. Shareholders of the Company on the date of implementation of the Plan will receive their pro rata share of 480,000 common shares of the restructured Company, or one common share for every 273 common shares held. There are currently 131 million shares of the Company issued and outstanding. Philip Services is an integrated metals recovery and industrial services company with operations throughout the United States, Canada and Europe. Philip provides diversified metals services, together with by-products management and industrial outsourcing services, to all major industry sectors. * The Danger Of Misclassifying Workers -------------------------------------- For those in the labor and employment law field and for employers throughout the United States, Microsoft brings to mind the continuing litigation involving that company's classification of workers as independent contractors, and the expensive consequences of that decision. The classification issue has broad ramifications for corporate America. The dangers of worker misclassification are significant. Potential tax liability may result, since companies do not withhold income taxes or pay Social Security taxes on behalf of independent contractors. Liability for benefits (such as retirement, health, stock purchase plans and other types of employee fringe benefits) is possible, both to workers improperly classified as independent contractors and to those employed by staffing firms. And, companies may be subject to claims under employment discrimination, labor law, unemployment compensation, and other statutes. Following a decade of restructuring, reorganizations and downsizing, millions of American workers departed the traditional workforce and became self-employed, or went on the payroll of temporary, leasing, payrolling or staffing companies. The structure of these arrangements vary. Many companies continue to use independent contractors, often entering into contracts with individual workers to define and delimit the nature of their relationship. Others contract with temporary employment agencies, employee leasing firms, payrolling services, or outside contractors to provide services. A whole new industry has emerged, known as professional employer organizations ("PEOs"), supplying companies with workforces to provide all types of services. Whatever the arrangement, companies are looking outside the traditional employment box in an effort to achieve flexibility in staffing, reduce or control labor costs, obtain help for specific, targeted projects or for ancillary services in a way that does not expand the payroll, and avoid the burdens and legal risks of managing employees. Often, company management believes too simplistically that by retaining another company to employ workers, or entering into an independent contractor relationship, exposure to liability can disappear or be shifted to others. Recent cases demonstrate, however, that shifting liability is easier said than done, and that the risks of entering into these relationships can be great. The Microsoft case is a prime example. 'Microsoft' Case Prior to 1990, Microsoft entered into written agreements with hundreds of so-called temporary workers who worked as proofreaders, software testers, production editors, and formatters. Many were labeled "temporary" despite years of working at Microsoft. The agreements included the workers' signed acknowledgements that they were "independent contractors" and not employees, and were responsible for their own insurance, benefits, and taxes, including Social Security taxes. The agreements specifically provided that the workers were not entitled to the various employee benefit programs available to Microsoft employees. The workers submitted invoices for their time which were paid through the company's accounts payable system rather than being paid through the payroll process. Yet, they worked side-by-side with Microsoft employees, performing the same functions under the same supervision, with the same access to the company's offices. In 1989 and 1990, the Internal Revenue Service conducted an employment tax audit and found that Microsoft either exercised, or retained the right to exercise, control and direction over the services performed by these individuals. Accordingly, the IRS concluded that these workers should have been considered employees, at least for tax purposes. Microsoft accepted the IRS determination and began to restructure its relationship with the workers. Some of the former contractors were hired directly onto the Microsoft payroll. Others were retained by placing them on the payroll of an employment agency which then contracted with Microsoft to provide the services of the workers. Microsoft's assumption, of course, was that because these workers technically were employed by the agency, and not on the payroll of the company, it had no liability to them. A few years later, the workers commenced a class action, claiming that prior to the 1990 audit, they were really employees and thus should have had the right to participate in all of Microsoft's employee benefit plans, including the valuable stock purchase and 401(k) savings programs offered to Microsoft's employee workforce. A federal district court rejected the plaintiffs' argument, finding that regardless of their employment status they had contractually waived their rights to Microsoft benefits. The plaintiffs appealed the dismissal of their claims relating to participation in Microsoft's 401(k) plan and stock purchase plan. Siding with the workers, the United States Court of Appeals for the Ninth Circuit reversed the district court's dismissal. (Vizcaino v. Microsoft Corp., 120 F.3d 1006 (9th Cir. 1997)(en banc), cert. denied, 118 S.Ct. 899 (1998).) In an en banc decision, the court determined that as to the 401(k) plan, the terms of the plan should, in the first instance, be reviewed by the plan administrator to determine whether, under the plan, the workers were covered. As to the stock purchase plan, the court held that the workers were both common law employees and employees under the terms of the plan and as such entitled to participate in the plan. The court remanded the case to the district court to determine an appropriate remedy. On remand, the plaintiffs raised the issue of the status of those workers who, following the IRS audit, continued to perform work for Microsoft while on the payroll of a temporary agency. Additionally, they sought relief for those who were hired by the temporary agency to work at Microsoft after the 1990 audit. This issue once again made its way to the Ninth Circuit which earlier this year ruled that all of those performing work for Microsoft while on the payroll of the agency were covered by the class action. (Vizcaino v. Microsoft Corp., 173 F.3d 713 (9th Cir. 1999).) The court reasoned that "even if for some purposes a worker is considered an employee of the agency, that would not preclude his status as common law employee of Microsoft. The two are not mutually exclusive." Thus, according to the Ninth Circuit, a worker is not automatically excluded from participation in one company's benefit plans merely because he is on the payroll of another company. Cases Proliferate If you think Microsoft was an aberration, think again. There are a growing number of cases in which similar claims are being made. Last year, the U.S. Department of Labor brought suit against Time-Warner in its capacity as administrator of the company's employee benefit plans. (Herman v. Time Warner, Inc., No. 98 Civ. 7589 (S.D.N.Y., filed October 26, 1998).) According to the Labor Department, the entertainment and publishing giant mistakenly classified workers as independent contractors or temporaries, thereby depriving them of the health and retirement benefits provided to "regular" employees. The Labor Department is alleging that Time-Warner and its administrative committee have violated the Employee Retirement Income Security Act, the federal employee benefits law, and that the committee has breached its fiduciary obligations by failing to enforce the participation rules of the plans to include temporary workers. Time-Warner disputes the allegations. A recent court of appeals decision reinstated a suit against California's Pacific Gas and Electric Company by a group of workers who worked at a PG&E office but were on the payroll of an employee leasing agency. (Burrey v. Pacific Gas & Electric Co., 159 F.3d 388 (9th Cir. 1998).) The workers claimed that PG&E violated ERISA by failing to include them in the company's benefit plans, including a retirement benefit plan. The retirement plan covered all PG&E employees but excluded "leased employees, as defined by @ 414(n) of the Internal Revenue Code." The plan administrator determined that because the employees were employed by a leasing company, they were not entitled to coverage under the plan. A district court dismissed the action, concluding that the workers were not PG&E employees. The appellate court refused to defer to the plan administrator's determination, concluding that because the plan incorporated a statutory definition of a worker's status, no deference was required. The court remanded the case to the district court for a determination of whether the leased employees were "common law employees" and thus entitled to coverage. Beyond Benefits The classification issue goes beyond employee benefits. The Equal Employment Opportunity Commission, which enforces the nation's employment discrimination laws, has gotten into the act. It recently issued extensive guidelines on the subject of who can be held liable for discrimination and harassment claims, particularly in situations where a worker is on the payroll of one company, but actually performs services for another. According to the EEOC, liability in these cases can be the joint responsibility of both companies (often referred to as the "joint employer" theory). But the EEOC also would absolve the payrolling employer in many cases where the discriminatory conduct was solely the responsibility of the company at which the work was performed. The EEOC's view has support among the federal courts. Under the theory of "joint employer," both the "technical" employer and the company for whom the work actually is performed have been held liable for discrimination under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, and the Americans with Disabilities Act of 1990. (See, e.g., Rivas v. Federacion de Associaciones Pecurias de Puerto Rico, 929 F.2d 814 (1st Cir. 1991); Poff v. Prudential Insurance Co. of America, 882 F.Supp. 1534 (E.D.Pa. 1995); Guerra v. Tishman East Realty, 52 Fair Empl. Prac. Cas. (BNA) 286 (S.D.N.Y. 1989).) In other cases, courts have ruled that the company at which an individual works, rather than the firm which issues the paycheck, is liable for discrimination or harassment, particularly where the payrolling firm has no knowledge of or involvement in the decisions or behavior being challenged. The Labor Department also has adopted this view in its interpretation of the requirements of the Family and Medical Leave Act. (See, e.g., Caldwell v. ServiceMaster, 966 F.Supp. 33 (D.D.C. 1997).) Recent Fair Labor Standards Act decisions also reinforce the need for proper classification of workers. In those cases, individuals treated as independent contractors sued for overtime pay violations, contending that they should have been considered employees. Labor Department regulations drecognize that an individual can be a statutory employee of more than one employer at the same time for FLSA purposes. (29 C.F.R. @ 791.2.) Under this theory, the company for whom the work is performed may be liable for a staffing company's noncompliance with minimum wage, overtime pay, child labor, and equal pay violations. Similarly, under the National Labor Relations Act, "joint employer" status has been found in a number of cases where both the payrolling company and the firm for whom the work is performed exercise control over the worker. The National Labor Relations Board has included a staffing company's workers in the bargaining unit of the company at which the work is performed if there is a sufficient nexus between the staffing firm's employees and the company. (NLRB v. Western Temporary Services, 821 F.2d 1258 (7th Cir. 1987); Continental Winding Co. and Kelly Services, 305 N.L.R.B. 122 (1991).) The test for determining whether an individual is an employee varies according to the statute at issue. For purposes of the employment tax laws, for example, the Internal Revenue Code defines "employee" to mean "any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee." IRS regulations state: Generally such relationship exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct and control the manner in which the services are performed; it is sufficient if he has the right to do so. (Treas. Reg. @ 31.3121(d).) 20 Questions The IRS's "20 questions" test often is used as a guide to determine whether sufficient control exists to establish an employer-employee relationship. (REV. RUL. 87-41.) The test, which has been criticized in recent years as too cumbersome and leading to uncertain results, nonetheless serves as a useful guide to the factors looked at to determine employment status. According to agency regulations, the relevant factors are as follows: * Instruction The company provides the worker with specific instructions on how the services are to be performed. * Training The company provides the worker with training relating to the services to be performed. * Integration The nature of the services are an integral part of the company's operations, rather than merely a support, staff or ancillary function. * Personal services The individual personally performs the services for the company, rather than hiring his own workforce to do so. * Hiring and paying The company hires and pays the worker. * Length of relationship There is a continuing relationship between the worker and the company, similar to the continuing relationship between an employer and its employees. * Hours of work The company establishes the hours during which the work is to be performed. * Amount of time The worker devotes all or substantially all of his time working for the company, restricting his ability to sell his services to others. * Location of work The work is performed on the company's premises, particularly where the work could be performed elsewhere. * Order of work The company determines the sequence or order of the work performed, or sets the priority of work. * Reports The company requires the worker to submit reports. * Payment Rather than payment by the job, the company compensates the worker by the hour, day, week or month. * Expenses The company reimburses the worker for expenses relating to the work, rather than those expenses being figured into the overall price by the worker. * Tools and equipment The company supplies the tools and equipment necessary to perform the work. * Capital investment The worker has made a significant investment in the business. * Profit or loss The worker can realize a profit (or loss) by the investment of his time and effort. * Multiple companies The worker can perform work during the same time frame for more than one company or individual, indicating that the worker is in business for himself and is not dependent for his income on one company. * Making services available The worker engages in efforts to market his services to others, not merely to the company for whom he is performing work. * Discharge The company retains the right to discharge the worker in the same manner as it does its employees. * Terminate The worker can terminate his relationship with the company without incurring liability. Review Required Intensified Internal Revenue Service scrutiny, combined with the rise in lawsuits and agency enforcement, mandate that companies review the status of all workers who are being treated differently than "regular employees" under company benefit programs. The IRS and the courts look at a variety of factors to determine whether an individual truly is an employee of a company, including the degree of supervision and control which the company exercises over that individual, the regularity of the work, the freedom of the individual to sell his services to others, where the work is performed, who provides the tools and materials, and how payment is made. A word to the wise: prevention remains the best cure. 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