/raid1/www/Hosts/bankrupt/CAR_Public/991223.MBX
C L A S S A C T I O N R E P O R T E R
Thursday, December 23, 1999, Vol. 1, No. 227
Headlines
ACTION PERFORMANCE: Milberg Files Expanded Securities Suit in Arizona
BAKER HUGHES: Milberg Files Expanded Securities Suit in Texas
BANK ONE: Barrack Rodos Files Securities Suit in Illinois
BANK ONE: Chief Executive Steps Down from Bank Facing Shareholder Suit
BAXTER HEALTHCARE: Settles for Hep. C Suit over Immune Globulin Therapy
BLACK BUILDING BONDS: Peterson Law Office Announces Dakota Settlement
BREAST IMPLANT: Settlement in Dow Corning Case Will Soon Be Made
BRUNSWICK CORP: Reaches Agreements With Boat Builders over Antitrust
COCA-COLA: Lawyers Say Mgt. Knew of Racial Bias; More Executives Named
CREDIT LYONNAIS: U.S., CA Probe into Takover of Failed Executive Life
DOMINICK'S SUPERMARKETS: Settles Suit Re Bias against Female Employees
FEN-PHEN: 5 Get $150M in Actual Damages from MI Jury; AHP Will Appeal
HK GOVT: Can’t Apply New Law for Higher Rates on Land, Ap Ct Rules
HMOs: Health Care Provider Blames Unfair Tax Laws for Problems
HOLOCAUST VICTIMS: More And More German Firms Join Compensation Fund
I.C. ISAACS: Yates Law Office Files Securities Lawsuit in Maryland
INDIGO AVIATION: Beatie and Osborn Files Securities Suit in New York
IWAN’S CATERING: $3 Mil Fund Is Set Up For Claims over Potato Salad
LASON INC: Lionel Z. Glancy Files Securities Suit in Michigan
LASON INC: Mantese Miller Files Securities Suit In Michigan
NAVIGANT CONSULTING: Revelations Add Fuel to Investors Class Action
NAVIGANT CONSULTING: Warns Earnings Will Fall, Says the Pomerantz Firm
PAYDAY LENDER: Nationwide Budget to Settle and End Operations in Il.
PLAINS ALL: Wolf Haldenstein Files Securities Suit in Texas
PUBLISHERS CLEARING: States Criticize Settlement in Sweepstakes’ Case
RENT-TO-OWN COS.: Edelman, Combs Sues 4 Cos and Their Collection Lawyer
RIBOZYME PHARMACEUTICALS: Wolf Haldenstein Files Colo. Securities Suit
RITE AID: Fla. RICO Action Prompts Action in PA. against Pharmacy Chain
SOURCE MEDIA: Announcement Seeks Members for Shareholder Suit in Dallas
SPYGLASS INC: Gets Prelim Ct Approval for Settlement of Securities Suit
TOBACCO LITIGATION: Law Journal Reports on $65M Conn. Jackpot for Attys
TORONTO CITY: Lawsuit over Hazards at Keele Valley Landfill Tossed Out
TYCO INT’L: Schoengold & Sporn Files Securities Suit in New York
USDA: Settlement With Hispanic Workers Was Not Breached, EEOC Rules
VERITY INC: Denies Allegations in Securities Lawsuit
Y2K LITIGATION: Lawyers Wait In Wings, Watching For Y2K Woes
Y2K: Legal Times Predicts Nothing Special Will Happen and Says Why
*********
ACTION PERFORMANCE: Milberg Files Expanded Securities Suit in Arizona
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Milberg Weiss (http://www.milberg.com)announced on December 21 that a
class action has been commenced in the United States District Court for
the District of Arizona on behalf of persons who purchased the publicly
traded securities of Action Performance Companies, Inc. ("Action
Performance") (Nasdaq:ACTN) between July 27, 1999 and December 16, 1999
(the "Class Period"). The complaint charges Action Performance and
certain of its officers and directors with violations of the Securities
Exchange Act of 1934.
If you wish to serve as lead plaintiff, you must move the Court no later
than 60 days from November 30, 1999. If you wish to discuss this action
or have any questions concerning this notice or your rights or
interests, please contact plaintiffs' counsel, William Lerach or Darren
Robbins of Milberg Weiss at 800/449-4900 or via e-mail at wsl@mwbhl.com.
The complaint alleges that on July 6, 1999, the Company's wholly owned
subsidiary goracing.com filed a registration statement with the SEC for
an initial public offering ("IPO") to raise $80 million. Because Action
Performance would own 80% of the stock of goracing.com subsequent to the
IPO, the top officers of Action Performance needed to make the IPO
successful. To this end, it was essential that Action Performance appear
to be successfully growing. Thus, defendants issued allegedly false
statements about the state of Action Performance's business and the
shipment of certain of its products to Home Depot.
On November 4, 1999, Action Performance issued a press release
announcing its preliminary 4thQ F99 results. These preliminary results
were worse than defendants represented, principally due to the fact that
an $8 million sale to Home Depot had not occurred as of September 30
1999, which was contrary to defendants' prior statements. Later, on
December 16, 1999, Action Performance announced that 1stQ F2000 results
would fall below expectations and the spin-off of goracing.com would be
delayed indefinitely. On these disclosures, Action Performance's stock
price declined to below $10 per share, its lowest level in nearly 4
years. As a result of the defendants' false statements, Action
Performance's stock price traded at inflated levels during the Class
Period.
Contact: Milberg Weiss Bershad Hynes & Lerach, LLP William Lerach,
800/449-4900 wsl@mwbhl.com
BAKER HUGHES: Milberg Files Expanded Securities Suit in Texas
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Milberg Weiss (http://www.milberg.com)announced that a class action has
been commenced in the United States District Court for the Southern
District of Texas on behalf of those who purchased or otherwise acquired
Baker Hughes, Inc. ("Baker") (NYSE:BHI) common stock during the period
between July 24, 1998 and December 8, 1999 (the "Class Period").
The complaint charges Baker and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. Baker services
the oil and gas industry, providing reservoir-centered products,
services, and systems to the worldwide oil and gas industry, provides
products and services for oil and gas exploration, drilling, completion
and production, and manufactures and markets a variety of roller cutter
bits and fixed cutter diamond bits. The complaint alleges that during
the Class Period, defendants reported favorable earnings and represented
that there were no accounting issues at the Company, which caused its
stock to trade at artificially inflated levels. On December 1, 1999,
Baker announced it expected 4thQ 99 earnings to be short of
expectations. Then on December 8, 1999, Baker announced it might restate
its past results due to accounting issues in its Inteq unit that would
require charges of $40-$50 million be taken. On these disclosures,
Baker's stock declined as much as 26% to as low as $15 on volume of 28
million shares. As a result of the defendants' false statements, Baker's
stock price traded at as high as$36-1/4 during the Class Period.
Contact: plaintiff's counsel, William Lerach or Darren Robbins of
Milberg Weiss at 800/449-4900 or via e-mail at wsl@mwbhl.com
BANK ONE: Barrack Rodos Files Securities Suit in Illinois
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Counsel for Class Plaintiff, Barrack, Rodos & Bacine, issued the
following on December 21:
A class action has been commenced in the United States District Court
for the Northern District of Illinois on behalf of all persons who
purchased the common stock of Bank One Corp. (NYSE: ONE) ("Bank One" or
the "Company") between October 22, 1998, and November 10, 1999,
inclusive (the "Class Period").
The complaint charges that defendants violated the federal securities
laws, including Sections 10(b) and 20 of the Securities Exchange Act of
1934, as amended, by making false and misleading statements in press
releases and filings with the Securities and Exchange Commission
concerning, among other things, the business, financial condition,
earnings and prospects of Bank One and its subsidiary, First USA.
Specifically, the complaint alleges that Bank One achieved its financial
results from First USA's improperly recorded revenues from late fees,
penalties and interest by failing to post credit card payments on time.
The complaint alleges that after a series of partial disclosures
beginning on August 24, 1999, and ending on November 10, 1999, the facts
concerning defendants' conduct became widely known, including a report
that First USA was the target of an investigation by the Office of the
Comptroller of the Currency. As a result, the stock price of Bank One
plummeted from its Class Period high of $63.563 per share to close at
$34.625 per share on November 10, 1999.
Contact: Maxine S. Goldman, Shareholder Relations Manager, at Barrack,
Rodos & Bacine, 3300 Two Commerce Square, 2001 Market Street,
Philadelphia, PA 19103, at 800-417-7305 or 215-963-0600, fax number
888-417-7306 or 215-963-0838 or by e-mail at msgoldman@barrack.com
BANK ONE: Chief Executive Steps Down from Bank Facing Shareholder Suit
----------------------------------------------------------------------
John B. McCoy, the chief executive who helped transform the Bank One
Corporation from a regional bank into the nation's fourth-largest bank
holding company through big mergers, stepped down on December 21 after a
tumultuous year at the helm. The bank's board said that Mr. McCoy, 56,
had decided to retire as chief executive and chairman effective
immediately. His duties will be assumed by Verne G. Istock, 59, the
president of Bank One, who will serve as acting chief executive until a
successor is chosen.
Shares of Bank One, which have been severely depressed for months,
soared on the news, climbing $3.375, to $33.375, on the New York Stock
Exchange.
Mr. McCoy's decision to step down from Bank One, which is based here,
comes after a series of executive departures tied to a yearlong earnings
slide. The weak results were largely attributed to the company's First
USA credit card and consumer lending division, which accounts for about
one-third of the bank's earnings.
The move, which surprised many on Wall Street, also underscores the
great difficulties banks and other large institutions are facing after a
wave of expensive mergers and acquisitions that have put increasing
pressure on top executives to integrate diverse corporate cultures and
then create the kind of earnings growth that would justify such a deal.
Wall Street analysts said that Mr. McCoy had promised great things from
the new Bank One, which merged last year with the First Chicago NDB
Corporation. A year earlier, Bank One acquired First USA, one of the
nation's largest credit card issuers, with more than 64 million
customers and about $70 billion in assets in 1998.
First USA was supposed to be the growth engine, helping to power a big
national bank. But First USA began sliding earlier this year, partly
because of increased competition but also because of growing attrition
rates, high penalty fees compared with rivals and poor customer service.
The profit declines in the First USA division hit Bank One hard,
creating two quarters of disappointing earnings, and there have been
warnings from the company about more bad news to come.
The stock price of Bank One is down about 50 percent from its high of
$64.875 in April 1998, and below the level it was before the Bank One
merger with First Chicago.
Henry Dickson, an analyst at Salomon Smith Barney, says Bank One profit
warnings have punished the stock. For 2000, profit expectations have
been cut by 32 percent, accounting for about $1.8 billion. As a result,
shareholders have taken a bath, analysts said, with the bank losing more
than $30 billion in market value. And there have been rumors that the
bank's stock collapse made it a possible takeover target.
A group of shareholders has already filed a class-action lawsuit, saying
the company comcealed earnings information, and the board, which
included at least one huge shareholder, grew disenchanted with Mr.
McCoy, analysts said. "Some on the board thought they had been sold a
pig in a poke," said Nancy Bush, a banking analyst at Ryan, Beck &
Company. "I was told the move today cleared the logjam on the board."
December 21's decision came after a series of resignations and
shake-ups. Earlier this year, two vice chairmen retired and the head of
the First USA division resigned. In October, the board reshuffled
management duties, giving Mr. McCoy oversight of First USA and Mr.
Istock control over the day-to-day duties of most of the other
divisions.
Some analysts said the problems went far beyond First USA. There were
high expectations and failed promises, management missteps and a clash
of cultures between the ambitious, risky Bank One group and the more
risk-averse First Chicago executives.
John Rau, the chief executive at the Chicago Title Corporation and
former employee of First Chicago, said that the board of Bank One became
impatient. "I've heard it said there are different skills necessary in
driving a series of community banks through a series of deals and riding
this big train," he said. "They had this First USA deal and it seems
they hitched too much to that star."
Mr. McCoy, who was with the bank for more than 29 years and served as
chief executive for the last 15 years, retired without making any
statement. He got his start in Columbus, Ohio, where Bank One had been
based until this year. And he was the third member of his family to head
the bank. His grandfather was a bank executive in the 1930's, and his
father, John G. McCoy, created the Banc One name in 1979.
Mr. Istock, the former chief executive at First Chicago, is said by
analysts to be more averse to risk, and in the interim, while the bank
searches for a replacement, he may be exactly what the company needs,
something steady. The bank said it expected to complete its search for a
chief executive in the next few months. In an interview on December 21,
Mr. Istock said he had to withhold comment until January, when the bank
plans to meet analysts to offer details about the financial situation
and the problems at First USA.
Analysts said that the company might be considering a spinoff of the
First USA division or a sale or merger of the company, but the consensus
now is that the bank must right its ship first. (The New York Times
December 22, 1999)
BAXTER HEALTHCARE: Settles for Hep. C Suit over Immune Globulin Therapy
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Plaintiffs' class counsel and Baxter Healthcare Corporation has
announced that they have agreed upon a proposed settlement of a class
action that will benefit individuals who have contracted or been exposed
to hepatitis C through the use of an immune globulin therapy during 1993
and early 1994. Immune globulin (IGIV) therapy is used to boost
patients' weakened immune systems.
The settlement provides financial compensation for U.S. individuals who
used Baxter's Gammagard(R) IGIV between January 1, 1993, and February
24, 1994. Baxter voluntarily withdrew Gammagard from the market in
February 1994 after reports of patients contracting hepatitis C through
its use. Baxter believes that the hepatitis C activity was a result of
changes to the blood screening process required by the FDA.
Baxter noted that the estimated cost of the settlement is covered by
previously established financial reserves. "This settlement is designed
to ensure that individuals who used this IGIV therapy can get
appropriate medical treatment, if necessary," said John Evans of Specter
Specter Evans & Manogue, P.C., lead counsel for the plaintiff class. "It
was designed with individual patient's needs in mind, providing
financial relief based on specific medical symptoms of hepatitis C they
may exhibit today or in the future."
People who were infused with Gammagard IGIV between January 1, 1993, and
February 24, 1994, can get a free test to determine if they contracted
hepatitis Those who were infected with the virus can receive payments
that will vary depending upon the progression of the illness. Those who
did not contract the hepatitis C virus also are eligible for payment.
Individuals with questions about possible class participation should
contact the settlement administrator at 888-921-4776.
In May 1994, Baxter introduced a new IGIV called Gammagard(R) S/D that
has an additional processing step that inactivates viruses such as
hepatitis C. Gammagard(R) S/D has an extensive record of safety and
efficacy; there have been no reports of hepatitis C associated with its
use.
Baxter Healthcare Corporation is the principal U.S. operating subsidiary
of Baxter International Inc. (NYSE: BAX). Baxter is a global medical
products and services company that focuses on critical therapies for
life-threatening conditions. Baxter's products and services in blood
therapies (biopharmaceuticals and blood collection, separation and
storage devices), cardiovascular medicine, medication delivery and renal
therapy are used by health-care providers and their critically ill
patients in 112 countries.
BLACK BUILDING BONDS: Peterson Law Office Announces Dakota Settlement
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This notice is given pursuant to Rule 23 of the North Dakota Rules of
Civil Procedure and the December 1, 1999 Order of the Cass County
District Court for the East Central Judicial District, State of North
Dakota. The purpose of this notice is to inform class members that the
action brought in the Court as a class action on behalf of purchasers of
City of Fargo, North Dakota, Industrial Development First Mortgage
Revenue Bonds (Black Building Project) Series 1986 ("Black Building
Bonds") during the period from October 1, 1986 to March 31, 1996, has
concluded in a proposed settlement. If you purchased Black Building
Bonds between October 1, 1986 and March 31, 1996, you may be eligible to
share in the settlement, and your rights will be affected by the
proposed settlement.
On December 9, 1999, a Notice, Proof of Claim and Release was mailed to
potential class members. That Notice contains important information
regarding the rights of class members and a form that must be completed
to share in the settlement. If you believe you are a member of the class
as defined above, and if you have not received a copy of the Notice by
mail, you may request a copy free of charge by mailing your request to:
Claims Administrator, Black Building Bonds Litigation, c/o Ben Yasgar,
C.P.A., 808 3rd Ave. So. Fargo, ND 58103-1865.
PROOF OF CLAIM AND RELEASE FORMS MUST BE FILED BY THE CLASS MEMBERS BY
FEBRUARY 2, 2000.
Lead Counsel for the Plaintiff Class in this matter are:
Craig A. Peterson David C. Thompson 808 So. 3rd Ave., Suite 205 Rebecca
Heigaard McGurran Fargo, ND 58103 P.O. Box 5235 (701)241-8444 Grand
Forks, ND 58206-5235 FAX(701)241-4151 (701)775-7012 FAX(701)775-2520
A HEARING ON THE APPROPRIATENESS OF THE SETTLEMENT AND CLASS COUNSEL'S
REQUEST FOR ATTORNEYS' FEES AND EXPENSES WILL BE HELD ON FEBRUARY 23,
2000 AT THE CASS COUNTY COURTHOUSE, 211 NINTH STREET SOUTH, FARGO, NORTH
DAKOTA. If you are a member of the class, you have the right to appear
at the hearing and object to the settlement or the request for
attorneys' fees and expenses. However, you must file written notice of
your intent to object with the Claims Administrator, in writing, at the
address listed above.
Contact: Craig A. Peterson David C. Thompson 808 So. 3rd Ave., Suite 205
Rebecca Heigaard McGurran Fargo, ND 58103 P.O. Box 5235 (701)241-8444
Grand Forks, ND 58206-5235 FAX(701)241-4151 (701)775-7012
FAX(701)775-2520
BREAST IMPLANT: Settlement in Dow Corning Case Will Soon Be Made
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The Calgary Sun says that another 150 of Docken's clients who are part
of class-action lawsuit against bankrupt Dow Corning for faulty breast
implants, could see settlement money early in the new year as well.
That amount looks to be a total of $ 100 million for 15,000 Canadian
clients, said Docken. (The Calgary Sun December 21, 1999)
BRUNSWICK CORP: Reaches Agreements With Boat Builders over Antitrust
--------------------------------------------------------------------
Brunswick Corporation (NYSE: BC) announced on December 22 that it had
reached agreements with two groups of boat builders who have asserted
antitrust claims against the company related to the sale of sterndrive
and inboard engines; these groups purchased 80 percent of the relevant
engines in the outstanding litigation. As a result, the company said it
would record an after-tax charge to operating earnings of approximately
$40 million in the fourth quarter of 1999.
Under the terms of the first agreement, the company will pay $30 million
to members of the class action suit filed on behalf of certain boat
builders. Settlement of this case is subject to approval by the court.
Under the terms of the second agreement, the company will pay the
members of the American Boatbuilders Association (ABA) $35 million.
As previously reported, Brunswick is appealing the award by a Little
Rock jury of trebled damages under the antitrust laws of $133 million to
a further group of boat builders, Independent Boat Builders, Inc.
(IBBI). Should the verdict be reversed by the appellate court, the
company would not have any liability to IBBI, nor would it make any
additional payments to the ABA.
If the company ultimately makes a payment to IBBI in excess of $35
million as a result of a final judgment or settlement, the company will
make an equal payment to the ABA, less the $35 million already paid to
the ABA. If the company makes a payment to IBBI in an amount less than
$35 million, the company will not be required to make any additional
payment to the ABA. "We are pleased that these agreements achieve two
major objectives. First, these boat builders are very important
customers of ours, and the agreements resolve all outstanding issues and
allow us to focus on meeting their future needs. Second, the agreements
reduce substantially the potential liability associated with this series
of lawsuits, thereby reducing the potential financial impact on the
company," said Brunswick Chairman and CEO Peter N. Larson.
Headquartered in Lake Forest, Illinois, Brunswick is a multinational
company serving outdoor and indoor active recreation markets with
leading branded consumer products that include Zebco and Quantum fishing
equipment; Igloo, American Camper and Remington camping gear; Igloo
coolers and ice chests; Mongoose and Roadmaster bicycles; Brunswick
bowling centers, equipment and consumer products; Brunswick billiards
tables; Life Fitness, Hammer Strength and ParaBody fitness equipment;
Sea Ray, Bayliner and Maxum pleasure boats; Baja high-performance boats;
Boston Whaler and Trophy offshore fishing boats; Mercury and Mariner
outboard engines; and Mercury MerCruiser sterndrives and inboard
engines.
COCA-COLA: Lawyers Say Mgt. Knew of Racial Bias; More Executives Named
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Top executives of Coca-Cola Co., the world's top soft drink maker, knew
about widespread bias against black workers as far back as 1995, lawyers
pressing a racial discrimination lawsuit against the firm said.
The lawsuit, originally filed in April, was revised on December 20 when
lawyers asked a federal court in Atlanta to add four current and former
Coca-Cola employees to the number of plaintiffs in the suit.
The revised suit alleged Douglas Ivester, retiring chairman and chief
executive and senior managers knew for years that black workers
routinely received less pay -- an average $26,830 per worker less in
1998 -- fewer promotions and fewer favorable performance reviews than
white employees (all figures in U.S. dollars). Mr. Ivester announced
earlier this month that he would retire next April. He will be replaced
by Douglas Daft.
'The amended complaint talks about how the upper level executives at
Coca-Cola Co. were aware and had been aware since at least 1995 of
serious deficiencies in this area and that they didn't do anything about
it,' said H. Lamar Mixson, a partner at Bondurant, Mixson & Elmore in
Atlanta, which filed the lawsuit.
Mr. Mixson said he expected the court to consider granting class action
status to the case within the next few months, which would allow between
1,500 and 2,000 black current and former Coca-Cola employees to join the
case. (National Post (formerly The Financial Post) December 22, 1999)
CREDIT LYONNAIS: U.S., CA Probe into Takover of Failed Executive Life
---------------------------------------------------------------------
U.S. authorities are investigating whether a French government-owned
bank broke California and federal laws when it acquired the assets of
the failed Executive Life Insurance Co. of Los Angeles in the early
'90s. The deal has resulted in some $ 2.5 billion in profits for the
bank and other French firms while leading to billions in losses for
Executive Life policyholders and other individuals.
Former top-ranking officials of Credit Lyonnais, a Paris-based bank, are
being investigated by the U.S. attorney's office in Los Angeles and the
Federal Reserve Bank in New York in connection with the deal, say
sources close to the inquiry. Investigators want to know, the sources
say, if Credit Lyonnais skirted U.S. federal laws that prohibited banks
from owning insurance companies.
In addition, the bank and several of its former business partners are
the targets of a related lawsuit filed early this year by the California
insurance commissioner, in an action that seeks to recoup $ 2 billion in
losses. It also is the target of a separate suit by a group of
policyholders.
The French bankers lied to state and federal regulators about the nature
of their plan to obtain and manage the seized assets of Executive Life,
according to California Insurance Commissioner Chuck Quackenbush. The
commissioner's suit accuses them of violating a state law prohibiting
foreign governments from owning California insurance companies.
The deal with Credit Lyonnais diverted assets that could have gone to
pay off former Executive Life policyholders, many of whom recouped only
a portion of their insurance benefits after the insurer collapsed in
1991 in the largest insurance failure in U.S. history.
Credit Lyonnais, if it is found guilty of wrongdoing, could face
enormous criminal and regulatory penalties.
Assistant U.S. Atty. Jeffrey B. Isaacs, who is heading the investigation
in Los Angeles, said Credit Lyonnais officials are cooperating with
investigators. "The investigation of the activities of Credit Lyonnais
in this district has been and continues to be a high priority for the
U.S. attorney's office and the FBI," Isaacs said.
However, even if federal authorities bring criminal charges against the
bank and its former officers, it would be difficult to bring them to
trial because France does not allow its citizens to be extradited here.
Credit Lyonnais' lawyers did not return phone calls for this report. The
French bank has acknowledged in a recent memorandum filed with the U.S.
Securities and Exchange Commission that it could be hit with
"substantial" penalties, including suspension of its U.S. banking
license.
Credit Lyonnais is "vigorously investigating the facts surrounding the
Executive Life matter and believes . . . it involves principally certain
former members of the senior management of the bank," the bank stated in
the SEC filing.
It is unclear who all those former executives are. Named in
Quackenbush's suit, however, are Jean-Francois Henin, former chief
executive of the Altus Finance subsidiary of Credit Lyonnais; Jean
Irigoin, director of the MAAF insurance consortium that acquired
Executive Life's insurance business; and Jean-Claude Seys, another
officer of MAAF.
Regardless of who or what is to blame, Quackenbush wants Credit Lyonnais
and the several other French firms allegedly involved in the deal to pay
the money back. "Two billion dollars would be a nice start and would go
a long way," said Gary Fontana, a San Francisco attorney who is
representing the insurance commissioner in the civil suit against Credit
Lyonnais. The suit was filed in February in Superior Court in Los
Angeles but has since been moved to U.S. District Court in Los Angeles.
Maureen Marr, a spokeswoman for Action Network for Victims of Executive
Life, said her group of 2,500 former Executive Life policyholders will
soon join the commissioner's suit.
A number of Executive Life policyholders have filed a separate
class-action suit in U.S. District Court in Los Angeles naming Credit
Lyonnais and several other French firms as defendants. The suit claims
that people who received monthly payments from Executive Life--through
policies stemming from personal injury lawsuits--were unfairly forced to
accept losses and discounts when the French took over. Among those
policyholders are Sue and Vince Watson of Phoenix.
The Watsons had won a $ 4-million award against a Phoenix hospital that
botched their 21-month-old daughter's treatment, leaving her with severe
brain damage. After it lost the case, the hospital purchased a policy
with Executive Life that paid the Watsons $ 12,000 a month so that they
could afford around-the-clock care for their daughter. That payment was
slashed in half after the French took over, Sue Watson said. "We ended
up losing our house and having to come out of semi-retirement to go back
to work," Sue Watson said. "It was the most devastating thing to our
family."
The federal investigation into Credit Lyonnais revives the controversy
over the 1991 seizure of insolvent Executive Life by John Garamendi, who
was the California insurance commissioner at the time.
In 1992, Credit Lyonnais paid $ 3.25 billion for Executive Life's
junk-bond portfolio. The bank advanced an additional $ 300 million to a
consortium of French firms that separately bought Executive Life's
insurance business.
Before sealing the deal, top officials with Credit Lyonnais--and their
lawyers--insisted in documents filed with insurance regulators and
statements to the judge overseeing Executive Life's receivership that
the foreign-owned bank would neither own nor manage the insurance
business.
But documents recently obtained by investigators reveal that members of
the French consortium were not the true buyers. The consortium had
entered into secret "parking" agreements to serve as fronts for the
bank's Altus Finance subsidiary. That arrangement, according to court
papers, was planned to skirt a host of banking and insurance
regulations.
California's insurance code prohibits a foreign government entity from
owning a state insurer. Federal laws at the time of the Executive Life
deal prohibited banks from engaging in non-banking activity and in
particular from owning insurance firms. That law was liberalized this
year.
Shortly after the acquisition of Executive Life's junk-bond portfolio,
the value of the bonds shot up, producing hundreds of millions of
dollars in instant profit for Credit Lyonnais.
Because Credit Lyonnais acquired the bond and insurance portfolios in
separate deals, it didn't have to share those huge returns with
Executive Life's policyholders. (If the insurance commissioner knew that
a single entity was purchasing both the bonds and the insurance
business, he would not sell them separately.) At the end of 1992, Credit
Lyonnais faced a major problem: The bonds would convert into controlling
equity stakes in about two dozen major U.S. companies, including
Samsonite luggage, Converse and Florsheim shoes, and the Vail ski
resort. And under the federal Bank Holding Company Act, a banking
institution such as Credit Lyonnais could not own equity interests in
excess of 25% in any U.S. industrial companies.
Enter Francois Pinnault, one of France's richest men and a close friend
of French President Jacques Chirac--and also one of Credit Lyonnais'
biggest debtors.
In November 1992, Credit Lyonnais and Pinnault set up a new company
called Artemis. Credit Lyonnais owned a 40% interest in Artemis and lent
the company $ 2 billion to buy the Executive Life junk-bond portfolio.
At the same time, Credit Lyonnais transferred to Artemis all its rights
to the parked shares in Executive Life's insurance business, according
to a statement made to a French newspaper by Henin, the former Altus
Finance executive. When the parking agreements expired in summer of
1994, Artemis bought the insurance business.
In obtaining the California insurance commissioner's approval to
purchase those shares, Artemis had to agree that no director of Credit
Lyonnias would have any control over the insurance business. But
documents from the insurance commissioner's office show Artemis failed
to disclose that it was acquiring these shares in accordance with the
parking agreement and that Pinnault was a director of Credit Lyonnais,
an apparent violation of state insurance laws.
Since acquiring the bond and insurance business, Artemis has raked in
profit in excess of $ 2 billion, according to court papers. The
commissioner has not named Artemis in the suit.
Fontana said attorneys for Artemis told him their client is "entirely
innocent" of any wrongdoing. "We have told them to produce all of their
documents showing what they knew and when," Fontana said. "Depending on
what we find out, they could still be sued."
The information about the deals between Altus and members of the French
consortium would not have come to light but for a whistle-blower who
contacted Fontana earlier this year, bearing copies of the parking
agreements. Fontana has declined to identify the whistle-blower beyond
saying the individual is "someone in Europe involved in the
transaction."
A few months ago, Quackenbush hired Fontana to take over a suit filed by
the whistle-blower on behalf of the insurance commissioner's office. If
the suit is successful, the whistle-blower stands to gain 15% of all the
money recovered. Fontana said the remaining funds would be used to pay
policyholders and people who suffered losses as a result of the alleged
deception by the French. Fontana said he is also cooperating with
federal authorities investigating Credit Lyonnais. (Los Angeles Times
December 21, 1999)
DOMINICK'S SUPERMARKETS: Settles Suit Re Bias against Female Employees
----------------------------------------------------------------------
In a move sure to send tremors through the grocery industry, Dominick's
Supermarkets Inc. said it has agreed to settle a class-action suit on
behalf of thousands of female employees who said the chain discriminated
against them in promotions and training.
The federal complaint against the Northlake-based grocer was one of the
largest class actions ever brought under Title VII of the 1964 Civil
Rights Act. Dominick's estimates the settlement, tentatively approved by
U.S. District Court Judge Elaine Bucklo, could benefit as many as 15,000
female employees.
Under the agreement, the company will set up a fund of slightly more
than $7.6 million to pay claims. Dominick's also will give $15,000 to
each of the nine plaintiffs named in the suit and cover their attorney
fees.
Specifically, terms of the settlement require Dominick's to create an
employee handbook that will outline routes to job enhancement, a formal
job posting system for entry-level as well as management-level
positions, a diversity training program and an internal complaint
procedure.
Initially filed in 1995, the lawsuit alleges that Dominick's
discriminated against women by failing to provide them with promotional
opportunities on the same basis as men; not giving them work experience
and training to qualify for promotions; and selecting them for less
desirable shifts and assignments.
The sheer size of the settlement is expected to make waves throughout
the grocery industry, where women traditionally make up much of the
workforce but often find it difficult to enter management ranks,
according to women's rights advocates.
At the time of the suit's filing, Dominick's had 85 stores in the area,
and 98 percent of store managers, 94 percent of co-managers and 96
percent of assistant managers were men.
"The industry has not been responsive about promotional opportunities
for women," said Hedy Ratner, co-president of the Chicago-based Women's
Business Development Center and a member of the Governor's Commission on
the Status of Women in Illinois. "Now we have a channel for promotions
for women in this industry. I think it's good for Dominick's and I think
it will set a precedent with other grocery chains nationally."
The suit against Dominick's wasn't the first against a large grocery
chain. In 1993, Dublin, Calif.-based Lucky Stores Inc. settled a sex
discrimination class action brought on behalf of 14,000 female employees
and paid out some $107 million.
After the suit was filed in 1995, Dominick's worked with the Women's
Business Development Center, the Chicago chapter of the National
Organization for Women and a few other women's groups to identify
roadblocks to equal opportunity. As a result, the chain has seen its
numbers improve.
According to spokeswoman Andrea Brands, a woman is either the manager or
co-manager in 30 of its 114 stores, making up about 26 percent of the
positions. With high-level management, such as the administrative ranks,
some 20 percent of employees are women, Brands said.
Dominick's is a division of Safeway Inc., based in Pleasanton, Calif.
Safeway purchased the chain in November 1998.
Brands said Dominick's agreed to the settlement to institute the job
programs in a timely fashion. The settlement does not include an
admission of fault on the part of Dominick's. "You never like to have
litigation of this nature," Brands said. "We wanted to have good
opportunities for employee advancement, whether or not there was a
lawsuit." That was the ultimate goal of the plaintiffs: to force changes
regardless of whether the suit went to trial. The suit against the
company began with two female employees who filed a complaint with the
Equal Employment Opportunity Commission.
Seven other women joined and alleged a widespread pattern of
discrimination. They told of being passed up for coveted positions such
as store manager, co-manager, assistant manager and meat and produce
managers. Instead, the women employees felt they were being restricted
to less desirable positions as front-end cashiers. In a 1997 interview
with the Tribune, former employee and plaintiff Maureen Gleixner alleged
that she was paid no more than a regular cashier despite the additional
duties she had taken on as a front-end manager. The only opportunity for
"advancement" that Gleixner was offered was a job as a bakery manager,
which she was told would involve a $2-an-hour pay cut.
In a court filing, former employee Karen Pescara said she witnessed a
system of discrimination after working as the No. 2 person to a deli
manager. "It happened repeatedly that a man transferred from another
store in the district to work in our deli department," said Pescara, who
worked at Dominick's for 14 years. "I trained him, and then he was
transferred and promoted to be a deli department manager at another
store in the area."
For the most part, women were kept to the front of the store as cashiers
and clerks, where advancement was difficult, said Judd Minor, attorney
for the plaintiffs. Many female employees, Minor said, didn't know the
procedure to apply for higher positions. Even Robert Mariano, who was
then Dominick's president and chief executive, acknowledged that
Dominick's did not have a formal job posting system that allowed all
employees to learn about openings within the company.
"Women ended up in lines of progression that were not stepping stones to
management positions," Minor said. "It became a way of business (for
Dominick's)."The formal job posting system as well as the employee
handbook should help to change the work environment, Minor said.
But in the eyes of at least one female employee, the company has already
made significant strides. Denise Oliver, 30, joined the company as a
store manager trainee in October 1998, and was promoted this March to
store manager. If there was evidence that Dominick's did discriminate
against women, Oliver said, that would come as a surprise to her. She
said much of the employee job actions are dictated by the union, and are
based on seniority rather than gender. "My perception is that some
people think the company was an old boy's network," she said. "I think
that's changing." (Chicago Tribune December 21, 1999)
FEN-PHEN: 5 Get $150M in Actual Damages from MI Jury; AHP Will Appeal
---------------------------------------------------------------------
A Mississippi jury awarded $150 million in actual damages on December 21
to five people who claimed their health problems could be traced to the
controversial diet drug cocktail known as fen-phen. The jury deliberated
for most of the day before ruling against drugmaker American Home
Products. Jurors reached a settlement for undisclosed sum on punitive
damages late December 21.
The trial, which began last month in this rural community of about
2,000, could have a major impact on a proposed national settlement of
thousands of lawsuits over the drug combination alleged to cause heart
and lung damage.
The plaintiffs' victory could motivate other diet drug users to opt out
of the settlement so they can sue on their own. "At least now we can get
the proper health care that we need. It hurts to know the company was
saying we weren't sick," said Vinester Williams, 35, of Itta Bena, who
wept after the verdict was read. "It was unbelievable that we were
treated the way we were."
American Home Products issued a statement saying it will appeal the
verdict. "We are obviously disappointed by today's verdict," said AHP
attorney Robert Johnson. "The evidence presented in this case clearly
demonstrated that the Company acted responsibly and lawfully in
marketing and monitoring the safety of the diet drugs Pondimin and
Redux, and that the plaintiffs suffered no harm from use of the drugs.
... We expect this verdict to be overturned on appeal."
Attorney Dennis Sweet of Jackson, representing the Mississippi
residents, accused American Home of putting the need to make money over
safety concerns. The plaintiffs claim the drug combination left them
with a lung disorder known as pulmonary hypertension.
"There was only one motivating factor for the sale of this drug -
m-o-n-e-y," Sweet said in closing arguments. He accused the company of
manipulating the federal Food and Drug Administration and of failing to
disclose the dangers of fen-phen.
The plaintiffs sought $130 million: $25 million each for four of the
plaintiffs and $30 million for the fifth and youngest, a 25-year-old
woman.
"I thought this wasn't about money," Johnson, the AHP attorney, told the
jury. Johnson said the plaintiffs had paid a doctor $150,000 to testify
about dangers of the diet drug. He also argued that the health risks
faced by the plaintiffs were based on preexisting problems related to
their weight, not the drugs. He said 280,000 people die each year of
obesity.
American Home Products made a diet drug called fenfluramine, the "fen"
in fen-phen. It sold the drug under the brand name Pondimin along with a
chemical relative called Redux.
About 6 million people took the mix of fenfluramine and phentermine
after it came out in the mid-1990s. American Home withdrew Pondimin and
Redux from the market in 1997 after a Mayo Clinic study linked fen-phen
to potentially fatal heart valve damage.
American Home agreed earlier this year to pay up to $4.83 billion in a
settlement that could cover all 6 million users. The deal would pay
claimants anywhere from a few hundred dollars to $1.5 million. There are
more than 11,000 fen-phen suits pending against the company.
In the only other verdict to be rendered in any fen-phen lawsuit, Debbie
Lovett, 36, of Grand Saline, Texas was awarded $23.3 million in July by
a jury for heart damage she suffered after taking fen-phen for more than
three months. The case was later settled for less than 10 percent of
that amount during an appeal. (The Associated Press December 21, 1999)
HK GOVT: Can’t Apply New Law for Higher Rates on Land, Ap Ct Rules
------------------------------------------------------------------
Hong Kong's property developers scored a significant victory against the
Government when the Court of Appeal quashed a system of calculating rent
on vacant land based on a "rateable value". The ruling is expected to
help the companies save millions of dollars.
A class-action suit had been launched by companies from nine groups to
challenge the Government's method of assessing rent on vacant land.
According to the suit, the method violated the Basic Law. The Lands
Tribunal ruled in favour of the Commissioner of Rating and Valuation in
March, but this was overturned by the Court of Appeal on December 16.
Companies taking part were included Cheung Kong group, Chinachem group,
Hang Lung group, Henderson group, Nan Fung group, Sino group, Sun Hung
Kai Properties group, Swire Pacific and Wheelock group.
Fifty-nine leases are involved on sites pending development or at
different stages of development or redevelopment.
Changes in the law post-1997 meant that as of July 1 that year, they
received demand notes for government rent on the land following the
introduction of the Government Rent Regulation. Previously, they had
paid only a nominal rent, typically $ 1,000 per annum. The new law
stipulated that rent would be charged at 3 per cent of the land's
rateable value.
However, the nine companies claimed that under another law - the Rating
Ordinance - these sites were not rateable at all. This is because the
sites were unable to derive income and were thus not regarded as being
under rateable occupation.
Mr Justice Simon Mayo ruled: "There is no specific provision in the Rent
Ordinance enabling the commissioner to ascertain the rateable value of
relevant land being developed otherwise than in accordance with the
Rating Ordinance." Principles in the latter law "did not entitle the
commissioner to take into account the intention to develop the land", he
stressed.
A sample valuation had been done for the court, notably on a Sino Group
development site located on Electric Road in North Point. The property
was to be developed into a 36-storey office and shopping complex. A
premium of HK$ 760 million had been paid for the site at public auction
in December 1996, and government rent of HK$ 1,000 per annum was
assessed on it up to June 30, 1997. After that date, a calculation of
the rateable value involved taking the site's alleged market value of
HK$ 741 million and applying a decapitalisation rate. The rateable value
was thus HK$ 29.64 million. Rent was then assessed at 3 per cent of that
figure.
Mr Justice Robert Ribeiro remarked: "In my view, the Commissioner's
approach, as illustrated by the sample valuation, is wholly inconsistent
with the Rating Ordinance and ignores basic rating principles . . ." The
companies were also awarded costs of the appeal. (South China Morning
Post December 17, 1999)
HMOs: Health Care Provider Blames Unfair Tax Laws for Problems
--------------------------------------------------------------
A class action suit against health maintenance organizations (HMOs) is
part of the problem, not part of the solution [Business, Dec. 14].
HMOs developed because government policies discourage people from buying
their own health insurance. Thanks to unfair tax laws, employers can
deduct 100 percent of health insurance costs, but ordinary individuals
cannot. The result is the somebody-else-should-pay-for-it mentality
prevalent in medicine today.
Patients don't shop for health insurance the way they shop for auto
insurance or televisions, and doctors don't answer to patients in the
private marketplace either. Instead, doctors shift costs to insurance
companies and Medicare (which have fought back by limiting payments to
doctors and by managing care).
No wonder health care is so expensive: Everybody wants it, but nobody
wants to pay for it.
Politicians take pride in programs such as Medicare and, more recently,
the Kennedy-Kassebaum law, designed to remove the supposed stench of
business from medicine. Yet look what we're getting in its place.
Suing HMOs for doing what they do will drive medical costs up further.
When will Americans learn that personal freedom and responsibility -- in
the medical marketplace, just as in any other marketplace -- is the only
moral, rational solution to the growing health care crisis? (MICHAEL J.
HURD, Chevy Chase -- The writer is a health-care provider.) (Published
in The Washington Post December 22, 1999)
HOLOCAUST VICTIMS: More And More German Firms Join Compensation Fund
--------------------------------------------------------------------
New firms are pledging every day to compensate Nazi-era forced and slave
laborers following an agreement last week launching the fund at 10
billion marks ($ 5.2 billion), the fund's spokesman said Tuesday. ''It's
not really a wave, but we have contact every day with new firms,''
Wolfgang Gibowski said. ''One day they call us up asking what they have
to pay, the next day their letter comes.''
About 75 firms are now participating in the fund, and 59 have made their
names public including newcomers such as the photographic equipment
maker Leica, truck manufacturer MAN, battery maker Varta, utility VIAG,
and most recently on Tuesday, Deutsche Telekom.
Telekom chairman Ron Sommer said the company was joining ''also for
solidarity with German industry,'' and added that he hoped it would set
an example for other firms. He said Telekom would be contributing its
share on par with other large companies.
Government and industry will contribute equally to the fund, first
promised in February under pressure of class-action lawsuits in the
United States.
Gibowski estimated that the firms' 5 billion mark ($ 2.6 billion)
contribution to the fund would be collected in three to four months, a
little earlier than estimates made last week.
The firms that join are required to pay a minimum of one-thousandth of
their total annual revenue, Gibowski said.
Gibowski said more firms are deciding to join because publicity over the
issue has spurred them to look into their corporate past. ''Many firms
didn't realize that their ancestors or whoever was in charge of the firm
had employed or used forced laborers,'' he said. ''They learn it by the
discussion and start to look in their archives.''
As part of the agreement, companies will open their archives for
research into their use of forced and slave labor, which the Nazis
employed to help keep industry running and replace German workers sent
to war.
More firms are also joining because the issue of legal closure has been
resolved, Gibowski said. In exchange for joining the fund, companies
will receive legal immunity in the United States and Germany. (AP
Worldstream December 21, 1999)
I.C. ISAACS: Yates Law Office Files Securities Lawsuit in Maryland
------------------------------------------------------------------
The following is an announcement by the Law Office of Attorney Alfred G.
Yates Jr on December 21:
Attention: I.C. Isaacs & Company, Inc. Shareholders (Nasdaq: ISAC)
YOU ARE HEREBY NOTIFIED A class action lawsuit was filed in the United
States District Court for the District of Maryland on behalf of all
persons who purchased or otherwise acquired common stock (collectively
the "common stock") of I.C. Isaacs & Company, Inc. ("I.C. Isaacs" or the
"Company") (Nasdaq: ISAC) between December 17, 1997 and November 11,
1998, inclusive (the "Class Period"), including all persons who
purchased the common stock of Isaacs pursuant to the Company's initial
public offering ("IPO") on December 17, 1997.
The complaint charges Isaacs and certain of its officers and directors
with violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder, and Sections 11,
12(a)(2) and 15 of the Securities Act of 1933. The complaint alleges
that defendants issued a series of materially false and misleading
statements concerning the Company's operations which artificially
inflated the price of Isaacs common stock during the Class period. In
addition, the complaint alleges that the Registration Statement and
Prospectus issued in connection with the Company's IPO contained false
and misleading statements concerning the Company's business, operations
and future prospects.
Contact: Alfred G. Yates Jr, Esq., 519 Allegheny Building, 429 Forbes
Avenue Pittsburgh, Pennsylvania 15219, Telephone: 800-391-5164 or
412-391-5164, e-mail: yateslaw@aol.com
INDIGO AVIATION: Beatie and Osborn Files Securities Suit in New York
--------------------------------------------------------------------
On December 15, 1999, Beatie and Osborn LLP filed a class action lawsuit
in the Supreme Court for the State of New York on behalf of public
owners of American Depository Shares of Indigo Aviation AB ("Indigo" or
the "Company")(Nasdaq: IAAB). The lawsuit seeks damages and injunctive
relief arising from the sale of Indigo to AerFi Group Plc ("AerFi") for
inadequate disclosure by AerFi, for inadequate compensation to the
public shareholders of Indigo, and for breach of fiduciary duty by the
insiders of Indigo.
The court has ordered the defendants to appear on January 3, 2000 to
show cause why an order should not be entered:
* enjoining the depositary for the tender offer, Bankers Trust Company,
from releasing to defendants or their agents stock tendered by Indigo
share holders in the tender offer dated November 17, 1999 (this
request may be moot); or,
* alternatively, ordering defendants to post a bond in the amount
deemed reasonable by the Court to preserve the interests of the class
in this tender offer (we would seek an amount equal to the largest
recover able damages);
* scheduling expedited discovery; and
* scheduling a hearing on a motion for a preliminary injunction.
The Complaint alleges that Indigo insiders, including individual
defendants, who owned 8,197,568 shares or 72.7% of the Indigo shares,
received various forms of consideration which appear to be worth more
than the $13 per share offered to the public shareholders. Among other
things defendants failed to disclose the value of AerFi stock received
by the insiders, which compelled Indigo shareholders to decide about the
tender offer without adequate information.
Plaintiffs sue for breach of fiduciary duties and violation of sections
717 and sections 1600-1603 of the New York Business Corporation Law.
Contact: Russel H. Beatie, Esq. Or Matthew S. Heiskell, Esq., BEATIE AND
OSBORN LLP, 599 Lexington Avenue, New York, New York 10022, 212-888-9000
IWAN’S CATERING: $3 Mil Fund Is Set Up For Claims over Potato Salad
-------------------------------------------------------------------
A $3 million fund has been set up to settle the claims of more than
5,000 people estimated to have been sickened after eating potato salad
from an Orland Park caterer in June 1998, a lawyer for plaintiffs in a
class-action suit announced on December 21.
Carol Esposito, a South Holland woman who was among those filing claims
against Iwan's Catering & Deli, said she's glad the fund is in place,
but she's saddened at the business' demise. "They always had such a good
reputation," she said. The company got its start in Calumet City and
operated in the south and southwest suburbs for 18 years.
But the once-popular restaurant and catering business, formerly of 15750
S. Harlem Ave. in Orland Park, was forced to close and ultimately
liquidated as a result of what became a record-setting E. coli bacteria
outbreak.
The outbreak was traced to portions of the more than 2,000 pounds of
potato salad prepared by Iwan's and served at an estimated 300 parties,
mostly in Cook and Will Counties.
Under terms of a court-administered settlement announced on December 21
by attorney Lawrence W. Leck of Chicago, who represented Esposito and
other plaintiffs in the original class-action suit filed June 17, 1998,
claims for a share of the settlement pool are being accepted.
Notice of the claims procedure will be mailed to known claimants
beginning this week, Leck said. All claims must be filed with the Iwan's
Claims Administration, P.O. Box 100, La Grange, IL 60525, no later than
Feb. 16.
The $3 million fund is the maximum allowed by the caterer's policy, said
attorney Robert Chemers of Chicago, who represented Iwan's insurers. The
money will be posted with the court for distribution.
An order authorizing the settlement was approved by Cook County Circuit
Judge Joseph Casciato, who will oversee the distribution of the claims.
"We basically gave the money to the court and told the court that we
have no way of determining on any reasonable basis who is entitled to
what or how much or why, and rather than the insurers take on that
expense, this is a recognition that perhaps money is owed," Chemers
said.
Esposito, her daughter and some other family members attended a June 6
graduation party in Tinley Park. About half of the two dozen people
there became ill, including one person who required hospitalization,
Esposito said.
A federal Centers for Disease Control and Prevention report surmised
that an overloaded operation resulted in the sickening of about 5,600 of
the estimated 25,000 people who ate food at parties June6 and 7. The
report concluded that poor sanitation and refrigeration probably were at
fault.
A rare but tenacious form of E. coli bacteria, ETEC, causes a disease
commonly called traveler's diarrhea. Although ETEC often causes illness
in developing countries, officials said it is rare in the United States.
The bacteria can breed in food or water and can be passed by direct
contact with hands or other contaminated objects, health officials said.
After making significant improvements in its facilities and procedures,
Iwan's reopened in August 1998 amid great fanfare and a big display of
community support. But the business never rebounded to where it was
before the outbreak, even though owner Mitch Iwan never was accused of
wrongdoing. "There has never been a link to anything he ever did," said
his attorney, Joseph H. Horwitz of Wheaton, on December 21.
On Feb. 1, Iwan voluntarily closed the business indefinitely, citing the
personal and financial toll of the June outbreak on his business.
The last vestiges of the deli and catering business were auctioned in
July. Buyers of the business' ovens, freezers and restaurant equipment
and fixtures said it was a bittersweet bargain for anyone in the food
service business. (Chicago Tribune December 22, 1999)
LASON INC: Lionel Z. Glancy Files Securities Suit in Michigan
-------------------------------------------------------------
The Law Offices of Lionel Z. Glancy issued the following announcement on
December 21.
Notice is hereby given that a Class Action has been filed in the United
States District Court for the Eastern District of Michigan on behalf of
all persons who purchased the common stock of Lason, Inc. ("Lason")
(Nasdaq:LSON) between November 15, 1999, and December 17, 1999,
inclusive (the "Class Period").
If you wish to discuss this action or have any questions concerning this
Notice or your rights or interests with respect to these matters, please
contact Lionel Z. Glancy, Esquire, or Michael Goldberg, Esquire, of the
Law Offices of Lionel Z. Glancy, 1801 Avenue of the Stars, Suite 311,
Los Angeles, California 90067; by telephone at 310/201-9150 or toll-free
at 888/773-9224; or by e-mail to info@glancylaw.com.
The Complaint alleges that Lason and certain of its officers and
directors artificially inflated the price of Lason's shares in violation
of the federal securities laws. Among other things, plaintiff claims
that defendants' material omissions and the dissemination of materially
false and misleading statements regarding the nature of Lason's
operations drove Lason's stock price to a Class Period high of $33 3/8
per share.
Contact: The Law Offices of Lionel Z. Glancy, Los Angeles Lionel Z.
Glancy or Michael Goldberg 310/201-9150 or 888/773-9224 lglancy@aol.com
LASON INC: Mantese Miller Files Securities Suit In Michigan
-----------------------------------------------------------
Mantese Miller and Mantese, P.L.L.C. issued the following announcement
on December 21.
Notice is hereby given that a Class Action has been commenced in the
United States District Court for the Eastern District of Michigan on
behalf of a class (the "Class") consisting of all persons who purchased
Lason, Inc. securities between November 15, 1999 and December 17, 1999
(the "Class Period").
The action asserts claims against Lason, Inc. ("Lason") (NASDAQ: LSON)
and certain of its directors and officers. Defendants are charged with
violations of sections 10(b), and 20(a) of the Securities Exchange Act
of 1934 and Rule 10b-5 promulgated thereunder by reason of material
misrepresentations and omissions during the Class Period concerning
Lason's revenues and earnings.
Contact: E. Powell Miller, Esquire, or Marc L. Newman, Esquire, of
Mantese Miller and Mantese, P.L.L.C., 1301 W. Long Lake Road, Suite 135,
Troy, Michigan 48098, by telephone at (248) 267-1200, by e-mail to
mlnewman@ameritech.net
NAVIGANT CONSULTING: Revelations Add Fuel to Investors Class Action
-------------------------------------------------------------------
Navigant Consulting, Inc. (NYSE: NCI) and certain of its senior officers
have been charged by Wolf Popper LLP in a class action lawsuit with
committing securities fraud. That lawsuit was filed on behalf of all
persons who purchased Navigant common stock from May 6, 1999 through
November 19, 1999.
The Complaint charges that defendants manipulated Navigant's reported
growth rate by reporting interim 1999 operating results that included
the operating results of seven non-public companies that were acquired
by Navigant during the second and third quarters of 1998 and the first
quarter of 1999, and comparing those operating results against
Navignant's historical 1998 operating results, which excluded the
operating results of those seven non-public companies. Navigant's method
of financial reporting had the effect of grossly distorting Navigant's
growth rate.
The Complaint further alleges that defendants failed to disclose the
substance and nature of $17 million in loans made to Navigant's top
officers, and falsely represented that a $10 million loan to defendant
Robert P. Maher was for a "real estate transaction." In fact, the loan
was to pay for $10 million in Navigant common stock purchased in
defendant Stephen J. Denari's name. Those shares were purchased just
prior to the Company's announcement that it was exploring "strategic
alternatives, including a potential merger with a larger company."
Defendants' use of company money to purchase Navigant common stock
placed in jeopardy Navigant's ability to use favorable pooling-
of-interest accounting for acquisitions.
It was further revealed in a filing reported on December 17, 1999 at
11:22 P.M. that defendant Maher had sold 605,684 shares of Navigant
common stock (or approximately 80% of his entire holdings) from November
5, 1999 through November 21, 1999, immediately prior to the disclosure
of materially adverse facts that caused Navigant's stock price to
decline below $10 per share. On December 21, 1999, Navigant issued a
further press release adding additional fuel to the class action
lawsuit. Navigant stated, in the December 21 press release, that it
anticipates that fiscal 1999 operating results would include $40-$55
million of additional expense, before income taxes, for certain
adjustments and non-recurring charges. Included in those charges are
"write- downs of the book values of certain ... assets, additions to the
company's allowance for doubtful accounts and certain other litigation
and settlement costs." The press release revealed that Navigant and its
auditors "are reviewing the extent to which a portion of these
adjustments may relate to prior quarters in 1999." Under generally
accepted accounting principles, if these adjustments relate to prior
quarters, Navigant would be required to restate its financial statements
for those periods. The failure to recognize those expenses in prior
periods would have caused Navigant to report inflated operating results
in violation of GAAP. The company also acknowledged that it is
continuing its "previously disclosed review of whether the pooling of
interests accounting treatment of the business combinations consummated
in the first quarter of 1999 remain appropriate in light of purchases of
the Company's stock that occurred in the third quarter of 1999."
Contact: Robert C. Finkel, Esq., or James A. Harrod, Investor Relations
Representative, WOLF POPPER LLP, 845 Third Avenue, New York, NY
10022-6689, Telephone: 212-451-9620 or 212-451-9642, Toll Free:
1-877-370-7703, Facsimile: 212-486-2093 or 212-486-2238, E-Mail:
wolfpopper@aol.com Website: http://www.wolfpopper.com
NAVIGANT CONSULTING: Warns Earnings Will Fall, Says the Pomerantz Firm
----------------------------------------------------------------------
The following is an announcement by the law firm of Pomerantz Haudek
Block Grossman & Gross LLP on December 21:
Navigant Consulting, Inc. ("Navigant" or the "Company") (NYSE:NCI),
formerly known as Metzler Group, Inc. (Nasdaq: METZ), revealed that its
fourth quarter revenue and earnings per share will fall as much as 50%
below analysts' estimates. Navigant announced that it expects to earn 20
to 25 cents per share in the fourth quarter, less than the 40 cents per
share average estimate of analysts. It was also revealed that the
results for the year ending December 31, 1999, will include $40 to $50
million of additional expenses, before income taxes, for certain
adjustments and non-recurring charges.
In addition, it was revealed on December 17, 1999 that Navigant's ousted
Chief Executive Robert P. Maher had sold 605,684 shares of Navigant
common stock (approximately 80% of his entire holdings) from November 5,
1999, through November 21, 1999. Maher's sale occurred immediately prior
to the disclosure that several of Navigant's top officers had partook in
$17 million of improper loans, including a $10 million personal loan to
Maher, which caused Navigant's stock price to decline dramatically,
according to allegations in a Complaint filed by Pomerantz Haudek Block
Grossman & Gross LLP (www.pomerantzlaw.com). The Complaint was filed on
behalf of all those who purchased Navigant common stock during the
period between May 6, 1999 and November 19, 1999, inclusive (the "Class
Period").
If you purchased Navigant common stock during the Class Period, you have
until January 24, 2000 to ask the Court to appoint you as one of the
lead plaintiffs for the Class. In order to serve as lead plaintiff, you
must meet certain legal requirements. If you wish to discuss this action
or have any questions, please contact Andrew G. Tolan, Esq. of the
Pomerantz firm at 888-476-6529 (or (888) 4-POMLAW), toll free, or at
agtolan@pomlaw.com by e-mail. Those who inquire by e-mail are encouraged
to include their mailing address and telephone number.
Contact: Andrew G. Tolan, Esq. Pomerantz Haudek Block Grossman & Gross
LLP Phone: (888) 476-6529 ((888) 4-POMLAW) agtolan@pomlaw.com
PAYDAY LENDER: Nationwide Budget to Settle and End Operations in Il.
--------------------------------------------------------------------
A unit of the Cook County state's attorney's office established earlier
this year to combat consumer fraud has just won its first big victory. A
settlement reached December 21 with Nationwide Budget Finance Inc.
requires the St. Louis-based payday loan company to shutter its 26 shops
in Illinois and pay $ 350,000 each to the office of State's Attorney
Richard A. Devine and the Illinois Department of Financial Institutions.
Four identified victims of the company will get $ 500 each in settlement
of a Cook County Circuit Court suit filed by Devine's office. And
further redress will be provided to Nationwide borrowers under a
proposed six-figure settlement of two private federal class-action
cases, according to Mark N. Pera and Thomas Rieck. The two assistant
state's attorneys are part of a three-lawyer team in the new Major
Actions Unit, which is part of the Public Interest Bureau in Devine's
office.
I think it's safe to say that this is one of the biggest settlements
that's come out of the office civilly," Pera said of the money to be
paid by Nationwide.
The case arose from a postcard forwarded to Devine by a Nationwide
borrower last spring that was in essence threatening criminal
prosecution" for passing a bad check, he and Rieck said.
Nationwide and other companies that provide short-term loans, commonly
referred to as payday loans, typically require a borrower to write a
post-dated personal check and present a pay stub as proof of employment.
The borrower then gets cash in return. After he or she gets the next
paycheck, the personal check is then cashed by the lender -- or the
borrower may be given an opportunity to roll over" the loan or borrow
additional funds until the next paycheck arrives.
Thus, although the threat of prosecution was based on bad" checks that
could not be cashed, the postcard sent by Nationwide did not a represent
a good-faith action, Rieck and Pera said, because a payday lender knows
when it accepts a post-dated check that it is not backed by current
funds in a borrower's account.
The complaint in the government's suit also charged Nationwide with
multiple violations of the Illinois Consumer Fraud Act. It contended
that the company had harassed borrowers and their references, improperly
used wage assignment forms, and threatened to pursue civil suits and
criminal charges when in fact it had no intention of taking such action.
The Department of Financial Institutions was an active participant in
the suit because Nationwide's conduct violated the Consumer Installment
Loan Act and DFI regulations based on that statute, the two assistant
state's attorneys said.
When annualized, the interest rate on a payday loan can exceed 500
percent. For example, one woman described in the government's complaint
in the Nationwide case borrowed a total of $ 3,825 by adding to her
original loan every two weeks over a period of about seven months,
according to Rieck and Pera. She paid $ 735 in interest, they said.
While some states have laws that prohibit payday lending, Illinois is
not among them, and there is no usury law limiting interest that a
business can charge here, the two assistant state's attorneys said.
Devine's office agreed to settle its suit, People, et al. v. Nationwide
Budget Finance Inc., No 99 CH 12992, only after it was established that
consumers would be adequately compensated in two related federal class
actions brought by Edelman, Combs & Latturner, according to Rieck and
Pera.
The $ 350,000 being paid to Devine's office by Nationwide will be used
to create a new Major Action Investigation and Enforcement Fund. It will
pay for more investigations like the one against Nationwide, as well as
prosecutions and consumer education, Rieck said.
Under the proposed settlement of the private class actions against
Nationwide, some borrowers will receive an unspecified amount of cash;
some will have charges erased; and those against whom adverse credit
reports were made by Nationwide will have their records corrected to
reflect disputed charges.
The class actions, which were brought in the Northern District of
Illinois by Daniel A. Edelman of Edelman, Combs & Latturner, are Mitchum
v. Nationwide Budget Finance Inc., No. 99 C 1862, and Garrett v.
Nationwide Budget Finance Inc., No. 99 C 5712.
Nationwide was represented both in the Cook County case and in the
private class actions by Eugene E. Murphy Jr. of Quinlan & Crisham Ltd.
and Charles L. Glick of Hedlund, Hanley & John. (Chicago Daily Law
Bulletin December 21, 1999)
PLAINS ALL: Wolf Haldenstein Files Securities Suit in Texas
-----------------------------------------------------------
The following was released by Wolf Haldenstein Adler Freeman & Herz LLP
on December 22:
Wolf Haldenstein Adler Freeman & Herz LLP announces that it filed a
class action lawsuit in the United States District Court for the
Southern District of Texas on behalf of investors who purchased the
limited partnership units ("Units") of Plains All American Pipeline L.P.
("Plains" or the "Company") (NYSE:PAA) between November 17, 1998 and
November 26, 1999 (the "Class Period"), including those who acquired
their Units pursuant to the Company's Initial Public Offering and
Secondary Offering Registration Statements/Prospectus.
The complaint alleges that Plains and certain of its officers violated
the federal securities laws by making misrepresentations about Plains'
business, earnings growth and financial statements and its ability to
continue to achieve profitable growth. During the Class Period, Plains
consistently reported profitable results claiming that it was
successfully executing its plan to expand its crude oil sales business.
While defendants were publicly reporting profits of more than $35
million for the first, second and third quarters of 1999, Plains sold
over $300 million of Plains Units in two consecutive public offerings.
As Plains continued to report profits from operations, the price of
Plains Units reacted, rising to a Class Period high of $20-3/16 on
November 9, 1999.
On November 29, 1999, Plains stunned the investing public by revealing
that it had incurred a loss of over $160 million which had been
concealed since the spring of 1999 as the result of speculative
commodity trading and that contrary to its representations in the
initial Public Offering Prospectus and the Secondary Offering
Prospectus, Plains did not have the ability to and was not monitoring
its hedging activities. Plains announced even worse news stating that it
would likely be restating its previously reported financial results for
each of the prior three quarters of fiscal 1999. This shocking news
caused Plains Units to fall as low as $9-5/8 per Unit, a decline of 55%
from its Class Period high.
Contact: Wolf Haldenstein Adler Freeman & Herz LLP at 270 Madison
Avenue, New York, New York 10016, by telephone at (800) 575-0735
(Michael Miske, Gregory Nespole, Esq., Fred Taylor Isquith, Esq. or
Shane T. Rowley, Esq.), via e-mail at classmember@whafh.com or visit our
website at www.whafh.com (All e-mail correspondence should make
reference to Plains.)
PUBLISHERS CLEARING: States Criticize Settlement in Sweepstakes’ Case
---------------------------------------------------------------------
Top prosecutors from seven states objected on December 20 in federal
court in East St. Louis to a proposed settlement of a class action suit
against Publishers Clearing House.
U.S. District Judge G. Patrick Murphy said he would rule on the national
settlement following another hearing Jan. 25. He did not indicate
whether he would approve it or reject it. "People are waiting for their
refunds," Murphy said. "I've got a responsibility to the class members."
The suit was filed by a Belleville-area law firm against the sweepstakes
giant on behalf of people who received solicitations from 1992 through
June 30. It claims the company duped people into buying magazines and
books by falsely leading them to believe this would increase their
chances of winning millions of dollars.
The federal class action suit was joined by attorneys general from many
states, who also filed suits in their state courts. A proposed
settlement was obtained earlier this year by the lawyers who first filed
the suit, Steven A. Katz, his sister, Judy L. Cates, and Douglas R.
Sprong.
Last month, 21 state attorneys general -- including Missouri Attorney
General Jay Nixon -- criticized the settlement proposal. Nixon said
consumers would get too little and had to jump through too many hoops to
file claims.
Fourteen lawyers stood before the judge, representing Missouri, Iowa,
Wisconsin, Arizona, Texas, Florida and Connecticut. The judge asked them
if they would rather pursue claims on their own but got no takers.
A main concern was whether the states could pursue legal action after a
national settlement is approved. The consensus was they could pursue
most of their claims, but not for cash restitution.
The attorneys said most of the people filing claims were elderly or
handicapped. One told a story of an Iowa couple who spent $ 24,000 in
purchases through Publishers Clearing House in hopes of winning a
jackpot. "We are afraid they are spending themselves poor," a neighbor
told an investigator after the couple moved to Arizona.
Mailings on the settlement went out to about 43 million people who
entered the sweepstakes. The claim deadline was Nov. 5. Katz said as
many as 25,000 claims might be processed, including many for $ 100 or
less. The average claim is about $ 700, he said. He said very few people
in the class object to the proposed settlement, which could cost
Publishers Clearing House as much as $ 30 million, including $ 8 million
in mailing costs.
Legal fees will also be approved by Murphy. Katz said the settlement, if
approved, allows his firm to seek up to $ 3 million in legal fees and
expenses, which he called a "quite reasonable number" based on a
settlement of $ 30 million. (St. Louis Post-Dispatch December 21, 1999)
RENT-TO-OWN COS.: Edelman, Combs Sues 4 Cos and Their Collection Lawyer
-----------------------------------------------------------------------
The Chicago law firm of Edelman, Combs & Latturner has filed a class
action lawsuit against four rent-to-own companies and their collection
lawyer, alleging illegal collection practices. The rent-to-own companies
are (i) Rent-A-Center, Inc., (ii) Renters Choice (now merged into
Rent-A-Center, Inc., (iii) Rental Management Co., d/b/a Aaron's Rental
Purchase, and (iv) Rent-Way, Inc. They rent furniture and related items
to working-class customers at exorbitant rates, with an option to
purchase. The collection lawyer is Kevin Hermanek. The suit was filed by
rent-to-own customer Theresa Thomas.
The rent-to-own companies, represented by Hermanek, obtained hundreds of
no-prior-notice replevin (seizure of property) orders from the Circuit
Court of Cook County, by presenting standard form documents claiming
that the renters were about to abscond with or sell or conceal the
rented furniture, and that the furniture was perishable.
Illinois law forbids the issuance of no-notice seizure orders except in
very limited circumstances, one of which is if the owner of property can
establish to the satisfaction of the court that the renter is about to
leave the state with its property, or to conceal or sell it. Another is
if the property is perishable. If their court papers are to be believed,
the four rent-to-own companies did not have any customers who fell
behind in their payments but were not about to abscond with the
furniture, and their furniture was so likely to deteriorate as to be
"perishable."
As soon as the orders were issued, Cook County Sheriff's officers,
accompanied by representatives of the rent-to-own company, would seize
the rented furniture from the customer. If the customer was not home,
they would break in with the aid of a locksmith and seize the rented
furniture. At least, they were supposed to seize the rented furniture.
In Ms. Thomas' case, they seized the wrong property. Avoiding such
mistakes is one of the reasons that the law requires prior notice and
hearing in front of a judge before a seizure order can be issued.
The lawsuit alleges that the presentation of hundreds of complaints
alleging that consumers have committed fraud, and the resulting entry
and execution of no-notice replevin orders, violated the civil rights of
each rental customer. The complaint also alleges violation of the Fair
Debt Collection Practices Act, a federal statute prohibiting unfair debt
collection practices.
Plaintiff's attorney Daniel A. Edelman said that, "This is one of the
most egregious collection tactics I have seen. Bogus reasons were
presented to courts on hundreds of occasions to get authority for
strong-arm tactics that are reserved for the most extreme and unusual
circumstances."
The case was filed in federal district court in Chicago on December 20,
Thomas v. Hermanek, 99 C 8267.
Contact: Daniel A. Edelman of Edelman, Combs & Latturner, 312-739-4200,
or fax, 312-419-0379
RIBOZYME PHARMACEUTICALS: Wolf Haldenstein Files Colo. Securities Suit
----------------------------------------------------------------------
The following was released by Wolf Haldenstein Adler Freeman & Herz LLP
on December 21:
Wolf Haldenstein Adler Freeman & Herz LLP announces that it filed a
class action lawsuit in the United States District Court for the
District of Colorado on behalf of investors who bought Ribozyme
Pharmaceuticals, Inc. (NASDAQ: RZYM) ("Ribozyme" or the "Company") stock
between November 15, 1999 and November 17, 1999 (the "Class Period").
The Complaint alleges that Ribozyme and its president and chief
executive officer committed violations of the federal securities laws
during the Class Period. The Complaint alleges that defendants misled
investors by issuing a false press release on November 15, 1999
headlined, "Colorado Pharmaceutical Co. Makes Cancer Drug History,"
stating that Angiozyme, one of Ribozyme's drugs in development, "has
taken an important step forward . . . making both clinical history and
industry news" and that a press conference will be held on November 17
at which the Company's "CEO and President . . . will explain Angiozyme
and its recent history-making leap, an achievement which may be of great
significance to cancer patients everywhere." As a result of the false
and misleading statements in the latter press release, on November 16
the price of Ribozyme's stock increased to a high of $22 per share, more
than double the closing price on November 15.
The truth was that Ribozyme had nothing new to report at the November 17
press conference never mind any "history-making progress." The Company
merely announced that Angiozyme had entered Phase I/II testing - a
development the Company had twice previously stated would occur before
the end of 1999. Once the investing public realized the truth regarding
the Company, Ribozyme shares plummeted to a closing price of $9 5/16 per
share on November 17, 1999. The Complaint seeks recovery of damages
suffered by all purchasers of Ribozyme stock during the Class Period.
Contact Wolf Haldenstein Adler Freeman & Herz LLP at 270 Madison Avenue,
New York, New York 10016, by telephone at (800) 575- 0735 (Michael
Miske, Gregory Nespole, Esq., Fred Taylor Isquith, Esq. or Shane T.
Rowley, Esq.), via e-mail at classmember@whafh.com or visit our website
at www.whafh.com (All e-mail correspondence should make reference to
Ribozyme.)
RITE AID: Fla. RICO Action Prompts Action in PA. against Pharmacy Chain
-----------------------------------------------------------------------
Fast on the heels of the racketeering suit filed by the Florida Attorney
General against Rite Aid Corp., Philadelphia lawyers have filed a
similar suit against the giant retail pharmacy chain for allegedly
overcharging their customers for some prescriptions. Wright et al. v.
Rite Aid Corp. et al., No. 2906 (PA C.P., Philadelphia Cty., Sept. 24,
1999).
The class action was filed in Philadelphia Court of Common Pleas by Ann
Miller of the firm of Donovan Miller in Philadelphia. Both the
Philadelphia and Florida suits assert that since 1989, Rite Aid has been
overcharging for prescription drugs purchased for cash by uninsured
retail pharmacy customers. "In a form of pain-profiteering scheme, Rite
Aid told pharmacists to impose these overcharges on uninsured pharmacy
patients who were purchasing 'emergency-type' drugs or drugs designed to
remedy an acute condition because such persons would be unlikely to shop
for a good price on pain medication or antibiotics," the Philadelphia
complaint asserts.
The complaint contends that the scheme was so pervasive that far more
than emergency patients were overcharged. Moreover, Rite Aid's computer
software was specifically designed to impose these overcharges. The suit
alleges that the dual-pricing scheme violates the Pennsylvania Unfair
Trade Practices and Consumer Protection Law.
Plaintiff Theresa Wright is uninsured and paid cash for her prescription
drugs at a center city Rite Aid retail pharmacy. Rite Aid has its
headquarters in Camp Hill, PA.
In addition to Miller, plaintiff is represented by C. Oliver Burt of
Burt & Pucillo in West Palm Beach, FL. (Health Law Litigation Reporter,
November 1999)
SOURCE MEDIA: Announcement Seeks Members for Shareholder Suit in Dallas
-----------------------------------------------------------------------
The following is shown in the Communications Daily of December 22, 1999:
Source Media shareholders Jan. 20-Aug. 14, 1998 are being sought for
class action suit pending in U.S. Dist. Court, Dallas (398-CV-1980-R).
Plaintiffs allege Source Media inflated its financial figures after
acquiring Brite Voice Systems in "materially false and misleading"
information, thus inflating securities prices paid by shareholders.
(Communications Daily December 22, 1999)
SPYGLASS INC: Gets Prelim Ct Approval for Settlement of Securities Suit
-----------------------------------------------------------------------
Spyglass Inc. (Nasdaq: SPYG) announced that it has received preliminary
approval from the court of the settlement of previously filed securities
litigation brought against Spyglass and certain of its officers and
directors covering a class period of October 21, 1998 through January 4,
1999. Although Spyglass and the individual defendants continue to deny
any wrongdoing, the settlement allows management to focus their efforts
on overall business operations and avoids lengthy and costly litigation
that could potentially divert company resources. The settlement will be
funded entirely by Spyglass' director and officer liability insurer.
The settlement, in which all defendants specifically deny any liability
and which will only become effective upon final court approval, provides
that Spyglass and the director and officer defendants will receive a
full release and dismissal of all claims brought by the class when the
settlement becomes final.
TOBACCO LITIGATION: Law Journal Reports on $65M Conn. Jackpot for Attys
-----------------------------------------------------------------------
Fighting Big Tobacco looked suicidal but for three feisty in-state firms
it eventually meant hitting the jackpot. It is a deal so rich the firms
are turning down most of their fees. Connecticut's $3.6 billion
settlement with Big Tobacco is paying three in-state firms and one in
Philadelphia a total of $65 million in legal fees, the firms have just
disclosed.
The four firms waived their original 25 percent contingency contract,
negotiating directly with the tobacco defendants for a separate fee that
amounts to just 1.6 percent of the total award. A fatter slice would
simply be too much compensation, the firms agreed.
To many, this case didn't seem promising -- or even possible at first.
Just three years ago, what has become the most lucrative legal action in
Connecticut history looked like a bad deal -- too dangerous to touch.
Says lead counsel David S. Golub, of Stamford's Silver, Golub & Teitell,
the invitation to sue the nation's tobacco giants was so unattractive in
1996 that Attorney General Richard Blumenthal had to plead with firms to
take the work.
Initially, most of the partners at Silver, Golub and at Waterbury-based
Carmody & Torrance regarded the contingency case as a prescription for
firm suicide. In partner votes, both firms initially rejected
Blumenthal's offer, which required the firms to pay all costs and work
on a straight contingency basis, at a time when the tobacco companies
were undefeated in court.
Many of the state's leading plaintiffs' firms declined to apply for the
work, or dropped out of the running. Others presented counter-offers,
seeking a minimum hourly rate or payment of costs.
Although the four firms' settlement terms became final in late May,
Golub, as spokesman, did not publicly disclose the fee amounts until
Nov. 24. He declined to break out each firm's share, but says most of
the money went to the three Connecticut firms.
Stamford's Emmett & Glander and Philadelphia's class-action firm Berger
& Montague also represented the state. Name partner Kathryn Emmett at
Emmett & Glander is Golub's wife.
Silver, Golub has 13 lawyers, including six partners. Emmett & Gander
has three lawyers, two of whom are partners. Carmody & Torrance has 47
lawyers, including 32 partners. Berger & Montague has 50 lawyers, 25 of
whom are partners.
The $206 billion national settlement, reached in November 1998, included
$8. 6 billion allocated to a "strategic contribution fund." That fund
was to reflect the legal work performed by the various states and
territories. Connecticut's lawyers garnered an additional $280 million
for the state from this fund for their extra effort.
Connecticut was the 10th state to file, and its legal contribution was
ranked fifth among the states, trailing only Washington, New York,
California and Massachusetts. A three-member panel of former attorneys
general credited Connecticut with 3.3 percent of the legal
effectiveness, as compared to first- ranked Washington's 5.7 percent and
fourth-ranked Massachusetts' 4 percent. Connecticut First
Blumenthal specified in his 1996 invitation for private legal help that
firms would have to represent Connecticut exclusively. Three national
firms bid for the work, but were disqualified because they already had
other states as clients. These contenders were 373-lawyer Ness, Motley,
Loadholt, Richardson & Poole of Charleston, S.C. and Lieff, Cabraser,
Heimann & Bernstein of San Francisco, which both had other states as
clients.
Philadelphia's Berger & Montague agreed to limit its work to
Connecticut, and got the nod. When Golub filed the original 1996
complaint, only his firm and Berger Montague were on board.
Some notable Connecticut plaintiffs' firms, like Hartford's RisCassi &
Davis, chose not to bid on the work in the first place. Others, like
Bridgeport's Koskoff, Koskoff & Bieder, initially asked to be
considered, but withdrew. Says partner Michael Koskoff: "We were in
litigation against the state at that time" in a major state police
wiretapping case that has since settled. Koskoff says he didn't want
members of the wiretap case to be able to say his firm had a conflict,
and did less than its best against the state.
Hartford-based Rome, McGuigan & Sabanosh made a counter-offer, seeking a
discounted hourly rate of $85 per hour for attorney time. Partner Joseph
Burns says, "Obviously, in hindsight, a straight contingency fee would
have been fine," but in 1996, taking on the tobacco industry seemed
terribly risky. The case, he noted, could well have dragged on for years
at enormous expense, only to ultimately fail.
Stephen I. Traub, of New Haven's Lynch, Traub, Keefe & Errante, says his
firm declined to take the state's terms. The firm would have been
interested if the state had agreed to pick up the costs, such as expert
witness fees, he says. Upon learning that the four finalists settled for
$65 million, Traub says, "Good for David. He deserves every penny of it.
They took a tremendous risk."
Golub says that Connecticut was ready to have a consortium of 10 or more
firms participate, as other states had done. Says Golub: "In reality, of
the firms that submitted bids, a number of them would only do it on an
hourly rate, which the state was not willing to do. *The* idea was to
take the law firms that submitted bids, and form a consortium of the
firms that submitted bids, but the law firms wouldn't do it. "
That's not what some of the also-rans say. "We expected to advance the
costs, and never expected to get paid except through the contingent
fee," says Robert Reardon, of New London. He says his five-lawyer firm
would 0have expanded its offices and ranks to gear up for the work, and
has a background in mass tort work. Reardon says his firm was notified
with a brief letter from an assistant attorney general. "We were
disappointed that we didn't ever get a meeting. There was no discussion
with us, and we were interested," says Reardon, a former president of
the Connecticut Trial Lawyers Association.
The smallest firm to bid, Seifert & Hogan of Old Lyme, was also ready to
join a consortium and play by the state's terms, says Conrad Seifert.
"We were willing to help," he says.
Charles C. Goetsch, of New Haven's Cahill & Goetsch, says he certainly
doesn't begrudge the winning firms their multimillion-dollar fees. "I
did make a proposal to the attorney general's office -- a pretty good
proposal, and a great interview. I would have enjoyed working with the
AG. Obviously he decided otherwise. I don't know what the criteria were,
but it's ultimately his decision to work with the firms he decides to
work with."
Robert Werner, now a partner in the Hartford offices of Bingham, Dana &
Gould, coordinated the selection process for the AG's office. "A lot of
the big firms we were anxious to attract weren't willing to do it, or
were positioned to work for the tobacco industry." Indeed, because the
work was viewed as little more than a pro bono effort, "we had a lot of
trouble finding people," he says.
The state wanted a manageable team. "With too many firms, you lose
accountability," Werner says. Firms' size, resources and support were
considered, but ultimately the decision was somewhat subjective, he
says, noting, "We didn't accept every firm that offered to be involved."
Regarding the 1.6 percent fee Golub accepted, Werner says, "David has a
strong sense of fairness." He noted that the private lawyers in
Massachusetts, for example, arbitrated for more than a 9 percent fee.
Five private lawyers in Texas had not accepted a $3.3 billion fee as of
last month, and were litigating for more. Political Pull?
When Blumenthal was in private practice, he was a partner at Silver,
Golub & Teitell in the late '80s. Connecticut's Governor John G.
Rowland, a Waterbury native, uses Carmody & Torrance managing partner
James K. Robertson as his personal counsel and counselor. With 20-20
hindsight, it looks like the governor's and the AG's favorite firms were
hand-picked for an extraordinarily juicy chunk of legal work.
"I know how it *looks* -- he's my former partner, but it worked in
reverse," says Golub. "You look at the law firms in this state who you
would ordinarily expect to see in this case, besides my law firm, and
you don't see them in this case. You look at the plaintiffs' firms in
this state, and they either didn't submit bids, or they didn't go
through with being involved in this case. And it wasn't because they
were excluded."
Indeed, after Koskoff, Koskoff & Bieder declined the work, Michael
Koskoff suggested that Anthony M. Fitzgerald, of Carmody's New Haven
office, might be a key addition to the state's tobacco team. Initially,
a firm-wide vote nixed the idea, but Robertson did some "missionary
work" with the firm's partners, Fitzgerald says, followed by a
presentation by Blumenthal, which won the firm's support.
Golub agrees. "Dick Blumenthal made personal appeals, personal appeals
to senior people in those two law firms. In my law firm, and in Carmody
& Torrance, to get us to do it." Unique Issues
Blumenthal took a very personal role in the Connecticut litigation, and
was present every day the case was in court, first in Litchfield, and
later in Waterbury, on the complex litigation docket.
The facts of the case were strong, says Golub. But the hard part was
framing theories of law to fit those facts. "The Connecticut Unfair
Trade Practices Act, CUTPA, was the easiest one to frame, because CUTPA
prohibits immoral and unscrupulous conduct," Golub says. "And these
documents *detailing tobacco company duplicity* are so vivid."
The team pushed to have an immediate trial on the CUTPA issues alone. It
also sought a prejudgment remedy, under Connecticut's standard requiring
only "probable cause." The $2 billion attachment motion was serious, and
drew Herbert Wachtell, senior partner of New York's Wachtell, Lipton,
Rosen & Krantz, to argue the case for the tobacco industry. If all
states demanded such attachments, the industry would be paralyzed and
possibly bankrupted, the defenders argued.
Another unusual Connecticut provision is a state antitrust law that
allows the state to sue for practices that damage Connecticut's economy.
The state's expert testimony included an analysis by Yale epidemiologist
John A. Rizzo, who found that since 1971 tobacco use cost the state
$68.9 billion in lost labor and productivity.
A cornerstone of the tobacco industry's defense is that smoking is a
voluntary habit, in which the risk is assumed by the smoker. To counter
this, Emmett came up with new evidence from Yale experts on the effects
of smoke on unborn children. Another assault on "voluntariness" was
extensive testimony about nicotine's addictive nature. The plaintiffs
even obtained a video deposition in England from 88-year-old
epidemiologist Sir Richard Doll, who developed powerful proof of the
connection between cigarettes and lung cancer in the early 1950's. Why
Settle?
Why did the plaintiffs settle for 1.6 percent when they had a contract
for 25 percent? Fitzgerald says that when the litigation began, everyone
involved thought that it would take at least five years and involve
extensive litigation costs. "We didn't have any concept at the time that
the *settlement* numbers would be so big," Fitzgerald says. As tobacco
defenders started talking settlement, the plaintiffs' risk and workload
got lighter fast.
Although the defense firms haven't said why they settled, Fitzgerald
says he has a good idea: Even if cases from all 50 states were tried
separately, the tobacco companies could win eight cases in a row on a
certain theory, and lose in the ninth state. After that, the doctrine of
collateral estoppel would apply the loss to all the remaining states,
like the domino effect.
And because the states raised a host of different legal theories, there
were multiple 50-tile rows of dominoes ready to fall if the cases went
to court, says Fitzgerald. The settlement served both sides. Even if the
issues were all thrashed out in court, he says, "We could have won some
and lost some and ultimately wound up with less money than Connecticut
ultimately recognized." (The Connecticut Law Tribune December 6, 1999)
TORONTO CITY: Lawsuit over Hazards at Keele Valley Landfill Tossed Out
----------------------------------------------------------------------
The Ontario Court of Appeal has ruled a class-action lawsuit brought by
a Vaughan man over environmental hazards at Toronto's Keele Valley
landfill site has no legal grounds to proceed. ''We're happy with the
decision,'' Angelos Bacopoulos, a spokesperson for the city's solid
waste division said. ''We believe the site is being operated in a manner
that meets all the environmental standards.''
The $600 million civil action was brought against the city of Toronto in
December, 1997, by John Hollick, a 52-year-old civil engineer, on behalf
of 30,000 residents in Maple and Richmond Hill.
Graham Rempe, a lawyer for the city, said the three appeal court
justices had found insufficient grounds to allow the suit to go ahead.
''On looking at the test, the court found the test had not been met,''
Rempe said in an interview.
In a unanimous decision handed down last week, Mr. Justice James Carthy,
Mr. Justice Stephen Goudge and Madam Justice Kathryn Feldman ruled that
the scope of the suit was far too large, making it all but impossible to
prove that each and every individual had been equally affected by the
landfill site.
Therefore, the suit could not go forward as a class action suit, but the
justices said their finding did not preclude Hollick from bringing a
private nuisance suit against the city. ''If the emissions are as
troublesome as the plaintiff alleges, it should not be too difficult to
call witnesses in this neighbourhood to prove a sufficiently large
collection of private nuisances to justify relief,'' said the 21-page
decision, written by Mr. Justice Carthy.
Lawyers for the city expect the decision to be appealed to the Supreme
Court of Canada.
The lawsuit alleged that the city - and Metro Toronto before that -
negligently allowed large quantities of methane, hydrogen sulphide and
vinyl chloride gases to escape from Keele Valley, which is located in
Maple. Neighbours had filed countless complaints about foul odours,
dust, litter and noise associated with the site, Hollick alleged.
In an affidavit filed in 1997 with the Ontario Court, general division,
(now the Superior Court of Justice), Hollick stated that odours from the
landfill site ''substantially interfered'' with the resident's enjoyment
of life. (The Toronto Star December 21, 1999)
TYCO INT’L: Schoengold & Sporn Files Securities Suit in New York
----------------------------------------------------------------
The law firm of Schoengold & Sporn, P.C. announced on December 21, to
All Persons or Institutions Who Acquired Tyco International, Ltd. Common
Stock Between October 1, 1998 and December 9, 1999:
On December 21, 1999, a shareholder securities class action lawsuit was
filed in the Federal District Court for the Southern District of New
York against Tyco International Ltd. ("Tyco" or the "Company") (NYSE:
TYC), L. Dennis Kozlowski, Mark H. Swartz, Michael A. Ashcroft, Philip
M. Hampton, Mark A. Belnick, Neil R. Garvey and Robert P. Mead on behalf
of purchasers of the common stock of Tyco between October 1, 1998 and
December 9, 1999, inclusive, by the law firm of Schoengold & Sporn, P.C.
The securities class action complaint charges the defendants with
violations of the federal securities laws (Sections 10b(5) and 20 of the
Securities Exchange Act of 1934), by, among other things,
misrepresenting and/or omitting material information concerning the
Company's business and revenues, specifically, the improper accounting
treatment for the Company's spate of acquisitions over the past year,
thereby artificially inflating the price of Tyco common stock. In
addition, the plaintiffs allege that the Individual Defendants, who are
"insiders" and control persons of Tyco, reaped over $470 million by
improperly selling shares of Tyco common stock at artificially inflated
prices while in the possession of materially adverse facts.
Contact: Schoengold & Sporn, P.C., Jay P. Saltzman, Esq., Ashley H. Kim,
233 Broadway, New York, New York 10279, Tel: (800) 232-8092, (212)
964-0046, Fax: (212) 267-8137, Website:
http://www.schoengoldandsporn.comE-Mail: SCHOENGOLD@AOL.COM
USDA: Settlement With Hispanic Workers Was Not Breached, EEOC Rules
-------------------------------------------------------------------
The Equal Employment Opportunity Commission has ruled that an agreement
settling a class action complaint against the Agriculture Department was
not breached when the agency failed to correct Hispanic
underrepresentation. Michael Brionez, et al v. Glickman, Secretary,
Department of Agriculture, 100 FEOR 3091 (EEOC 10/14/99).
In March 1992, a group of Hispanic workers entered an agreement with
USDA settling their class action complaint.
In return for withdrawing the complaint, the agency committed to take
certain actions that included Hispanic recruitment, as well as changes
in its affirmative action responsibilities, application and hiring
procedures, promotions, training, retention and supervisor evaluations.
When USDA failed to meet its promises, the employees notified the agency
that it was in breach of the agreement.
In an initial decision, the Commission found that the agency was aware
that it would be downsizing at the time it entered the agreement and
that the consideration received by the employees in return for the
withdrawal of their class complaint was therefore "inadequate."
Upon reconsideration, however, the Commission found the agency had
agreed only to undertake "new obligations" in return for the employees
withdrawing their complaint.
Contrary to the employees' assertions, the Commission found the
settlement agreement did not require the agency to achieve Hispanic
representation proportionate to the civilian labor force.
Also, a review of record did not show, as the employees claimed, that
the agency failed to act in good faith in carrying out its obligations.
The Commission acknowledged the employees' assertion that some members
of the putative class have been subjected to reprisal, but found that
these alleged acts should not be pursued as breach of settlement claims,
but should instead be the subject of new complaints. (Federal EEO
Advisor December 16, 1999)
VERITY INC: Denies Allegations in Securities Lawsuit
----------------------------------------------------
Verity, Inc. (Nasdaq: VRTY), a leading provider of enterprise and
Internet knowledge retrieval solutions, announced on December 22 that it
had become aware from press reports that a law firm had commenced a
class action lawsuit against Verity and certain of its officers and
directors based upon alleged violations of the federal securities laws.
While the Company has not yet reviewed a copy of the complaint, the
Company indicated that the allegations of wrongdoing as described in the
press release were completely without merit and that the Company would
vigorously defend the lawsuit.
Y2K LITIGATION: Lawyers Wait In Wings, Watching For Y2K Woes
------------------------------------------------------------
For some lawyers, the year 2000 has already arrived. Several law firms
that specialize in class-action cases are suing software companies and
other high-tech firms across the country over snafus related to the
so-called Y2K computer bug. And as New Year's Eve approaches, many
businesses are making last-minute preparations, forcing their attorneys
to shelve plans for eggnog and champagne.
But legal experts say it's impossible to predict whether the date change
will produce a flood of lawsuits, as some conservative politicians and
business groups have warned.
"It's really going to depend on what actually occurs," said Walter
Effross, an American University law professor who has testified before
Congress about the issue. "There are certainly people waiting to file
suits if problems arise. . . . (What matters) is not just how well your
house is in order, but what's the shape of all the companies you rely
on."
At least 90 lawsuits involving Y2K issues have been filed in state and
federal courts in the United States, according to a survey by the
accounting and consulting firm PricewaterhouseCoopers. But since many
involve multiple plaintiffs suing the same defendant, the actual number
is probably closer to 55, the firm said.
Early Settlement
The first known Y2K case, filed in August 1997, involved a Michigan
grocer whose cash registers crashed when a customer tried to use a
credit card with an expiration date ending in "00." The grocer, Mark
Yarsike of Warren, Mich., later settled his suit against TEC America for
$ 260,000. Fears of a litigation explosion -and sky-high legal bills for
corporate America -led Congress and President Clinton to approve
landmark legislation last summer that limits punitive damages and
requires plaintiffs to wait up to 90 days before filing suits. But some
legal observers say those fears now seem overblown, or at least
overshadowed by recent class-action suits against HMOs, lead-paint
companies, and gun manufacturers.
"Two or three years ago, Y2K looked like it was going to be a huge issue
for the legal community. There were signs of gloom and doom everywhere,"
said Dale Miller, a Chicago attorney whose firm represents banks,
insurers and publishing companies. "Over the past year, it's become
increasingly clear most industries in the United States have gotten on
top of the problem."
Even so, this New Year's Eve won't be much fun for some corporate
attorneys. Take Jack Strausman. The 38-year-old lawyer has to ring in
the millennium with his clients at Potomac Electric Co. The company,
which serves 700,000 customers in Washington and Maryland, is keeping
its lawyers, spokesmen and government- relations representatives up late
New Year's Eve in case any problems occur. "We don't believe there will
be any Y2K disruptions," Strausman said. But, "we are concerned that any
person who gets drunk, runs into a pole and disrupts a feeder (might be)
construed as a Y2K-related problem. We want to be able to respond very
quickly to that."
Other law firms say they are setting up 24-hour "command centers" their
clients can call if they need advice on how to explain a mishap.
"There's clearly an element of unpredictability," said Larry Eisenstein,
an attorney with Swidler Berlin Shereff Friedman, LLP, which represents
insurance companies and telecommunications firms. "We may get no phone
calls or fifty."
Law Has Critics
Plaintiffs' attorneys predict the new law will punish small business
owners like the Michigan grocer, Mark Yarsike, who says his store would
have folded if the law had been in effect at the time of his suit. Trial
lawyers also say the bill is a gift to software companies that should
have upgraded their products years ago.
But like any new legislation, the law doesn't cover every possible
scenario. Two of America's biggest companies, Xerox Corp. and GTE Corp.,
already have sued their insurers, claiming their policies should cover
the hundreds of millions of dollars each has spent to fix their computer
systems. Because these cases don't involve computer systems that
actually failed as a result of the date change, they don't appear to
fall under the new Y2K law, legal observers say.
"If planes start falling out of the sky and trains crash into walls,
(trial lawyers) will have plenty of time to respond," said Victor
Schwartz, an attorney for the Washington-based American Tort Reform
Association. "But I don't smell them in the halls."
People seem less concerned about possible Y2K problems than they were a
year ago. A new Gallup Poll reports 51 percent of Americans plan no
special preparations for the event. Forty percent plan to stockpile some
food and water, down from 65 percent last December. Grocery stores
report no discernible rush.
The government has suggested that people store enough food, water and
cash for at least three days, and that they secure copies of medical and
financial records. (The Des Moines Register December 19, 1999)
Y2K: Legal Times Predicts Nothing Special Will Happen and Says Why
------------------------------------------------------------------
On Jan. 1, nothing special will happen. Nothing involving computers,
anyway. Predictions of Y2K chaos will be disproved. Why?
First, as the 10-Qs and 10-Ks of corporate America confirm, aggregate
spending to head off Y2K risks has consumed billions of dollars. True,
some of this money has gone for purposes other than actual computer code
revision or replacement, such as canvassing business partners on their
readiness (which logically, if not in practice, leads to asking business
partners about their business partners, and so on). But the upshot is
that most companies have already attacked even small Y2K code issues,
sometimes with large armies.
Second, the Y2K effect is not a one-time event on New Year's Day. If Y2K
were going to cause widespread operational problems, rather than
sporadic anomalies, we would already be seeing more of them. Computers
can process three kinds of dates: past, present, and future. On Jan. 1,
the system date will roll over. But for most calculations involving
future dates, 2000 has already arrived. Where's the bug?
In some areas of processing, like mortgage interest computations, dates
extend into the future by as much as 30 years. For these calculations,
Y2K arrived around 1970. Reservation systems-whether for ordering a sofa
or booking a flight-look ahead by as much as a year. Even routine
short-term billing applications deal with future due dates. With 2000
now less than a month away, we're seeing none of the auguries of major
failure.
What about "offshore" Y2K issues? Some commentators complain that the
rest of the world has not taken Y2K seriously enough. This fact, if it
is one, should not be a surprise. As Philip Howard observed in The Death
of Common Sense, "it is a particularly American trait, as we all know,
to take an idea and push it as hard as possible." Y2K is a particularly
American idea, and Americans have pushed it accordingly.
To be sure, the United States shares a calendar with the rest of the
industrialized world, and dates must also be processed abroad. But
recent currency collapses, earthquakes, and other overseas catastrophes
have had a limited effect on the booming U.S. economy. It's doubtful
that Y2K problems overseas, if they do arise, will have a much stronger
impact.
Moreover, while Y2K consciousness appears to be low in many countries,
the lack of Y2K concern generally appears to correlate with less
dependence on computers in the first place. For example, despite little
or no spending on remediation, there is no significant Y2K risk in
Bangladesh.
No Software Problems?
Even without Y2K, there will always be software problems. Research has
shown that some 25 percent of large custom software systems are never
even completed. Of those that are completed, up to 75 percent are
considered " operating failures," in the sense that they fail to meet
significant user needs. Nor are such problems limited to large systems.
Have you ever had to reboot your personal computer?
The World Wide Web, one of computing's most significant successes, is by
no means exempt. Major auction and online trading sites have recently
experienced lengthy and well-publicized outages, possibly even
affecting, at least temporarily, the stock prices of the ventures
involved. A large encyclopedia publisher recently introduced a new free
Web-based service, which immediately (and involuntarily) went offline
for several days.
But when it comes to computers, we are always upgrading, fixing,
patching, and working around. Perhaps because software offers so many
tremendous attractions and benefits, both business and personal users
accept a frequency of fault in software that users of other products
would not. A television would not last long in the marketplace if, at
the critical moment in "Melrose Place," its screen went blue with a
"fatal error." Nor would many people want to upgrade each year just to
watch the networks' new fall lineups. With software, however, the need
for ongoing "maintenance" and enhancement is simply assumed.
ALL a Hoax?
So is Y2K a hoax propagated by out-of-work computer programmers? Not at
all.
For one thing, there aren't many out-of-work computer programmers. In
fact, the U.S. Bureau of Labor Statistics projects that "software
support specialists" (along with database administrators) will make up
the fastest- growing of all job categories for the 10 years ending in
2006. Computer engineers rank second, and systems analysts third. All
these job categories are expected to double in size.
In addition, there's no doubt that date processing is a real problem. Of
perhaps 250 billion lines of code in use worldwide, it's estimated that
as many as 180 billion lines are written in COBOL, a language introduced
in 1959 and now infrequently used for new projects. This large installed
base of aging and often poorly documented "legacy" software requires, on
a regular basis, a variety of increasingly difficult repairs.
Key government systems often tend to be even older, and thus more
vulnerable, than commercial systems. Call it national resolve or
bureaucratic self-preservation, but real work was required to address
Y2K issues in such essential areas as air traffic control and Social
Security accounting. Were it not for the glare of publicity, one can
easily imagine the government's Y2K compliance having been delayed to
2003 or 2004.
And yet, while the Y2K effect is real, it seems equally clear that some
people, such as those who have headed for the hills and taken lessons in
how to tan a hide, have exaggerated its significance. This should not be
surprising, given the apocalyptic visions that have long been attached
to the end of the millennium-not to mention the numerological intrigue
of the " 9/9/99 problem," which came entirely to naught.
This particular millennium, moreover, happens to be turning at a time
when Americans have been peculiarly awakened to what might be called the
rewards of risk. For example, many regulators, lawyers, and consultants
have spent a substantial portion of their careers focusing on extremely
subtle-some would argue trivial-risks from substances that exist, often
in trace amounts, in the environment, the workplace, or the home.
In the environmental context, once a risk is identified, even though it
may be nothing more than a mathematical construct that epidemiological
evidence fails to confirm, companies are routinely required to commit
tens or hundreds of millions of dollars to "remediation." Some
commentators are already persuasively arguing that the response is out
of proportion to whatever risk exists and ignores other, more pressing
needs. But when particular risks have the imprimatur of regulatory and
interest-group recognition, they can be costly to ignore.
The vocabulary of Y2K, including the use of the term "remediation" to
describe prevention efforts, is consistent with this scenario. The
formation of committees, task forces, and action groups, as well as the
sometimes unseemly anticipation of a torrent of Y2K litigation, also
fits the pattern. But environmental risk is not fixed to a date certain
and thus is not put to a temporal test. In this respect, the erroneous
expectation that "something big" will happen on Jan. 1 may even help
awaken the broader public to the need to keep risk in perspective.
Reliability vs. liability
Of course, a modest amount of Y2K litigation has already occurred, and
legal issues remain. Some insurance policyholders have begun to seek
recovery of the large sums expended on Y2K prevention. Creative class
action lawyers will continue to develop new litigation theories. It is
not out of the question that a company with no significant widespread
Y2K failures, having successfully avoided litigation for not doing
enough, may next be accused by imaginative shareholder counsel of having
spent too much.
Y2K remediation efforts may themselves introduce new and different
errors into existing software, and replacement systems may have problems
of their own. In addition, some definitions of "Year 2000 compliance"
are so broad that almost any date processing failure in 2000 or beyond
arguably may violate a Y2K compliance warranty. For example, IEEE
Standard 2000.1-1998 states that "Year 2000 compliant technology shall
correctly process date data" not only "between the 20th and 21st
centuries" but also "within" them-which conceivably could be taken to
mean for the next hundred years-and similar language appears in many
contracts.
Nevertheless, specific Y2K consequences are not the most important issue
for 2000 and beyond. Instead, it is the emerging choice between software
reliability and software liability. Long before the focus on Y2K,
software reliability was already one of the most vexing problems in
software engineering. Indeed, software engineering itself has been
described as a " term of aspiration," because-even with recent advances
in software modularization and reuse-software development is still very
much a craft. Of course, some would say that software in general,
including American software in particular, is great precisely because
its development is as much an art as a science. But it is an art on
which much science depends, and reliable performance is increasingly
key.
As software becomes more capable, more interconnected, and thus more
complex and vulnerable, the incidence and costs of software shortcomings
are likely to increase. Our ability to accept flaws as the inevitable
price of new features will be tested. Undoubtedly, there will be demand
for deep changes in how software is developed. There will be significant
legal issues, as the dispute over the rights of software vendors and
customers under the proposed Uniform Computer Information Transactions
Act already highlights.
The new legal issues surrounding software reliability demand careful
attention by every party to every software contract. Although companies
negotiating software development and license agreements often focus most
heavily on intellectual property and payment terms, warranty and
liability provisions often prove to be the most important of all.
Defining required performance is often difficult, and therefore
neglected, but increased attention to performance terms in software
agreements will likely prove essential.
Whatever happens-or doesn't-on Jan. 1, the Y2K effect should not
distract us. No single year, day, or event will bring to a head all the
legal issues that surround software reliability. But the broad challenge
of building reliable software will continue to gain prominence.
If lawyers and software engineers do not adequately deal with
reliability issues, these problems will hold us back more than Y2K ever
could.
Douglas E. Phillips is coordinator of the Year 2000 practice group at
D.C. 's Covington & Burling. He advises clients in a broad range of
industries on Year 2000 and other software legal issues. (Legal Times
December 6, 1999)
*********
S U B S C R I P T I O N I N F O R M A T I O N
Class Action Reporter is a daily newsletter, co-published by Bankruptcy
Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc.,
Washington, DC. Theresa Cheuk and Peter A. Chapman, editors.
Copyright 1999. All rights reserved. ISSN 1525-2272.
This material is copyrighted and any commercial use, resale or
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re-mailing and photocopying) is strictly prohibited without prior
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