/raid1/www/Hosts/bankrupt/CAR_Public/991231.MBX
C L A S S A C T I O N R E P O R T E R
Thursday, December 30, 1999, Vol. 1, No. 231
Headlines
AMERITRADE HOLDING: Sued for Inability to Handle Internet Services
ARCE: TX Ruling Says Atty Fees May Be Forfeited If Client Not Satisfied
BAKER HUGHES: Entwistle & Cappucci Files Expanded Securities Suit in TX
BANK ONE: Milberg Weiss Files Securities Suit in Illinois
FOREST HAVEN: The Washington Post Cites Frustration in Getting Files
HMOs: Legality of Recovering Billed, Not Just Paid Amt Far from Settled
LASON INC: Kirby McInerney Files Securities Suit in Michigan
LASON INC: Milberg Weiss Files Securities Suit in Michigan
MTBE: NY Is Likely to Be Forum for Lawsuits over Contaminated Water
NY CITY: Ct Denies Class to Tenant’s Suit over Hazardous Conditions
PLANTATION: Advocate Seeks To Leave Case over Accessibility to Disabled
REPUBLIC MORTGAGE: Old Republic Announces Suit in Fd Ct for Georgia
SELECT COMFORT: Consolidated Securities Complaint Filed in Minnesota
TYCO INT’L: Keller Rohrback Files Securities Lawsuit
VALLEN CORP: Milberg Weiss Files Securities Lawsuit
VARIAN MEDICAL: ISOs Sue over Antitrust Re Oncology Systems’ Parts
VERITY INC: Stull, Stull Files Securities Suit
Y2K LITIGATION: Act Excludes Claims But Leaves Debate Open
Y2K LITIGATION: Companies Look to Insurers to Foot Bills
YIELD BURNING: Judge to Review Lissack’s Documents V. Broker-Dealers
*********
AMERITRADE HOLDING: Sued for Inability to Handle Internet Services
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On September 16, 1998, a putative class action complaint was filed in
the District Court, Douglas County, Nebraska, regarding the Company's
alleged inability to handle the volume of subscribers to its Internet
brokerage services. After initial proceedings and discovery, the
complaint was amended and, on September 10, 1999, a second amended
complaint was filed. The amended complaint seeks injunctive relief
enjoining alleged deceptive, fraudulent and misleading practices,
equitable relief compelling the Company to increase capacity, and
unspecified compensatory damages. The Company believes that it has
viable defenses to the allegations raised in the amended complaint and
intends to assert them vigorously. However, because this proceeding is
still at a preliminary phase and the amount of damages sought has not
been quantified, the Company is not presently able to predict the
ultimate outcome of this matter.
The Company and its operating units are parties to a number of other
legal matters arising in the ordinary course of its business. In
management's opinion, the Company has adequate legal defenses respecting
each of these actions and does not believe that any such matters, either
individually or in the aggregate, will materially affect the Company's
results of operations or its financial position.
ARCE: TX Ruling Says Atty Fees May Be Forfeited If Client Not Satisfied
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Ten years ago, a series of explosions ripped through a Houstonarea
chemical plant, killing 23 workers and injuring hundreds more. A second
shock wave a decade later from the ensuing litigation has rattled the
Texas legal community and threatens to reverberate far beyond the Lone
Star State.
A unanimous Texas Supreme Court held this summer that lawyers who breach
their fiduciary duties to their clients can be required to forfeit their
fees -- even if the clients suffer no actual damages. Burrow v. Arce,
No. 98-0184 (July 1).
In doing so, the court lowered the already dropping bar for malpractice
actions, effectively eliminating the usual requirement that a plaintiff
prove the underlying case would have succeeded had it not been for the
lawyer's bungling. At least in theory, the decision also sets up a
potentially perverse scenario in which a client can reap big bucks in a
settlement or jury award, then go after the lawyer's fees if the client
believes the lawyer's conduct wasn't on the up-and-up.
Theory Ignites
The effect in Texas was immediate. "I get a call about every week on
this thing, and I have ... for about two years" since the case was
decided by a Texas appeals court, says Houston lawyer David M. Gunn, who
represents the defendant attorneys. "It's taken off like wildfire." Gunn
says it's simply a question of when -- not if -- similar actions break
out in other states. "Watch out," he says. "Visualize standing on the
edge of a dry forest with a lighted match."
Already in Texas, Attorney General John Cornyn has suggested Arce may
play a role in his efforts to get back $ 3.3 billion in fees paid to a
team of private lawyers who represented the state in a lawsuit against
the tobacco industry. Coincidentally, some of the tobacco lawyers were
defendants in Arce.
The case also may figure prominently in a class action filed against
Houston lawyer John M. O'Quinn -- also a member of the state's tobacco
team -- on behalf of 2,000 breast implant clients who claim O'Quinn
cheated them out of $ 23 million in deducting expenses from their
settlement awards. "Hold onto your hats on that suit, too," says Gunn.
And the state supreme court is poised to decide yet another case
involving claims of fiduciary breach and overcharges by lawyers that
could flesh out Arce's reach. At issue is the amount to be forfeited.
While two members of a Texas Court of Appeals panel allowed forfeiture
of only the $ 750,000 in overcharges, dissenting Justice Sarah B. Duncan
would have socked the lawyers for their entire $ 6.75 million fee. Lopez
v. Munoz, Hockema & Reed, 980 S.W.2d 738 (1998).
"To do otherwise, in my view, constitutes yet another example of the
special rules made by lawyers for lawyers, and it will further erode
public confidence in the legal profession as a whole and the elected
Texas judiciary in particular," Duncan wrote.
Gunn also represents the defendant lawyers in that case. But lawyers
elsewhere also should worry, he says, because the cases don't involve
obscure quirks in Texas law. Looking to New Restatement
Indeed, the Texas Supreme Court in Arce relied heavily on Section 49 of
the proposed Restatement (Third) of the Law Governing Lawyers. The
provision allows for full or partial fee forfeiture by "a lawyer
engaging in clear and serious violation of duty to a client," and
considers both "threatened or actual harm to the client."
That part of the Restatement only has been cited in a handful of other
cases, but its extensive treatment by the Texas court may signal that
it's ready for a national coming out. "I think you can expect to see
Section 49 pick up steam," Gunn says. "I think it's just a matter of
time before you see a majority of the states fall in line."
Houston lawyer Steven M. Smoot, who represents the former clients of
O'Quinn, agrees that Arce could sweep broadly across the landscape. But
he adds that economics likely will deter an all-out conflagration.
"Handling a legal malpractice claim is like handling a medical
malpractice claim," Smoot says. "I reject the vast majority of them
because there's not enough money involved. It has to be at least six
figures before I'll do it."
Plenty of money is at stake in Arce. The case, filed for 126 plaintiffs,
was one of numerous lawsuits lodged in the wake of the Oct. 23, 1989,
blasts at a Phillips 66 plant in the Houston suburb of Pasadena.
The case settled for about $ 190 million, leaving the lawyers with a
contingent fee of more than $ 60 million. Then 49 of the plaintiffs
turned around and sued their lawyers, mainly beefing that the lawyers
had settled with Phillips without their approval.
The trial court granted summary judgment to the defendant lawyers,
finding the settlement fair and holding that the plaintiffs were not
damaged and thus could not seek fee forfeiture for any misconduct by the
lawyers.
The supreme court didn't let the lawyers skate away, however, holding
that they may have to forfeit some or all of their fees if the
plaintiffs can prove misconduct at trial, expected early next year.
Trust Valued Above All
The court rejected the lawyers' claims that forfeiture without damages
encourages renegotiation of fees through extortion after the
representation concludes. Tracking the restatement, Justice Nathan L.
Hecht stated that forfeiture protects the trust inherent in the
attorney-client relationship instead of compensating for damages.
"Fee forfeiture for attorney misconduct is not a windfall to the
client," Hecht wrote. "An attorney's compensation is for loyalty as well
as services, and his failure to provide either impairs his right to
compensation."
That may not mean a slamdunk for the former clients, however. The Texas
justices noted that the restatement is flexible in determining the
amount of any fee forfeiture. Considerations include:
* Seriousness of the violation.
* Whether the misconduct is repeated and continuing, or a single
incident.
* Whether the misconduct is intentional.
* Threatened or actual harm to the client.
* Sufficiency of other remedies.
The court added that great weight should be given to the public interest
in the integrity of attorney-client relationships, which it described as
"the heart of the fee forfeiture remedy."
Perhaps more significant for the defendant lawyers is that a jury would
determine the factual issue of whether misconduct occurred, while a
judge would decide the amount forfeited.
"How many judges are going to hammer them?" asks Smoot, who filed the
case against the lawyers for the Phillips 66 plaintiffs on Halloween
1992. Smoot and the defendant lawyers should know soon enough who gets
tricked and who gets treated. (ABA Journal November, 1999)
BAKER HUGHES: Entwistle & Cappucci Files Expanded Securities Suit in TX
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Entwistle & Cappucci LLP, gives notice on December 28 that an expanded
class action lawsuit for violations of the federal securities laws has
been filed against Baker Hughes Inc. ("Baker Hughes" or the "Company")
(NYSE: BHI) and certain of its officers and directors in the United
States District Court for the Southern District of Texas. The lawsuit
was brought on behalf of all persons who purchased Baker Hughes common
stock between July 24, 1998 and December 8, 1999, inclusive (the "Class
Period").
The complaint charges Baker Hughes and certain of its officers and
directors with violations of the Securities Exchange Act of 1934. Baker
Hughes supplies reservoir-centered products, services, and systems to
the worldwide oil and gas industry. The Company 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 Hughes announced it expected 4th Quarter 1999 earnings to be short
of expectations. Then on December 8, 1999, Baker Hughes 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, the Company's stock declined as much as 26% to as low as
$15 per share on volume of 28 million shares. As a result of the
defendants' false statements, the Company's stock price traded at as
high as $36-1/8 per share during the Class Period.
Contact plaintiff's counsel, Vincent R. Cappucci, Esq. of Entwistle &
Cappucci LLP, 400 Park Avenue, 16th Floor, New York, New York 10022
(Telephone: 212-894-7200), mboyle@entwistle-law.com
BANK ONE: Milberg Weiss Files Securities Suit in Illinois
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The following was announced on December 28 by the law firm of Milberg
Weiss Bershad Hynes & Lerach:
Notice is hereby given that a class action lawsuit was filed on December
28, 1999, in the United States District Court for the Northern District
of Illinois, on behalf of all purchasers of the common stock of Bank One
Corp. ("Bank One" or the "Company") (NYSE: ONE) between October 22,
1998, through November 10, 1999, inclusive (the "Class Period").
The complaint charges Bank One and certain of its senior officers and
directors with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 as well as Rule 10b- 5 promulgated thereunder. The
complaint alleges that defendants issued a series of materially false
and misleading statements concerning the Company's financial condition
and results of operations. Because of the issuance of a series of
materially false and misleading statements the price of Bank One common
stock was artificially inflated during the Class Period. Prior to the
disclosure of the adverse facts described above, certain defendants sold
tens of thousands of shares of Bank One common stock to the unsuspecting
investing public at artificially inflated prices. These defendants
realized over $ 7.4 million in proceeds from their insider trading
activities.
Contact: Milberg Weiss Bershad Hynes & Lerach LLP Shareholder Relations
Dept. E-Mail: endfraud@mwbhlny.com 1-800-320-5081 or Steven G. Schulman
or Samuel H. Rudman at One Pennsylvania Plaza, 49th Floor, New York, New
York 10119-0165, by telephone 1-800-320-5081 or via e-mail:
endfraud@mwbhlny.com or visit website at http://www.milberg.com
FOREST HAVEN: The Washington Post Cites Frustration in Getting Files
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Sixteen months after advocates for retarded District residents sought
access to D.C. Superior Court files -- and four months after an
exasperated federal judge took the rare step of intervening on their
behalf -- the local court has not complied.
The records are essential to hundreds of former residents of the
District's decrepit Forest Haven asylum. In a broken system of care,
defenders of the retarded want to know which of them have attorneys and
which do not, which ones are competently represented and which are not.
Much of the information has always been within reach, in the file rooms
of Superior Court. But gaining access to the records has proved
impossible for advocates and now for a U.S. District judge who wants to
resolve a 23-year-old class-action lawsuit. The duel over the court
files illustrates how the fate of the District's retarded people often
hinges on small details and decisions. Many months into the dispute, for
example, Superior Court clerks told attorneys that they could retrieve
only four files each day, despite the need to review 760 cases. One
Superior Court judge said the effort would cost more money than the
court could afford: $ 2,675.
At another point, Superior Court Chief Judge Eugene N. Hamilton promised
a response within days. Weeks went by, but Senior U.S. District Judge
Stanley S. Harris said he never heard from Superior Court again.
A recent Washington Post investigation found 350 documented cases of
abuse and 116 unexamined deaths of group home residents in an industry
pocked by corporate fraud and government neglect. The District's network
of homes and day programs, which spends about $ 100,000 annually per
client, is among the costliest in the nation.
The dispute over the court files appears emblematic of the way D.C.
authorities have failed the onetime residents of Forest Haven. What
Harris terms the "unwillingness" of Superior Court to provide essential
information adds a district judge's voice to the chorus of local and
federal players who have recently criticized the court for poor
performance and ineffective leadership.
Defenders of the retarded hope to improve conditions by ensuring that
each person is represented by an attorney who is aware of the rights and
guarantees defined in the 1976 class-action lawsuit now before Harris.
Legal appointments are made by Superior Court, which is responsible for
overseeing the commitment and treatment of the District's mentally
retarded population.
"We suspected that the Superior Court cases were not as active as they
should be and that attorneys were probably not checking on people's
placements and doing the advocacy that the statute allows them to do and
requires them to do," said Kelly Bagby, a lawyer with University Legal
Services, a federally funded advocacy group. "We began discovering more
and more cases of [retarded people] who were committed but had no
attorney. No one had shown up at the house for years."
Family Court Presiding Judge Zinora Mitchell-Rankin said in an interview
yesterday that Superior Court has been slowed by financial troubles and
an overtaxed staff but is working to fulfill Harris's demand.
In February, Harris requested a report on the Superior Court advocacy
system. That meant locating the lawyers, who can earn $ 1,300 or more a
year representing the interests of the retarded.
A federal court monitor had been working since August 1998 to find the
same information, according to a detailed ruling by Harris. Letters went
unanswered by Charles Gaines, chief of Superior Court's mental health
and mental retardation branch. Gaines later offered a series of
explanations for being unable to deliver, Harris said, but eventually
delivered an incomplete list of lawyers' names.
When court monitor Lydia Williams contacted the lawyers, she discovered
that many no longer accepted court appointments--some because they were
frustrated with the court's slow payment habits. Others knew nothing of
their clients' special rights under the federal lawsuit--or even that
the class-action case existed. Only one-third of the wards appeared to
have a working attorney. A series of fruitless dealings and petty
frustrations followed.
When Family Court's Mitchell-Rankin explained that the court's files
were not automated, the attorneys volunteered the services of law
students. The judge rebuffed them, citing crowded courthouse work areas
and worries that the volunteers would breach confidentiality rules.
As efforts stalled, Harris interceded. Mitchell-Rankin stood him up once
without explanation, he said. Then she said it would take 168 hours of
overtime to review the 760 files and explained that Superior
Court--which has an annual budget of $ 121 million--could not afford the
$ 2,675 cost. Harris, declining to underwrite the expense, said the
volunteer law student idea "seemed eminently feasible."
Mitchell-Rankin promised to confer with Chief Judge Hamilton and report
back. She never did. Harris then spoke with Hamilton, who said he was
aware of the issue and would contact Harris within a few days. Hamilton
never got back in touch.
When Forest Haven class-action attorneys sought to review the files one
by one, Superior Court officials denied them access, contending that
only the individual attorneys--whose very names the lawyers were
seeking--could review the material. Harris called the court's policy
"wholly illogical."
On Aug. 20, Harris expressed his "acute disappointment" and ordered
Superior Court to make the files available. He called the history of the
dispute "rather remarkable." "To me, this is like a non-issue,"
Mitchell-Rankin countered in an interview yesterday. "We've never been
obstreperous. We've said from the very beginning that we're prepared to
provide the information. Hopefully, with one more day of overtime, we
will be completed."
Court oversight of the District's retarded wards was not meant to depend
so heavily on lawyers. Under city law, Superior Court was supposed to
appoint for each ward a "certified personal advocate": a trained
volunteer to visit the ward in the group home and day program and convey
his or her needs and concerns to court authorities. But fewer than 25
percent of the city's wards have an advocate today.
Mitchell-Rankin attributes the city's failure to comply with the law to
a lack of public interest and a limited budget for recruiting and
volunteer retention. She said a successful program costs "in excess of $
12,000 to $ 15,000. That's not a terrific amount of money . . . but it's
not chump change."
Tracy Dacosta, a 28-year-old legal assistant, sees things differently.
In March, after reading a Washington Post series about unchecked abuse
and neglect in city's group homes, she signed up to be an advocate and
quickly completed the three-hour training course needed for
certification.
Nine months later, in December 1999, she is still waiting to be
assigned. "They're supposedly begging for volunteers, but it's been a
bunch of runaround trying to be one," said Dacosta, thumbing through a
detailed chronology of deferment.
Superior Court informed her this summer that she would be assigned to a
51-year-old woman named Mary Ann. Then the court hearing at which
Dacosta was to be appointed was canceled. The city social worker and the
lawyer had failed to show.
Through the autumn, Dacosta peppered the court and the lawyer with phone
calls, but the hearing was never rescheduled. She recently learned that
Mary Ann's annual review had been conducted without her. "I wonder if
the problem is that the city and the group homes don't want advocates
snooping around," said Dacosta, who reported that the bureaucratic
obstacles have only strengthened her sense of mission. "One of these
days I am going to get to meet her," she said of Mary Ann. "And we'll be
laughing, saying, 'It's about time.'" (The Washington Post December 15,
1999)
HMOs: Legality of Recovering Billed, Not Just Paid Amt Far from Settled
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Susan DeGarmo, who stands a commanding 6 feet, 2 inches, with broad
shoulders and a full head of red-blond hair, is clearly no one to be
trifled with. But she almost met her match in her family's health
maintenance organization.
After her son was paralyzed from the waist down when a pickup truck ran
over his bicycle, she won nearly $ 1 million from the negligent
driver--only to have her HMO demand nearly 25% of her take.
When she refused to pay, the HMO sued. DeGarmo countersued. After five
bitter years, she prevailed. "What they were doing infuriated me,"
DeGarmo said. "Stephen won this minimal amount of money that he's going
to need to take care of himself for the rest of his life . . . and they
were trying to take it away."
As HMOs resort to increasingly aggressive business practices in the face
of ever-shrinking profit margins, consumers at both the local and the
national levels are banding together to challenge them. DeGarmo's saga
and others like it offer a glimpse of what lies ahead in the bigger
class-action lawsuits filed recently against such health care giants as
Aetna U.S. Healthcare, Humana Inc. and California-based Pacificare
Health Systems and Foundation Health.
Particularly upsetting to DeGarmo was that she had believed people
bought insurance so that someone else would assume the risk of large
medical bills. Why should she have to pay for her son's medical costs
out of the award, which was designed primarily to compensate him for
future economic losses and pain and suffering?
Then she discovered something few consumers know: Buried deep in the
fine print of most insurance contracts is language giving insurers the
right to a share of damage awards.
HMO's Recovery Practices Scrutinized
Stymied by that provision, DeGarmo and her lawyer began to scrutinize
the HMO's recovery practices. What they found was that Health Plan of
the Upper Ohio Valley actually had ordered her to pay back more than the
HMO had spent for Stephen's care. That business practice became the
heart of her challenge in state court.
Consumers in some other parts of the country, however, have had less
success in taking on their HMOs for the same practice. In a Minnesota
case, the U.S. 8th Circuit Court of Appeals ruled against consumers. And
in California, state courts have upheld the right of HMOs to recover
more than they've paid.
In the larger class-action suits recently filed against the industry
giants, plaintiffs and their lawyers are questioning other widespread
HMO practices, such as paying bonuses to doctors who cut down on costly
patient treatments, mandating that patients use prescription drugs on a
limited list even when their doctor recommends an alternative medication
and unilaterally altering physicians' contracts and payment schedules.
As with the practice challenged by the DeGarmos, there are no federal
laws directly governing such activities, and the courts have yet to rule
on them.
The DeGarmos' HMO is the largest in the region. Its 100,000 customers in
West Virginia and eastern Ohio are the sons and daughters of coal and
steel workers who scrape together a living in the few remaining steel
plants, the LaBelle nail plant in Wheeling, the Bayer aspirin plant in
nearby Marshall County and the shipping yards along the river.
DeGarmo is a business manager in a doctor's office; Michael, her
husband, runs his own business remodeling homes and building additions.
His skills came in handy when their own doors had to be widened for
Stephen's wheelchair.
Stephen was riding his bike to flag football practice one September
afternoon in 1990 when a pickup truck smashed into him. For three
months, his life hung in the balance. When the crisis had passed, Susan
DeGarmo applied her considerable energy to getting the rehabilitation he
would need.
To the DeGarmos, their $ 950,000 settlement with the driver--reduced by
legal fees and court costs to just over $ 500,000--seemed like the bare
minimum Stephen would need. To the Health Plan of the Upper Ohio Valley,
however, it seemed like a windfall. And the HMO wanted $ 128,000 of it.
The HMO's position was that it had paid for Stephen's health care while
the family had paid nothing more than the monthly premiums and small
co-payments required for each doctor's office visit or hospital stay.
"We said we had the right to the money," said Dave Mathieu, the health
plan's vice president for marketing.
Most consumers in DeGarmo's position simply pay whatever the HMO asks,
usually after receiving strongly worded letters from collection agencies
hired by the HMO. When consumers don't pay up, the HMO often sues.
The DeGarmos found it bad enough that their own health care provider
would sue when their son faced the rest of his days in a wheelchair.
What turned their distress into a major court case was that the HMO
demanded payment of the full amount that Stephen's doctors and hospital
had billed, not just the discounted amount that the health plan actually
had paid them.
A 40%-50% Discount in Service Fees
Like most HMOs, the Health Plan of the Upper Ohio Valley pays
considerably less to the doctors and hospitals in its network than those
doctors and hospitals bill non-HMO patients. This is one reason HMOs are
so much cheaper than traditional fee-for-service medicine.
The amount paid by the health plan for Stephen was said by the DeGarmos
to have been discounted 40% to 50%. That meant the HMO was seeking
nearly twice as much from the DeGarmos as it had paid.
As Kresen prepared the DeGarmos' case, he discovered that Susan was just
one of hundreds of people who had received letters from the HMO
requesting repayment of part of their court awards and out-of-court
settlements. So he sought to turn the DeGarmo case into a class action
on behalf of all the others. Ultimately, Kresen divided the case into
four class actions, each on behalf of plaintiffs with somewhat different
insurance contracts.
The first of the four suits to go to trial did not directly involve the
DeGarmos, but Susan DeGarmo and other HMO members testified about their
experiences at the hands of the health plan. One of the most effective
witnesses was Dora Pitt. Pitt, now 49, was a pediatric nurse until she
suffered an incurable back injury when her car was rear-ended in 1991.
The accident not only cost Pitt her job, but it also meant that she
could no longer lift and cradle her adopted daughter, Missy, a
3-year-old with multiple disabilities from abuse she suffered as an
infant. Her settlement with the other driver was $ 25,000, and her
lawyer's fee left her with barely $ 15,000.
Then the HMO said it was owed $ 9,000 of that to recoup the cost of her
care. Pitt, a quiet, petite woman, came out swinging. "Because I
couldn't lift anymore, I needed someone to come and help me take care of
Missy, and she needed adaptive toys and durable medical equipment," Pitt
said. Missy had to do without for many years as Pitt tried to make ends
meet with Missy's adoption allowance and federal assistance for the
disabled poor.
At the conclusion of the trial, state Circuit Judge John T. Madden ruled
that the Health Plan of the Upper Ohio Valley owed $ 68,000--the
difference between billed and paid amounts--to the roughly 80 HMO
members who had brought the suit. "There is something offensive to a
proposition that permits an entity to profit by its members'
misfortune," Madden wrote. He called the HMO's practice of recovering
from injured patients more than had actually been paid for their care
"neither fair nor equitable nor right."
He turned over to a jury the decision of whether to award compensatory
damages for pain and suffering, or punitive damages. The jury came back
with a verdict of $ 4 million as compensation for the plaintiffs'
"aggravation, annoyance and inconvenience" and $ 6 million in punitive
damages.
The verdict forced the health plan to change its ways. "We just recover
the paid charges now," Mathieu said. The HMO also decided to cut its
losses and settle the other three class actions pending against it. In
the end, the Health Plan of the Upper Ohio Valley agreed to pay $ 9
million to the plaintiffs in the four suits combined. Kresen accepted,
to avoid lengthy appeals and to ensure that every plaintiff got
something.
DeGarmo got $ 10,000 for being a class representative and the same $ 118
as every other member of her class in the lawsuit. But most important to
her, she did not have to pay back any of the money from Stephen's
settlement.
Asking consumers injured in accidents to pay their health plan a portion
of the money they recover from third parties turns out to be
commonplace. Of the 635 HMOs nationwide, 311--nearly half--get some of
their revenue through such recoveries, said Mark Driggs, a consultant in
Salt Lake City who tracks HMO business practices. HMOs received $ 765.7
million through this practice in 1998--not a trivial sum, Driggs
said--although several HMOs said not even 1% of their revenue came from
this source. It is unknown how many health plans attempt to recover the
billed amounts rather than the smaller amounts that they actually paid.
But the DeGarmo case is not the first time the issue has arisen.
Health plans operated by Blue Cross/Blue Shield in a number of states
have paid millions of dollars to settle legal proceedings brought by
state health insurance commissioners who accused the plans of charging
consumers the amounts billed by doctors.
The legality of the practice remains far from settled by the courts,
however. In California, Kaiser Permanente has persuaded courts that
recovering billed amounts is a legitimate practice for its kind of HMO,
where all doctors are on salary and the company does not keep track of
how much it pays a doctor for each operation or treatment. Kresen is
planning to bring at least six more suits similar to the one he tried in
West Virginia, naming both HMOs and their collection agencies.
Although that victory may embolden other lawyers to file class-action
suits attacking a variety of largely unexamined HMO business practices,
the road ahead looks far from smooth. The suits take years to come to
completion and test both the lawyers' and the plaintiffs' staying power.
Furthermore, the issues in the larger class-action cases involve complex
interactions of federal and state law.
The plaintiffs' lawyers are gambling that eventually their clients will
win the sympathies of jurors and judges. (Los Angeles Times December 29,
1999)
LASON INC: Kirby McInerney Files Securities Suit in Michigan
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Please take notice that a class action lawsuit has been commenced in the
United States District Court for the Eastern District of Michigan on
behalf of all purchasers of Lason,Inc. (NASDAQ: LSON) securities between
August 14, 1998 and December 17, 1999 (the "Class Period").
The complaint alleges that Lason and certain of its officers and
directors issued materially false or misleading statements in violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. As a
result of these misrepresentations and omissions, the complaint alleges,
the price of Lason's securities was artificially inflated during the
class period, and investors who bought these securities were damaged
thereby.
Contact: Ira Press, Esq. Robert Feinstein, Paralegal KIRBY McINERNEY &
SQUIRE, LLP 830 Third Avenue 10th Floor New York, New York 10022
Telephone: (212) 317-2300 or Toll Free (888) 529-4787 E-Mail:
kms@kmslaw.com
LASON INC: Milberg Weiss Files Securities Suit in Michigan
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The following was announced on December 29 by the law firm of Milberg
Weiss Bershad Hynes & Lerach:
Notice is hereby given that a class action lawsuit was filed on December
27, 1999, in the United States District Court for the Eastern District
of Michigan, on behalf of all purchasers of the common stock of Lason,
Inc ("Lason" or the "Company") (Nasdaq: LSON) between July 27, 1999,
through 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, at Milberg Weiss Bershad Hynes & Lerach ("Milberg Weiss"),
Steven G. Schulman or Michael A. Swick at One Pennsylvania Plaza, 49th
Floor, New York, New York 10119-0165, by telephone 1-800-320-5081 or via
e-mail: endfraud@mwbhlny.com or visit our website at
http://www.milberg.com
The complaint charges Lason and certain of its senior officers and
directors with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 as well as Rule 10b- 5 promulgated thereunder. The
complaint alleges that defendants issued a series of materially false
and misleading statements concerning the Company's detriorating
financial condition and integration problems with its recent
acquisitions.
Contact: Milberg Weiss Bershad Hynes & Lerach LLP Shareholder Relations
Dept. E-Mail: endfraud@mwbhlny.com 1-800-320-5081
MTBE: NY Is Likely to Be Forum for Lawsuits over Contaminated Water
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Based on recent regulatory and litigation developments, New York is
likely to become a forum for lawsuits over water supplies allegedly
contaminated with the substance methyl tertiary butyl ether or "MTBE."
Depending on how the complaints are styled, MTBE litigation could
present the New York courts with new opportunities to address vexing
questions in the mass tort field involving, among other things, the
appropriateness of class actions and medical monitoring of claimants who
do not display symptoms of disease.
Although ozone and air toxic levels around the country have decreased
since the implementation of the federal Clean Air Act, numerous areas,
including several in New York and elsewhere in the Northeast, have not
attained national ambient air quality standards. In response, Congress
enacted the Clean Air Act Amendments of 1990, which established the
reformulated gasoline ("RFG") program. That program mandated changes in
motor fuel formulation by requiring RFG used in nonattainment areas to
contain increased oxygen levels to allow for cleaner fuel consumption
and lower noxious motor vehicle emissions.
Fuel Additives
To meet this requirement, various oxygen-rich compounds, called
oxygenates, have been developed and marketed as fuel additives. The
leading oxygenate is MTBE, which is found in over 85 percent of RFG.
Although there is disagreement regarding the precise role played by MTBE
in attaining air quality standards, the evidence indicates that the use
of MTBE has reduced emissions of carbon monoxide and other toxics to
below those standards.
At the same time, however, MTBE is being detected in drinking water
supplies with greater frequency. Between 5 and 10 percent of community
drinking water supplies in areas using RFG contain MTBE, although
usually at concentrations below the Drinking Water Advisory of 20 to 40
parts per billion("ppb") set by the U.S. Environmental Protection Agency
("EPA"). At even low levels, however, consumers have voiced taste and
odor complaints, causing some public water suppliers to stop using water
supplies and to incur treatment and remediation costs. MTBE has also
been detected in private wells, which are less protected than public
drinking water supplies and not monitored regularly for contamination.
Surface waters too have been impacted with MTBE, particularly during the
summer boating season.
The major source of MTBE in groundwater appears to be leaking
underground gasoline storage tanks ("USTs"). Although USTs have been
upgraded within the past several years, many have not been, and even
upgraded USTs purportedly may release RFG due to inadequate design,
installation, maintenance, and operation. Beyond that, gasoline spills
to ground and surface waters account for an additional source of MTBE in
drinking water supplies.
List Publicized
Just a few weeks ago, attorneys for plaintiffs involved in MTBE
litigation outside of New York obtained and publicized a list compiled
in 1998 by the New York State Department of Environmental Conservation
("NYSDEC") that identifies over 1,500 soil and groundwater sites within
the State that contain MTBE. According to the NYSDEC list, MTBE was
detected in all 62 counties in the State with most sites located in
Nassau(198), Suffolk(183), and Westchester (96). More than 90 percent of
the MTBE spills reported by NYSDEC allegedly require remediation.
Soon after the NYSDEC data were publicized, on Sept. 15, a panel
appointed by U.S. EPA Administrator Carol Browner to investigate the
benefits and risks of MTBE issued its long awaited report, "Achieving
Clean Air and Clean Water: The Report of The Blue Ribbon Panel on
Oxygenates in Gasoline." The report may further encourage MTBE
litigation in New York by those equipped with the NYSDEC data.
For example, the blue ribbon report underscores that MTBE is more
water-soluble than other gasoline components - moving at nearly the same
speed through soils as groundwater itself - and appears resistant to
biodegradation relative to those other components. According to the
report, "Given sufficient time and distance, MTBE would be expected to
be at the leading edge of a gasoline contamination plume or could become
completely separated from the rest of the plume if the original source
of oxygenate were eliminated."
Although more even-handed in its discussion of the human health effects
associated with MTBE exposure, the report could provide fodder to those
contemplating suit against industry. On the one hand, the report notes
that both the International Agency for Research on Cancer (IARC) and the
National Institute of Environmental Health Sciences (NIEHS) have
concluded that the data do not allow them to classify MTBE as a probable
or unknown human carcinogen. And the report advises that drinking water
containing MTBE below the taste and odor levels identified in EPA's
Drinking Water Advisory is "not expected to cause adverse health
concerns for the majority of the population."
Data Is Limited
On the other hand the report notes that there are only limited data on
human populations that may be sensitive to MTBE. The report also
observes that at high doses, MTBE and its metabolites have caused cancer
in rats and mice. Although it cautions against extrapolating such
effects to humans, the report suggests that significant health effects
may be beside the point, because even at very low levels, MTBE takes on
the taste and odor of turpentine and can make drinking water
unacceptable to consumers.
Finally, the blue ribbon report portrays as difficult and expensive the
treatment of water containing MTBE. According to the report,
conventional treatment technology such as air stripping and carbon
adsorption are costly and ineffective for MTBE removal. The report
further notes that other treatment technologies, like advanced
oxidation, may generate byproducts of MTBE that could be of health and
environmental concern, thus limiting their usefulness and increasing
treatment costs.
Having raised those concerns, the blue ribbon panel concluded that MTBE
poses a risk to the environment and public health, and its
"occurrence...in drinking water supplies can and should be substantially
reduced." Toward that end, the report recommended that federal and state
authorities be authorized to regulate and/or eliminate the use of MTBE
in gasoline.
In light of the NYSDEC listing of State MTBE sites and the panel's
report on the threat allegedly posed by MTBE, a new wave of MTBE
litigation should be expected to break in New York. How will those
lawsuits be framed? Three recent cases filed elsewhere may provide a
snapshot.
Cases Filed Elsewhere
Earlier this year in Maynard, et al. v. Amerada Hess Corp., et al., CA.
No. 99-CVS-00068 (North Carolina Super. Ct,. New Hanover Co.), the same
attorneys who publicized the NYSDEC MTBE listings brought a putative
state class action, on behalf of individuals whose water supplies are or
may be contaminated by MBTE, against manufacturers and distributors of
RFG. The suit alleges that the defendants marketed MTBE without adequate
warnings or toxicological studies and with knowledge that MTBE passes
through soil and groundwater and ultimately contaminates drinking water
supplies.
Although the Maynard complaint is replete with suggestions of some
toxicological threat posed by MTBE, it does not include any claim for
personal injury, and specially excludes from the putative class any such
claimant. Nor does it allege the presence of MTBE above applicable state
drinking water standards. Instead, plaintiffs merely suggest that MTBE
at any concentration leaves water with a foul taste and odor distasteful
to consumers. Based on that, plaintiffs then break their proposed class
into three subclasses: (1) all well owners who have or wish to have
their wells tested for MTBE; (2) all well owners whose wells contain
MTBE at or above 5 ppb; and (3) all owners of land above groundwater
that contains MTBE at or above 5 ppb.
Because the defendants allegedly choose to market MTBE in spite of its
known propensity to leach into groundwater, the Maynard plaintiffs claim
that the defendants are liable under several theories, including
negligence, gross negligence, product liability for defective design and
failure to warn, trespass, nuisance, conspiracy, and fraud. In addition
to an order certifying their case as a class action, plaintiffs seek: an
order compelling defendants to establish a fund for sampling and
analysis of all North Carolina drinking water wells for MTBE, and
reimbursement for all wells already sampled; the costs of remediating
all wells containing MTBE at or above 5 ppb or providing alternative
water sources; damages for diminution in property value and stigma for
plaintiffs whose property is above groundwater containing MTBE at or
above 5 ppb; an order directing defendants to issue warnings and fund a
public education program regarding the threat that MTBE allegedly poses
to groundwater; and punitive damages.
Maynard was preceded by a similar putative class action filed in Maine
Superior Court by the same plaintiffs' attorneys. In that case Millet,
et al. v. Atlantic Richfield Co., et al., C.A. No. CV-98-555 (Maine
Super. Ct., Cumberland Co.), plaintiffs also allege that although MTBE
manufacturers, distributors, and promoters knew that MTBE readily
leaches into groundwater, they provided no warnings of that, and
marketed the compound as environmentally safe and beneficial. And again,
while plaintiffs suggest that MTBE poses a health risk, and assert that
thousands of private wells in Maine contain the chemical above Maine's
health-based maximum contaminant level of 35 ppb, the complaint does not
allege any claim for personal injury, and specifically excludes any such
claim from the putative class. Rather, plaintiffs assert that even trace
levels of MTBE can render water unfit for consumption. Given that, they
see certification of two sub classes: (1) all persons whose wells have
been tested and found to contain MTBE in "unacceptable concentrations;"
and (2) all persons whose wells have not been tested for MTBE.
As in Maynard, the plaintiffs in Millet assert several theories of
liability, including strict liability for failure to warn and for
misrepresentation, unfair and deceptive trade practices, negligence,
negligent misrepresentation, conspiracy, and fraud. And in addition to
an order certifying their suit as a class action, the Millet plaintiffs
seek: an order requiring defendants to pay for court-approved sampling
and analysis of all Maine private water supplies for MTBE; damages for
lost property value and the cost of cleaning up class members'
groundwater containing MTBE levels above 2 ppb; an order compelling
defendants to issue warnings and fund a public education program
regarding the threat that MTBE allegedly presents to groundwater;
imposition of a constructive trust and asset freeze upon defendants'
MTBE-related profits; and punitive damages.
Class Action Issue
The Millet case sheds more light on plaintiffs' strategy to achieve
class action certification. Unlike the Maynard complaint, which does not
even mention North Carolina's Rule 23(b), the Millet complaint and
motion for class action certification assert that the lawsuit can be
certified as a class action under either Maine Rules 23(b)(1), 23(b)(2),
or 23(b)(3). Recognizing the clear trend against certifying nationwide
class actions for personal injury because individual issues of law and
fact usually predominate, the Millet plaintiffs attempt to satisfy rule
23(b)(3) by limiting their suit to a state action involving a uniform
claim defined by MTBE levels above 2 ppb. As they argue in their motion
papers, "[t]his case...is not burdened with the management problems that
have impeded some other mass tort class actions, such as the necessity
to litigate injury and causation individually in each case and to apply
the laws of different states to different class members."
But even if individual issues preclude certification under Rule
23(b)(3), the Millet plaintiffs argue that certification is appropriate
under Rules 23(b)(1)(A) or 23(b)(2) because they purportedly seek
primarily "court approved" injunctive relief. Most interestingly, taking
advantage of the recent trend allowing claims for medical monitoring to
be certified under Rule 23(b)(2), the Millet plaintiffs analogize their
claims for sampling and analysis of untested wells and for public
warnings and education outreach to claims for medical monitoring.
According to the plaintiffs, their claims should be certified under Rule
23(b)(2) for the same reasons a growing number of courts have certified
medical monitoring claims under that rule.1
Finally, in August 1999, the City of Dinuba, Calif. brought suit against
numerous MTBE manufacturers and distributors to recover the costs of
treating its water supply contaminated with MTBE, and securing
alternative water supplies. In City of Dinuba v. Unocal Corp., et al.,
C.A. No. 305450 (California Super. Ct., San Francisco Co.), the
plaintiff makes the familiar charge that the defendants knew that MTBE
would reach groundwater, but failed to guard against that or issue
appropriate warnings to the public while continuing to market the
chemical as environmentally sound.
Like the plaintiffs in Maynard and Millet, the City of Dinuba makes
cryptic reference to MTBE's "link[ ] to a wide variety of threats to
human health." But its primary concern is not with public health, but
with MTBE levels as low as 2 ppb that allegedly make water distasteful
and odorous to some 15,000 residents.
Although California has promulgated an MTBE Secondary Drinking Water
Standard of 5 ppb for taste and odor concerns, the City of Dinuba
appears to have requested the remediation of any level of MTBE in its
water supply. Toward that end, its complaint alleges several counts,
including strict product liability, negligence, trespass, nuisance, and
unfair competition. In addition to the cost of remediating and/or
replacing its water supplies, the city seeks punitive damages and the
disgorgement of all MTBE-related profits earned by the defendants.
New York Suits Likely
NYSDEC's listing of MTBE sites, EPA's blue ribbon panel report
encouraging the elimination of MTBE in gasoline, and the recent parade
of MTBE lawsuits suggest strongly that mass tort litigation against the
MTBE industry will soon make its debut in the New York courts. Creative
plaintiffs' attorneys attempting to analogize their claims to medical
monitoring may be emboldened by New York County Supreme Court Justice
Helen E. Freedman's recent decision in In re: New York Diet Drug
Litigation, Index No. 70000/98 (Sup. Ct. N.Y.Co., Sept. 14, 1999),2
finding that New York recognizes a cause of action for medical
monitoring of asymptomatic claimants. And although New York has
promulgated a generic "Unspecified Organic Contaminant" drinking water
standard of 50 ppb applicable to hundreds of thousands of chemicals,
including MTBE, plaintiffs' theories elsewhere indicate that litigation
will be brought even when MTBE is detected in drinking water at a small
fraction of that level.3
Companies named as defendants in any New York MTBE litigation should be
expected to oppose the claims vigorously. Would-be plaintiffs in New
York, like claimants in other jurisdictions, probably will not allege
any personal injury from MTBE. This, in combination with limited levels
of MTBE detected in drinking water supplies, could make it difficult for
them to sustain a medical monitoring-like cause of action.
Justice Freedman's opinion in the diet drug litigation, acknowledging
that the Court of Appeals has not yet addressed medical monitoring,
stressed that such a claim might be cognizable "under the right
circumstances." The test she adopted requires sufficient evidence of
significant exposure to a harmful agent resulting from a defendant's
negligence and an increased risk of contracting serious disease, among
other elements. Based on currently available information about MTBE, and
particularly the lack of any scientific consensus on its propensity to
cause harm, these criteria could prove insurmountable to MTBE plaintiffs
in New York.
All indications are that the wave of MTBE litigation is rising and will
break in New York. This litigation will present new challenges for the
courts and litigants in the hardscrabble arena of alleged mass torts.
Footnotes
1 For example, in In Re Diet Drugs: (Phentermine, fenfluramine,
dexfenfluramine) Products Liability Litigation: Barbara Jeffers and
Johanna Day v. American Home Products Corp., 1996 U.S. Dist LEXIS
13228 (E.D. Pa., Aug 26, 1999), Judge Bechtle of the U.S. District
Court for the Eastern District of Pennsylvania conditionally
certified a nationwide class action for medical monitoring on behalf
of consumers who allegedly fear an increased risk of heart valve
disease from using certain diet drugs. The court observed, among
other things, that the ingestion of the drugs was "discrete and
ascertainable" and, thus, individual issues of exposure could be
managed in one class action.
2 See New York Law Journal, Sept. 17, 1999, at 1.
3 Even if plaintiffs' theories rely on an exceedence of the 50 ppb
"Unspecified Organic contaminant" standard for MTBE, that by itself
may not establish liability. See State of New York v. Fermenta ASC
Corp., 608 N.Y.S. 2d 980, 986 (Suffolk Co. 1994) (contravention of
"Unspecified Organic Contaminant" standard alone is insufficient to
establish liability for public nuisance). (The Metropolitan Corporate
Counsel December, 1999)
NY CITY: Ct Denies Class to Tenant’s Suit over Hazardous Conditions
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Before the court was a motion by plaintiffs and proposed intervening
plaintiffs to permit intervention and to certify the action as a class
action. The proposed class consisted of New York City tenants (including
non-minority members) in privately owned buildings, who alleged that
their buildings have hazardous conditions that had not been timely and
adequately inspected or corrected. The tenants contended that they were
being subjected to discrimination on account of race because they
resided in an 80 percent minority census tract. The court held that the
crux of plaintiffs' claim, under Title VI, was disparate impact on
minority tenants, however the proposed class specifically included
non-minority members and, since the claims of these two classes were
inconsistent, class certification was inappropriate, due to lack of
"commonality."
Judge Jones
3004 ALBANY CRESCENT TENANTS' ASSOCIATION v. CITY OF NEW YORK
QDS:02761850 - Before this Court is the motion of plaintiffs, and
proposed intervening plaintiffs: (1) to permit the proposed intervening
plaintiffs to intervene in the action, pursuant to Rule 24(b); and (2)
to certify this action as a class action, pursuant to Fed. R. Civ. P.
23(a) & (b)(2). Defendants do not oppose the intervention motion, see
Defendants' Mem. of Law. at 4, and thus the motion to permit the
proposed intervening plaintiffs to intervene in the action is granted.
For the following reasons, the motion to certify this action as a class
action, pursuant to Fed. R. Civ. P. 23(a) & (b)(2) is denied.
Background
Created in 1977, the New York City Department of Housing Preservation
and Development ("HPD") exercises and enforces "all functions of the
city relating to the rehabilitation, maintenance, alteration and
improvement of residential buildings and privately owned housing...."
N.Y. City Charter @ 1802(1). HPD is responsible for the enforcement of
the Multiple Dwelling Law, the Housing Maintenance Code, and other
housing laws for New York City. See N.Y. Multiple Dwelling Law @ 303;
N.Y. Housing Maintenance Code @ 27 - 2092; N.Y. Real Property Actions
and Proceedings Law @ 755. To assist in the administration of this
enforcement, HPD receives federal Community Development Block Grant
("CDBG") funds from the U.S. Department of Housing and Urban Development
("HUD") . See 42 U.S.C. @ 5303. In accordance with federal standards, 51
percent of the CDBG funds received by HPD must benefit persons of low
and moderate income. See 42 U.S.C. @ 5305(c)(2)(A). Plaintiffs claim to
represent the class of low and moderate income individuals who are to
benefit from the CDBG financing of HPD.
Plaintiffs are individual minority tenants, and tenants associations
whose members are predominantly African-American and Latino, residing in
low-income housing in low income neighborhoods throughout the City of
New York. (See Compl. PP 1, 45, 52.) Plaintiffs claim that defendants'
alleged abdication of their duties create intolerable living conditions
in plaintiffs' residences. (See id. PP 2 -3.)
Defendants Deborah Wright, Harold Shultz and Paul Cantillo serve
respectively as Commissioner, Deputy Commissioner, and Assistant
Commissioner of HPD. (See id. PP 42, 43, 44.) As such, defendants are
responsible for overseeing enforcement of and ensuring compliance with
the New York City Housing Maintenance Code. (See id.) Plaintiffs
maintain that the City of New York, as a municipal corporation, is
liable for the acts of HPD and HPD's employees. (See id. PP 40.)
Plaintiffs allege numerous causes of action, including defendants'
failure to enforce and comply fully with New York City's Housing
Maintenance Code @ 27 - 2115, N.Y.C. Charter @ 1802(1) and N.Y. Multiple
Dwelling Law. (See id. PP 132 -157.) Specifically, plaintiffs allege
that: (1) defendants fail to administer an effective, non-discriminatory
citywide program to identify hazards in housing promptly (See id. PP 13,
35); (2) defendants fail to issue citations for housing code infractions
to delinquent landlords (See id. P 11); (3) defendants fail to enforce
repairs by landlords of cited violations (See id. PP 17, 37); and (4)
defendants fail to re-inspect violations that are certified by landlords
as corrected. (See id. P 17.) Plaintiffs claim that defendants' failure
to act against delinquent landlords has caused plaintiffs' displacement
from their homes, has forced plaintiffs to lose wages in their efforts
to maintain safe and habitable accommodations, and has caused plaintiffs
to suffer dangerous, unsanitary and unhealthy living conditions. (See
id. PP 25, 28, 33.)
In a previous memorandum and order, this Court denied defendants' motion
to dismiss plaintiffs' Title VI and local law claims, but granted
defendants' motion to dismiss plaintiffs' Title VIII and Fourteenth
Amendment Due Process claims. See 3004 Albany Crescent Tenants' Assoc.
v. City of New York, No. 95 Civ. 10662, 1997 WL 225825 (S.D.N.Y. May 5,
1997) (McKenna, J.).
Proposed Class
"The proposed class consists of all New York City residents (1) who are
tenants in privately-owned multiple dwellings, (2) whose dwelling places
now have, or may in the future have, hazardous or immediately hazardous
conditions which have not been timely and adequately inspected or
corrected, and (3) who reside in census tracts in which the combined
non-White and/or Hispanic population equals or exceeds eighty percent."
Plaintiffs' Mem. of Law at 8. "The proposed class includes all persons
residing in the 80 percent minority census tracts... including
non-minority members residing in such census tracts, it being
plaintiffs' contention that all residents of affected tracts are being
subjected to discrimination on account of race." Id.
Rule 23(a)
In order to maintain a class action, a party must first meet the
following prerequisites listed in Rule 23(a):
* the class is so numerous that joinder of all members is
impracticable,
* there are questions of law or fact common to the class, (3) the
claims or defenses of the representative parties are typical of the
claims or defenses of the class, and (4) the representative parties
will fairly and adequately protect the interests of the class.
Fed. R. Civ. P. 23(a). The moving party must also show that the putative
class fits one of the three categories set forth in Rule 23(b). Here,
plaintiffs contend that certification of the class is appropriate under
Rule 23(b)(2) because defendants have allegedly "acted or refused to act
on grounds generally applicable to the class, thereby making appropriate
final injunctive relief or corresponding declaratory relief with respect
to the class as a whole." Fed. R. Civ. P. 23(b)(2).
The burden of proving each of the requisite elements of Rule 23 rests
with the party seeking certification. See Amchem Prods., Inc. v.
Windsor, 521 U.S. 591, 614 (1997). A court must accept the complaint's
allegations as true and should avoid a preliminary inquiry into the
merits of the case. See Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178
(1974). However, a court may consider material outside the pleadings in
determining the appropriateness of class certification. See Kaczmarek v.
IBM, 186 F.R.D. 307, 311 (S.D.N.Y. 1999).
Class certification should be granted if the court "is satisfied, after
a rigorous analysis," that the requirements of Rule 23 have been met.
See General Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 161 (1982).
Numerosity
Turning to the first prerequisite under Rule 23(a), plaintiffs must show
that the proposed class is so numerous that joinder of all members is
impracticable. Impracticable does not mean impossible, but simply
difficult or inconvenient. See Primavera Familienstiftung v. Askin, 178
F.R.D. 405, 409 (S.D.N.Y. 1998). Precise enumeration or identification
of the class members is not required. See Jane B. by Martin v. New York
City Dept. of Social Services, 117 F.R.D. 64, 70 (S.D.N.Y. 1987).
Plaintiffs contend, and defendants do not dispute, that the proposed
class is clearly too large to permit joinder of all claims in a single
action. Plaintiffs argue that 822 of New York City's 2,215 census tracts
have minority populations of eighty percent or more. See Plaintiffs'
Mem. of Law at 10. The total number of persons residing in these 822
census tracts is 2,952,274. See id. Plaintiffs contend that - in general
- 60 percent of the city's population resides in privately-owned
multiple dwellings, and that if the percentage of persons occupying
privately-owned multiple dwellings is the same throughout New York City,
then approximately 1.8 million residents are members of the proposed
class. See id. at 10 - 11. At this stage in the litigation, the
numerosity requirement has been met. See Jones v. Goord, No. 95 Civ.
8026 (WHP), 1999 WL 767045, at *8 (S.D.N.Y. Sept. 27, 1999).
Commonality and Typicality
"The commonality and typicality requirements tend to merge... the crux
of both requirements is to ensure that 'maintenance of a class action is
economical and [that] the named plaintiff's claim and the class claims
are so interrelated that the interests of the class members will be
fairly and adequately protected in their absence.'" Marisol A. v.
Giuliani, 126 F.3d 372, 376 (2d Cir. 1997) (quoting Falcon, 457 U.S. at
157 n.13). Commonality looks to whether there are common issues of law
or fact among plaintiffs, see, e.g., In re Agent Orange Prod, Liab,
Litigation, 818 F.2d 145, 166 - 167 (2d Cir. 1987), while the typicality
requirement is satisfied where "the claims of the purported class
members derive from the same set of events, and similar legal arguments
are needed to establish liability on the part of the defendants." Hua
Mui v. Union of Needletrades, Indus, and Textile Employees, AFL-CIO, 97
Civ. 7270 (HB), 1999 WL 4918, at *2 (S.D.N.Y. Jan. 5, 1999). Some
factual variation among class members' specific grievances will not
prevent certification of claims on behalf of a class of plaintiffs. See
Marisol A., 126 F.3d at 377.
Plaintiffs' proposed class must share common interests, specifically
that the underlying questions of law and fact be applicable in the same
manner to each member of the class. This poses a problem for the
plaintiffs.
First, the gravamen of plaintiffs' Title VI claim is that HPD's code
enforcement policies and practices have a disparate impact on minority
tenants in privately owned multiple dwellings. However, the proposed
class - as defined by the plaintiffs - specifically includes
non-minority members residing in such census tracts, it being
plaintiffs' contention that all residents of affected tracts are being
subjected to discrimination on account of race. Because the claims of
non-minority tenants and minority tenants in the proposed class are
inconsistent, class certification is wholly inappropriate.
In Strykers Bay Neighborhood Council, Inc. v. City of New York, 695 F.
Supp. 1531 (S.D.N.Y. 1988), this Court considered a motion seeking
certification of a subclass consisting of "all low income residents who
formerly resided on Site 30...." Strykers Bay, 695 F. Supp. at 1536
(citation omitted).
In deciding the motion, Judge Conner concluded that:
The subclass as defined includes both minority and non-minority former
residents of site 30. One of plaintiffs' claims is that defendants have
discriminated against the subclass on the basis of race. It is
impossible, however, for defendants to have engaged in racial
discrimination against both minorities and non-minorities at the same
time. The claims of minority and non-minority class members are thus
inconsistent with each other. Strykers Bay, 695 F. Supp. at 1537.
Plaintiffs argue that the defendants have violated Title VI of the Civil
Rights Act of 1964. Section 601 of Title VI provides:
No person in the United States shall, on the ground of race, color, or
national origin, be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program or
activity receiving Federal financial assistance. 42 U.S.C. @ 2000d.
While non-minority tenants in the proposed class may be discriminated
against based on their socio-economic status, they are not being
aggrieved, by HPD's allegedly discriminatory practices, based upon their
race - the basis of a Title VI claim. Thus, non-minority members of the
proposed class by virtue of their lack of standing do not share
underlying questions of law.
Additionally - at this point in the litigation - plaintiffs have failed
to meet their burden with regard to the typicality requirement.
Typicality "is satisfied when each member's claim arises from the same
course of events, and each class member makes similar legal arguments to
prove defendant's liability." In re Drexel Burnham Lambert Group, Inc.,
960 F.2d 285, 291 (2d Cir. 1992).
In their Complaint, plaintiffs contend only that "plaintiffs' claims are
typical of the claims of the class." (Compl. P 47.) Plaintiffs' Motion
for Class Certification and supporting declarations does not cure this
deficiency. While plaintiffs' declarations describe in detail the
alleged deficiencies of their multiple dwelling buildings, nothing is
adduced about other multiple dwelling buildings in plaintiffs' proposed
class besides the statement that "a rough average of violations per unit
city-wide appears to be less than 2 per unit [in comparison to the over
20 per unit of the plaintiffs' buildings]." (Chachere Decl. P 8.)
The proposed class representatives are the remaining four plaintiffs,
consisting of three individuals, and one tenant association, and the ten
proposed intervening plaintiffs, consisting of five individuals and five
tenant associations. Plaintiffs argue that these individuals and tenant
associations are suitable class representatives because they reside in
multiple dwellings located in minority census tracts having hundreds of
unresolved violations, many of them hazardous or immediately hazardous.
The proposed representatives have brought tenant actions against their
landlords in Housing Court to compel correction of the outstanding
violations in their respective dwelling units. According to the
defendants, those tenant actions have resulted in the issuance of court
orders directing the respective landlords to correct the outstanding
code violations in the subject dwelling units - court orders which
plaintiffs' landlords have apparently ignored. Because the gravamen of
the plaintiffs' complaint is that HPD, rather than the landlords, is at
fault for the deteriorating conditions in their buildings, the proposed
representatives' claims may not arise from the same course of events as
those of the nearly 1.8 million other proposed class members.
Further, the eight individuals proposed as class representatives are
residents of eight different minority census tracts in northern
Manhattan and the Bronx. Although 502 of the City's 822 minority census
tracts are allegedly in Brooklyn, Queens, and Staten Island, none of the
proposed representatives reside in these three boroughs. Plaintiffs have
failed to establish that multiple dwelling residents in other boroughs
have similar interests and claims to those raised by plaintiffs here. In
fact, plaintiffs have failed to show that their claims are typical of
those of the nearly 1.8 million tenants included in the proposed class,
including those residing in Manhattan and the Bronx.
As the Court of Appeals stated in Chateau de Ville Productions, Inc. v.
Tams-Witmark Music Library, Inc., 586 F.2d 962, 966 (2d Cir. 1978):
"Although the trial court must determine if an action is to be
maintained as a class action 'as soon as practicable after the
commencement' of the action, Fed. R. Civ. P. 23(c)(1), this does not
mandate precipitous action. The court should defer decision on
certification pending discovery if the existing record is inadequate for
resolving the relevant issues." Here, further discovery may aid the
plaintiffs in shouldering their burden under Rule 23(a).
Because plaintiffs' proposed class fails to satisfy all of the elements
of Rule 23(a), their motion for class certification must be denied.
Conclusion
The motion to permit the proposed intervening plaintiffs to intervene in
the action is granted. For the reasons set forth in this Opinion, the
Court denies without prejudice plaintiffs' motion to certify a class and
orders discovery to continue. Plaintiffs are granted leave to file a new
motion for class certification, on or before December 20, 1999, which
takes into account the Court's rulings in this Opinion or to advise the
Court on or before that date that more time is needed to complete
discovery. So ordered. (New York Law Journal December 2, 1999)
PLANTATION: Advocate Seeks To Leave Case over Accessibility to Disabled
-----------------------------------------------------------------------
An advocate for the disabled has asked to have his name and that of an
organization he represents removed from a lawsuit against the city.
Robert Cohen said he and the Coral Springs Advocacy Committee for the
Handicapped have asked to be dropped from the list of plaintiffs suing
Plantation in federal court. Cohen said their decision was based on the
belief that other parties in the lawsuit had chosen to pursue monetary
damages without his or the advocacy committee's consent. "I basically
felt that the decision was made without any discussion on our behalf,"
said Cohen, who is chairman of the Coral Springs organization. "That's
not the method we chose."
Cohen and the advocacy committee were two of the five plaintiffs in the
lawsuit, filed in 1998, that accused Plantation of ignoring federal
mandates to make city services and buildings more accessible to the
disabled. The remaining plaintiffs are two individuals, John Garon and
Vatrice Rivera, and the Association for Disabled Americans Inc.
Garon said miscommunication may have been to blame for Cohen's decision.
"It will not affect the case," he said.
The lawsuit went before a federal magistrate in Miami for mediation Nov.
30. At that time, the lawyer representing the plaintiffs, William
Charouhis, said the three individuals, including Cohen, were seeking $
100,000 apiece. But Cohen said it was never his intention to seek
monetary damages in the lawsuit, and he said neither the attorney nor
others in the lawsuit ever told him any financial award was being
sought. He said his organization was interested solely in forcing cities
and businesses to improve services for the disabled and to comply with
federal law. Cohen said he sent Charouhis a letter explaining his desire
to be dropped from the lawsuit.
When the city of Plantation and the plaintiffs met for mediation last
month, U.S. Magistrate William Turnoff ordered both sides not to speak
about their discussions. (Sun-Sentinel (Fort Lauderdale, FL) December
29, 1999)
REPUBLIC MORTGAGE: Old Republic Announces Suit in Fd Ct for Georgia
-------------------------------------------------------------------
Old Republic International Corporation, (NYSE: ORI), announced on
December 29 that a class-action suit has been filed against its mortgage
guaranty insurance subsidiary, Republic Mortgage Insurance Company,
(RMIC), in the Federal District Court for the Southern District of
Georgia.
The lawsuit alleges that RMIC provided pool insurance and other benefits
to mortgage lenders at preferential, below market prices in return for
mortgage insurance business and that such practices violated the Real
Estate Settlement Procedures Act. RMIC will defend against the lawsuit
vigorously and denies liability.
Similar class-action lawsuits were reportedly filed simultaneously
against at least three other mortgage guaranty insurers, according to
information available to RMIC.
Chicago based Old Republic International Corporation is an insurance
holding company whose subsidiaries market, underwrite and provide risk
management and reinsurance services for a wide variety of coverages in
the property and liability, mortgage guaranty, title and life and health
fields. One of the nation's 50 largest publicly held insurance
enterprises, Old Republic has assets of approximately $6.9 billion and
total capitalization of $2.4 billion.
SELECT COMFORT: Consolidated Securities Complaint Filed in Minnesota
--------------------------------------------------------------------
On October 4, 1999, a Consolidated Class Action Complaint was filed
against Select Comfort Corporation (Nasdaq: AIRB) ("Select Comfort" or
the "Company"), H. Robert Hawthorne, and Daniel J. McAthie, in the
United States District Court for the District of Minnesota. The
complaint alleges claims on behalf of a class consisting of all persons
and entities, other than defendants and their affiliates, who purchased
Select Comfort common stock: (i) issued under and/or traceable to the
Company's Registration Statement and Prospectus dated December 4, 1998;
or (ii) in the open market during the period December 4, 1998 through
June 7, 1999 (the "Class Period"), and who were damaged by defendants'
violations of the federal securities laws (the "Class").
The Complaint charges that defendants violated the U.S. securities laws
by issuing materially false and misleading statements, and by omitting
material facts required to be disclosed so as to make the statements
issued not materially false and misleading throughout the Class Period.
Specifically, the complaint alleges that defendants failed to disclose
that the Company's only source of customer financing had significantly
tightened its credit standards in January 1999 and that the Company's
sales had been, and were continuing to be severely negatively impacted.
The true facts concerning the dire state of the Company's financial
condition were finally disclosed prior to the commencement of trading on
June 8, When trading in Select Comfort's shares opened later that day,
the price of the Company's common stock plunged more than 43% from
$13-1/8 to $7-7/16 per share, evidencing the materiality of the
information that had long been withheld from Class members by
defendants. Defendants have moved to dismiss the action and the United
States District Court for the District of Minnesota heard oral argument
of defendants' motion on December 21, 1999. The Court has not yet
rendered any decision concerning defendants' motion to dismiss the
consolidated class action complaint.
Any person or entity who purchased Select Comfort securities on the
initial public offering or in the secondary market who has questions
concerning the litigation should contact: Paul O. Paradis, Esq. or James
Harrod, Investor Relations Representative, WOLF POPPER LLP, 845 Third
Avenue,New York, NY 10022-6689, Telephone: 212-451-9676, 212-451-9642,
Toll Free: 877-370-7703, Facsimile: 212-486-2093, E-Mail:
pparadis@wolfpopper.com or irrep@wolfpopper.com Website:
http://www.wolfpopper.com
TYCO INT’L: Keller Rohrback Files Securities Lawsuit
----------------------------------------------------
Notice on December 29 says Keller Rohrback L.L.P. filed a class action
complaint against Tyco International Ltd. (NYSE:TYC) ("Tyco" or the
"Company") and certain of its officers and directors for violation of
federal securities laws on behalf of those persons who purchased Tyco
securities between October 1, 1998 and December 8, 1999, inclusive.
The complaints charges, among other things, that during the Class
Period, Tyco misled investors by utilizing improper accounting methods
in connection with certain acquisitions made by the Company during the
Class Period. The effect of this practice was to make Tyco's earnings
growth rate appear significantly greater than it actually was. During
the Class Period, certain officers of the Company sold Tyco shares at
artificially inflated prices, for proceeds of at least $270 million.
On December 9, 1999, Tyco acknowledged that the SEC had commenced an
inquiry into Tyco's accounting practices related to charges and reserves
taken in connection with the Company's acquisitions. Tyco shares have
lost more than 40% of their value since mid-October, 1999, which
shareholders allege is primarily due to the questions concerning Tyco's
accounting and financial reporting.
If you purchased Tyco securities between October 1, 1998 and December 8,
1999, inclusive, you may wish to join the securities class actions that
have been filed. You may move the court to serve as a lead plaintiff no
later than February 7, 2000.
Contact: Keller Rohrback L.L.P. (Lynn L. Sarko, Juli E. Farris or
Elizabeth A. Leland, Esq.) toll free at 800/776-6044, or via e-mail at
investor@kellerrohrback.com (Those who inquire by e-mail are asked to
provide their mailing address and telephone number.)
VALLEN CORP: Milberg Weiss Files Securities Lawsuit
---------------------------------------------------
A class action has been commenced on behalf of the public shareholders
of Vallen Corporation ("Vallen") (Nasdaq:VALN) against Vallen, its Board
of Directors and Hagemeyer P.P.S North America, Inc. ("Hagemeyer")
(Nasdaq:HAGN) alleging, among other things, that on November 16, 1999,
the directors of Vallen entered into a merger agreement with Hagemeyer
in violation of their fiduciary duties by, among other things, failing
to take steps to maximize shareholder value in connection with the sale
of Vallen and ignoring and/or failing to take steps to protect against
the directors' own conflicts of interest.
Plaintiff is represented by the law firm of Milberg Weiss Bershad Hynes
& Lerach LLP. Contact plaintiff's counsel, William Lerach or Darren
Robbins of Milberg Weiss at 800/449-4900 or via e-mail at wsl@mwbhl.com
VARIAN MEDICAL: ISOs Sue over Antitrust Re Oncology Systems’ Parts
------------------------------------------------------------------
Report to the Securities and Exchange Commission on Form 10-K filed as
of December 23, 1999:
Varian Medical Systems Inc. is a party to three related federal actions
involving claims by independent service organizations ("ISOs") that its
policies and business practices relating to replacement for Oncology
Systems' parts violate the antitrust laws (the "ISOs Litigation"). The
ISOs purchase replacement parts from VMS and compete with it for the
servicing of linear accelerators made by VMS.
In response to several threats of litigation regarding the legality of
VMS's parts policy, VMS filed a declaratory judgment action in a U. S.
District Court in 1996 seeking a determination that its new policies are
legal and enforceable and damages against two of the ISOs for
misappropriation of VMS's trade secrets, unfair competition, copyright
infringement and related claims.
Subsequently, four of the defendants filed separate claims in other
jurisdictions raising issues allegedly related to those in the
declaratory relief action and seeking injunctive relief against VMS and
damages against VMS in the amount of $10 million for each plaintiff. The
defendants' motion for a preliminary injunction in U. S. District Court
in Texas with respect to the VMS's was defeated. The ISOs defendants
amended the complaint to include class action allegations, allege a
variety of other anti-competitive business practices and filed a motion
for class certification, which was heard by the U. S. District Court in
Texas in July 1999. No decision, however, has been entered.
The Distribution
In August 1998, the Company (then known as Varian Associates, Inc.,
"Varian") announced its intention to spin off its instruments business
and its semiconductor equipment business to its stockholders. The
Company subsequently transferred its instruments business to Varian,
Inc. ("VI"), then a wholly owned subsidiary, and transferred its
semiconductor equipment business to Varian Semiconductor Equipment
Associates, Inc. ("VSEA"), then a wholly owned subsidiary. On April 2,
1999, the Company distributed to its stockholders all of the outstanding
shares of common stock of VI and VSEA (the "Distribution"). The business
retained by the Company consists of its medical systems business,
principally the sales and service of oncology systems, and the sales of
x-ray tubes and imaging subsystems. The Company has been engaged in
aspects of the medical systems business since 1959.
These transactions were accomplished under the terms of an Amended and
Restated Distribution Agreement dated as of January 14, 1999 by and
among the Company, VI and VSEA (the "Distribution Agreement"). In
addition, for purposes of governing certain ongoing relationships
between and among the Company, VI and VSEA after the Distribution, the
Company, VI and VSEA entered into certain other agreements, including an
Employee Benefits Allocation Agreement, an Intellectual Property
Agreement, a Tax Sharing Agreement and a Transition Services Agreement
(the "Distribution Related Agreements").
Following the Distribution, VMS retained the liabilities related to the
medical systems business prior to the Distribution, including the ISOs
Litigation. In addition, under the terms of the Distribution Agreement,
the Company agreed to manage and defend liabilities related to legal
proceedings and environmental matters arising from corporate or
discontinued operations of the Company prior to the Distribution. Under
the terms of the Distribution Agreement, VI and VSEA generally are each
obligated to indemnify VMS for one- third of these liabilities (after
adjusting for any insurance proceeds realized or tax benefits recognized
by VMS), including certain environmental- related liabilities described
below, and to fully indemnify VMS for liabilities arising from the
operations of the business transferred to each prior to the
Distribution. The availability of such indemnities will depend upon the
future financial strength of VI and VSEA. No assurance can be given that
the relevant company will be in a position to fund such indemnities. It
is also possible that a court would disregard this contractual
allocation of indebtedness, liabilities and obligations among the
parties and require VMS to assume responsibility for obligations
allocated to another party, particularly if such other party were to
refuse or was unable to pay or perform any of its allocated obligations.
In addition, the Distribution Agreement generally provides that if a
court prohibits a company from satisfying its indemnification
obligations, then such indemnification obligations will be shared
equally between the two other companies.
The Company has been named by the U.S. Environmental Protection Agency
or third parties as a potentially responsible party under the
Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended, at eight sites where Varian is alleged to have shipped
manufacturing waste for recycling or disposal. The Company is also
involved in various stages of environmental investigation and/or
remediation under the direction of, or in consultation with, federal,
state and/or local agencies at certain current VMS or former Varian
facilities (including facilities disposed of in connection with Varian's
sale of its Electron Devices business during 1995 and the sale of its
Thin Film Systems business during 1997). Under the terms of the
Distribution Agreement, VI and VSEA are each obligated to indemnify VMS
for one-third of these environmental-related investigation and
remediation costs (after adjusting for any insurance proceeds realized
or tax benefits recognized by VMS). Expenditures for environmental
investigation and remediation amounted to $0.9 million in fiscal year
1999, $1.7 million in fiscal year 1998 and $0.8 million in fiscal year
1997, net of amounts that would have been borne by VI and VSEA.
For certain of these sites and facilities, various uncertainties make it
difficult to assess the likelihood and scope of further investigation or
remediation activities or to estimate the future costs of such
activities if undertaken. As of October 1, 1999, VMS nonetheless
estimated that VMS's future exposure (net of VI and VSEA's
indemnification obligations) for environmental- related investigation
and remediation costs for these sites ranged in the aggregate from $12.4
million to $29.8 million. The time frame over which VMS expects to incur
such costs varies with each site, ranging up to approximately 30 years
as of October 1, 1999. Management believes that no amount in the
foregoing range of estimated future costs is more probable of being
incurred than any other amount in such range and therefore accrued $12.4
million in estimated environmental costs as of October 1, 1999. The
amount accrued has not been discounted to present value.
As to other sites and facilities, VMS has gained sufficient knowledge to
be able to better estimate the scope and costs of future environmental
activities. As of October 1, 1999, VMS estimated that its future
exposure (net of VI and VSEA's indemnification obligations) for
environmental-related investigation and remediation costs for these
sites and facilities ranged in the aggregate from $22.9 million to $39.0
million. The time frame over which these costs are expected to be
incurred varies with each site and facility, ranging up to approximately
30 years as of October 1, 1999. As to each of these sites and
facilities, management determined that a particular amount within the
range of estimated costs was a better estimate of the future
environmental liability than any other amount within the range, and that
the amount and timing of these future costs were reliably determinable.
Together, these amounts totaled $26.7 million at October 1, 1999. VMS
accordingly accrued $11.9 million, which represents its best estimate of
the future costs discounted at 4%, net of inflation. This accrual is in
addition to the $12.4 million described in the preceding paragraph.
The foregoing amounts are only estimates of anticipated future
environmental-related costs, and the amounts actually spent may be
greater or less than such estimates. The aggregate range of cost
estimates reflects various uncertainties inherent in many environmental
investigation and remediation activities and the large number of sites
and facilities involved. VMS believes that most of these cost ranges
will narrow as investigation and remediation activities progress. VMS
believes that its reserves are adequate, but as the scope of its
obligations becomes more clearly defined, these reserves (and the
associated indemnification obligations of VI and VSEA) may be modified
and related charges against earnings may be made.
Although any ultimate liability arising from environmental-related
matters described herein could result in significant expenditures that,
if aggregated and assumed to occur within a single fiscal year, would be
material to VMS's financial statements, the likelihood of such
occurrence is considered remote. Based on information currently
available to management and its best assessment of the ultimate amount
and timing of environmental-related events (and assuming VI and VSEA
satisfy their indemnification obligations), management believes that the
costs of these environmental-related matters are not reasonably likely
to have a material adverse effect on the consolidated financial
statements of VMS.
VMS evaluates its liability for environmental-related investigation and
remediation in light of the liability and financial wherewithal of
potentially responsible parties and insurance companies with respect to
which VMS believes that it has rights to contribution, indemnity and/or
reimbursement (in addition to the obligations of VI and VSEA). Claims
for recovery of environmental investigation and remediation costs
already incurred, and to be incurred in the future, have been asserted
against various insurance companies and other third parties. In 1992,
Varian filed a lawsuit against 36 insurance companies with respect to
most of the above-referenced sites and facilities. Varian received
certain cash settlements during fiscal years 1995, 1996, 1997 and 1998
from defendants in that lawsuit. The Company has also reached an
agreement with another insurance company under which the insurance
company has agreed to pay a portion of the Company's past and future
environmental-related expenditures, and VMS therefore has a $3.6 million
receivable in Other Assets at October 1, 1999. VMS believes that this
receivable is recoverable because it is based on a binding, written
settlement agreement with a solvent and financially viable insurance
company. Although VMS intends to aggressively pursue additional
insurance and other recoveries, VMS has not reduced any liability in
anticipation of recovery with respect to claims made against third
parties.
VERITY INC: Stull, Stull Files Securities Suit
----------------------------------------------
The following is an announcement on December 28 by the law firm of
Stull, Stull & Brody:
Class Action Filed Against Verity, Inc. On Behalf Of Shareholders Who
Purchased Stock between December 1, 1999 and December 14, 1999
A class action lawsuit has been filed in U.S. District Court on behalf
of purchasers (the "Class") of Verity, Inc., ("Verity" or the "Company")
(NASDAQ: VRTY) common stock between December 1, 1999 and December 14,
1999 (the "Class Period").
Verity develops, markets and supports search engine software designed
for large enterprises. Verity specializes in search engines that
organize navigation of corporate intranets, extranets and e-commerce
sites.
The defendants include Verity, Anthony Bettencourt, III, Gary J. Sbona
and James E. Ticehurst. The Complaint charges that defendants violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule
10-b(5). The action arises from damages incurred by the Class as a
result of a scheme and common course of conduct by defendants which
operated as a fraud and deceit on the Class during the Class Period.
Defendants' scheme included rendering false and misleading statements
and/or omissions concerning the present and future financial condition
and business prospects of the Company, as well as the financial benefits
that would enure to Verity and its shareholders.
Contact: plaintiffs' counsel Michael D. Braun at 888-388-4605 or via
e-mail at info@secfraud.com or visit the firm's web site at
http://www.secfraud.com
Y2K LITIGATION: Act Excludes Claims But Leaves Debate Open
----------------------------------------------------------
The enactment of federal Y2K legislation has certainly been a cause for
celebration among those who were worried about a flood of litigation
relating to failed computer systems. But any serious partying should be
put on hold until some months after the New Year.
The reason for delaying the party is that the Year 2000 Readiness and
Responsibility Act not only excludes a number of claims from its
coverage, but it also leaves open to debate what exactly constitutes a
Y2K claim -- a fact that many people will hope to litigate to their
benefit.
The act sets forth contract- and tort-law rules and procedures that will
apply to all federal and state court civil actions and agency board of
contract appeal proceedings in which a plaintiff alleges actual or
potential harm from a year-2000 date-related failure in any device or
computer system.
It should be noted that the act does not apply to cases involving
personal injury or wrongful death and generally does not apply to
private securities cases. Rather, it focuses on the enforcement of
contractual rights between buyers and sellers of software and hardware
and process-control equipment that contains date-sensitive
microprocessors and microcontrollers.
The Y2K Act covers all actions brought after Jan. 1, 1999, and it
"sunsets" on Jan. 1, 2003. Among other things, it requires prelitigation
notice of a claim before a lawsuit can be filed; provides that written
contractual terms, including a limitation or exclusion of liability or a
disclaimer of warranty, shall be "strictly enforced"; codifies the
"economic loss rule," which provides that claims for economic or
consequential damages (e.g., lost profits) must be governed by contract
law; requires plaintiffs to take steps to mitigate damages; makes it
tougher to obtain punitive damages; and limits joint liability and class
actions.
Unclear Definition
Unanswered in all of this is what exactly constitutes a "Y2K action."
Because many actions will involve "mixed" disputes -- containing Y2K and
non-Y2K issues the legislation is liable to be seen by many as a useful
shelter in a litigation storm. A company facing a massive lawsuit or
class action might find it advantageous to identify a Y2K angle. So
whether the act will be a punch for defendants or a mere poke may depend
on the willingness of courts to declare many commercial disputes Y2K
actions.
The impact of the new law may also depend on judicial acceptance of
provisions that freeze contract and tort law as of Jan. 1, 1999.
Congress chose to freeze state law in some areas in the belief that this
would facilitate early and less costly resolution of Y2K claims. The
lawmakers believed that this sound public policy goal would be thwarted
if courts or state legislatures could change the legal rules midstream.
That said, it is unusual for courts to be told to apply old law to a new
dispute. It is an open question whether courts will remain faithful to
the letter and spirit of the act.
What about unconscionability, for example? The act provides that written
contractual terms must be "strictly enforced" unless enforcement would
"manifestly and directly contravene" state statutory law or the state
common-law doctrine of unconscionability, including adhesion, as of Jan.
1, 1999.
Thus, a court may be asked to decide whether to enforce a clause in a
contract that excludes liability for consequential damages and limits
the buyer's remedies to repair or replacement of the component that was
not year-2000 compliant.
If it is honored, this provision should mean that unconscionability
arguments will rarely succeed, as courts have generally been reluctant
to undo contractual arrangements under such amorphous equitable
principles. And yet, the intent of Congress may be frustrated if the
courts decide that sellers should be held responsible for year-2000
problems and use the unconscionability hook to topple contract
disclaimers and warranty limitations.
Unpredictable Days
It is difficult to gauge the amount of resistance that the courts will
demonstrate to Congress' decision to freeze the development of state law
for the duration. If the resistance turns out to be strong, the narrow
unconscionability loophole could swallow many of the protections that
were intended to be put into place by the act.
So, all in all, it is premature to rejoice. No one can really predict
whether the Y2K Act will work or not. Our hope and belief is that judges
will remain faithful to the intent of Congress by allowing legitimate
Y2K claims to proceed, but will, at the same time, act to keep the year
2000 from becoming an unnecessary economic boon to trial lawyers. (The
National Law Journal December 6, 1999)
Y2K LITIGATION: Companies Look to Insurers to Foot Bills
--------------------------------------------------------
After the New Year's hangovers have subsided there's still a whopper of
a Y2K headache looming. Who's going to pay to fix all those computer
systems?
Businesses have spent upwards of $ 100 billion checking computer code,
updating software programs, buying new hardware and ferreting out
embedded computer chips that don't know 2000 from 1900.
In contrast, the federal government's costs to fix year 2000 computer
problems has been pegged at about $ 8.4 billion by the Office of
Management and Budget.
While taxpayers ultimately will pay the costs of fixing government
computers, businesses are another matter. Already, several big companies
have filed lawsuits against their insurance companies to recoup the
costs of upgrading their computer systems to guard against Y2K problems.
The lawyers will huff and they'll puff. And some insurance houses may be
blown down. It all depends how state and federal courts interpret the
law and the language of insurance policies.
Some of the bigger suits filed so far include:
* Xerox Corp. sued its commercial property insurer, American Guarantee
& Liability Insurance Co., to recover $ 150 million in Y2K costs.
* GTE Corp. sued five commercial property insurers to recover $ 400
million in Y2K costs.
* Nike Inc. wants to recover about $ 110 million it has spent to
prepare for Y2K.
Industry experts say some companies are pinning their hopes on a 19th
century maritime practice in which ship owners, when away from their
home ports, were advised to make needed emergency repairs to avoid the
higher expense of losing a ship and its cargo at sea.
But losing a ship in a sudden storm is quite different from the Y2K
problem, say insurance industry experts. For one thing, the potential
for Y2K-related business disruptions have been known for years. There is
nothing unexpected about it.
One industry expert said all those companies are trying to do is shift
Y2K costs to the insurance industry because it has deep pockets.
Paul Blume Jr., a vice president at the Chicago-based American Insurance
Association, compared the problem to someone driving a car with bald
tires, getting in an accident, and then filing a claim with an insurance
company to recover the cost of replacing the tires. "GTE isn't a mom and
pop operation...for them to say they didn't think ahead and now it's our
problem is troubling," Blume said. "Some onus should be put on them."
Other lawsuits that have been filed blast software companies for
providing products that might fail after Jan. 1.
But in July, Congress passed legislation intended to slow a rush to the
courts with these kinds of claims. The legislation gives businesses 90
days to fix computer glitches related to Y2K issues, and limits certain
class action lawsuits.
Experts who follow these issues locally say they are not aware of any
Indiana companies filing lawsuits. Kevin M. Toner, an attorney at
Indianapolis law firm Baker & Daniels, said he thinks most Indiana
companies of any size have taken the necessary steps to inoculate
themselves from the Y2K bug.
Still, unforeseen problems may crop up, he said, especially as companies
begin preparing year-end and monthly reports.
Like Toner, Jesse Moore Jr., director of economic development and small
business issues for the Indiana Chamber of Commerce, is confident large
corporations have made adequate preparations for Y2K. It's small
businesses, those with fewer than 250 employees, that he's worried
about. Of the 152,000 businesses in Indiana, 129,000 fall into that
group, Moore said. Many either have not taken the issue seriously, or
haven't had enough money in reserve to upgrade their systems and are
waiting to see what glitches arise before spending money to fix
problems. "My feeling is smaller companies have not taken the necessary
steps to make sure they are Y2K complaint," he said. And what kind of
impact that might have on customers and venders is anybody's guess, he
said. (The Indianapolis Star December 29, 1999)
YIELD BURNING: Judge to Review Lissack’s Documents V. Broker-Dealers
--------------------------------------------------------------------
A federal judge said on December 28 that she would review documents
submitted by former Smith Barney Inc. banker Michael Lissack as part of
his yield-burning whistleblower case against the broker-dealer community
to assess whether any of them fell outside the definition of "work
product," which covers materials that should not be publicly released.
Dwight Brock, the clerk of Collier County, Fla., who has filed a
class-action suit alleging yield burning by a number of investment
banking firms, subpoenaed Lissack's disclosures to the Justice
Department regarding the practice, in which broker-dealers allegedly
lowered the yield on U.S. Treasury bonds sold to municipal issuers for
refunding escrows by overcharging the issuers.
But Judge Barbara Jones said she would side with the government's
request to quash the subpoena for most of the documents Lissack
submitted in the case, citing the U.S. attorney's office's arguments
that making Lissack's claims public would hinder the government. (The
Bond Buyer December 29, 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
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to be
reliable, but is not guaranteed.
The CAR subscription rate is $575 for six months delivered via e-mail.
Additional e-mail subscriptions for members of the same firm for the
term of the initial subscription or balance thereof are $25 each. For
subscription information, contact Christopher Beard at 301/951-6400.
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