text:
Thursday, September 2, 2004, Vol. 6, No. 174
ALTRIA GROUP: Continues To Face Smoking Suits in Various Courts
ALTRIA GROUP: Continues To Face Health Care Recovery Litigation
ALTRIA GROUP: Continues To Face Several Light Cigarettes Suits
ALTRIA GROUP: Trial in Consolidated NY Smokers Lawsuit Stayed
ALTRIA GROUP: Removed As Defendant in CA Consumer Fraud Lawsuit
AMYLIN PHARMACEUTICALS: Reaches Settlement For CA Stock Lawsuit
CARDINAL HEALTH: Scott + Scott Files Motion To Be Lead Plaintiff
CB RICHARD: Wexler Firm Files IL Motion For Class Certification
COLIN NATHANSON: Settles $29.5M SEC Securities Fraud Complaint
COLORADO: Law Firm Lodges Suit V. Flawed $199M Benefits System
DEBIT CARDS: Consumers Sue Visa, MasterCard For Unfair Practices
ECUMED HEALTH: FDA Alerts Patients Over Quality of Mammograms
EMACHINES INC.: Trial Date Yet To Be Set for CA Securities Suit
FLEXTRONICS INTERNATIONAL: CA Court Okays Stock Suit Settlement
FORD MOTOR: FL Judge Grants Class Status in Suit V. Police Cars
GENTA INC.: Shareholders Launch Securities Fraud Lawsuits in NJ
HARLEY DAVIDSON: WI Court Dismisses Third Suit Over Cam Bearings
HOLLYWOOD ENTERTAINMENT: Enters Suit Settlement Discussions
HOLLYWOOD ENTERTAINMENT: Inks Settlement For OR Suit V. Merger
HOLLYWOOD ENTERTAINMENT: Enters Mediation For CA Overtime Suits
IMCLONE SYSTEMS: Fact Discovery Proceeds in NY Securities Suit
INSURANCE BROKERAGES: Face Bigger Concerns With IL, CA Lawsuits
OHIO: Two Prescription Drug Wholesalers Plead Guilty To Fraud
PERINI CORPORATION: Plaintiffs File Amended Stock Lawsuit in MA
PFIZER INC.: Lawsuits V. Menopause Treatment Moved To E.D. AK
PFIZER INC.: Faces CA Consumer Fraud Lawsuit Over Zoloft Drug
PFIZER INC.: Named As Defendant in Securities Fraud Suit in NJ
PFIZER INC.: NJ Court Dismisses Celebrex Consumer Suits
PHILIP MORRIS: Seeks Vendors Suit Summary Judgment Ruling Review
QLT INC.: NY Court Refuses To Reconsider Stock Lawsuit Dismissal
RYLAND GROUP: Shareholders Launch Securities Lawsuit in C.D. CA
SAFEGUARD SCIENTIFICS: New Securities Lawsuit Filed in E.D. PA
SAFEGUARD SCIENTIFICS: DE Court Nixes Faster Proceedings in Suit
SOUTH JERSEY: Attorneys Lodge Suit V. Gas Lines, Seeks Repairs
STATE FARM: IA Couples File Suit V. Under-Compensation Practices
STATION CASINOS: Court Hears Appeal of Suit Certification Denial
STATION CASINOS: Reaches Settlement For CA Consumer Fraud Suit
STATION CASINOS: Reaches Settlement For NV Derivative Lawsuit
TENNESSEE: Importers Launch Lawsuits V. Cotton Checkoff Program
UICI: Shareholders Launch Securities Fraud Lawsuits in TX Courts
UICI: Stock Suit Settlement Hearing Set October 5, 2004 in TX
UICI: Consumer Suit Moved From CA State Court To Federal Court
UICI: Unfair Trade Practices Lawsuit Removed to CA Federal Court
UICI: TX Court Dismisses Consumer, Unfair Trade Practices Suit
UICI: JPMDL Transfers Consumer Fraud Lawsuit To CA Federal Court
UICI: JPMDL Transfers AK Consumer Fraud Suit To TX Federal Court
UICI: Consumers Launch Five Fraud Lawsuits in Idaho State Courts
CLARK BROS.: Farser Stryker Files Securities Fraud Lawsuit in NE
PRIMUS TELECOMMUNICATIONS: Cohen Milstein Files Stock Suit in VA
SYNOPSYS INC.: Charles J. Piven Files Securities Suit in N.D. CA
TECO ENERGY: Brian M. Felgoise Files Securities Fraud Suit in FL
WETS SEAL: Charles J. Piven Files Securities Fraud Lawsuit in CA
WORLD INFORMATION: Schatz & Nobel Files Securities Lawsuit in NY
Altria Group, Inc. and its subsidiary Philip Morris USA, Inc.
(PM USA) continue to face numerous putative smoking and health
class actions in various state and federal courts. In general,
these cases purport to be brought on behalf of residents of a
particular state or states (although a few cases purport to be
nationwide in scope) and raise addiction claims and, in many
cases, claims of physical injury as well.
Class certification has been denied or reversed by courts in 56
smoking and health class actions involving PM USA in Arkansas,
the District of Columbia (2), Florida (the "Engle" case),
Illinois (2), Iowa, Kansas, Louisiana, Maryland, Michigan,
Minnesota, Nevada (29), New Jersey (6), New York (2), Ohio,
Oklahoma, Pennsylvania, Puerto Rico, South Carolina, Texas and
PM USA was named as a defendant in Scott class action filed in
in the United States District Court in New Orleans, Louisiana,
on behalf of all Louisiana residents who are or were smokers on
or before May 24, 1996, and who desire to participate in a
medical-monitoring / smoking-cessation program. The suit sought
no punitive damages.
In July 2003, following the first phase of the trial in the
Scott class action, in which plaintiffs sought creation of funds
to pay for medical monitoring and smoking cessation programs, a
Louisiana jury returned a verdict in favor of defendants,
including PM USA, in connection with plaintiffs' medical
monitoring claims, but also found that plaintiffs could benefit
from smoking cessation assistance. The jury also found that
cigarettes as designed are not defective but that the defendants
failed to disclose all they knew about smoking and diseases and
marketed their products to minors. The jury was not permitted
to award damages during the first phase of the trial.
The second phase of the trial began in March 2004. In May 2004,
the jury awarded plaintiffs approximately $590 million, against
all defendants jointly and severally, to fund a 10-year smoking
cessation program. In June 2004, the court entered judgment,
which awarded plaintiffs the approximately $590 million jury
award plus prejudgment interest, accruing from the date the suit
commenced.
As of June 30, 2004, the amount of prejudgment interest was
approximately $340 million. PM USA's share of the jury award
and pre-judgment interest has not been allocated. PM USA's
motion for judgment notwithstanding the verdict or a new trial
is pending.
In November 2001, in the first medical monitoring class action
case (the Blankenship case) to go to trial, a West Virginia jury
returned a verdict in favor of all defendants, including PM USA,
and plaintiffs appealed. In May 2004, the West Virginia Supreme
Court affirmed the judgment entered by the trial court. In June
2004, plaintiffs' motion for rehearing was denied.
Altria Group, Inc. (ALG) and Philip Morris USA, Inc. (PM USA)
continue to face health care cost recovery litigation, where
domestic and foreign governmental entities and non-governmental
plaintiffs seek reimbursement of health care cost expenditures
allegedly caused by tobacco products and, in some cases, of
future expenditures and damages as well.
Relief sought by some but not all plaintiffs includes punitive
damages, multiple damages and other statutory damages and
penalties, injunctions prohibiting alleged marketing and sales
to minors, disclosure of research, disgorgement of profits,
funding of anti-smoking programs, additional disclosure of
nicotine yields, and payment of attorney and expert witness
The claims asserted include the claim that cigarette
manufacturers were "unjustly enriched" by plaintiffs' payment of
health care costs allegedly attributable to smoking, as well as
claims of indemnity, negligence, strict liability, breach of
express and implied warranty, violation of a voluntary
undertaking or special duty, fraud, negligent misrepresentation,
conspiracy, public nuisance, claims under federal and state
statutes governing consumer fraud, antitrust, deceptive trade
practices and false advertising, and claims under federal and
state anti-racketeering statutes.
Defenses raised include lack of proximate cause, remoteness of
injury, failure to state a valid claim, lack of benefit,
adequate remedy at law, "unclean hands" (namely, that plaintiffs
cannot obtain equitable relief because they participated in, and
benefited from, the sale of cigarettes), lack of antitrust
standing and injury, federal preemption, lack of statutory
authority to bring suit, and statutes of limitations. In
addition, defendants argue that they should be entitled to "set
off" any alleged damages to the extent the plaintiff benefits
economically from the sale of cigarettes through the receipt of
excise taxes or otherwise. Defendants also argue that these
cases are improper because plaintiffs must proceed under
principles of subrogation and assignment.
Under traditional theories of recovery, a payor of medical costs
(such as an insurer) can seek recovery of health care costs from
a third party solely by "standing in the shoes" of the injured
party. Defendants argue that plaintiffs should be required to
bring any actions as subrogees of individual health care
recipients and should be subject to all defenses available
against the injured party.
Although there have been some decisions to the contrary, most
judicial decisions have dismissed all or most health care cost
recovery claims against cigarette manufacturers. Nine federal
circuit courts of appeals and four state intermediate appellate
courts, relying primarily on grounds that plaintiffs' claims
were too remote, have ordered or affirmed dismissals of health
care cost recovery actions. The United States Supreme Court has
refused to consider plaintiffs' appeals from the cases decided
by five circuit courts of appeals.
A number of foreign governmental entities have filed health care
cost recovery actions in the United States. Such suits have
been brought in the United States by 13 countries, a Canadian
province, 11 Brazilian states and 11 Brazilian cities. Thirty-
two of the cases have been dismissed, and four remain pending.
In addition to the cases brought in the United States, health
care cost recovery actions have also been brought in Israel, the
Marshall Islands (dismissed), Canada, France and Spain, and
other entities have stated that they are considering filing such
actions. In September 2003, the case pending in France was
dismissed, and plaintiff has appealed.
In March 1999, in the first health care cost recovery case to go
to trial, an Ohio jury returned a verdict in favor of defendants
on all counts. In June 2001, a New York jury returned a verdict
awarding $6.83 million in compensatory damages against PM USA
and a total of $11 million against four other defendants in a
health care cost recovery action brought by a Blue Cross and
Blue Shield plan, and defendants, including PM USA, appealed.
Trial in the health care cost recovery case brought by the City
of St. Louis, Missouri in which PM USA and ALG are defendants is
scheduled for June 2005.
In November 1998, PM USA and certain other United States tobacco
product manufacturers entered into the Master Settlement
Agreement (the MSA) with 46 states, the District of Columbia,
Puerto Rico, Guam, the United States Virgin Islands, American
Samoa and the Northern Marianas to settle asserted and
unasserted health care cost recovery and other claims. PM USA
and certain other United States tobacco product manufacturers
had previously settled similar claims brought by Mississippi,
Florida, Texas and Minnesota (together with the MSA, the "State
Settlement Agreements").
The State Settlement Agreements require that the domestic
tobacco industry make substantial annual payments in the
following amounts (excluding future annual payments contemplated
by the agreement with tobacco growers), subject to adjustments
for several factors, including inflation, market share and
industry volume: 2005 through 2007, $8.4 billion each year; and
thereafter, $9.4 billion each year. In addition, the domestic
tobacco industry is required to pay settling plaintiffs'
attorneys' fees, subject to an annual cap of $500 million.
The State Settlement Agreements also include provisions relating
to advertising and marketing restrictions, public disclosure of
certain industry documents, limitations on challenges to certain
tobacco control and underage use laws, restrictions on lobbying
activities and other provisions.
As part of the MSA, the settling defendants committed to work
cooperatively with the tobacco-growing states to address
concerns about the potential adverse economic impact of the MSA
on tobacco growers and quota-holders. To that end, four of the
major domestic tobacco product manufacturers, including PM USA,
and the grower states, have established a trust fund to provide
aid to tobacco growers and quota-holders. The trust will be
funded by these four manufacturers over 12 years with payments,
prior to application of various adjustments, scheduled to total
$5.15 billion.
Future industry payments (2005 through 2008, $500 million each
year; 2009 and 2010, $295 million each year) are subject to
adjustment for several factors, including inflation, United
States cigarette volume and certain contingent events, and, in
general are to be allocated based on each manufacturer's
relative market share. PM USA records its portion of these
payments as part of cost of sales as product is shipped.
In April 2004, a lawsuit was filed in state court in Los
Angeles, California, on behalf of all California residents who
purchased cigarettes in California from April 2000 to the
present, alleging that the MSA enabled the defendants, including
PM USA and the Company, to engage in unlawful price fixing and
market sharing agreements. The complaint sought damages and
also sought to enjoin defendants from continuing to operate
under those provisions of the MSA that allegedly violate
California law. In June, plaintiffs dismissed this case and
refiled a substantially similar complaint in federal court in
San Francisco, California.
The new complaint is brought on behalf of the same purported
class but differs in that it covers purchases from June 2000 to
the present, names the Attorney General of California as a
defendant, and does not name the Company as a defendant. In May
2000, a similar lawsuit was filed in state court in Oklahoma, on
behalf of a class of Oklahoma residents who purchased cigarettes
from June 2000 until the present. The Oklahoma lawsuit named PM
USA and ALG, among others, as defendants. In July 2004,
plaintiffs voluntarily dismissed the Oklahoma case.
A putative class action brought on behalf of certain importers
of cigarettes against the New York State Attorney General and
Commissioner of Taxation & Finance alleging that the MSA and
certain statutes enacted in New York in connection with the MSA
violate federal antitrust law is pending in New York. Neither
ALG nor PM USA is a defendant in the case. Plaintiffs' motions
for preliminary injunctive relief and summary judgment are
currently pending. Previously, the district court granted
defendants' motion to dismiss the case, and plaintiff appealed.
In January 2004, the United States Court of Appeals for the
Second Circuit affirmed in part and reversed and remanded in
part the trial court's ruling, and defendants' motions for
rehearing were denied.
continue to face several class actions filed on behalf of
individuals who purchased and consumed various brands of "light"
cigarettes. Several of the suits have also named as defendant
Philip Morris, Inc. and its subsidiaries. The brands in
question are:
(1) Marlboro Lights,
(2) Marlboro Ultra Lights,
(3) Virginia Slims Lights and Superslims
(4) Merit Lights and
(5) Cambridge Lights
Plaintiffs in these class actions allege, among other things,
that the use of the terms "Lights" and/or "Ultra Lights"
constitutes deceptive and unfair trade practices, and seek
injunctive and equitable relief, including restitution and, in
certain cases, punitive damages. Cases are pending in Arkansas,
Delaware, Florida, Georgia, Illinois (2), Louisiana,
Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey,
New York, Ohio (2), Oregon, Tennessee, Washington, West Virginia
(2) and Wisconsin. In addition, a case is pending in Israel.
To date, trial courts in Arizona and Minnesota have refused to
certify classes in these cases, and appellate courts in Florida
and Massachusetts have overturned class certifications by trial
courts. The decertification decision in Massachusetts is
currently on appeal to Massachusetts' highest court. Plaintiffs
in the Florida case have filed a motion for rehearing. Trial
courts have certified classes against PM USA in the "Price" case
in Illinois and in Missouri and Ohio (2). PM USA has appealed
or otherwise challenged these class certification orders. In
January 2004, plaintiffs in a case in California voluntarily
dismissed their case without prejudice.
With respect to the "Price" case, trial commenced in January
2003, and in March 2003, the judge found in favor of the
plaintiff class and awarded approximately $7.1 billion in
compensatory damages and $3 billion in punitive damages against
PM USA. In April 2003, the judge reduced the amount of the
appeal bond that PM USA must provide and ordered PM USA to place
a pre-existing 7.0%, $6 billion long-term note from ALG to PM
USA in an escrow account with an Illinois financial institution.
The judge's s order also requires PM USA to make cash deposits
with the clerk of the Madison County Circuit Court in the
following amounts: beginning October 1, 2003, an amount equal to
the interest earned by PM USA on the ALG note ($210 million
every six months), an additional $800 million in four equal
quarterly installments between September 2003 and June 2004 and
the payments of principal of the note, which are due in April
2008, 2009 and 2010. Through June 30, 2004, PM USA paid $1.2
billion of the cash payments due under the judge's order.
If PM USA prevails on appeal, the escrowed note and all cash
deposited with the court will be returned to PM USA, with
accrued interest less administrative fees payable to the court.
Plaintiffs appealed the judge's order reducing the bond. In
July 2003, the Illinois Fifth District Court of Appeals ruled
that the trial court had exceeded its authority in reducing the
bond. In September 2003, the Illinois Supreme Court upheld the
reduced bond set by the trial court and announced it would hear
PM USA's appeal on the merits without the need for intermediate
appellate court review. PM USA believes that the "Price" case
should not have been certified as a class action and that the
judgment should ultimately be set aside on any of a number of
legal and factual grounds that it is pursuing on appeal.
Trial in the consolidated class action filed against Altria
Group, Inc. Philip Morris, Inc. and other tobacco firms in the
United States District Court for the Eastern District of New
York has been stayed.
The suit was filed on behalf of a punitive damages class of
persons residing in the United States who smoke or smoked
Defendants' cigarettes, and who have been diagnosed by a
physician with an enumerated disease from April 1993 through the
date notice of the certification of this class is disseminated.
Excluded from the class are:
(1) those who have obtained judgments or settlements
against any defendants;
(2) those against whom any defendant has obtained judgment;
(3) persons who are part of the "Engle" class;
(4) persons who should have reasonably realized that they
had an enumerated disease prior to April 9, 1993; and
(5) those whose diagnosis or reasonable basis for knowledge
predates their use of tobacco
In September 2002, the court granted plaintiffs' motion for
class certification. Defendants petitioned the United States
Court of Appeals for the Second Circuit for review of the trial
Court's ruling, and the Second Circuit agreed to hear
defendants' petition. The parties are awaiting the Second
Circuit's decision. Trial of the case has been stayed pending
resolution of defendants' petition.
Plaintiffs removed Altria Group, Inc. as a defendant in a class
action filed in California state court on behalf of a purported
class of all California residents who purchased the "Merit"
brand of cigarettes since July 2000 to the present.
The suit alleges that defendants, including Philip Morris USA,
Inc. (PM USA) and the Company, violated California's s Business
and Professions Code Sections 17200 and 17500 regarding unfair,
unlawful and fraudulent business practices, including false and
misleading advertising. The complaint also alleges violations
of California's Consumer Legal Remedies Act. Plaintiffs seek
injunctive relief, disgorgement, restitution, and attorneys'
Amylin Pharmaceuticals, Inc. reached a settlement for the class
action filed in the United States District Court for the
Southern District of California against it, its Chairman and
former Chief Executive Officer and one director.
The suit alleges violations of the federal securities laws
related to declines in the Company's stock price. The complaint
alleges securities fraud in connection with various statements
and alleged omissions to the public and to the securities
In July 2004, the Company executed a memorandum of understanding
with plaintiffs to settle the lawsuit, subject to approval by
the court. The terms of the memorandum of understanding include
payment by the Company of $1.95 million plus $0.15 million for
class notice and related costs, all of which will be covered by
the Company's insurance. Any of the $1.95 million amount
remaining after full reimbursement to class members and payment
of plaintiff legal fees will be donated to the American Diabetes
Association.
Scott & Scott LLC of Colchester, Connecticut, which recently
commenced a class action suit against Dublin-based Cardinal
Health Inc. in the U.S. District Court for the Southern District
of Ohio has filed a motion to become lead plaintiff in the
various lawsuits against the health care giant, the Columbus
Business First reports.
The suit, which was filed on behalf of all individuals who owned
Cardinal stock between Oct. 24, 2000, and July 26, 2004 claims
that the company used improper accounting methods to inflate its
profit and share price, and that investors lost money when the
accounting irregularities came to light.
Cardinal is currently under investigation by both the Securities
and Exchange Commission and the U.S. Attorney's office for the
Southern District of New York over it's accounting practices.
The federal agencies are looking into charges that the company
booked as revenue from a lawsuit before the settlement was
finalized, as well as the way it accounted for sales.
Several other firms have filed similar suits.
Scott & Scott is currently lead counsel litigating major
shareholder cases including the employee benefits case against
Royal Dutch / Shell Petroleum and the securities fraud case
against ImClone Systems.
The Wexler Firm LLP filed a motion for class certification of a
nationwide sexual harassment lawsuit begun in September 2002
against commercial real estate giant CB Richard Ellis
(NYSE:CBG).
If the motion succeeds, as many as 9,000 current and former CBRE
employees could become members of one of the largest sexual
harassment class-action lawsuits filed. The lawsuit alleges CBRE
management condoned, and in some cases participated in, a
pattern of sexual harassment in its offices across the country.
CBRE had few policies and procedures against sexual harassment,
and those it did have were not enforced, according to today's
filing.
The 85-page motion filed with the U.S. District Court in
Chicago, provides a summary of testimony from numerous former
and current CBRE employees throughout the United States that
clearly documents management's support of a pervasive pattern of
sexually harassing behavior, including:
(1) A frat-house mentality existed that allowed the free
distribution and viewing of pornographic materials by
male employees and supervisors, regular sexually
explicit conversations and derogatory comments, the
rating of women's bodies by men and harassing behavior
at company events. As an example, at several annual
awards dinners, management presented a plastic dildo as
the "Rookie of the Year" award to the top first-year
broker. Neither the CBRE Chief Operating Officer nor
other managing directors in attendance ever registered
a complaint, conducted an investigation or took
disciplinary action about the awards. Under oath in a
deposition, the CBRE Chief Operating Officer said that
he did not know if he would take action even if the
incident were to occur again.
(2) Both the current CEO and president failed to attend
previously mandatory diversity training classes and
repeatedly refused to implement comprehensive
affirmative action programs, citing them as "low
priorities."
(3) The company failed to provide a clear protocol for
handling sexual harassment complaints. During
discovery, plaintiffs' attorneys found no fewer than 25
versions of policies that purport to govern sexual
harassment issues. In deposing CBRE management
personnel, including the company's corporate counsel
and HR representatives, it became clear that even
senior managers were uncertain what the company's
policies were. Throughout witness and plaintiff
testimony, female employees recount how their repeated
complaints to company management went nowhere.
(4) A former office administrator from St. Louis describes
how disempowered she was to act on female employee
complaints: ". . . I made complaints to corporate HR,"
Ms. Schramm said, "but HR either told me that there was
nothing the company could do or did nothing in response
to my complaints . . . I was repeatedly told that,
because the brokers made the money for the company, it
did not matter what kind of conduct they engaged in or
whether that conduct offended female employees."
(5) Despite the company's claim of having a "zero
tolerance" sexual harassment policy, no written
policies to that effect existed, and neither the human
resources nor legal department provided a supportive
system for female employees to resolve sexual
harassment issues. In a deposition, the CBRE General
Counsel stated that unless male perpetrators expressly
admitted to committing sexual harassment, the company
takes no action against them.
Plaintiffs' attorney Elizabeth A. Fegan said, "Through witness
testimony and depositions of CBRE's own management team, it is
clear that CB Richard Ellis' definition of 'zero tolerance' is a
parody and a superficial effort to avoid litigation. Despite
numerous incidents and cries for help from its female employees,
CBRE deliberately chose to forego establishing an effective
system to eliminate harassment from its ranks, instead condoning
this type of behavior as the norm."
"The harassment is humiliating and emotionally devastating,"
said lead plaintiff Amy Wiginton. "The support staff at CB
Richard Ellis is almost entirely female, and the brokers are
overwhelmingly male. Because women at the company are forced on
a daily basis to endure sexually explicit behavior from male
supervisors and employees, CBRE has created an environment that
is both hostile and totally intimidating for women. I finally
decided that someone needed to speak up and put an end to this
type of behavior. It's time that CB Richard Ellis be held
accountable."
Today's motion argues that the Wiginton lawsuit meets all the
tests for class-action status because of the large number of
current and former employees who make up the potential class,
because their experience of having to endure a hostile workplace
environment was substantially the same, and because management's
actions perpetuated and allowed the sexual harassment to exist
in all of its offices.
The suit filed by The Wexler Firm LLP of Chicago and attorney
Elizabeth A. Fegan seeks to enjoin CBRE from continuing to
sexually harass its female employees and seeks injunctive relief
and punitive damages for all members of the class.
For more details, contact Elizabeth A. Fegan, Esq. of The Wexler
Firm LLP by Phone: 312-346-2222 or by visit their Web site:
http://www.cbrichardellislawsuit.comOR E.E. Wang or Bill Furlow
of Furlow Wang Communications - Media contact by Phone:
The Securities and Exchange Commission through the Honorable
Gary L. Taylor, United States District Judge for the Central
District of Calif., obtained final judgments against defendants
Colin Nathanson and eight of the business entities Nathanson
founded pursuant to their consents. The Commission's complaint
alleged that the defendants, based in Orange County, perpetrated
a $29.5 million securities fraud. As part of the settlement,
Nathanson and the defendant entities, controlled by a court-
appointed receiver, consented to permanent injunctions, without
admitting or denying the allegations in the Commission's
complaint. Additionally, the defendant entities agreed to
disgorge all of their funds and assets pursuant to one or more
plans of distribution approved by the court, less any court-
approved receivership fees and expenses. Nathanson consented to
disgorge $4.7 million. In satisfaction of this debt, Nathanson
agreed to disgorge to the receiver all of his real property,
including three parcels of land he owns in Orange County, as
well as certain personal property that he owns. Payment of the
remainder of the $4.7 million is waived, based upon Nathanson's
demonstrated inability to pay.
The Commission's complaint, filed on March 25, 2004, in federal
court in Orange County, alleged that since 2001, Nathanson and
his companies raised $29.5 million from over 1800 investors
nationwide through four fraudulent investment schemes. At the
time the Commission filed its complaint, Nathanson was
continuing to raise funds from investors in at least two of his
schemes. The first of Nathanson's schemes involved selling
securities in a golf equipment company he controlled, Giant Golf
Co., which purportedly was preparing an IPO. The second scheme
was a Ponzi scheme involving several entities that would
purportedly purchase air time to air Giant Golf's infomercials.
In the third scheme, Nathanson sold investment interests through
the Nathanson Investment Trust in a purported unnamed software
company that he claimed would soon be bought-out by a larger,
unnamed, company. Finally, the complaint alleged that Nathanson
sold securities in a company known as Millennium Technical Group
that Nathanson said would exploit certain FCC licenses purchased
in 1994. The Commission alleged that in these four schemes, the
defendants lied to investors regarding how they would use the
investor funds. The complaint alleged that without the
investors' knowledge or consent, Nathanson commingled the
investors' monies, and used the commingled funds to operate both
the unprofitable defendant businesses and his other various
unprofitable businesses.
Additionally, the Commission's complaint alleged that since
February 2001, Nathanson used at least $1 million of investor
funds to support his extravagant lifestyle, including three
homes and payment of $346,500 in gambling-related debts.
Finally, the Commission alleged that, in Ponzi-like fashion,
Nathanson caused over $5 million of the $29.5 million raised to
be paid to certain investors either as purported "returns" on
their investments when, in fact, their investments were not
profitable, or as purported returns of their principal.
The Commission previously obtained a temporary restraining order
against all defendants. The Commission subsequently obtained a
preliminary injunction against all defendants. See LR-18663.
The action is titled, SEC v. Colin Nathanson, Individually and
Doing Business as Nathanson Investment Trust, Giant Golf
Company, Play Big Enterprises, Inc., Starquest Management, Inc.,
Whitehawk Consulting Group, Inc., Leafhead Consultants, Inc.,
NetTel Consulting Corp., Yrmac Consulting Services, Inc., and
Millennium Technical Group, Inc., Civil Action No. SA CV 04-0351
GLT, RZX, C.D.Cal. (LR-18861).
The Colorado Center on Law and Policy, a Denver-based law firm
initiated a class action lawsuit on behalf of needy Coloradans,
claiming the state's new $199 million Colorado Benefits
Management System (CBMS) will deny tens of thousands of the
needy access to food stamps, Medicaid and other benefits since
it is so error-prone, the Rocky Mountain News reports.
The state claims that the new system, which recently went online
will reduce paperwork and long lines for benefits applicants by
putting programs under one umbrella.
According to the Denver-based law frim, the system has an error
rate of about 33 percent, however the state agency that oversees
Medicaid puts the error rate at between 2 percent and 5 percent.
The lawsuit also included letters of concerns from county
officials, who say the new CBMS system isn't ready. This
included a letter from Boulder County Commission Chairman Paul
Danish that states, "this fatally flawed system be abandoned."
If not, Boulder County wants to be held blameless for any
lawsuits filed by people whose benefits were denied improperly.
Another one is form Brenda Woolsey, division manager of
assistance payments at Arapahoe County, who said problems with
the system that were supposed to be fixed have not been, and
complained about "made-up" data.
Karen Reinertson, executive director of the state's Health Care
Policy and Financing agency, defended her decision to go ahead
with the new system saying that the state has allotted about $2
million to help counties process applications faster. She
however acknowledged that many county workers don't like the
system but said, "I don't think any beneficiary is going to be
hurt." She also said, "If I thought a whole lot of people would
be hurt, I wouldn't have authorized the system to go up."
Critics argue that in the past applicants for Medicaid could get
prenatal care or any other service immediately if a county
social services worker deemed them "presumptively eligible" for
Medicaid. However, with the new system in place, applicants must
now wait until their Medicaid eligibility is confirmed before
availing of any of the services.
Tennessee consumers filed a lawsuit seeking class action status
in Washington County Chancery Court claiming Visa and MasterCard
are unfairly forcing retailers to take debit cards, WKRN.COM
The lawsuit alleges that the credit card companies are
"monopolistic" and violate the Trade Practices Act and the
Consumer Protection Act. Chancellor Richard Johnson ruled that
the group couldn't continue its case based on those claims
alone, he however allowed the case to continue on other grounds.
According to the Tennessee consumer group Visa and MasterCard's
requirement for retailers to accept debit cards has led them to
incur artificially inflated costs. Companies argued that they've
had to increase their prices to compensate for the additional
costs of taking debit cards.
The United States Food and Drug Administration (FDA) issued an
alert to patients about possible problems associated with the
quality of mammograms performed at the Ecumed Health Group
facility in Hialeah, Florida, over recent years.
The facility is located at 687 East 9Th Street. Women affected
by this alert are those who had mammograms at this facility from
January 7, 2001, to the present. The facility is no longer
performing mammography.
FDA has worked closely with Florida's Bureau of Radiation
Control to inspect the facility and develop information about
the nature and extent of the problems there. As a result,
Florida withdrew the facility's authorization to use the
mammography unit and fined the facility for operating the unit
without proper state authorization. FDA is also pursuing fines
against the facility.
FDA's review of a sample of mammography examinations done by the
Ecumed Health Group facility showed that the mammograms were of
poor quality and not reliable and the facility did not meet the
standards for clinical image quality as required by the FDA.
Under the Mammography Quality Standards Act (MQSA) of 1992, the
FDA's role is to ensure that all mammography facilities meet
certain high quality standards.
While this information does not necessarily mean that the
results of all of the examinations were inaccurate, it does mean
that patients might need to have mammograms re-evaluated and
possibly repeated.
FDA has contacted all physicians' offices known by the agency to
have sent mammography patients to the Ecumed Health Group
facility and informed them of the problem. Physicians who have
not been contacted by FDA but believe that one or more of their
patients had a mammogram at this facility during the time period
in question can contact Ecumed for further patient information.
FDA is providing the following advice for patients. Patients who
have had a mammogram at another facility since the one taken at
Ecumed Health Group should be advised that they do not need to
take any action other than to follow the recommendations from
the subsequent mammogram.
Patients who had a mammogram at Ecumed Health Group any time
after January 7, 2001, and have not had a mammogram at another
facility since then, should have their mammogram re-evaluated or
repeated. The FDA advised patients to observe the following
(1) Talk with your doctor as soon as possible about medical
follow up;
(2) If you have a different doctor than the one who
referred you to Ecumed Health Group, you should talk to
your new doctor as soon as possible;
(3) Call Ecumed Health Group to arrange for your
mammography exam report and x-rays to be given to you;
(4) If your doctor wants you to have the mammogram repeated
it should be done at an MQSA-certified facility. Your
doctor may recommend a facility, or you can find a list
of MQSA-certified facilities at
http://www.fda.gov/CDRH/MAMMOGRAPHY/certified.html;
(5) If you need to schedule a repeat mammogram and your
health insurance will not pay for it, you can call the
National Cancer Institute's (NCI) information number at
1-800-422-6237. Experts at this number can tell you if
there is a facility near you that provides free or low
cost mammograms. These experts can also answer
questions about breast health and mammograms.
The California Superior Court for the County of Orange has yet
to set a trial date for the class action filed against
eMachines, Inc. and others, styled "Dvorchak v. eMachines, Inc.,
The suit relates to a 2001 transaction in which eMachines, which
was then a public company, was taken private. The action
originally sought to enjoin the Company's merger with Empire
Acquisition Corporation to effectuate taking eMachines private.
The court denied the requested injunction on December 27, 2001,
allowing the consummation of the Merger. After the Merger,
plaintiffs filed amended complaints seeking unspecified monetary
and/or recessionary damages relating to the negotiations for and
terms of the Merger through allegations of breaches of fiduciary
duties by eMachines, its board members prior to the Merger, and
certain of its officers. After initially denying class
certification, on August 25, 2003, the court granted class
certification.
The United States District Court for the Northern District of
California granted preliminary approval to the settlement of the
consolidated securities class action filed against Flextronics
International, Inc. and certain of its officers and directors.
The consolidated amended suit was filed on behalf of those who
purchased, or otherwise acquired, the Company's ordinary shares
between January 18, 2001 and June 4, 2002, including those who
purchased ordinary shares in the Company's secondary offerings
on February 1, 2001 and January 7, 2002. The suit generally
alleges that, during this period, the defendants made
misstatements to the investing public about the financial
condition and prospects of the Company.
On July 16, 2003, Flextronics filed a motion to dismiss on
behalf of the Company and its officers and directors named as
defendants. On November 17, 2003, the Court entered an order
granting defendants' motion to dismiss without prejudice. On
January 28, 2004, plaintiffs filed an amended complaint. The
Company's motion to dismiss the amended complaint was filed on
In May 2004, the parties reached a tentative settlement of all
claims in the lawsuit and the defendants withdrew their motion
to dismiss. The settlement would be funded entirely by funds
from the Company's Officers' and Directors' insurance. On July
28, 2004, the Court entered an order preliminarily approving
the settlement. The settlement agreement is subject to final
Court approval and a hearing on final approval is scheduled for
Florida state court Judge G. Robert Barron granted class-action
status to a lawsuit filed in 2002 by Okaloosa County Sheriff
Charlie Morris over Ford Motor Company's Crown Victoria Police
Interceptors, the Detroit Free Press reports.
Judge Barron's decision gave city and county police agencies and
other Florida organizations that buy or lease Police Interceptor
models from 1992 to now, the option to join the suit.
In his suit, Sheriff Morris claims that the police cars are
unsafe because a number have exploded in flames when hit from
behind. More specifically, Sheriff Morris claims that the cars'
fuel tanks are dangerous because they're placed behind the rear
axle, which results in police cars bursting into flames or even
killing the officers inside them, whenever struck from behind.
According to Sheriff Morris' attorneys there have been 14
accidents nationwide in which Interceptors caught fire after
being rear-ended.
However Ford's legal team argued that the 14 accidents cover
just .01 percent of Police Interceptors on the road, and stated
that none happened to an Okaloosa County patrol car. They also
pointed out that the company has installed protective shields on
the back ends of the cars to make them safer during rear-end
collisions, and that the cars have gotten five-star crash
ratings from federal vehicle-safety inspectors.
Genta, Inc. and certain of its principal officers face several
securities class actions filed in the United States District
Court for the District of New Jersey on behalf of purported
classes of the Company's shareholders who purchased its
securities during several class periods.
The complaints generally allege that the Company and certain of
its principal officers violated the federal securities laws by
issuing materially false and misleading statements regarding
Genasense for the treatment of advanced melanoma that had the
Company's securities. The shareholder class action complaints
in the various actions seek monetary damages in an unspecified
amount and recovery of plaintiffs' costs and attorneys' fees.
In addition, two shareholder derivative actions have been filed
against the directors and certain officers of Genta in New
Jersey state and federal courts. Based on facts substantially
similar to those asserted in the shareholder class actions, the
derivative plaintiffs claim that defendants have breached their
fiduciary duties to the shareholders and other violations of New
Jersey law.
The Milwaukee State Court in Wisconsin dismissed the third
amended class action filed against Harley Davidson, Inc. over
alleged defective cam bearings in the Company's 1999 and early-
2000 model year Harley-Davidson motorcycles.
In January 2001, the Company, on its own initiative, notified
each owner of 1999 and early-2000 model year Harley-Davidson
motorcycles equipped with Twin Cam 88 and Twin Cam 88B engines
that the Company was extending the warranty for a rear cam
bearing to 5 years or 50,000 miles.
Subsequently, on June 28, 2001, a putative nationwide class
action was filed against the Company in state court in Milwaukee
County, Wisconsin, which was amended by a complaint filed
September 28, 2001. The complaint alleged that this cam bearing
is defective and asserted various legal theories. The complaint
sought unspecified compensatory and punitive damages for
affected owners, an order compelling the Company to repair the
engines, and other relief.
On February 27, 2002, the Company's motion to dismiss the
amended complaint was granted by the Court and the amended
complaint was dismissed in its entirety. An appeal was filed
with the Wisconsin Court of Appeals. On April 12, 2002, the
same attorneys filed a second putative nationwide class action
against the Company in state court in Milwaukee County,
Wisconsin relating to this cam bearing issue and asserting
different legal theories than in the first action. The
complaint sought unspecified compensatory damages, an order
compelling the Company to repair the engines and other relief.
On September 23, 2002, the Company's motion to dismiss was
granted by the Court, the complaint was dismissed in its
entirety, and no appeal was taken. On January 14, 2003, the
Wisconsin Court of Appeals reversed the trial court's February
27, 2002 dismissal of the complaint in the first action, and the
Company petitioned the Wisconsin Supreme Court for review. On
March 26, 2004 the Wisconsin Supreme Court reversed the Court of
Appeals and dismissed the remaining claims in the action.
On April 12, 2004, the same attorneys filed a third action in
the state court in Milwaukee County, on behalf of the same
plaintiffs from the action dismissed by the Wisconsin Supreme
Hollywood Entertainment Corporation is involved in settlement
discussions for the class action filed in the Circuit Court of
St. Clair County, Twentieth Judicial Circuit, Illinois against
it, over its late rental fees.
The Company has been named in several purported class action
lawsuits alleging various causes of action, including claims
regarding its membership application and additional rental
period charges.
The Company has been successful in obtaining dismissal of three
of the actions filed against it. A statewide class action
entitled George Curtis v. Hollywood Entertainment Corp., dba
Hollywood Video, Defendant, No. 01-2-36007-8 SEA was certified
on June 14, 2002 in the Superior Court of King County,
Washington.
On May 20, 2003, the nationwide class action entitled "George
DeFrates v. Hollywood Entertainment Corporation, No. 02 L 707"
was certified. The Company expects this case to be resolved in
Hollywood Entertainment Corporation reached a settlement for the
eight class actions filed against it and the members of its
Board of Directors in the circuit courts of Clackamas and
Multnomah counties, Oregon.
The suits relate to the Company's proposed merger with Carso
Holdings Corporation, an affiliate of Leonard Green & Partners,
L.P. The lawsuits allege generally that in approving the Merger
Agreement the members of the Board breached fiduciary duties
owed to the Company's shareholders. Each lawsuit seeks a court
order enjoining the Company from completing the merger, damages
in an unstated amount allegedly suffered by the shareholders by
reason of the Merger Agreement and the payment of costs and
attorneys' fees to the plaintiffs' lawyers.
Hollywood Entertainment Corporation is set to enter mediation on
September 9, 2004, for three overtime wage class actions filed
in California State Court.
The plaintiffs are seeking to certify a class action alleging
that certain California employees were denied meal and rest
periods. There are several additional related wage and hours
claims for unpaid overtime, late payment of wages and off-the-
clock work.
The Company and plaintiffs have agreed to stay these cases
pending consolidation and mediation. The Company believes it
has provided adequate reserves in connection with these
lawsuits, it stated in a regulatory filing.
Fact discovery is ongoing in the consolidated securities class
action filed against ImClone Systems, Inc. in the U.S. District
Court for the Southern District of New York, styled "Irvine v.
ImClone Systems Incorporated et al., No. 02 Civ. 0109 (RO)."
The consolidated amended complaint also named as defendants:
(1) former President and Chief Executive Officer, Dr.
Samuel D. Waksal,
(2) the Company's former Chief Scientific Officer and then-
President and Chief Executive Officer, Dr. Harlan W.
Waksal, and
(3) several of the Company's other present or former
The complaint asserted claims for securities fraud under
sections 10(b), 20(a) and Rule 10b-5 of the Securities Exchange
Act of 1934, on behalf of a purported class of persons who
purchased the Company's publicly traded securities between March
27, 2001 and January 25, 2002 and asserted claims against Dr.
Samuel D. Waksal under section 20A of the Exchange Act on behalf
of a separate purported sub-class of purchasers of the Company's
securities between December 27, 2001 and December 28, 2001.
The complaint generally alleges that various public statements
made by or on behalf of the Company or the other defendants
during 2001 and early 2002 regarding the prospects for FDA
approval of ERBITUX were false or misleading when made, that the
individual defendants were allegedly aware of material non-
public information regarding the actual prospects for ERBITUX at
the time that they engaged in transactions in the Company's
common stock and that members of the purported stockholder class
suffered damages when the market price of the Company's common
stock declined following disclosure of the information that
allegedly had not been previously disclosed. The complaint
sought to proceed on behalf of the alleged class described
above, sought monetary damages in an unspecified amount and
sought recovery of plaintiffs' costs and attorneys' fees.
On June 3, 2003, the court granted in part, a motion to dismiss
filed by all defendants other than Dr. Samuel D. Waksal, the
Company and Dr. Harlan W. Waksal. Dr. Harlan W. Waksal, Dr.
Samuel D. Waksal and the Company each filed an answer to the
complaint on June 27, 2003. On July 31, 2003 plaintiffs filed a
motion for class certification. Defendants opposed that motion.
On April 14, 2004, the court granted plaintiffs' motion for
class certification. Fact discovery is currently scheduled to
conclude on November 30, 2004.
Lawsuits filed in Illinois and California against the largest
commercial insurance brokers over their disclosure of contingent
compensation agreements are likely to present a bigger concern
for the brokerages than ongoing regulatory probes of the
practice in New York, Connecticut and California, David K.
Bradford, chief knowledge officer of consultant Advisen Ltd. an
insurance industry-specific information provider, asserted,
according to a BestWire Services reports.
Most recently, three suits were filed against the three largest
brokers -- Marsh Inc., Aon Corp., and Willis Group Holdings Ltd.
-- in Los Angeles and San Diego counties by the 12-year-old, San
Francisco-based consumer organization United Policyholders under
the state's "private attorney general" statute, which allows
third parties to plead actions on behalf of the general public.
Each of the complaints accuses the brokers of a "systematic
scheme and common course of unfair and fraudulent business
conduct" related to commissions paid by underwriters to the
brokers on the basis of the volume or profitability of the
business they produce, which the suits characterize as "under-
the-table payments or kickbacks" that "destroy any objectivity
that defendants have in advising their customers."
Mr. Bradford noted it was curious to see the suits were filed by
United Policyholders, which he said was "not an organization
that most risk managers would generally identify with," as the
group historically has taken interest primarily in issues
affecting retail consumers and not those affecting business
buyers. He further adds, "It's interesting that the cast of
class-action law firms are getting involved. I think it's sort
of a toe in the water to see what the opportunity is. If this
catches, then I think we're going to see a barrage of lawsuits
coming out from the Milberg Weisses of the world."
Previously, Judge Julia M. Nowicki of Cook County Circuit Court
-- a jurisdiction observers have noted is known for hostility
toward corporate defendants -- certified a five-year-old suit
alleging inadequate disclosure of income by the Aon as a class
action. According to Mr. Bradford, the Illinois suit could set
an interesting precedent in that it doesn't actually allege
violation of any insurance regulation, but rather was brought
under the state's Consumer Fraud and Deceptive Business
Practices Act. Mr. Bradford states, "Every state has their own
version of a similar law, and so even if it's been a practice
that's been at least tolerated under the existing insurance
regulations, it doesn't mean that it's going to be any less
susceptible to liability under the consumer fraud acts."
Contingent commissions are fees paid by an insurance company to
a broker based on a share of the profits it earns on the clients
the broker places with that carrier. Placement fees are paid
when a broker places a specific volume of insurance with a
particular insurance company or agrees that it only will place
insurance with a limited number of insurance companies. These
arrangements became the subject of headlines because of
regulatory probes by New York Attorney General Eliot Spitzer,
who has subpoenaed several of the largest commercial brokers for
information about the practices, as well as California Insurance
Commissioner John Garamendi and Connecticut Attorney General
Richard Blumenthal.
However, the lawsuits and the general dissatisfaction of clients
with disclosure practices now appear to be a more immediate
concern for brokers than the probes, Mr. Bradford said, pointing
to May's Advisen survey that found more than two-thirds of risk
managers believed commission arrangements between insurance
brokers and insurance carriers to be a conflict of interest and
that only 20% were satisfied with current disclosures. Mr.
Bradford also states, "What we found in our survey is that the
level of discontentment was bubbling below the surface and had
never really broken through, and I think once risk managers had
the momentum of this whole investigation behind them, and a
venue for expression their frustration, it's starting to come
out in a way that the brokers are not going to be able to just
push this under the carpet no matter what the outcome of the
investigation is."
Release of Advisen's survey sparked the Risk and Insurance
Management Society Inc. to call a special task force to examine
the issue of contingent compensation agreements. RIMS recently
issued a position statement declaring that all sources of broker
compensation should be disclosed "without client request." Since
1999, RIMS had endorsed a minimum policy that brokers must, if
asked, disclose their fee arrangements with insurance companies
to their clients.
"It's not a huge departure from what they had said before, but I
think it's more forceful," Bradford said. "I think it gives risk
managers a little bit more that they can grasp a hold of, so
that they can go back to their brokers and be a little bit more
assertive with what they expect to get. I don't think it's going
to be Earth-shattering in its impact, but I think it sort of
keeps the pressure on in a material way."
On the other hand, according to Bradford, risk managers were
overwhelmingly of the opinion that the practice didn't
materially change the overall amounts they spent on insurance,
which, he noted, "is probably why they didn't express any
outrage earlier." Most brokers expect that if the money that is
coming out of the insurer's pocket disappears, it's going to
come out of their pockets, he said.
"Talking to people in the brokerage industry, one of the reasons
such fees were implemented in the first place was that it was
easier to extract those commissions from the insurers than from
the clients," Bradford said. "So I don't think the buyers are
going to sit back idly and watch their fees go up. At the very
least, what it's going to do is be the catalyst for a rather
bloody round of competition by the brokers, with the potential
for some of the smaller firms to gain market share."
Moreover, the regulatory investigations seem to have been headed
in a new direction, according to Bradford. The probes followed a
February letter from a Washington-based public interest law and
policy group, the Washington Legal Foundation, to the insurance
commissioners and attorneys general of New York and California,
arguing that the agreements create conflicts of interest and
potential violations of a broker's fiduciary duty to clients.
"The sense that we're getting from what's wafting in the air is
that the emphasis has shifted to the employee-benefits area,
which in my opinion might be a more fertile area for them to
pursue," Bradford said. "From what we're gathering, they're
still actively pursuing this, but they've shifted the focus and
are still in the data-collection phase with the employee
benefits issue."
While an initial round of subpoenas from Spitzer's office --
which still hasn't officially confirmed the existence of an
investigation into commission practices -- targeted major
brokers and commercial insurers, more recently, subpoenas have
gone out to health insurers Aetna Inc. and Cigna Corp, as well
as UnumProvident Corp., the nation's largest disability insurer.
Two Cincinnati, Ohio area prescription drug wholesalers pled
guilty in United States District Court for the Southern District
of Ohio for failing to provide to their customers with what is
commonly referred to in the pharmaceutical industry as a drug
"pedigree" or a "Statement Identifying Pharmaceutical Sale," the
United States Food and Drugs Administration announced in a
"This is one of the first convictions of its kind and marks a
significant step in assuring that prescription drug wholesalers
fully conform with laws that ensure the integrity of the
nation's drug supply," the FDA said.
RxBazaar, Inc., and its wholly owned subsidiary, FPP
Distribution, Inc., each pled guilty to one misdemeanor charge
under the Federal Food, Drug and Cosmetic Act (the Act) for not
providing required documentation identifying each prior sale,
purchase, or trade of prescription drugs that they distributed.
This documentation statement is commonly referred to in the
pharmaceutical industry as a drug "pedigree".
Each company was sentenced to five years probation and a
$100,000 fine. RxBazaar, Inc., a publicly traded company,
operated a web site called www.rxbazaar.com through which buyers
and sellers would conduct wholesale pharmaceutical transactions.
RxBazaar collected fees from sellers who utilized their web site
and would distribute the pharmaceuticals to customers through
FPP Distribution, Inc.
The Prescription Drug Marketing Act (PDMA), which became
effective in 1988 as an amendment to the Act, was enacted amid
growing concerns of prescription drug diversion and
counterfeiting. One of the many provisions of the PDMA is the
requirement for drug wholesalers that are not manufacturers or
authorized distributors of a drug to provide a pedigree for
every prescription drug they distribute. Drug wholesalers that
do not provide pedigrees, or provide fraudulent pedigrees,
facilitate drug counterfeiters and diverters looking to enter
illegal and potentially dangerous products into U.S. commerce.
Failure to comply with the pedigree requirement of the PDMA, as
well as other provisions of the Act, including the distribution
of counterfeit drugs, are strict liability misdemeanors for
which ignorance of the law or the lack of criminal intent is no
defense. A second conviction for the same misdemeanor offense
under the Act is a felony.
"These guilty pleas are part of FDA's increased effort to combat
drug diversion and counterfeiting," said Acting FDA Commissioner
Dr. Lester M. Crawford. "We will not tolerate any illegal action
which undermines the integrity of our nation's drug supply."
FDA's initiation of its criminal investigation followed several
reports that drugs distributed by these companies were
misbranded or counterfeit. FDA's Office of Criminal
Investigations will continue to aggressively pursue criminal
charges against prescription drug wholesalers who seriously and
repeatedly violate federal laws and expose U.S. consumers to the
risk of counterfeit, diverted or otherwise fraudulently obtained
or sub-standard drugs.
Plaintiffs filed a third amended securities class action against
certain of Perini Corporation's current and former directors in
the United States District Court for the District of
Massachusetts.
Frederick Doppelt, Arthur I. Caplan and Leland D. Zulch filed
the suit, styuled "Doppelt, et al. v. Tutor, et al., Case No.
02CV12010," individually, and as representatives of a class of
holders of the Company's Depositary Shares. . Doppelt is a
current director of Perini and Mr. Caplan is a former director
of Perini.
Specifically, the original complaint alleged that the defendants
breached their fiduciary duties owed to the holders of the
Depositary Shares and to Perini. The plaintiffs principally
allege that the defendants improperly authorized the exchange of
Series B Preferred Stock for common stock while simultaneously
refusing to pay accrued dividends due on the Depositary Shares.
In July 2003, the plaintiffs filed an amended complaint. The
amended complaint added an allegation that the defendants
further breached their fiduciary duties by authorizing a tender
offer for the purchase of up to 90% of the Depositary Shares and
an allegation that the collective actions of the defendants
constitute unfair and deceptive business practices under the
provisions of the Massachusetts Consumer Protection Act. The
amended complaint withdrew the allegation of a breach of
fiduciary duty owed to Perini, but retained the allegation with
respect to a breach of those duties owed to the holders of the
Depositary Shares.
On April 12, 2004, pursuant to defendants' motion to dismiss,
the Court dismissed the claim under the Massachusetts Consumer
Protection Act. The Court did not dismiss the claim for breach
for fiduciary duty, except as such claim relates to the tender
offer for the purchase of Perini's Depositary Shares. Pursuant
to the Court's April 12, 2004 Order, in May 2004 the plaintiffs
filed a third amended complaint and thereafter filed a motion
for class certification. The plaintiffs seek damages in an
amount not less than $10 million, plus interest, costs, fees and
other unspecified damages.
In 2001, a similar lawsuit was filed by some of the same
plaintiffs in the United States District Court for the Southern
District of New York, which claimed that the Company breached
its contract with the holders of Depositary Shares. In 2002, the
case was dismissed and upon appeal by the plaintiffs to the
United States Court of Appeals for the Second Circuit, the Court
of Appeals affirmed the dismissal.
The federal court cases filed against Pfizer, Inc. over certain
of its estrogen and progestin medications have been transferred
to a multi-district litigation in the United States District
Court for the Eastern District of Arkansas, for consolidated
pre-trial proceedings.
The Company, Pharmacia Corporation (its direct, wholly owned
subsidiary), Pharmacia & Upjohn, Inc. (its indirect, wholly
owned subsidiary) and Greenstone Ltd. (another indirect, wholly
owned subsidiary), along with several other pharmaceutical
manufacturers, have been named as defendants in a number of
lawsuits in various federal and state courts alleging personal
injury resulting from the use of certain estrogen and progestin
medications prescribed for women to treat the symptoms of
menopause.
The cases against Pfizer, Pharmacia, Pharmacia & Upjohn and
Greenstone involve the products femhrt (which Pfizer divested in
2003), Provera, Ogen, Depo-Estradiol and Activella, all of which
remain approved by the FDA for use in the treatment of
One of the suits, in which Pfizer and Greenstone have been
named, is a purported nationwide class action; the other suits
are individual or multi-plaintiff actions. Plaintiffs in these
suits allege a variety of personal injuries, including breast
cancer, stroke and heart disease. All of the suits are in
preliminary stages.
Pfizer, Inc. faces a purported representative action filed on
behalf of all California residents in Los Angeles Superior
Court in California.
The plaintiff alleges the Company engaged in various practices
relating to Zoloft in violation of California law, including
false and misleading advertising and marketing, and seeks
damages in an unspecified amount and injunctive relief.
In a related matter, in July 2004 the Company received a
notice, from the same law firm involved in the purported
representative action, of an intention to bring another claim
against the Company alleging violations of the California
Consumers Legal Remedies Act resulting from the Company's
alleged failure to adequately warn California consumers of the
alleged risk of reactions upon withdrawal from Zoloft. The
notice indicated that civil penalties in an unspecified amount,
punitive damages and injunctive relief will be sought in
connection with this claim.
Pfizer, Inc. has been named as a defendant in the consolidated
class action filed in the U.S. District Court for the District
of New Jersey by persons who claim to have been purchasers of
publicly traded securities of Pharmacia Corporation during the
period from April 17, 2000 through August 22, 2001.
Several actions were originally filed against Pharmacia
Corporation, the Company's wholly owned subsidiary, and certain
former officers of Pharmacia. The complaints allege that the
defendants violated federal securities laws by misrepresenting
the safety of Celebrex. Several of the cases further allege
that all of the individual defendants breached fiduciary duties
by virtue of their alleged conduct concerning Celebrex.
Pursuant to an amended consolidated complaint, these cases have
been consolidated for pre-trial purposes.
The United States District Court for the District of New Jersey
dismissed the class actions filed against Pfizer, Inc. and
Pharmacia Corporation, alleging that the companies
misrepresented and over-promoted Celebrex in violation of the
New Jersey Consumer Fraud Act and that they misled the United
States Food and Drug Administration (FDA) to obtain approval of
On December 2, 2003, one of these two actions was dismissed
without prejudice. On June 15, 2004, the court in the other
action granted defendants' motion for summary judgment and
dismissed the claims.
Philip Morris USA, Inc. petitioned the United States Supreme
Court for a review of an appeals court reversing in part a
summary judgment in their favor in the class action filed
against it on behalf of a nationwide class of cigarette vending
machine operators.
Plaintiffs allege the Company has violated the Robinson-Patman
Act in connection with its promotional and merchandising
programs available to retail stores and not available to
cigarette vending machine operators. The initial complaint was
amended to bring the total number of plaintiffs to 211 but, by
stipulated orders, all claims were stayed, except those of ten
plaintiffs that proceeded to pre-trial discovery. Plaintiffs
request actual damages, treble damages, injunctive relief,
attorneys' fees and costs, and other unspecified relief.
In June 1999, the court denied plaintiffs' motion for a
preliminary injunction. Plaintiffs have withdrawn their request
for class action status. In August 2001, the court granted PM
USA's motion for summary judgment and dismissed, with prejudice,
the claims of the ten plaintiffs. In October 2001, the court
certified its decision for appeal to the United States Court of
Appeals for the Sixth Circuit following the stipulation of all
plaintiffs that the district court's dismissal would, if
affirmed, be binding on all plaintiffs.
In January 2004, the Sixth Circuit affirmed in part and reversed
in part the trial court's ruling that granted PM USA's motion
for summary judgment. The Sixth Circuit denied PM USA's
petition for rehearing in March 2004. The Sixth Circuit stayed
the mandate to the district court to allow PM USA to seek
further review from the United States Supreme Court.
The United States District Court of the Southern District of New
York refused to reconsider its dismissal of the securities class
action filed against QLT, Inc. and:
(1) Julia Levy, (former President and Chief Executive
Officer and a current Director of the Company) and
(2) Kenneth Galbraith (former Executive Vice President and
Chief Financial Officer and Corporate Secretary of the
Company)
The suit was filed on behalf of purchasers of the Company's
common shares between August 1, 2000 and December 14, 2000.
The plaintiffs allege that the defendants violated Sections
10(b) and 20(a) of the Securities Exchange Act of 1934.
The plaintiffs allege that on December 14, 2000 the Company
announced that it expected to miss its Visudyne sales estimates
for the fourth-quarter 2000, and that in response, the Company's
common share price dropped approximately 31%. The plaintiffs
claim that the Company's December 14, 2000 statements
contradicted prior information issued by the defendants
concerning the demand for Visudyne and the Company's prospects,
an earlier Class Action Reporter story (June 11,2004) states.
The plaintiffs further allege that the defendants overstated the
demand for Visudyne, did not properly disclose reimbursement
issues relating to Visudyne and that the defendants had no basis
in the months preceding the December announcement for their
projections of fourth-quarter sales. The plaintiffs further
allege that the intent of the individual defendants to
mislead investors can be inferred from their sale of a
substantial amount of the Company's common shares during the
months of August and September 2000. The plaintiffs sought
injunctive relief, fees and expenses and compensatory
damages in an unspecified amount.
The class action was dismissed on the basis that the plaintiffs
had failed to state a valid claim for securities fraud. On
April 14, 2004, the plaintiffs filed a motion with the same
court for reconsideration of the Opinion and Order dismissing
the class action.
The time period within which the plaintiffs could appeal the
Opinion and Order dismissing the class action complaint expired
on July 22, 2004. No appeal was filed by that date. The
Company believes that this lawsuit has now been finally
concluded.
Ryland Group, Inc. and two of its officers face several
securities class actions filed on behalf of purchasers of the
Company's publicly traded securities during the period between
October 22, 2003 through January 7, 2004, inclusive.
The complaint, filed in the United States District Court for the
Central District of California, charges Ryland Group, R. Chad
Dreier, and Gordon Milne with violations of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934, and Rule 10b-5
promulgated thereunder. Between October 22, 2003 and January 7,
2004, the defendants issued a series of material
misrepresentations to the market concerning the Company's
financial results.
Safeguard Scientifics, Inc. faces a new securities class action
filed in the United States District Court for the Eastern
District of Pennsylvania, styled "Mandell v. Safeguard
Scientifics, Inc., et al."
On June 26, 2001, the Company and Warren V. Musser, the
Company's former Chairman, were named as defendants in a
putative class action filed in the United States District Court
for the Eastern District of Pennsylvania. Plaintiffs allege
that defendants failed to disclose that Mr. Musser had pledged
some or all of his Safeguard stock as collateral to secure
margin trading in his personal brokerage accounts.
Plaintiffs further allege that defendants' failure to disclose
the pledge, along with their failure to disclose several margin
calls, a loan to Mr. Musser, the guarantee of certain margin
debt and the consequences thereof on Safeguard's stock price,
violated the federal securities laws. Plaintiffs allege claims
under Sections 10(b) and 20(a) of the Securities Exchange Act of
On August 17, 2001, a second putative class action was filed
against the Company and Mr. Musser asserting claims similar to
those brought in the first proceeding. In addition, plaintiffs
in the second case allege that the defendants failed to disclose
possible or actual manipulative aftermarket trading in the
securities of Safeguard's companies, the impact of competition
on prospects for one or more of Safeguard's companies and the
Company's lack of a superior business plan.
These two cases were consolidated for further proceedings under
the name "In Re: Safeguard Scientifics Securities Litigation"
and the Court approved the designation of a lead plaintiff and
the retention of lead plaintiffs' counsel. The plaintiffs have
filed a consolidated and amended complaint.
On May 23, 2002, the defendants filed a motion to dismiss the
consolidated and amended complaint for failure to state claim
upon which relief may be granted. On October 24, 2002, the
Court denied the defendants' motions to dismiss, holding that,
based on the allegations of plaintiffs' consolidated and amended
complaint, dismissal would be inappropriate at that juncture.
On December 20, 2002, plaintiffs filed with the Court a motion
for class certification. On August 27, 2003, the Court denied
plaintiffs' motion for class certification. On September 12,
2003, plaintiffs filed with the United States Court of Appeals
for the Third Circuit a petition for permission to appeal the
order denying class certification. Safeguard filed its
opposition to that petition on September 23, 2003.
On November 5, 2003, the Third Circuit denied plaintiffs'
petition and declined to hear the appeal. On November 18, 2003,
plaintiffs' counsel moved to intervene new plaintiffs and
proposed class representative in the consolidated action, which
motion was denied by the Court on February 18, 2004.
The new complaint asserts similar claims to those asserted in
the consolidated and amended class action complaint. The
complaint also asserts individual claims on behalf of two
individual plaintiffs who had attempted unsuccessfully to
intervene in the consolidated action. Safeguard has not yet
responded to the new complaint.
The Delaware Court of Chancery refused plaintiffs' motion for
expedited proceedings and discovery in the class action filed
against Safeguard Scientifics, Inc., CompuCom Systems, Inc. and
members of CompuCom's board of directors.
The suit was filed on behalf of CompuCom's minority stockholders
seeking to enjoin the proposed merger of CompuCom with Platinum
Equity, LLC on the ground that the members of the board of
directors of CompuCom and Safeguard have allegedly breached
fiduciary duties to CompuCom and its minority stockholders.
On July 27, 2004, the plaintiffs filed an amended class action
complaint, asserting claims similar to those brought in the
original complaints and adding claims relating to CompuCom's
disclosure in its Schedule 14A filed with the Securities &
Exchange Commission on July 15, 2004. On July 27, 2004, the
plaintiffs also filed a motion for expedited proceedings and
discovery in connection with the injunctive relief sought and
requested that a preliminary injunction hearing be held before
August 19, 2004, the date of the special meetings of the
shareholders of the Company and the stockholders of CompuCom
relating to the CompuCom merger. Defendants filed their
opposition to the motion on July 28, 2004.
Attorneys Stephen DeNittis and Philip Stephen Fuoco initiated a
lawsuit seeking class action status against the South Jersey Gas
Co. over the issue of safety at gas line connection spots,
Cherry Hill Courier Post reports.
The complaint, which was filed in Superior Court in Camden,
seeks class certification for residential customers in seven
counties whose gas meters or exposed gas pipes are within 36
inches of a driveway, parking space, or garage opening.
The named plaintiff is Melissa A. Diaz, who became aware of the
danger created by the exterior gas meter at her home when a car
slid on the ice at a Mount Laurel house in February 2003 and
struck a gas meter, leading to an explosion.
According to the lawsuit, homeowners who receive gas service
from South Jersey Gas, who have has 307,000 residential
customers do not own the meters or have input in where the
meters are installed.
Attorney DeNittis told the Cherry Hill Courier Post, "We're
looking for them to fix the meters, either by constructing
cement bollards or installing an excess flow valve that would
shut off the gas if there is any rupture to the line. He also
stated that an investigation that they conducted before the
lawsuit discovered that several South Jersey Gas customers have
unprotected meters, in areas ranging from Gibbsboro, Voorhees
and Medford to Ocean City and North Wildwood.
The lawsuit seeks a court finding that the condition is a safety
risk that South Jersey Gas Company should have been aware of and
asks that the utility pay to protect the meters from being
struck by a vehicle.
Illinois-based State Farm Fire and Casualty Co. faces a class
action lawsuit filed by two Iowa couples that accuses them of
under-compensating policyholders who have had a history of
claims against their insurance policies, Quad City Times
Filed last week in Scott County District Court by Jeffrey and
Lydia Varboncoeur of Columbus Junction, and Luis and Liovigilda
Rios of Burlington, the suit charges that State Farm treats its
policyholders "in a materially different manner for purposes of
loss evaluation, negotiation and adjustment, depending upon
whether the insured has a State Farm claims history."
The couples, whose homes suffered hail damage in separate storms
last year, allege that because of their prior claims they were
paid or offered loss payments below what the insured would have
received for the same loss and/or the replacement cost value
under the same policy if the insured had no claims history. They
are also accusing State Farm of bad faith acts, fraud - failure
to disclose, unjust enrichment and breach of express contract.
According to Plaintiff's attorney Jeffrey Bittner, the couples
are each seeking less than $75,000 in compensatory damages. He
further adds, that the suit could also include a class of
"thousands of former and current State Farm homeowner's
policyholders."
Aside from the aforementioned allegations, the plaintiffs are
also accusing State Farm of training, directly or indirectly,
its claims adjustors to treat those with claims histories
differently and "to under-quote the initial loss payment
proposal, often in an amount below the known deductible" and
that the company also trains them to persuade policyholders not
to challenge the loss payment proposal.
The United States Ninth Circuit Court of Appeals heard oral
arguments on plaintiffs' appeal of the denial of class
certification to the lawsuits filed against Station Casinos,
Inc. and other gambling firms.
On April 26, 1994, a suit seeking status as a class action
lawsuit was filed by plaintiff, William H. Poulos, et al., as
class representative, in the United States District Court for
the Middle District of Florida, naming 41 manufacturers,
distributors and casino operators of video poker and electronic
slot machines, including the Company.
On May 10, 1994, a lawsuit alleging substantially identical
claims was filed by another plaintiff, William Ahearn, et al.,
as class representative, in the Florida District Court against
48 manufacturers, distributors and casino operators of video
poker and electronic slot machines, including the Company and
most of the other major hotel/casino companies.
The lawsuits allege the defendants have engaged in a course of
fraudulent and misleading conduct intended to induce persons to
play such games based on a false belief concerning how the
gaming machines operate, as well as the extent to which there is
an opportunity to win. The two lawsuits were consolidated into
a single action, and transferred to the United States District
Court for the District of Nevada.
On September 26, 1995, a lawsuit alleging substantially
identical claims was filed by plaintiff, Larry Schreier, et al.,
as class representative, in the Nevada District Court, naming 45
manufacturers, distributors, and casino operators of video poker
and electronic slot machines, including the Company.
Motions to dismiss the Poulos/Ahearn and Schreier cases were
filed by defendants. On April 17, 1996, the Poulos/Ahearn
lawsuits were dismissed, but plaintiffs were given leave to file
Amended Complaints on or before May 31, 1996. On May 31, 1996,
an Amended Complaint was filed, naming William H. Poulos, et
al., as plaintiff. Defendants filed a motion to dismiss.
On August 15, 1996, the Schreier lawsuit was dismissed with
leave to amend. On September 27, 1996, Schreier filed an
Amended Complaint. Defendants filed motions to dismiss the
In December 1996, the Nevada District Court consolidated the
Poulos/Ahearn, the Schreier, and a third case not involving the
Company and ordered all pending motions be deemed withdrawn
without prejudice, including Defendants' Motions to Dismiss the
Amended Complaints.
The plaintiffs filed a Consolidated Amended Complaint on
February 13, 1997. On December 19, 1997, the Nevada District
Court issued formal opinions granting in part and denying in
part the defendants' motion to dismiss. In so doing, the Nevada
District Court ordered plaintiffs to file an amended complaint
in accordance with the Court's orders in January 1998.
Accordingly, plaintiffs amended their complaint and filed it
with the Nevada District Court in February 1998. The Company
and all other defendants continue to deny the allegations
contained in the amended complaint filed on behalf of
plaintiffs. The plaintiffs are seeking compensatory, special,
consequential, incidental, and punitive damages in unspecified
amounts.
On June 25, 2002, the Nevada District Court denied plaintiffs'
motion for class certification. On July 11, 2002, plaintiffs
filed a petition for permission to appeal such class
certification ruling with the United States Court of Appeals for
the Ninth Circuit. On August 15, 2002, the Ninth Circuit
granted the plaintiffs' petition for permission to appeal such
class certification ruling. The parties have filed briefs
setting forth their arguments, and rebutting the other party's
arguments concerning the issue on appeal.
Station Casinos, Inc. reached a settlement for the class action
filed in the Superior Court of Los Angeles County, California
against it and one of its operating subsidiaries, Palace Station
Hotel & Casino, Inc.
The lawsuit seeks to recover for alleged breach of contract,
fraud, negligent misrepresentation, breach of covenant of good
faith and fair dealing, promissory fraud, unjust enrichment and
violations of sections 17200 and 17500, et. seq. of the
California Business and Professions Code, all in connection with
energy and telephone surcharge fees imposed on Palace Station
hotel guests. The plaintiff is requesting unspecified actual
and punitive damages, as well as injunctive and other relief.
On November 10, 2003, the defendants filed a response to the
complaint denying all liability. On June 18, 2004, the parties
entered into a Settlement Agreement and Release. Pursuant to
the Proposed Settlement and subject to Superior Court approval,
the parties have agreed that the Company will:
(1) issue two personalized coupons to each Settlement Class
Member (as defined in the Proposed Settlement), one for
$3.00 and one for $2.50, with each coupon to be good
toward a discount of a quoted room rate for a single
night's stay at any of the Station Hotels (as defined
in the Proposed Settlement), and
(2) pay the plaintiff's reasonable attorneys' fees and
expenses in exchange for the plaintiff dismissing the
lawsuit (including all claims held by the members of
the settlement class and the general public) with
prejudice.
The Proposed Settlement stipulates that the Company denies any
liability with respect to the plaintiff's claims. A final
approval hearing on the Proposed Settlement has been set for
Station Casinos, Inc. reached a settlement for the derivative
action filed in the District Court of Clark County, Nevada
against it (as a nominal defendant only) and all of its
executive officers and directors. The suit also seeks status as
The lawsuit alleges that:
(1) the director defendants breached their fiduciary duties
by failing to make certain disclosures in the Company's
2002 Proxy Statement regarding the sale by the Company
of its subsidiary, Southwest Gaming Services, Inc.
(SGSI), and regarding a proposal seeking shareholder
approval of an amendment to the Company's stock option
plan;
in approving the sale of SGSI and in recommending
approval of the option plan amendment; and
(3) the purchasers of SGSI and the recipients of certain
benefits made possible by the option plan amendment
were unjustly enriched.
The plaintiff is requesting unspecified actual damages, as well
as injunctive and other relief.
On July 21, 2003, the defendants filed a motion to dismiss or,
in the alternative, motion to stay all of the plaintiff's
claims. On October 24, 2003, the District Court granted the
motion to stay all of plaintiff's claims pending the
consideration of such claims by a special litigation committee
to be formed by the Company in accordance with the Court's order
granting such motion. On February 27, 2004, the District Court
entered another order extending the stay for another 120 days
pending the special litigation committee investigation.
On July 9, 2004, the parties entered into a Stipulation of
Settlement. Pursuant to the Proposed Settlement and subject to
District Court approval, the parties have agreed that the
Company will adopt new language in its Corporate Governance
Guidelines, which specifically relates to "interested director
transactions," and pay the plaintiff's attorneys' fees and
expenses in exchange for the plaintiff dismissing the lawsuit
(including all claims held by the Company and the members of the
certified class), with prejudice. The Proposed Settlement
stipulates that the Company denies any liability with respect to
the plaintiff's claims. A final settlement hearing on the
Proposed Settlement has been set for September 13, 2004.
More than 100 textile importers filed lawsuits against the
cotton checkoff program of the Cotton Research and Promotion Act
contending that it forces them to finance promotions against
their will, the Commercial Appeal reports.
The checkoff program collects about $2.35 for every bale of
cotton raised or sold in the United States. The proceeds, $66
million this year, promote the sale of U.S. cotton worldwide and
fund research to improve cotton production and textile
manufacturing. The program is administered by the Memphis-based
Cotton Board, which contracts with Cotton Inc. to carry out the
research and advertising campaigns.
According to Bill Weaver, an Arkansas producer and chairman of
Cotton Inc., "We've always thought we've done a good job for
everybody. We've never been partial to any group. We think it's
made everybody money and kept a lot of people in business."
Most of the money raised through the program comes from the
23,000 U.S. cotton producers that contribute about two-thirds of
the total while the remainder comes from 6,000 to 8,000
importers most of which are U.S.-based firms, including retail
juggernaut Wal-Mart Stores.
Although Wal-mart has not yet filed a suit, others like Cricket
Hosiery have, branding the checkoff program as being
unconstitutional since it impinges on their First Amendment
Bill Crawford, president and CEO of the Cotton Board told AP,
"I'm certain one of these complaints has asked for a class
action suit."
Legal experts described the argument as a mimic of the issue
disgruntled beef producers in North Dakota raised and won
against the beef checkoff, which is to be heard in the U.S.
Supreme Court this fall. Both parties in the cotton cases have
agreed to a stay until a verdict is issued in the beef case.
UICI and certain of its officers and current and former
directors face several class actions filed in the Texas federal
courts, alleging violations of federal securities laws.
Four suits are pending in the United States District Court in
Texas, namely:
(1) Dolores Miele, on behalf of herself and all others
similarly situated, v. UICI, Gregory T. Mutz, Ronald L.
Jensen, et al, filed on May 26, 2004 and pending in the
United States District Court, Northern District of
Texas, Dallas Division as Case No. 3-04-CV-1149-P;
(2) Lois Johnston, v. UICI, Gregory T. Mutz, Ronald L.
Jensen, et al, filed on June 3, 2004 and pending in the
United States District Court for the Northern District
of Texas, Fort Worth Division, as Case No. 04-CV-418-Y;
(3) Mohammad A. Chaudhry, individually and on behalf of all
others similarly situated, v. UICI, Inc., Gregory T.
Mutz, Ronald L. Jenson, et al, filed July 1, 2004 and
pending in the United States District Court for the
Northern District of Texas, Fort Worth Division, as
Case No. 04-CV-484-Y; and
(4) Ronald Antosko v. UICI, Gregory T. Mutz, Ronald L.
Jenson, et al, filed July 20, 2004 and pending in the
of Texas, Dallas Division, as Case No. 304CV1575-D
In each of the cases, plaintiffs, on behalf themselves and a
purported class of similarly situated individuals have alleged
that, among other things, the Company failed to disclose all
material facts relating to the condition of its former AMS
subsidiary, in violation of Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 thereunder.
UICI has also been named as a nominal defendant in two
shareholder derivative suits arising out of the July 2003 AMS
announcement - "Bodenhorn v. Gregory T. Mutz, Ronald L. Jensen,
et al, filed June 15, 2004 in the District Court of Tarrant
County, Texas, Case No. 048-206108-04;" and "Suprina v. Gregory
T. Mutz, Ronald L. Jensen, et al, filed June 15, 2004 in the
District Court of Tarrant County, Texas, Case No. 352-206106-
04)."
In each of the cases, the plaintiffs seek a recovery on behalf
of UICI and have alleged that the individual defendants violated
Texas state law by concealing the true condition of Academic
Management Services Corp. prior to the July 2003 announcement.
Final fairness hearing for the settlement of the consolidated
securities class action filed against UICI, The MEGA Life and
Health Insurance Company (MEGA) and UICI Marketing, Inc. is set
for October 5,2004, in the United States District Court for the
Northern District of Texas, Dallas Division.
A purported nationwide class action suit was filed on October
30, 2003 in the United States District Court for the Northern
District of Mississippi, Eastern Division, styled "Eugene A.
Golebiowski, individually and on behalf of others similarly
situated, v. MEGA, UICI, the National Association for the Self-
Employed, et al."
Plaintiff alleged, among other things, that the relationship
between the Company, MEGA, and the National Association for the
Self-Employed (the "NASE") constitutes an improper marketing
scheme devised by the defendants to sell insurance and that the
"scheme" involves the non-disclosure of relationships between
the defendants, the undisclosed transfer of association
membership dues and fees to the Company, and the utilization of
"teaser rates" that are artificially low and established at an
amount below that which would be actuarially recommended.
Plaintiff, individually and on behalf of similarly situated
class members, asserted several causes of action, including
fraudulent concealment, breach of contract, common law liability
for non-disclosure, breach of fiduciary and trust duties, civil
conspiracy, unjust enrichment, and violation of state deceptive
and trade practice acts. Plaintiff seeks declaratory judgments,
injunctive, and other equitable relief.
The Company, MEGA and Mid-West National Life Insurance Company
of Tennessee ("Mid-West") were also named as defendants in an
action filed on April 22, 2003, styled "Lacy v. The MEGA Life
and Health Insurance Company, et al." in the Superior Court of
California, County of Alameda, Case No. RG03-092881. Plaintiff,
purportedly on behalf of the "general public" of California,
alleged that all of the defendants are under common control and
operate as a unified business arrangement established for the
purpose of, among other things, generating profits through
association dues and bypassing and circumventing more stringent
state insurance regulations applicable to other California
insurance companies.
Plaintiff further alleged that defendants have knowingly and
intentionally failed to disclose the common ownership and
control of the defendant group, the amount and character of
association dues, administrative fees, and costs of obtaining
insurance from MEGA and Mid-West, and that initial premium rates
are below the amount actuarially calculated for the purpose of
inducing purchases of MEGA and Mid-West policies. Plaintiff
asserted that defendants' actions constitute a violation of
California Business and Professions Code § 17200, for which
plaintiff and the California general public are entitled to
injunctive, disgorgement, and monetary relief in an unspecified
The Judicial Panel on Multi-District Litigation subsequently
transferred the "Lacy" and "Golebiowski" cases to, and such
cases are currently pending in, the United States District Court
for the Northern District of Texas, Dallas Division, styled "In
re UICI "Association Group" Insurance Litigation, MDL Docket No.
1578."
On May 14, 2004, the Company, MEGA, and Mid-West executed a
definitive Stipulation of Settlement and Release agreement
contemplating, among other things, the full and final settlement
of the "Golebiowski" and "Lacy" cases. Pursuant to the terms of
the settlement, MEGA and Mid-West have agreed to include
enhanced disclosures in their marketing and sales materials with
respect to the contractual relationships between UICI and the
insurance companies, on the one hand, and the associations, on
the other hand, and MEGA and Mid-West have also agreed to enter
into an injunction with respect to certain business practices.
In addition, members of a to-be-certified nationwide class of
current and former MEGA and Mid-West insureds and current and
former members of the associations will be entitled to relief in
the form of free insurance coverage for a period of months under
a personal accident policy to be issued by a UICI subsidiary
(covering, among other things, accidental death and out-patient
and hospital costs incurred as a result of specified accidents)
and discounts on association membership fees. The settlement
also contemplates the payment of attorneys' fees to counsel for
the plaintiffs' class. The proposed settlement does not
contemplate a release of specific claims by individuals for
insurance coverage benefits.
On July 6, 2004, the Court issued an order granting conditional
certification of the nationwide settlement class, confirming
appointment of class counsel and granting preliminary approval
of the proposed settlement. Notice of the settlement was mailed
to members of the plaintiff class and published on August 2,
2004. The settlement of the to-be-certified class action
litigation remains subject to the final approval of, and
granting of a final judgment by, the United States District
Court for the Northern District of Texas.
The class action filed against UICI and The MEGA Life and Health
Insurance Company, styled "Diaz v. The MEGA Life and Health
Insurance Company, UICI, et al." has been removed to the United
States District Court for the Central District of California.
The suit, initially filed in the Superior Court for the State of
California, County of San Bernardino, Rancho, as Case No. RCV-
080379, alleges, on behalf of themselves and as representatives
of all other policyholders of MEGA in California, that the
defendants are engaged in an illegal and fraudulent marketing
scheme in violation of California common law and the California
Business and Professions Code 17200. Plaintiffs also have
alleged that defendants:
(1) maintain NASE to illegally avoid premium rate
(2) fail to issue insurance coverage to members of the NASE
on a guaranteed issue basis in violation of California
law, and
(3) rescind certificates in violation of California law
Plaintiffs seek injunctive relief and monetary damages in an
Insurance Company for violations of California unfair trade
practices law has been removed to the United States District
court for the Central District of California.
The suit, styled "Joyce, et al. v. UICI, MEGA, the National
Association for the Self-Employed, et al." and initially filed
in the Superior Court for the State of California, County of Los
Angeles as Case No. BC315580, alleged that defendants breached
the implied covenant of good faith and fair dealing and
committed fraud, professional negligence, and negligent
misrepresentation. In addition, Plaintiffs have alleged, on
behalf of themselves and persons similarly situated in the state
of California, that defendants violated the unfair competition
restrictions of California Business and Professions Code 17200.
The District Court of Starr County, Texas, 381st Judicial
District dismissed with prejudice the class action filed against
UICI and The MEGA Life and Health Insurance Company, on behalf
of its customers.
The suit, styled "Garcia v. UICI, et al.," asserted, among other
things, that MEGA, the NASE Group Trust, and the NASE are under
common control and ownership and operate as a "unified business
arrangement" that is used solely for the purpose of generating
profits through association dues and avoiding state insurance
regulations. Plaintiffs alleged that defendants have used false
and deceptive advertising and sales practices in connection with
the sale of insurance in Texas in violation of the Texas
Insurance Code, and plaintiffs further alleged conversion and
breach of contract, for which they asked for a return of all
association dues and administrative fees collected by the
On May 13, 2004, the Company agreed, without acknowledging any
fault, liability or wrongdoing of any kind, to settle the
"Garcia" case, on terms that did not have a material adverse
effect on the Company's financial condition or results of
The Judicial Panel for Multidistrict Litigation (JPMDL)
transferred the class action filed against UICI, The MEGA Life
and Health Insurance Company, and UICI, styled "Tremor v. The
MEGA Life and Health Insurance Company, et al." to the United
States District Court for the Northern District of California.
The suit, initially filed in the Circuit Court of Saline County,
Arkansas, alleges that the defendants knowingly misrepresented,
among other things, the relationships of defendants, and brings
claims for fraudulent concealment, breach of contract, common
law liability for actual and punitive damages for non-
disclosure, breach of fiduciary and trust duties, civil
conspiracy, unjust enrichment, violation of the Arkansas
Deceptive Trade Practices Act, and declaratory and injunctive
The "Tremor" case was removed to the United States District
Court for the Eastern District of Arkansas, Western Division on
February 23, 2004. On April 23, 2004, the Judicial Panel on
Multi-District Litigation issued an order transferring the
matter to the United States District Court for the Northern
District of Texas for coordinated pretrial proceedings in the
"In re UICI `Association Group' Insurance Litigation, MDL Docket
No. 1578."
The Judicial Panel on Multidistrict Litigation (JPMDL)
and Health Insurance Company and UICI Marketing Inc., styled
"Jessie Powell v. The MEGA Life and Health Insurance Company, et
al.," to the United States District Court for the Northern
The suit, initially filed in the Circuit Court of Phillips
County, Arkansas, Case No. CV 2004-106," alleges that the
defendants knowingly misrepresented, among other things, the
relationships of defendants, and brings claims for fraudulent
concealment, breach of contract, common law liability for actual
and punitive damages for non-disclosure, breach of fiduciary and
trust duties, civil conspiracy, unjust enrichment, violation of
the Arkansas Deceptive Trade Practices Act, and declaratory and
injunctive relief.
The "Powell" case was removed to the United States District
Court for the Eastern District of Arkansas, Eastern Division on
May 11, 2004. On July 1, 2004, the Judicial Panel on Multi-
District Litigation issued a conditional transfer order
transferring the matter to the United States District Court for
the Northern District of Texas for coordinated pretrial
proceedings in the "In re UICI `Association - Group' Insurance
Litigation, MDL Docket No. 1578."
UICI and Mid-West National Life Insurance Company of Tennessee
face five pending consumer fraud class actions in Idaho state
court, namely:
(1) Skinner, et al. v. Mid-West, UICI, et al., pending in
the District Court for the County of Lemhi, Idaho;
(2) Hansen v. Mid-West, UICI, et al., filed in the District
Court for the County of Lemhi, Idaho;
(3) Petersen, et al. v. Mid-West, et al., filed on August
2, 2002,in the District Court for the County of Twin
Falls, Idaho;
(4) Murphy, et al. v. Mid-West, et al., filed in the
District Court for the County of Twin Falls, Idaho;
(5) Graybeal, et al. v. Mid-West, et al., filed in the
District Court for the County of Twin Falls, Idaho
Plaintiffs in the Skinner and Hansen cases allege that the
insurance products they purchased were more expensive and
provided less coverage than represented by the agent who sold
the policies, and that they have not been paid on health claims
submitted pursuant to those certificates. Plaintiffs in Skinner
and Hansen claim damages, including punitive damages, and
attorneys' fees. The Company moved for partial summary judgment
with respect to plaintiffs' breach of contract and bad faith
claims in both cases. The Court ruled in favor of the Company,
and dismissed those claims with prejudice.
Mid-West filed a motion in Skinner to dismiss plaintiff Judy
Skinner for lack of standing to assert the claims alleged in the
Complaint. The Court granted this motion with respect to the
breach of contract and bad faith claims and denied the motion
with respect to the fraud and intentional infliction of
emotional distress claims. Mid-West filed a motion for partial
summary judgment in Hansen based on similar standing arguments.
The Court denied the motion. Discovery has commenced in each
case. The Skinner case is scheduled for trial in October 2005,
and trial in Hansen is scheduled to commence in August 2005.
Plaintiffs in Peterson, Murphy, and Graybeal have alleged, among
other things, that the Mid-West certificates that they purchased
were of a lesser quality than represented, and that they have
not been paid for certain claims submitted under the
certificates. Plaintiffs in Peterson purport to represent a
class of similarly situated persons. Plaintiffs in each of the
actions claim damages, including punitive damages, and
attorneys' fees. The Idaho Supreme Court has ruled that the
Murphy plaintiffs were not required to arbitrate their disputes
with Mid-West. Discovery has commenced in these cases. The
trial in Peterson is scheduled to begin in July 2005, and the
trial in Graybeal is scheduled to begin in January 2006. The
trial date has been set in Murphy for December 14, 2004.
The law firm of Fraser Stryker Meusey Olson Boyer & Bloch, P.C.
initiated a class action lawsuit, Olsen et al. v. Clark et al.,
in the United States District Court for the District of Nebraska
against Clark Bros. Transfer, Inc., and certain of its former
officers and directors on behalf of all individuals in the
United States who are or were participants and beneficiaries of
the Clark Bros. Transfer, Inc. Employee Stock Ownership Plan and
Trust ("ESOP") from and after 2002, with the exception of named
defendants James D. Clark, J. DeYonge, and Stuart Kutler.
("Class Period").
The Complaint alleges that during the Class Period, Defendants
James D. Clark, Grant J. DeYonge and Clark Bros. Transfer, Inc.
violated Sections 10(b) and 20(a) of the Exchange Act and Rule
10b-5 promulgated thereunder by making a series of materially
false and misleading statements and/or omitting to state
material facts necessary to make the statements not misleading
about Clark Bros.' business operations, future prospects and
valuation in an effort to maintain artificially low prices for
Clark Bros.' securities and to cause the former participants in
the ESOP to sell their company stock to Clark Bros. at
artificially low or deflated prices. Specifically the Defendants
misrepresentations and/or omissions included the following:
(1) Defendants causing the termination of the ESOP for the
purpose of acquiring sufficient ownership interest to
allow for the sale of Clark Bros. without the knowledge
or consent of the ESOP or the plan participants; and
obtaining for their benefit the value of the shares of
the Company Stock held by the ESOP upon the sale of the
(2) Defendant Clark failing to disclose to the ESOP plan
participants that he either had or intended to enter
into negotiations for the sale of Clark Bros.
(3) Defendant Clark failing to disclose to Ameritas prior
to completion of the 2003 Valuation that he either had
or intended to enter into negotiations for the sale of
Clark Bros.
(4) Defendants providing misleading and incomplete
information to the ESOP plan participants prior to
their election to sell or put their shares of Company
Stock to Clark Bros. at the price set forth in the
valuation prepared in 2003 (the "2003 Valuation") or
hold their shares of Company Stock.
(5) Defendants telling the ESOP plan participants that
there would be no market for their shares of Company
Stock after the expiration of the second put option
when a market for their shares would have existed upon
sale of the Company Stock.
(6) Defendant Clark telling the ESOP plan participants that
Clark Bros. currently was not for sale and that whether
Clark Bros. ever would be sold was uncertain when Clark
already had been approached about the sale of all of
the Company Stock.
(7) Defendants telling the ESOP plan participants that any
decision to sell or retain the Company would be made by
the Board of Directors and the Clark family as the
controlling shareholders of Clark Bros. when any such
sale would have required the approval of at least some
of the ESOP plan participants.
(8) Defendants causing the ESOP plan participants to sell
their shares of Company Stock to Clark Bros. for less
than adequate consideration.
(9) Defendants failing to disclose that the purchase price
of the shares did not represent the actual fair market
value of the shares of Company Stock held by the ESOP
as of December 31, 2002 or at the time the ESOP plan
participants elected to put their shares of Company
(10) Defendants failing to disclose to the ESOP plan
participants the voting rights that they would have
been able to exercise in connection with any merger of
Clark Bros. or sale of substantially all of its assets.
(11) Defendants failing to disclose that, prior the
repurchase of stock by the Company, the ESOP plan
participants had sufficient voting shares to prevent
the merger or sale of substantially all of the assets
of Clark Bros.
(12) Defendants relying upon the 2003 Valuation when they
knew or should have known that it did not reflect the
true fair market value of the shares of Company Stock
and without questioning the accuracy of the Valuation.
For more details, contact Michael F. Coyle or Roger
Shiffermiller of Fraser Stryker Meusey Olson Boyer & Bloch, P.C.
by Mail: 500 Energy Plaza, 409 S. 17 Street, Omaha, NE 68102 by
Phone: 402-341-6000 or by E-mail: mcoyle@fslf.com or
rshiffermiller@fslf.com
The law firm of Cohen, Milstein, Hausfeld, & Toll, P.L.L.C.
initiated a lawsuit on behalf of purchasers of Primus
Telecommunications Group, Inc. (Nasdaq:PRTL) ("Primus" or the
"Company") securities between August 5, 2003, and July 29, 2004,
inclusive (the "Class Period"). The Complaint seeks to pursue
remedies under the Securities Exchange Act of 1934 against
Primus and certain of its officers and directors in the United
States District Court for the Eastern District of Virginia.
The complaint alleges that the defendants repeatedly announced
improving financial results throughout the Class Period, touting
their "record" results. Defendants also continued to affirm the
Company's financial projections and assured investors that
Primus would meet its earnings targets. However, the Complaint
alleges that these representations were false and misleading,
and allowed the Company to raise significant needed funds
through bond offerings and allowed Company insiders to profit by
selling their own Primus shares.
On July 29, 2004, following the close of the markets, defendants
announced that rather than meeting the 10 cents per share profit
that Wall Street had estimated, in fact the Company incurred a
second-quarter loss of $14.9 million or $0.17 per share. On this
news, Primus shares lost more than half of their value, closing
down 53% on enormous volume.
For more details, contact Steven J. Toll, Esq. or Robert Smits
of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. by Mail: 1100 New
York Avenue, N.W. West Tower - Suite 500, Washington, D.C. 20005
by Phone: 888-240-0775 or 202-408-4600 by E-mail: stoll@cmht.com
or rsmits@cmht.com
The law offices of Charles J. Piven, P.A. commenced a securities
class action on behalf of shareholders who purchased, converted,
exchanged or otherwise acquired the common stock of Synopsys,
Inc. (Nasdaq:SNPS) between December 3, 2003 and August 18, 2004,
Northern District of California. The action charges that
defendants violated federal securities laws by issuing a series
of materially false and misleading statements to the market
throughout the Class Period, which statements had the effect of
artificially inflating the market price of the Company's
securities. No class has yet been certified in the above action.
For more details, contact the law offices of Charles J. Piven,
P.A. by Mail: The World Trade Center-Baltimore, 401 East Pratt
Street, Suite 2525, Baltimore, MD 21202 by Phone: 410/986-0036
or by E-mail: hoffman@pivenlaw.com
The law offices of Brian M. Felgoise, P.C. commenced a
securities class action on behalf of shareholders who acquired
TECO Energy, Inc. (NYSE: TE) securities between October 30, 2001
and February 4, 2003, inclusive (the Class Period).
Middle District of Florida, against the company and certain key
officers and directors.
The action charges that defendants violated the federal
securities laws by issuing a series of materially false and
misleading statements to the market throughout the Class Period
which statements had the effect of artificially inflating the
market price of the Company's securities. No class has yet been
certified in the above action.
For more details, contact Brian M. Felgoise, Esq. by Mail: 261
Old York Road, Suite 423, Jenkintown, PA 19046 by Phone:
(215) 886-1900 or by E-mail: FelgoiseLaw@aol.com
The law offices of Charles J. Piven, P.A. initiated a securities
exchanged or otherwise acquired the common stock of Wet Seal,
Inc. (Nasdaq:WTSLA) between January 8, 2004 and August 19, 2004,
Central District of California. The action charges that
The law firm of Schatz & Nobel, P.C. initiated a lawsuit seeking
class action status in the United States District Court for the
Southern District of New York on behalf of all persons who
purchased the securities of World Information Technology Inc.
(OTC: WRLT) ("World Information Technology") between January 3,
2003 and March 16, 2004 (the "Class Period").
The Complaint alleges that during the Class Period World
Information Technology reported artificially inflated sales,
accounts receivable and net income. The truth was partially
revealed when their outside auditor, Beckstead & Watts, LLP,
resigned in January, 2004. Then, on March 16, 2004, the
Securities and Exchange Commission temporarily suspended trading
of World Information Technology securities due to the inaccuracy
and incompleteness of its financial statements.
For more details, contact Wayne T. Boulton of Schatz & Nobel,
P.C. by Phone: (800) 797-5499 by E-mail: sn06106@aol.com or
visit their Web site: http://www.snlaw.net
asbestos defendants that, according to independent researches,
USA. Glenn Ruel Se�orin, Aurora Fatima Antonio and Lyndsey
Resnick, Editors.