DONOVAN SEARLES, LLC
The following are descriptions of cases that have been handled by DONOVAN SEARLES.
Williams vs. Empire Funding, et al.
Cendant Securities Litigation Cendant, a direct marketing
Company, was formed by the $14 billion merger of HFS Inc. and CUC on December
17, 1997. On April 15, 1998 Cendant stunned the investing public
by disclosing that it had discovered "accounting irregularities" at certain
former CUC divisions which are part of Cendant’s Alliance Marketing Division.
The Company said it would be restating its annual and quarterly net income
and earnings per share for 1997 and was also investigating further "accounting
irregularities" at CUC for fiscal years 1995 and 1996. The effect
on 1997 results is expected to be a reduction to net income of approximately
$100 to $115 million and earnings per share by about 11 to 13 cents, respectively.
On the release of these revelations
the price of Cendant common stock dropped dramatically, falling over 50%
from $35.625 to $17.50 on extraordinarily heavy volume. Prior to
the shocking disclosures described above, defendants Walter A. Forbes and
Henry R. Silverman sold 2 million shares of their own stock at prices as
high as $38.25 to reap proceeds of over $72,804,000. The complaint
alleges, inter alia, that during the Class Period, defendants engaged in
a course of conduct that was designed to, and did:
HARRIS v. GREENTREE FINANCIAL
Rockefeller Center Properties Securities Litigation The principal claims in the case are that defendants
misrepresented the fairness of the Buyout by (i)
failing to disclose the planned sale of the NBC
lease hold to GE/NBC; (ii) misrepresenting the
possibility that such a sale would or could occur
within two years after the Buyout; (iii)telling half-truths
about an alternative to the Buyout in which RCPI would have
more than enough cash to own and operate Rockefeller Center on
its own; (iv) misrepresenting the viability of the alternative to the Buyout, a
rights offering to raise $200 million for RCPI; (v) omitting any disclosure of
the ownership, control, value and adverse interests in the
development rights; and (vi) misrepresenting the likely
cash flow of RCPI by failing to disclose expected rent
increases from new, Class A tenants at Rockefeller Center.
Among the issues addressed in plaintiffs' opposition
brief are whether defendants' alleged omissions and
misstatements were "material" to the RCPI shareholders
whose proxies defendants had solicited; whether defendants
had a duty to fully and accurately disclose the facts and plans
plaintiffs contend were omitted or misstated during the proxy
solicitation; whether defendants acted with knowledge or
recklessness in omitting or misstating the important facts;
and whether certain of the background and contextual facts
contained in plaintiffs' amended complaint are relevant to
the subject matter of the claims and, therefore, may not be
stricken from the complaint.
To assist the Court in analyzing the claims, plaintiffs included with
their brief a Timeline, reproduced below, illustrating the
more significant events relating to plaintiffs' claims.
Lemelledo v. Beneficial Management Corp. of America
The ruling came in a case brought by Jeanne C. Lemelledo in 1994 on
behalf of herself and all other Beneficial customers who had been
tricked into paying for credit insurance products included with
their loans from Beneficial. Ms. Lemelledo alleged that
Beneficial's practice of pre-completing the loan forms so
as to include the unwanted and unrequested insurance created
the impression that such insurance was required in order for
the consumer to obtain the loan. She also alleged that Beneficial
receives undisclosed "kickbacks" or commissions from selling the
insurance, but nevertheless charges consumers amounts which do not
reflect the actual amounts paid for the insurance. Beneficial
contended that it was immune from Ms. Lemelledo's Consumer Fraud Act
claims because it was regulated by the state's insurance and banking
departments. The trial court agreed with Beneficial and dismissed those claims.
On appeal, however, New Jersey's intermediate appellate court reversed the
trial court and reinstated the claims. The Supreme Court affirmed that
decision. Michael D. Donovan argued the case for Ms. Lemelledo
before the Supreme Court.
Advanta Securities Litigation
Donovan Searles is one of the lead counsel in this home improvement
financing class action filed on behalf of consumers deceived by a two-contract
sales and financing scheme allegedly perpetrated by a now defunct Pittsburgh-based
contractor and a national subprime lender headquartered in Austin, Texas.
According to the Complaint, which is filed in the United States District
Court for the Eastern District of Pennsylvania, the defendants engaged
in a plan, scheme and common course of conduct to market home improvement
goods and services as well as financing in a manner that circumvented the
consumers' right to rescind the transactions and misrepresented the services
and financing as sponsored by a government program. The Complaint
further alleges that the work performed on customers' homes was uniformly
deficient, incomplete or not performed in a workmanlike manner as promised.
In addition, consumers were subjected to harassing debt collection tactics
and unlawful debt collection letters. On behalf of herself and over
300 class members, plaintiff seeks an order declaring that consumers may
now rescind the transactions, may void the loans and the secondary mortgages
on their homes, obtain compensatory and treble damages and other legal
and equitable relief. Plaintiff's motion for certification of the
class has been fully briefed and is now pending before the Court.
Donovan Searles is one of several firms that have filed a securities
class action in the United States District Court for the District of New
Jersey on behalf of purchasers of the common stock of Cendant Corp. ("Cendant")
who purchased shares of Cendant or its predecessors, CUC International,
Inc. or HFS, Inc. between May 28, 1997 and April 15, 1998, inclusive.
The Complaint charges Cendant and certain of its officers and directors
with violations of the federal securities laws and alleges that defendants
issued false and misleading financial statements because the Company materially
misstated its revenues and expenses, among other things, thereby materially
misstating its earnings.The Complaint charges Cendant and certain officers
and directors of the Company during the relevant time period with violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 for
misrepresenting material information concerning Cendant’s financial condition
and earnings throughout the Class Period.
In this consumer class
action alleging unfair and deceptive home improvement
sales and financing practices, Donovan Searles has taken
the lead in attacking as unfair and unconscionable a one-sided
arbitration clause included on the back of the uniform loan
financing contracts used by Greentree Financial. In July 1997,
Michael Donovan argued on behalf of the consumers in the case
in opposition to defendants’ motion to enforce the arbitration
clause. On December 19, 1997, the United States District Court
for the Eastern District of Pennsylvania agreed with the plaintiffs
and found the arbitration clause to be unconscionable and
unenforceable. Defendants have since appealed that ruling.
In addition, on January 18, 19 and 20, 1998, The Philadelphia
Inquirer ran a series of investigative reports on its front page detailing
many of the problems, scams and unlawful practices in the Title
I loan program, some of which were first reported by the
plaintiffs’ class action complaint in this case. Donovan
Searles is handling similar claims on behalf of consumers
against other financial institutions.
As co-lead counsel in this multimillion dollar class action alleging
violations of the securities laws in connection with a freeze-out merger
of the public shareholders of this REIT, Donovan Searles took the
lead in preparing plaintiffs' opposition to defendants' motion to dismiss.
The opposition brief was filed with the U.S. District Court for the District
of Delaware, where the consolidated case is pending, on July 9, 1997.
Among other things, plaintiffs allege that defendants misrepresented
the fairness of an $8.00 per share buyout approved by the REIT's
shareholders after a proxy solicitation that culminated in a
March 25, 1996 special meeting at which a majority of the
publicly held shares were voted in favor of the buyout. In
connection with the proxy solicitation, plaintiffs allege that
defendants misrepresented and omitted to state material facts
bearing on whether the stockholders should approve the proposed
Buyout and whether the $8.00 per share offer was, in fact, fair
to the stockholders in light of the value, prospects, assets and
planned transactions for the landmark Rockefeller Center. Among
the most significant facts omitted by defendants was the planned sale of
about 20 percent of the Property to one of the major tenants of
Rockefeller Center, the National Broadcasting Company ("NBC")
and its parent, General Electric Co. ("GE"), for $440 million,
implying a value for the entire Rockefeller Center of approximately
$2.2 billion. That sale was formalized just twenty eight (28) days
after a majority of RCPI's public shareholders had accepted the
strong recommendations of defendants and voted to accept the $8.00
per share, which, in striking contrast, implied a value for Rockefeller
Center of only $1.2 billion.
New Jersey Supreme Court decision, 150 N.J. 255, 696 A.2d 546 (N.J. 1997).
New Jersey Supreme Court holds that New Jersey Consumer Fraud Act
Applies to even "highly regulated" industries such as banking and
insurance. In a landmark decision for consumers, the New Jersey
Supreme Court has held that the state's consumer protection laws
apply to even "highly regulated" industries, such as banking and
insurance. The unanimous, 24 page decision was issued in a class
action charging Beneficial Consumer Discount Company, a subsidiary
of Beneficial Finance, with illegally "packing" high-interest rate
consumer loans with unwanted, unrequested and unnecessary insurance
products such as credit life insurance, credit disability insurance
and credit property insurance, Lemelledo v. Beneficial Management Corp.
of America, No. A-107-96. The decision appears to reverse a trend
in the lower state and federal courts in New Jersey that had exempted
certain companies, particularly insurance companies and utilities,
from many claims of deception by consumers.
Donovan Searles is one of several law firms representing
plaintiffs in a federal securities class action filed against this
financial services and credit card holding company. The first-filed
case, captioned Poppel v. Advanta Corp, et al., No. 97- 4343, is
pending before Judge Ronald L. Buckwalter of the U.S. District Court
for the Eastern District of Philadelphia. Among other things,
plaintiffs allege that defendants omitted to state the known impact
of a change in accounting method adopted by Advanta in the third
quarter of 1996. Although that change enabled Advanta to continue
the appearance of increasing earnings and return on equity ratios in
1996, defendants allegedly knew, but failed to disclose, that the
change would also result in a reported loss for the first quarter of
1997. On March 17, 1997, Advanta shocked the market by reporting its
first quarterly loss in the last 23 quarters. As a result, its stock
price plummeted, causing substantial damages to all investors who had
purchased Advanta stock since approximately September 16, 1996, which
is the beginning of the alleged class period, according to the Complaint.
The Complaint also alleges that in December 1996, several of Advanta's
top management sold significant amounts of their personal holdings of
Advanta stock while in possession of material, nonpublic information
concerning the probable impact in the first quarter of 1997 of the
change in accounting for bankrupt credit card accounts.
