National Legal Briefs (Tampa edition)

Judge orders Gates

to give deposition

Microsoft Corp. Chairman Bill Gates must submit to questioning under oath by lawyers for Burst.com Inc. and Sun Microsystems Inc. as they prepare antitrust claims against the world's largest software maker, a U.S. judge ruled.

U.S. District Judge J. Frederick Motz in Baltimore ordered Gates to undergo the pretrial questioning for three hours. Burst.com has sued Microsoft, accusing the company of breaking antitrust laws to prevent competition for software used to broadcast sound and audio programs over the Internet.

Motz noted that a federal appeals court has limited use in private suits against Microsoft of evidence from the government's antitrust case against the company. So lawyers for Sun and Burst must be able to prepare their own evidence, he said.

"It seems to me you ought to be able to depose Mr. Gates or anybody else deposed by the government as much as you want to," Motz told Lloyd Day, who represents Sun Microsystems.

Motz accepted Burst's argument that Gates "is no Lee Iacocca" and should be forced to answer questions about allegations Microsoft illegally stifled competition.

Iacocca, when he headed Chrysler Corp., was excused from being questioned under oath in a product-liability lawsuit after arguing he wasn't personally responsible for the alleged design flaws in cars that were at issue in the case.

Motz also ordered Microsoft to produce a witness to tell Burst when and why it decided to destroy e-mails. Burst lawyer Spencer Hosie said gaps in producing documents as part of pretrial preparation shows that "this is a company that has simply destroyed e-mails in anticipation of litigation."

A U.S. appeals court in Richmond held that only critical factual findings in the government's antitrust case against Microsoft that showed the company illegally protected its Windows monopoly could be submitted as uncontested evidence in the suits by Burst, based in Santa Rosa, Calif., and Sun Microsystems of Santa Clara, Calif.

Sun's lawsuit, seeking billions in damages, charges that Redmond, Wash.-based Microsoft harmed its business by stifling distribution of its Java programming language. Burst accuses Microsoft of stealing its patented technology for sending video and audio broadcasts on the Internet and using its monopoly to stifle competition.

Johnson & Johnson to settle

suits over heartburn drug

Johnson & Johnson, the world's fourth-biggest drugmaker, said it will pay as much as $90 million to settle lawsuits that claimed the company's Propulsid heartburn drug caused health problems.

The drugmaker also will establish an administrative fund not to exceed $15 million and will pay legal fees of as much as $22.5 million to a committee of plaintiffs' lawyers, New Brunswick, N.J.-based Johnson & Johnson said in a statement. Court approval of the settlement is required.

The company said about 4,000 people are included in federal cases. Another 12,000 people who have claims and haven't filed lawsuits "must agree to participate in the settlement before it will become effective."

Propulsid, which once had global sales of $1 billion, was sold from 1993 to 2000 and taken by over 10 million people. It's still available to patients under a limited-access program overseen by the Food and Drug Administration.

Plan to force company lawyers

to disclose fraud challenged

U.S. securities regulators should reject a plan that would require corporate lawyers to inform the government when they discover evidence of company fraud, lawyers told a congressional panel earlier this month.

The proposal before the Securities and Exchange Commission could "pit lawyer against the client, thus eroding the client's trust and confidence in its lawyer and interfering with the clients access to effective legal counsel," Stanley Keller, a partner at Boston's Palmer & Dodge, told the House Financial Services capital markets subcommittee in Washington.

The plan, known as "noisy withdrawal," is under staff review at the SEC, according to SEC spokesman John Nester. SEC officials proposed the idea of requiring lawyers to quit and tell regulators about corporate wrongdoing after financial scandals at companies, such as Enron Corp

Last year, while calling for further study of the noisy-withdrawal plan, the SEC approved a rule that lawyers at publicly traded companies must report misconduct to senior executives and board members. The American Bar Association and other groups said to require lawyers to go further and inform regulators about wrongdoing would violate lawyer-client confidentiality.

"If lawyers are viewed as in-house cops," Linda Madrid said on behalf of the Association of Corporate Counsel, "then the attorney-client relationship will have been undermined."

George M. Cohen of the University of Virginia School of Law said exemptions already exist to client confidentiality and the argument that the proposed rule "would suddenly result in clients not talking to their lawyers is untenable."

Louisiana Rep. Richard Baker, subcommittee chairman, said the noisy-withdrawal concept could create problems for executives getting legal advice. "I'm not sure that the rule as currently constructed is the right answer," Baker said. "But I do believe additional disclosures and higher standards of fiduciary responsibility are certainly appropriate."

Ohio Rep. Michael Oxley, chairman of the House Financial Services Committee, said the SEC "went beyond congressional intent" of the 2002 Sarbanes-Oxley corporate governance law.

Lawsuits: Home Depot deceived

consumers with credit program

Home Depot Inc., the world's largest chain of home-improvement stores, was sued by customers who claim the retailer's interest-free, deferred-payment credit promotions are deceptive.

A lawsuit filed last month in federal court in Baltimore and similar suits in California and Washington state accuse the company of engaging in a "pattern of racketeering activity" including mail and wire fraud. The consumers claim payments intended to reduce high-interest credit balances were instead applied to the interest-free balances.

"Home Depot defrauded consumers through their mishandling and misapplication of their payments," said lawyer Roy Katriel, who represents a consumer in the Maryland lawsuit, which seeks to represent a class of thousands of Home Depot customers.

Credit cards are big business for Home Depot, with its cards generating about 23% of all 2002 sales. In fiscal 2002, 3.3 million customers opened Home Depot credit accounts, bringing the total to 12 million.

Home Depot spokesman Jerry Shields declined comment and referred questions to Citigroup Inc.'s Citibank, which took over last year from General Electric Co.'s Monogram Bank as issuer of the cards. Citibank, not named in the lawsuits, said it has changed how payments are applied.

Home Depot attracts customers with promotions that offer no-interest and deferred payments on large purchases using a store credit card. For example, credit purchases exceeding $299 may require no payment and accrue no interest if the balance is paid off before the promotional period ends.

Subsequent smaller purchases made with the same card accrue interest and require monthly payments. The lawsuits say that when customers made their monthly payments to reduce high-interest revolving balances, the money was applied to the interest-free balances on which no payments were due. Interest on the balances not covered by the promotions was as high as 21%, the suits said.

- Bloomberg News Service