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The proposed $100 million settlement of the South Florida class action lawsuit against the Menorah Gardens funeral homes chain is in danger as a result of a judge’s refusal in West Palm Beach, Fla. to accept plea agreements in a criminal case against the company, according to representatives of the chain’s parent company, Houston-based Service Corporation International. But plaintiff attorneys in the class action say the company is crying wolf. Civil and criminal cases against SCI both concern the mishandling of remains by Menorah Gardens employees at cemeteries in Broward and Palm Beach counties. The settlement in the Broward class action was announced in December; the plea deal in the Palm Beach, Fla. criminal case was brought Wednesday before Circuit Judge Lucy Brown. Brown rejected the plea deal because it included no admission of guilt by the company. She gave prosecutors another 30 days to find a solution acceptable to her. In their arguments to the judge in defense of the arrangement, prosecutors and attorneys for SCI both warned that a guilty plea would endanger the company’s liability coverage and, as a result, its ability to fulfill the terms of the settlement in the class action. Assistant Statewide Prosecutor James Cobb hinted to the judge that a guilty plea might result in the company’s bankruptcy, according to news accounts. But later, he declined requests from the Miami Daily Business Review to discuss the case further. “There are so many pieces still on the table,” SCI spokesman Don Mathis said in an interview. “Loss of some insurance coverage is definitely a concern. As to bankruptcy, nobody’s talking about it. But long-term, anything could happen. “ A detailed description of the class settlement, originally scheduled for delivery to Broward Circuit Judge J. Leonard Fleet last week, will be presented Wednesday, Mathis said. Attorneys for the class action plaintiffs say that bankruptcy is an idle threat. They said the company knew that insurance coverage was already uncertain when they accepted the settlement. “This is a two-and-a-half billion dollar corporation,” said Miami lawyer Ervin Gonzalez, co-counsel to the class action plaintiffs. “They’ve already told their stockholders that they can absorb the losses regardless of insurance questions. The settlement is not contingent on insurance.” Ted Leopold, a Palm Beach Gardens, Fla. litigator who is co-counsel to a group of more than 60 families in the class action who plan to opt out of the settlement, agrees with Gonzalez, though the two are locked in a bitter dispute about the allocation of punitive damages in the settlement. “SCI is trying to spin Brown’s ruling,” Leopold said. “They would lose their insurance coverage if they take a guilty plea. But the company agreed to the $100 million at a time when its insurance carriers had already filed suit for declaratory judgment that would absolve them of liability.” Insurance law experts say that the language of tort liability policies varies. But they say that coverage typically extends to negligent acts only and that guilt in criminal cases indicates intent. Mathis confirmed that a portion of the company’s insurance status is in dispute with two carriers with whom mediation has failed. He said those companies have filed suit in Florida state court to void coverage and that SCI has filed countersuits in Texas to collect. He said other insurers had “paid or committed to pay.” When announcing the $100 million settlement last December, SCI declared it had “substantial face amount of insurance coverage” to handle the claims. The company said that as of Sept. 30 of last year, it had recognized reserves of $23 million for the Florida litigation. It also said it expected to recognize “additional litigation related expenses of approximately $77 million on a pretax basis in the fourth quarter of 2003.” Thus far, the prospect of a sizable settlement payout has left Wall Street unfazed. On Jan. 26, SCI stock hit a 52-week high of $7.29 a share. Earlier that month, Merrill Lynch upgraded the stock from “neutral” to “buy.” In trading Thursday, the shares changed hands at $6.82. Gonzalez seemed unfazed by the developments in the Palm Beach criminal case. “The insurance may be important,” he said. “But that’s not the judge’s concern. I would have done the same thing if I were her. The company has to pay the price.”

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