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               Tuesday, February 1, 2000, Vol. 2, No. 22


CIRCUIT CITY: Arbitration Term Barring Employees’ Suit Is Unenforceable
DOE RUN: Co-Defendant in MD Suit over Lead Paint in Housing
HMO: UnitedHealthcare Sued for Removing Children's Hospital from List
LSU: Ap Ct Says University’s Athletic Dept Knowingly Makes Gender Bias
MOBIL OIL: AOPA Says Fuel Contamination Compensation Package Is Flawed

MOBIL OIL: Aust Suit over Avgas by Aircraft Owners & Operators Begins
NET GAMBLING: WI Fd Ct Dismisses RICO Suit over Losses thru Credit Card
STATE BANK: Suit V Indian Bank over Payment of Bonds to Proceed in U.S.
SYNTHETIC STUCCO: NC Homeowners May Net Millions from 5 Major Makers
TIMBER COMPANIES: Sued in Florida over Migrant Farmworkers’ Wages

TOBACCO LITIGATION: Erie County in NY Prepares to Securitize Settlement
UNITED CONSUMER: Buying Club Not 'Enterprise' under Statute, IL Ct Says

* Rethinking Clayton Act's Treble Damages Provision in Antitrust Cases


CIRCUIT CITY: Arbitration Term Barring Employees’ Suit Is Unenforceable
Ramirez v. Circuit City Stores Inc., Supreme Court Case No. S085000

Case below: A085701; Cal.Ct.App., 1st Dist., Div. 1; 76 Cal.App.4th
1229, 90 Cal.Rptr.2d 916, 99 C.D.O.S. 9740

Petition filed: Jan. 11, 2000

Procedure: Petition for review after affirmance of judgment.

Question presented: Was a non-negotiable arbitration agreement that,
among other things, barred employees from bringing class actions against
their employer unconscionable and therefore unenforceable?

Facts: Robert Ramirez applied for work at the automotive department of a
store run by Circuit City Stores Inc. As part of his job application,
Ramirez was required to sign a "Circuit City Dispute Resolution

The agreement provided for mandatory and binding arbitration of any and
all claims brought by Ramirez against Circuit City which might arise out
of Ramirez's eventual employment with Circuit City. The agreement
provided for arbitration of all employment-related claims, including
claims arising from age discrimination, violation of civil rights or
violation of the Fair Labor Standards Act.

Ramirez was hired. He later filed a class action lawsuit against Circuit
City, alleging multiple violations of the Lab. Code, the Cal. Code of
Regulations, and the Bus. & Prof. Code. Specifically, Ramirez alleged
that Circuit City failed to pay its employees at least twice the minimum
wage despite requiring them to provide many of the tools used in the
installation process, that Circuit City required its employees to work
overtime but did not pay them overtime at the rate of one and one-half
times the minimum wage, and that Circuit City was misreporting the
statements of gross and net earnings of its employees. Ramirez brought
the action on behalf of himself and all similarly situated Circuit City
employees. He sought restitution, statutory damages, injunctive relief
and attorneys fees.

Circuit City moved to compel arbitration, citing the arbitration
agreement executed by Ramirez.

The trial court denied the motion, finding the lawsuit was brought as a
class action and the arbitration agreement specifically excludes class
actions from its mandatory arbitration provisions. The court found
further that the agreement contravened California law to the extent that
it limited the rights conferred on employees by the Lab. Code. Finally,
the court found the agreement to be unconscionable.

The court of appeal affirmed, holding that arbitration agreement was
unenforceable as unconscionable. The court found the agreement to be
both procedurally and substantively unconscionable.

First, the contract was one of adhesion. Ramirez had no ability to
negotiate the terms of the agreement and no meaningful choice other than
to agree to the terms as stated, regardless of whether or not he even
understood them, if he wanted to apply for work with Circuit City. The
court rejected Circuit City's argument that Ramirez had the obvious
choice simply not to apply for work with Circuit City. The court found
Circuit City's contention ignored the realities of the marketplace. The
court found persons such as Ramirez, applying for an entry level
position, presumably need a job and lack much in the way of salable
skills. Circuit City was in a position to provide the needed job. The
court also found it unrealistic to suppose that persons such as Ramirez,
seeking work and applying for positions not requiring specialized
education, would have the background to understand the significance of
rights they were relinquishing. In these circumstances, the agreement
was procedurally unconscionable.

Further, the substance of the agreement was unconscionable. The terms
clearly favored Circuit City. Although employees were bound to arbitrate
all claims against Circuit City, Circuit City was not so limited with
regard to any claims it might have against an employee. The unilateral
nature of the agreement rendered it unconscionable.

The court found that the agreement also impermissibly limited the
ability of an employee to obtain relief against Circuit City by
participating in a class action. Further, the agreement subverted the
purpose of punitive damage awards by limiting such awards to a maximum
of $5000. Finally, the court found that the agreement tended to
discourage the prosecution of employee claims that are encouraged by
statute, by making discretionary awards of costs and attorneys fees that
by statute are mandatory and by making a complaining employee
potentially liable for Circuit City's costs and attorneys fees, a
liability not authorized by statute.

Counsel for petitioner Circuit City Stores Inc.: Rex Darrell Berry,
Davis Grimm Payne Marra & Berry, 1111 Third Ave., Ste. 1865, Seattle, WA
98101, 206-447-0182

Counsel for respondent Robert Ramirez: Joseph A. Creitz, Van Bourg,
Weinberg, Roger & Rosenfeld, 180 Grand Ave., Ste. 1400, Oakland, CA
94612 (California Supreme Court Service, January 21, 2000)

DOE RUN: Co-Defendant in MD Suit over Lead Paint in Housing
Doe Run Resources Corporation is one of several defendants in Cofield Et
Al. V Lead Industries Association, Inc., Et Al. filed on September 21,
1999 in the Circuit Court for Baltimore City, Maryland. This is a class
action seeking to certify as a class the owners of all housing in the
State of Maryland built prior to 1978 that has lead paint on the
premises. The complaint alleges that all defendants were members of Lead
Industries Association (LIA), a trade association, who improperly
promoted lead paint and seeks damages for paint removal for all such
housing in the state of Maryland. This suit also seeks punitive damages.

The Company, with several other defendants, was named in Smith Et Al. V.
Lead Industries Association, Inc. Et Al., filed on September 21, 1999 in
the Circuit Court for Baltimore City, Maryland. Defendants are the same
defendants named in the COFIELD case except that this is a suit for
personal injuries by children alleging lead poisoning from lead paint in
the family residence. The suit requests damages, including punitive

HMO: UnitedHealthcare Sued for Removing Children's Hospital from List
Faced with the agonizing choice of either switching hospitals and
pediatricians or suffering loss of insurance coverage, a group of
UnitedHealthcare policyholders have banded together to challenge the
managed care organization's decision to prohibit Children's Hospital
here from participating in its healthcare provider network.

Earlier this month, parents were notified that Children's Hopital was no
longer an approved hospital in the UnitedHealthcare plan, forcing more
than 20,000 insureds to seek treatment at Tulane Hospital or Ocshner
Hospital's pediatric units.

In a class action lawsuit filed January 31, parents claim
UnitedHealthcare engaged in a "bait and switch" sales tactic by removing
Children's Hospital, its pediatricians and sub-specialists from its
provider network after most policies were purchased or renewed by

Considering UnitedHealthcare exclusively sells group health insurance,
and most of these group policies were purchased by parents and employers
with the understanding that Children's Hospital, its pediatricians and
sub-specialists would be available on the UnitedHealthcare plan, parents
were shocked to learn United would not cover medical treatment at the
only free-standing pediatric hospital in the state effective Jan. 1,

Parents also claim the letters notifying them of the new policy were
dated Dec. 13, 1999, yet did not arrive until mid-January 2000.

According to court records UnitedHealthcare gave its assurance to
policyholders that their pediatrician of record would not be affected by
the change, since most doctors had privileges at "other UnitedHealthcare
network facilities" in addition to Children's.

Attorneys representing the class claim these letters blatantly
misrepresented the fact since almost all doctors and medical staff
associated with Children's do not have privileges at Tulane and Ocshner
-- the only hospitals in the UnitedHealthcare network offering pediatric
specialty resources.

"Policyholders were told they could keep their pediatrician and only had
to switch hospitals. That's simply not feasible when a doctor cannot and
does not practice at any other pediatric hospital in the United
network," explained Steven Lane of the Law Firm of Herman, Herman, Katz
& Cotlar, representing the class plaintiffs.

As doctors affiliated with Children's fielded calls from concerned
parents, a second wave of letters arrived from United, this time
requiring those pediatricians and pediatric specialists "to document
admitting privileges at other network facilities" or be dropped from the
provider network.

In some cases, doctors were given only three days to do so, others
received letters after the deadline had expired.

While parents are reeling over how the state's largest healthcare
provider could arbitrarily eliminate Children's Hospital, attorneys on
their behalf are seeking injunctive relief in federal court from the

Class members claim United's decision will affect the quality of care
their children will receive, arguing continuity of care is critical in
the successful treatment of children. "When you're dealing with children
who cannot express their needs, the benefit of a strong doctor/patient
relationship exponentially increases. By forcing a parent to sever that
relationship, you are putting a child at risk," explains Lane. "United
made a tactical error -- they underestimated the passion and power of
parents. Policyholders will not choose a pediatrician or hospital out of
the Yellow Pages without a fight. It's going too far," contends
co-counsel, Stephen Herman.

Parents of children requiring specialized or long-term care are
particularly concerned since generally a team of pediatric specialists
develops an integrated treatment program for these children. "Many
special-needs children have been cared for by the same team since birth.
You're essentially asking their parents to start at square one," Lane

Supporters of Children's Hospital worry the substantial loss of revenue
from one of the largest provider networks in the state could place the
community hospital at considerable risk as well. "It's a real concern,
not just of the class members, but by locals who built and support this
hospital," Lane said. "Since a large number of UnitedHealthcare members
seek treatment at Children's, the loss of this group of patients has the
potential to negatively affect all patients seeking care at the
hospital," Herman warned.

While it remains to be determined how far-reaching and detrimental the
effects of the new policy will be on Children's Hospital, its staff
members, local doctors, as well as tens of thousands of children and
their parents, a judge will decide whether to temporarily halt the
managed care organization's action until the case can be heard in court.
Meanwhile, parents are urging United to respond to their concerns and
reinstate the hospital "stat."

Contact: Herman Herman Katz & Cotlar, New Orleans Steven Lane, 504/58

LSU: Ap Ct Says University’s Athletic Dept Knowingly Makes Gender Bias
Louisiana State University's athletic department intentionally violated
federal law requiring equal opportunities for male and female college
athletes, a federal appeals court ruled.

The decision released on January 27 by the panel of the 5th U.S. Circuit
Court of Appeals means five women who filed a discrimination lawsuit can
seek unlimited monetary damages from the university.

The ruling reversed a 1996 finding by U.S. District Judge Rebecca
Doherty. She found that the college's athletic department had ''archaic
and antiquated'' views about female athletes but did not intend to
violate Title IX, the federal law requiring equal athletic opportunities
at schools accepting federal funding.

The federal appeals panel also ordered Doherty to reconsider her
decision denying the lawsuit class action status, meaning more female
students could be added as plaintiffs.

Testimony during the trial quoted LSU athletic director Joe Dean
referring to plaintiff Lisa Ollar as a ''honey,'' ''sweetie'' and

Dean also said the school's first women's softball team was disbanded
because of the sexual preference of the players. And he told one
plaintiff if he had to start one women's sport he'd prefer women's
soccer because players ''look cute in their shorts.'' (AP Online,
January 28, 2000)

MOBIL OIL: AOPA Says Fuel Contamination Compensation Package Is Flawed
Mobil's fuel contamination compensation packages came under renewed fire
on January 31, being condemned as flawed. The Aircraft Owners and Pilots
Association (AOPA) told a senate hearing in Sydney that there was not
yet a way to quantify the financial burden of the avgas crisis which
grounded 5,000 light aircraft.

Mobil announced two packages - a $15 million hardship fund to help keep
customers operating and another compensation package which has not been
costed. But Mobil has said anyone who settled out of court must not take
part in the two class actions or any other litigation against Mobil for

AOPA President Bill Hamilton said there was no way the association would
encourage its members to accept the packages. "The Mobil program at this
point fails the most basic test of justice," Mr Hamilton told the

He said the hardship funds were flawed, devised and run by the fuel
giant. "Quite simply it is a Mobil program, with criteria established by
Mobil and judged by Mobil." He said the level of detail being asked of
those seeking compensation was similar to that needed on a tax audit.
Many organisations were not willing to submit that degree of financial
detail to another commercial company.

The association said there was yet no way of determining the short or
long term financial cost caused by the fuel disaster. "At this stage we
have no idea even of the short term cost of getting the aviation fleet,
some 5000 aircraft, back in the air.”"We're a long way from
understanding whether there will be long term additional maintenance to
keep those aircraft worthy.” "We haven't even begun to quantify the
personal hardships, the problems suffered.” "The long term economic
effects of this fuel disaster we haven't even begun to estimate it, let
alone come up with any quantifiable figures."

Mr Hamilton said in terms of losses the figures Mobil had presented were
effectively meaningless. (AAP Newsfeed, January 31, 2000)

MOBIL OIL: Aust Suit over Avgas by Aircraft Owners & Operators Begins
The first of two class actions brought by aircraft owners and operators
against Mobil over contaminated avgas began in the Supreme Court in
Melbourne on January 31. The action before Justice Hedigan involved an
application by counsel for the Aircraft Owners and Pilots Association
(AOPA) to expedite hearings. A decision on the applications was expected
February 4.

Slater & Gordon partner Peter Gordon, acting on behalf of AOPA, said the
main aim was to get orders to have the trial heard as soon as possible.

Mr Gordon said Mobil told the court they would deny any accusations they
were negligent in distributing fuel which ended up forcing the grounding
of about 5,000 small aircraft in the eastern states earlier this month.
He also said Mobil told the court they may want to argue that the class
action laws in the Victorian Supreme Court may be unconstitutional.

The second class action, being brought by Maurice Blackburn Cashman on
behalf of about 3,000 pilots and aviation firms, will also seek a speedy
trial in light of the financial hardship faced by operators over the
crisis. The case is due for a directions hearing in the Federal Court on
March 1. (AAP Newsfeed, January 31, 2000)

NET GAMBLING: WI Fd Ct Dismisses RICO Suit over Losses thru Credit Card
A district court judge in Wisconsin has dismissed at the pleading stage
a federal racketeering lawsuit against MasterCard International Inc. and
MBNA American Bank, finding that the companies' involvement with on-line
casinos does not constitute a violation of the Racketeer Influenced and
Corrupt Organizations Act (RICO). Jubelirer et al. v. MasterCard
International Inc. et al., No. 99-C-256-S (WD WI, Sept. 17, 1999).

U.S. District Court Judge John C. Shabaz, of the Western District of
Wisconsin, concluded that the plaintiff's third amended complaint failed
to allege the existence of a RICO enterprise, or the conduct of such an
enterprise, by the two defendants.

According to the complaint, the plaintiff, Ari Jubelirer, activated a
credit card account with Casino 21, an on-line gambling website. He used
his MBNA MasterCard to place a deposit of $25 in order to receive 25
wagering chips.

After losing $20, plus a $4.95 processing fee, Jubelirer filed a class
action lawsuit against MasterCard and MBNA. Jubelirer alleged that
MasterCard and MBNA committed RICO violations by charging, clearing, and
paying credit card charges to illegal gambling operators. He further
averred that the two defendants aided and abetted others in violating
federal anti-gambling laws. Lastly, he sought to enjoin the collection
of all debts for illegal gambling charged to MBNA credit cards, and (2)
to have such activity declared unlawful.

MasterCard and MBNA moved for dismissal, alleging the third amended
complaint failed to state a claim under RICO, or for aiding and abetting
a RICO violation. They also contended that declaratory relief was not
available under the circumstances. Finally, they argued the action
should be barred by the doctrine of in pari delicto, a doctrine by which
the court usually denies relief when parties have made an illegal
agreement and both are equally at fault.

The court agreed with the defendants and dismissed the RICO and aiding
and abetting claims with prejudice. According to Judge Shabaz, a RICO
claimant under Sec. 1962(c) must allege four elements: (1) the conduct
(2) of an enterprise (3) through a pattern (4) of racketeering activity.
He concluded Jubelirer insufficiently pleaded facts to support the
existence of a RICO enterp rise or the conduct of such an enterprise by
the defendants. Instead, he found MasterCard and MBNA merely collect
debts incurred by its cardholders, regardless of the merchant involved.

"Accepting plaintiff's allegations as sufficient to allege a RICO
enterprise would lead to the absurd conclusion that each of the many
million combinations of merchant, MasterCard, and lender is a RICO
enterprise," Judge Shabaz wrote. "However broadly worded, the RICO
statute is not to be applied to situations absurdly remote from the
concerns of the statute's framers." The court concluded its analysis of
the RICO claims by saying the defendants' involvement with online
casinos is a routine contractual relationship that does n ot rise to the
level of being an enterprise for RICO purposes.

Turning to the separate aiding and abetting allegations, the court found
the language of the RICO statute, requiring participation in the conduct
of an enterprise, too narrow to permit liability for aiding and
abetting. It observed that the language of Sec. 1962(c), which requires
that a defendant "participate" "in the conduct of" an enterprise is
narrower than liability for "aiding and abetting."

"Implying a cause of action for aiding and abetting where the language
is purposely drawn more narrowly would circumvent rather that further
Congressional intent," Judge Shabaz said.

The court also declined to grant Jubelirer declaratory relief, finding
it lacked subject matter jurisdiction over the claim. Judge Shaba z said
subject matter jurisdiction for declaratory actions generally exists
only where the defendant could have brought a coercive action to enforce
its rights in federal court against the plaintiff. Presently, however,
the court determined that neither MasterCard nor MBNA could have sued
Jubelirer in federal court to collect the $25 obligation he incurred in
connection with Casino 21. The court found no federal question invo lved
in a simple debt collection, and also concluded no diversity
jurisdiction existed.

Jubelirer and the proposed class are represented by Ronald S. Goldser
and Keelyn M. Friesen with Zimmerman Reed in Minneapolis.

MasterCard and MBNA are represented by Richard Norton Jr., Senior Vice
President, Legal Depar tment, in Purchase, NY, and Stanley J. Adelman
with Rudnick & Wolfe in Chicago. (Civil RICO Litigation Reporter,
November 1999)

STATE BANK: Suit V Indian Bank over Payment of Bonds to Proceed in U.S.
Plaintiffs sought damages stemming from defendant foreign bank's alleged
failure to deliver payment of the principal amount of certain bonds on
the due date. The terms of the bonds stated "the Courts in India and the
United States of America only shall have jurisdiction in respect of all
matters of disputes about the [bonds]." Plaintiffs brought suit in the
U.S. and defendant moved to dismiss for forum non conveniens, contending
that India was the only convenient forum. The court found that the
clause used the words "shall," and "only," thereby consenting to
jurisdiction in those courts and making them the exclusive forums that
may decide disputes. The court held that the combination of these words
made the clause mandatory. Thus, plaintiffs chose a forum in compliance
with defendant's contract. Defendant's motion was denied accordingly.

Judge Cedarbaum

PODDAR v. STATE BANK OF INDIA QDS:02762006 - Plaintiffs sue for breach
of the terms of bonds purchased from defendant State Bank of India
("SBI"). SBI moves to dismiss the complaint on the ground of forum non
conveniens. For the reasons that follow, the motion is denied.


Plaintiffs Shrikumar Poddar, Mayurika Poddar, Vaishnava Center for
Enlightenment, Inc. and India Foundation, Inc. seek damages for breach
of contract and unjust enrichment stemming from SBI's alleged failure to
deliver payment of the principal amount of certain bonds on the due

The bonds at issue are Series II India Development Bonds ("IDBs"). SBI
issued the IDBs in accordance with The Remittances of Foreign Exchange
and Investment in Foreign Exchange Bonds (Immunities and Exemptions)
Act, 1991 (the "Act"). The Act was designed to attract foreign currency
to the Indian economy. It encouraged investment in foreign exchange
bonds by providing purchasers with certain tax benefits in India. Only
individuals of Indian origin not residing in India and certain overseas
corporations controlled by such persons could purchase IDBs. For
purposes of the IDBs, persons of Indian origin were persons who at any
time had held an Indian passport or who had a parent or grandparent who
was at any time a citizen of India.

Plaintiff Shrikumar Poddar purchased IDBs in the face amount of $
100,000 in his individual capacity, $ 100,000 in his capacity as plan
administrator of the ESS Employees Profit Sharing Trust, and $ 75,000 in
his capacity as trustee of the Mayurika Poddar family trust. (Cmplt. P
23.) Plaintiff Mayurika Poddar purchased IDBs in the face amount of $
100,000 in her individual capacity and $ 75,000 in her capacity as
trustee of the Shrikumar Poddar Family Trust. (Cmplt. P 24.) Plaintiff
Vaishnava Center for Enlightenment, Inc. purchased IDBs in the face
amount of $ 100,000. (Cmplt. P 25.) Plaintiff India Foundation, Inc.
purchased IDBs in the face amount of $ 100,000. (Cmplt. P 26.) Each of
the named plaintiffs purchased the IDBs by submitting an application and
remitting funds to the SBI branch in New York City. Plaintiffs have
characterized this action as a class action on behalf of all bondholders
similarly situated, but a class has not yet been certified.

The IDBs matured on February 15, 1997. The Terms of Offer of the IDBs
provided that "the principal amount of the IDBs and the interest earned
thereon... are payable in US Dollars on expiry of five years from the
date of allotment." To redeem the IDBs, holders were required to present
the IDBs with "instructions regarding disposal of the proceeds to the
Issuing Office, the State Bank of India, NRI Branch... Bombay."
Plaintiffs allege that they complied with all of the redemption
requirements but did not receive payment on February 15, 1997 as, they
contend, the terms of the IDBs required. The complaint does not state
when the named plaintiffs actually received payment, and the named
plaintiffs do not specify their damages.

SBI asserts that it mailed warrants to bondholders on February 15, 1997
and that mailing payment on that date fulfilled its obligations under
the terms of the IDBs. The resolution of the underlying dispute will
depend on how the redemption term of the IDBs is interpreted.

The Terms of Offer of the IDBs state that "the Courts in India and the
United States of America only shall have jurisdiction in respect of all
matters of disputes about the IDBs." This same clause also appears on
the face of the IDB certificates. The certificate explicitly
incorporates the Terms of Offer as a part of the governing contract. For
simplicity, this opinion only refers to the Terms of Offer. The Terms of
Offer were not negotiated by plaintiffs. Plaintiffs accepted the Terms
of Offer as presented by defendant by purchasing IDBs.


Defendant must make the difficult showing that enforcement of the forum
selection clause would be "unreasonable or unjust" or that the clause
was the product of "fraud or overreaching" to avoid the enforcement of
the forum selection clause. M/S Bremen v. Zapata Off-Shore Co., 407 U.S.
1, 15, 92 S. Ct. 1907, 1916, 32 L. Ed. 2d 513, 523 (1972). The
difficulty of making such a showing is particularly great in this case
because the defendant drafted the language consenting to jurisdiction in
the courts of the United States. Plaintiffs are contractually bound to
bring any action relating to the IDBs in a United States or Indian
court. Plaintiffs have complied with that obligation. Since SBI has a
branch in New York, SBI drafted the clause at issue, and SBI solicited
the purchase of IDBs in this country, enforcing the forum selection
clause in this case is not so "unreasonable or unjust" as to justify
setting it aside.

Defendant argues that the forum selection clause is "permissive" rather
than "mandatory" and that, therefore, the M/S Bremen standard does not
apply. Blanco v. Banco Indus. de Venezuela, S.A., 997 F.2d 974, 979 (2d
Cir. 1993). But an examination of Blanco shows that defendant's
characterization of the forum selection clause in this case is
erroneous. In Blanco, the forum selection clause stated that an action
"may be brought" in one of four listed jurisdictions. The Court of
Appeals read the word "may" as permissive language. Indeed, the Second
Circuit emphasized that a forum selection clause identifying a number of
permissible for a could be mandatory if the words used were words of
command. Blanco, 997 F.2d at 979 ("We reach this conclusion solely
because of the nonmandatory words the parties chose to express their
agreement, and not... because the permissive clause contemplates more
than one forum.").

This forum selection clause, in contrast, limits available fora to
courts in the United States and India only. This clause uses the word
"shall," thereby consenting to jurisdiction in the courts of the United
States and India, and uses the word "only," thereby making those courts
the exclusive fora that may decide disputes arising from the IDBs. The
combination of these words makes the clause mandatory. The plaintiffs
have chosen a forum in compliance with a contractual obligation that the
defendant drafted. The defendant will not now be heard to complain that
the United States is an inconvenient forum.

Even if normal forum non conveniens analysis applied in this case,
defendant has not shown that the balance of both public and private
interests weighs so strongly in its favor that plaintiffs' selection of
a forum to which defendant has consented should be overturned.


Defendant drafted a mandatory forum selection clause consenting to be
sued in the United States. It cannot now complain that India is the only
convenient forum for this action. Moreover, defendant has not made the
strong showing required to prevail on a motion to dismiss for forum non
conveniens. Accordingly, defendant's motion is denied. (New York Law
Journal, January 18, 2000)

SYNTHETIC STUCCO: NC Homeowners May Net Millions from 5 Major Makers
North Carolina homeowners are expected to claim tens of millions of
dollars in settlement money from the five major manufacturers of
synthetic stucco.

The Wilmington lawyers who brought the statewide class-action lawsuit
say it's too soon to know how many homeowners will file claims or how
expensive it will be for the manufacturers of the exterior siding. "We
anticipate there will be thousands of claims," lawyer Trey Thurman said
on January 28. "We're going to handle them and process the money as soon
as possible."

Average payments are expected to range from $ 15,000 to $ 18,000. The
amount depends on how much of the house was damaged by the material,
which is known as exterior insulation finish systems (EIFS).

The material is believed to cause moisture to build up in walls and lead
to rotting. The manufacturers deny their product is defective and blame
builders and subcontractors for any damage.

North Carolina homeowners will receive more per square foot than
residents of other states under a national settlement reached with the
Synergy Corp. in 1998. Except for claims involving the Sto Corp.,
homeowners in this state will receive $ 6 per exterior square foot that
is proved to have been damaged. The Sto formula has not been determined.

Thurman, from the law firm Shipman and Associates, said plaintiffs'
attorneys are getting the word out to potential claimants through
television advertisements and newspaper ads were soon to begin. As of
January 27, more than 1,000 people had requested claim forms, which was
in addition to the 1,300 people already in the firm's database, Thurman
said. A Web site about the case, which has a claim form that can be
downloaded, has attracted 1,400 hits, he said. Homeowners submitting
claims for synthetic stucco made by Sto Corp. have until June 30. Claims
to the other four companies can be made over the next three years.

Sto only agreed to put $ 2.2 million into a court-controlled fund, which
will be distributed on a square-footage rate determined by the number of
claims submitted, minus attorneys' fees and court costs.

Unlike Sto homes, claims submitted for the other companies will not have
to wait until the filing period closes to pay. Thurman said payments
should be made soon after the court approves each claim. Plaintiffs'
attorneys could receive as much as $ 10 million in fees from the

The settlements affect only EIFS used on one- or two-family houses and
townhouses. Condominiums, apartments, hotels and other commercial
buildings are not eligible. Anyone who as of Sept. 18, 1996, owned a
home clad with synthetic stucco made by Parex Inc., Sto Corp., W.R.
Bonsal Co., Continental Stucco Products Inc. or Dryvit Systems Inc. is
covered by the settlements. Under some circumstances, homeowners who
already have replaced EIFS and former homeowners may be entitled to some
of the money.

The class-action lawsuit was filed in 1996 in Superior Court in New
Hanover County, where synthetic stucco first surfaced as a widespread
problem. Subsequently, homeowners reported problems all over North
Carolina and in many other states. In the Triangle, Cary has a
concentration of problems connected to the material. The state Attorney
General's Office called it perhaps the most serious consumer problem
ever in this state.

Superior Court Judge Ben F. Tenille, who handles complex business cases
across the state, will review the settlements March 17 in Wilmington.

Anyone who wants to file a claim can call (800) 378-4214, or write: EIFS
Litigation, Class Counsel, PO Box 1567, Faribault, Minn. 55021-1567. The
settlements are on the Web at http://www.ncstucco.com(The News and
Observer (Raleigh, NC), January 31, 2000)
TIMBER COMPANIES: Sued in Florida over Migrant Farmworkers’ Wages

Three of the largest U.S. timber  companies were accused in lawsuits
filed January 27 of paying some  6,000 foreign workers in the United
States less than the federal  minimum wage and failing to pay overtime.
The class-action lawsuits  were filed in U.S. District Court in
Tallahassee against International Paper Co., Georgia-Pacific Corp. and
Champion International Corp. The lawsuits were filed on the migrants'
behalf by the Florida Legal Services Migrant Farmworker Justice Project.

The plaintiffs, from Mexico and Central America, were granted U.S. visas
under an immigration law allowing  them to work temporarily in jobs for
which U.S. workers are in short  supply, said James Knoepp, an attorney
for them. They worked an  average of four months each planting trees and
thinning timber  stands, mostly in the southeastern United States,
Knoepp said. The  lawsuits allege that the timber companies paid them
less than the legal minimum wage, failed to pay them for all the hours
they worked  and failed to pay them overtime pay as required by law.

The lawsuits also allege that the companies failed to reimburse workers
for  transportation costs and equipment purchases. The workers got $100
to $200 a week for 60 or 70 hours of work and had to use part of that
for transportation, housing and work tools, the lawsuit alleged. ``You
can't charge people for things that are for the benefit of the employee
if those charges drop their wages below the minimum wage,'' Knoepp said.
``They didn't receive the minimum wage in the first place.''

A spokesman for Georgia Pacific, Ken Haldin, said the company would need
to review the allegations but as a matter of policy did not comment on
litigation.  He added, however, that ``as a responsible company, we
follow all applicable regulations and adhere to labor law.''

The lawsuits seek back wages for all foreign workers hired in the United
States by the three companies from 1996 to the present, about 6,000
people. Most spoke little or no English and were unaware of  their legal
rights, Knoepp said. They were recruited in their home countries by
labor contractors, who handled the actual hiring and distribution of
wages. Still, the lawsuits said, the timber companies were aware of the
abuses and ``turned a blind eye.''

International Paper is the largest pulp and paper company in the United
States and the country's largest single private landowner. It owns and
controls about 8.5 million acres of timber and other land.
Georgia-Pacific and its affiliates, the nation's No. 2 pulp and paper
company, own or control 4.8 million acres of timberland, while Champion
owns or controls 5 million acres. (Reuters, January 27, 2000)

TOBACCO LITIGATION: Erie County in NY Prepares to Securitize Settlement
Caught between its location in a region badly in need of economic
development, and a major source of revenue buffeted by constant
controversy, Erie County, N.Y., is preparing to securitize its expected
payments from the national tobacco settlements, according to county

Erie wants to hit the market "as soon as possible," said county
Executive Joel A. Giambra. Giambra has yet to decide on how the proceeds
will be used, but having begun an aggressive tax cut program intended to
spur growth in the Buffalo region, some of the money could be used for
economic development projects, he said.

If Erie does bring a deal to market, it would be the fourth municipality
in New York State, and possibly the fourth in the country, to securitize
its expected tobacco settlement revenues. To date, New York City, Nassau
County, and Westchester County have securitized at least some of the
revenues they received from the tobacco settlement.

One of the dynamics driving Erie into the market is the uncertain
outlook for the tobacco industry, Giambra said. Shares of Philip Morris
Cos., Loews Corp., and British American Tobacco hit 52-week lows as
investors fled tobacco company stocks in the wake of a class-action suit
by smokers seeking a share of payments from the national tobacco

While investors in tobacco-backed securities have not been feeling the
same jitters as tobacco company stockholders, secondary market trading
in the securities has been light compared to some other large issues,
investors said.

Of the three deals in the market, only the bonds issued by TSASC Inc. --
the local development corporation created by New York City to issue its
tobacco settlement debt -- appear daily on The Bond Market Association's
Web site listing bonds traded four times or more in the same day.

Underlying the light trading in tobacco settlement bonds has been retail
investors' dominant presence in the municipal market, said Thomas C.
Spalding, a portfolio manager with Nuveen Advisory Corp.

"To the extent it's not really a retail item, which is where most of the
demand has been over the last two to three months, I don't think there's
a lot of liquidity," Spalding said. And the retail-led market is likely
to hold sway for the near future, according to Spalding.

"I sense it's going to last a while longer, at least until we stabilize
and get through a Federal Reserve Board meeting or two," Spalding said.
"I don't sense that we're going to be an institutionally driven market
anytime in the first quarter, at least. Maybe in the second quarter
we'll start to see some stabilization."

Secondary trading may also be relatively light because of the arduous
process fund companies undertook to qualify the unfamiliar credit for
their portfolios, one market source said. After investing time and
resources in the decision to buy tobacco bonds, a fund company might not
want to quickly trade them, he said.

While news surrounding the tobacco industry has alternated between bad
and worse, investors in tobacco settlement bonds have not pushed the
panic button. The prices reported to the Municipal Securities Rulemaking
Board, and subsequently posted on TBMA's Web site, reflect yields both
higher and lower than where the bonds debuted in November.

Even when New York State implemented a 55-cent per pack increase on
cigarette taxes in December, trading levels in the secondary market were
unaffected, according to market participants.

Erie County has sent out requests for proposals for a securitization and
will begin to move forward once it has named a lead underwriter and a
financial adviser, Giambra said.

The county's securitization could produce approximately $245 million in
proceeds, according to budget director Joseph Passafiume. The county
expects to receive $580 million in settlement payments during the next
25 years. (The Bond Buyer, January 31, 2000)

UNITED CONSUMER: Buying Club Not 'Enterprise' under Statute, IL Ct Says
Plaintiffs Edward and Judy Stachon filed a timely amended class action
complaint against United Consumer Club Inc. and its officers,
franchisees, members, manufacturers, suppliers and wholesalers. They
alleged violations of the civil provisions of RICO as well as the
Illinois Consumer Fraud and Deceptive Trade Practices Act. Without
reciting the facts of the case, the U.S. District Court for the Northern
District of Illinois analyzed the RICO claim and dismissed it for
failure to allege a proper RICO enterprise. (Stachon v. United Consumers
Club Inc., No. 98 C 7020 (N.D. Ill. 10/21/99).)

Under 1961(c) of the RICO statute, the plaintiff must show (1) conduct
(2) of an enterprise (3) through a pattern (4) of racketeering activity.
The complaint alleged that the UCC and its members, franchisees,
manufacturers, wholesalers and suppliers formed an association-in-fact,
which is a kind of "enterprise" under RICO.

The court first stated that UCC could not be a participant in the
alleged enterprise because a firm and its employees or a parent and its
subsidiaries are not an "enterprise" separate and distinct from the firm
itself. Only individual defendants, and not UCC, are possible
participants in the enterprise.

The court then concluded that UCC franchisees could not be part of the
RICO enterprise because franchisees are no different from employees when
examining a RICO enterprise. The fact that a company chooses to operate
through agents rather than employees does not make a difference in terms
of preventing the type of abuse for which RICO was designed.

The court next analyzed the remaining defendants: the manufacturers,
suppliers and members of United Consumers Club. It said that an
"enterprise" must have an ongoing structure of persons associated
through time. The changing, unnamed manufacturers, suppliers and members
did not function as a continuing unit or an ongoing structure.
Plaintiffs offered nothing to show that the alleged "enterprise" was
anything more than UCC simply contracting with members and suppliers. No
case law supports the proposition that a purchasing club's ordinary
business dealings with past and present manufacturers, suppliers or
members constitute a structure. Moreover, the plaintiffs failed to show
that the individual defendants were associated together for a common
purpose of engaging in a course of conduct. Finally, the plaintiffs
failed to show the enterprise was organized in a manner amenable to
hierarchical or consensual decision-making. Plaintiffs did not
demonstrate that the individual defendants ever made consensual
decisions as a unit to promote the alleged common purpose or that
members ever contacted or dealt directly with manufacturers or

The court ended by saying that a classic RICO association-in-fact is "a
polite name for a criminal gang or ring." The plaintiffs had not proven
the existence of such a criminal gang. Therefore, the RICO charges were
dismissed. Opinion by: U.S. District Judge Norgle. (Civil RICO Report,
December 23, 1999)

* Rethinking Clayton Act's Treble Damages Provision in Antitrust Cases
Kelly is managing partner of the Washington, D.C., office of
Philadelphia's Morgan, Lewis & Bockius where his practice focuses on
antitrust and trade regulation matters. He also represents clients
before the U.S. Department of Justice's Antitrust Division and the
Federal Trade Commission in criminal and civil matters. Sayyed is an
associate at the firm.

Treble damages can subvert the competitive process they are meant to
protect, creating incentives for strategic use of antitrust laws to
harass rivals or 'hold up' businesses.

Corporations are acutely aware of the high price being paid by antitrust
violators. In the last four years both Archer-Daniels-Midland and
Hoffmann-La Roche pleaded guilty to price-fixing charges and paid
hundreds of millions of dollars in fines. Top executives of
Archer-Daniels-Midland also landed in jail  In addition, violators can
face more than staggering criminal fines and jail terms for employees;
they also may be hit with follow-on litigation by states and private
parties. The federal government's success in identifying and punishing
companies engaged in cartel behavior is to be applauded. At the same
time, this success underscores a crying need for reform.

Enhanced criminal fines, particularly the twice-the-loss/twice-the-gain
formulation enacted in 1987, may well deter some future violations, but
they also threaten the very economic well-being of convicted
corporations. The enormous penalties now being imposed by courts were
never contemplated by Congress when it enacted the current enforcement
scheme. The time has come therefore to reassess the antitrust damages

The central question is whether mandatory treble damages in private
antitrust actions are still appropriate. Section 4 of the Clayton Act
states that "any person who shall be injured in his business or property
by reason of anything forbidden in the antitrust laws may sue therefor
... and shall recover threefold the damages by him sustained." This
provision was intended both to compensate antitrust victims and to deter
future misconduct.

Antitrust violations are notoriously difficult and expensive to uncover
and prove. By increasing the potential monetary award in excess of
suffered harm, treble damages do create incentives for private parties
to act as private attorneys general and pursue cases that are in the
public interest. In essence, the possibility of treble damages alters
the cost-benefit calculation of litigation. But treble damages also can
subvert the competitive process they are meant to protect, creating
incentives for strategic use of the antitrust laws to harass rivals or
"hold up" businesses.

This is not the first time that the question of treble damages reform
has been raised. The Reagan administration tried and failed to pass
reform legislation in the mid-1980s. The concern then was that private
treble damages awards threatened companies with potentially uncapped
liability. That problem has since been exacerbated by a new government
aggressiveness in seeking high criminal fines.

Making use of statutory and sentencing provisions not in place until a
decade ago (and not used in any significant manner until the mid-1990s),
the Justice Department's Antitrust Division has been able to
significantly increase the potential costs to corporations and their
officers of violating the antitrust laws. Fines of tens of millions of
dollars are becoming commonplace; fines in the hundreds of millions of
dollars no longer shock the antitrust defense bar.

Last May, in the two main vitamin price-fixing cases United States v. F.
Hoffmann-La Roche and United States v. BASF Aktiengesellschaft -- the
Antitrust Division won awards of $500 million and $225 million,
respectively. The previously shocking $100 million fine lowered on
Archer-Daniels-Midland in 1996 pales in comparison. The hefty fines
announced Sept. 9 of this year against three Japanese pharmaceutical
companies -- $25 million, $40 million, and $72 million -- seem (almost)
light. And individuals too can be liable for fines in the millions, as
Dr. Kuno Sommer, a former executive at Hoffmann-La Roche, can testify.

Fines of this magnitude are not made possible by anything in the Sherman
Act, which limits fines to $10 million for a corporation and $350,000
for an individual. Instead, they are made possible by provisions of the
Criminal Fine Improvements Act which allows for fines equal to twice the
gain the company derived from the offense or twice the loss suffered by
the victims -- or by the U.S. Sentencing Guidelines -- which sanction
fines based on the volume of commerce affected. For antitrust cases, the
guidelines decree a base fine, which can be adjusted upward or downward,
of 20 percent of the volume of affected commerce.

Fear of such fines is pushing antitrust conspirators to take advantage
of the Antitrust Division's corporate leniency program at a record pace.
In many cases, co-conspirators race each other to the Justice
Department. Subtle adjustments to the scope of the leniency program are
encouraging even more confessions, as parties attempt to limit, or even
eliminate, their criminal liability.

Corporations also recognize that there is an increasingly high degree of
cooperation among antitrust enforcers globally. Both the European
Commission's DG IV and the Canadian Competition Bureau are uncovering
and prosecuting cartels and imposing fines at the same record pace as
the Antitrust Division.

Daunting as these criminal fines appear, they are only the beginning of
what companies who have violated the antitrust laws face. Violators are
soon the subject of numerous class actions and opt-out lawsuits, where
the plaintiffs are seeking settlements of hundreds of millions, and even
billions, of dollars.

Even those parties who make use of the corporate leniency program to
limit criminal fines are the subject of such suits. Rhone Poulenc SA,
for example, which received leniency for helping the Antitrust Division
crack the vitamins conspiracy and suffered no fines, is still a
defendant in a series of private party actions, as is the Carbon
Graphite Group, another recipient of Antitrust Division amnesty.

In such situations, what worthwhile public policy goal is being achieved
by the mandatory trebling of monetary damages?

By simply participating in a follow-on suit, a private plaintiff is not
truly serving as a "private attorney general." The enforcement agency
charged with that responsibility has already acted. One could plausibly
argue that follow-on suits border on overkill. Plaintiffs attorneys are
just cashing in on the treble damages bonanza. Moreover, there is likely
little marginal deterrent effect from additional penalties once a
company has paid tens or hundreds of millions of dollars in criminal

Ultimately, the magnitude of treble damages can actually work to weaken
or eliminate competition as companies cannot continue to operate in the
face of such large losses. Consider the case of the SGL Carbon Corp.,
which filed for bankruptcy protection in Delaware last year in
anticipation of the likely large settlement costs of private actions
arising after its settlement with the Antitrust Division. While the
division takes into consideration such a likelihood (since its mission
is to protect competition, not maximize settlement amounts), private
plaintiffs do not.

At least on the margin, treble damages may also have the perverse effect
of discouraging parties from making use of the corporate leniency
program. Parties have to take into account that confessing to an
undiscovered or limited violation of the antitrust laws will still make
them subject to the likely follow-on private lawsuits.

Concern about excessive or unnecessary recovery is not limited to
criminal matters. It applies to the large number and variety of civil
investigations undertaken by the antitrust agencies as well.

It is true that because heavy criminal fines are not levied in civil
cases, monetary damages awarded private plaintiffs may need to be higher
to include some deterrent component. But this is offset somewhat by the
increasing likelihood that the settlement of civil matters with the
antitrust agencies or state attorneys general will include some monetary

Moreover, any time that private parties bring a damage action after a
government settlement, or the mere announcement of an agency action,
they are initiating litigation from which some of the usual risk has
been eliminated and in which there is a greater likelihood of recovery.
Private parties in such follow-on cases do not need the extra motivation
or compensation of treble damages.

                        Duplicative Remedy?

A striking recent development brings the continuing "need" for treble
damages into further question. Last July, a U.S. district court held in
Federal Trade Commission v. Mylan Laboratories Inc. that the FTC has the
authority to seek consumer redress for antitrust violations through an
order for disgorgement of profits, plus interest.

William Baer, then director of the Bureau of Competition, advised that
the FTC will seek restitution and disgorgement in two situations: (1)
where the illegal activity is akin to a per se violation of the
antitrust laws, i.e., price fixing, bid rigging, and certain group
boycotts; and (2) where the illegal activity results in large monetary
gains, but the likelihood of a successful private suit is low due to
procedural hurdles. Such increased authority for the FTC would appear to
decrease the rationale for both the deterrent and incentive effects of
the treble damage provisions.

The FTC's justification for use of this power -- that some individuals
are hindered or prohibited from collection of antitrust damages -- may
operate to frustrate the entire antitrust enforcement structure
developed by Congress and interpreted by the courts. The agency's
new-found authority creates a significant risk that courts will fashion
duplicative or conflicting remedies -- something the Supreme Court
warned against in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).

Use of this new authority would end-run the holding in Illinois Brick
that only direct purchasers have standing to sue under the federal
antitrust laws; the FTC has noted that it will seek monetary relief for
indirect purchasers. In addition, Congress has explicitly and
unequivocally granted power only to the Justice Department to seek
monetary penalties for criminal behavior.

Mylan illustrates another unfortunate feature of antitrust litigation:
its incredible scale and scope. In the Mylan matter, there were
approximately 20 private antitrust class actions and more than 30
attorneys general seeking monetary relief. Similarly, the private
actions in the vitamins cases have grown to include more than 40
defendants, with more than 50 federal cases filed -- some of which can
be attributed to forum shopping in search of a larger damages award with
which to increase settlement pressure on other parties. The potential
for duplicative recovery in such situations is great, even assuming that
actual damages can be correctly measured. Trebling damages simply
compounds any error.

A fairly simple modification to the antitrust laws would address the
dangers of overkill. Treble damages should be available only in actions
where there is no ongoing antitrust agency investigation or where no
settlement or guilty plea has been entered into with an antitrust
agency. Single damages would remain available for any entity harmed by
anti-competitive acts.

Such a modification would respect the general intent of the Clayton
Act's treble damages provision. It would not eliminate the incentive for
private plaintiffs to bring an antitrust action where the agencies have
not acted. It would not undercut the remedial, punitive, and public-good
theories supporting treble damages. And it would be consistent with the
practices of many other countries that already limit or proscribe
private antitrust actions either entirely or once an official
investigation has begun.

What this modification would accomplish is the elimination of the piling
on of subsequent lawsuits, which are destructive of economic wealth and
corporate health. Private plaintiffs would still have the right to
receive compensation to the extent of any harm suffered, plus attorney
fees and costs. They would also continue to benefit from the antitrust
agencies' success in winning criminal pleas and settlements, which would
still be recognized as prima facie evidence of liability. (New Jersey
Law Journal, January 17, 2000)


S U B S C R I P T I O N  I N F O R M A T I O N

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Copyright 1999.  All rights reserved.  ISSN 1525-2272.

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