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              C L A S S   A C T I O N   R E P O R T E R

               Friday, July 28, 2000, Vol. 2, No. 146

                              Headlines

ADAM'S MARK: Audit Shows Hotel Chain Beats Average in Hiring Minorities
ALLSTATE INSURANCE: Failure to Tell Limit of 'Med Pay' Not Deceptive
BMG DIRECT: Cleared of Deception in Shipping Charges for Selling by Mail
BONE SCREW: High Ct Will Decide If Fed Approval Is Precluded from Fraud
CAPROCK COMMUNICATIONS: Cauley & Geller Files Securities Suit in TX

D.C. SCHOOL: Court May Take over School Transportation System
DOE: Hispanics Seeking Homestead Property Back Files Suit
HMOs: Fed Ct Tells NH to Find People Owed Medicaid Refunds
HMOs: LA Fed Ct Remands Aetna Case over Delayed Payments to State Court
HOLOCAUST VICTIMS: Judge OKs Swiss Banks' Settlement for Money Hoarding

INGRAM BARGE: Judge OKs Chemical Leak Settlement; Attys to get $16.7M
INMATES LITIGATION: Inmates At Ages of 18-22 Forfeit Right to Education
INMATES LITIGATION: NYC Ordered to Give Mental Health Care after Release
NAPSTER: Online Music Swapping Service Shut Down under Court Order
PASCO SHERIFF: Zen Fest Search Suit Filed on Behalf of Patrons

SC: Retired Chief Justice Sues State in Sales Tax Dispute
TOBACCO LITIGATION: A.G. Said Lawsuits Could Affect Payment to States
TOBACCO LITIGATION: Industry Tries to Get Smokers' Case Moving in Fd Ct
TOBACCO LITIGATION: NY Jury Believes Smoker's Cancer Due to Toxins
U.S.: MN Seniors Lose Challenge to Medicare Managed Care Plan Rates

* Pension Reform Prospects Brighten As House Passes Bill

                             *********

ADAM'S MARK: Audit Shows Hotel Chain Beats Average in Hiring Minorities
-----------------------------------------------------------------------
An independent audit of employment practices at the Adam's Mark hotels
chain shows it surpasses industry averages in its hiring of minorities.

That was the finding released Wednesday by the outside monitoring group
Project Equality, which was paid $20,000 by Adam's Mark for the audit.
The audit looked at 21 of the chain's 22 hotels, and the St. Louis-based
corporate office. The chain requested the audit following allegations of
racial bias.

Carlean Miller, director of equal employment opportunity for the Kansas
City-based monitor, said the chain had a "very strong diversity record"
when it came to employment opportunities. Miller said she also found no
evidence that the company had tried to discriminate against employees.

Minorities made up 14.1 percent of upper management, 28.4 percent of
officials and managers and 65.5 percent of hourly employees, the audit
said. The company, HBE Corp., has about 9,000 employees.

According to Miller, the U.S. business average was 10.5 percent for
minority officials and managers and 39.8 percent for minority hourly
workers. Those figures were based on 8-year-old statistics from the U.S.
Department of Labor.

Project Equality's audit, conducted from Feb. 14 through May 19, did not
cover the chain's new Indianapolis hotel.

Numbers from the Equal Employment Opportunity Commission showed that the
company was above the industry average in hiring minority officials and
managers but below average in the percentage of professionals. It also
had a higher percentage of minorities concentrated in service jobs than
the industry overall.

Miller also said the audit found that the Adam's Mark's practice of using
wristbands to identify hotel guests was not based on race, but employed
throughout the chain's hotels out of security concerns during the New
Year's holiday.

Project Equality's audit, however, doesn't further address the issue of
customer service - the subject of a U.S. Department of Justice lawsuit
filed against HBE Corp. in December.

In March, the company agreed to pay $8 million to settle the lawsuit.
Under the terms of the deal, the company will be subject for the next
three years to a study using "secret shoppers" to evaluate customer
service.

The Justice Department's suit was triggered by a class-action lawsuit by
five African-American hotel guests at the chain's Daytona Beach, Fla.,
hotel last year for the Black College Reunion.

Adora Obi Nweze, Florida president of the National Association for the
Advancement of Colored People, said Thursday she had not seen the report,
but doubted it.

"Just because someone with a fancy name issues a document doesn't make it
accurate," she said. "And since the purse strings are tied to the
results, I rest my case."

The company undertook the audit on its own, before it and the Justice
Department reached a settlement in the Florida case.

Fred S. Kummer III, executive vice president of Adam's Mark hotels, said
he was pleased that the report reaffirmed that the company was an
"industry leader" in hiring practices. He called the company a "good and
fair" employer. (The Associated Press State & Local Wire, July 27, 2000)


ALLSTATE INSURANCE: Failure to Tell Limit of 'Med Pay' Not Deceptive
--------------------------------------------------------------------
Allstate Insurance Co. did not commit fraud under the Arizona Consumer
Fraud Act by failing to tell policyholders that its optional "Med Pay"
medical insurance coverage would only pay for those medical expenses that
insured persons became legally liable to pay, an Arizona appeals court
has ruled. Haisch v. Allstate Insurance Co., No. 1CA-CV 98-0703 (Ariz.
Ct. App., June 6, 2000).

Plaintiff Elizabeth Haisch was a member of CIGNA Private Practice Plan of
Arizona, a managed care organization, and was completely covered for
charges resulting from health care services listed in her plan. She was
also covered by Allstate under an automobile liability policy that
included optional Med Pay medical coverage of up to $5,000.

Haisch was injured in a car accident in August 1994. She later submitted
medical surgical bills for $6,204 to Allstate with a request for payment
up to her Med Pay coverage limits.

Allstate paid only $943, representing her copays and the sums she
incurred for physical therapy and other health care services not covered
by CIGNA.

Allstate explained that Med Pay covered expenses "actually incurred" from
the auto accident. Under Arizona law, HMOs are required to provide "basic
health-care services" to their patients and they are not allowed to
charge their customers for those services with the exception of copayment
amounts or charges for services not normally covered under their plans.

Allstate argued that in this case, Haisch had received basic health-care
services following her accident that would have been paid for through her
HMO premiums and she had not "actually incurred" any expenses other than
the $943 that it had paid.

Haisch filed a class-action suit against Allstate in an Arizona court in
February 1996, alleging that the insurer engages in a systematic practice
of unfairly marketing Med Pay coverage because it fails to disclose to
customers that the program will not cover any medical expenses already
covered by the policyholder's HMO or health insurance.

The suit alleged that Allstate's conduct constituted negligent
misrepresentation, common-law fraud and violation of the Arizona Consumer
Fraud Act. Haisch and the purported class members sought declaratory and
injunctive relief, the return of insurance premiums paid for useless
insurance, and punitive damages.

The trial court granted summary judgment to Allstate, finding that its
marketing of Med Pay coverage did not establish a viable claim under any
of Haisch's theories of recovery.

Haisch appealed to the Arizona Court of Appeals, Division One, which
upheld the lower court ruling by a 2--1 vote.

Haisch argued that by failing to disclose that it would not cover
automobile accident-related expenses for health care that her HMO
provides, Allstate committed a false, material representation. She
claimed to have paid expensive premiums for the Med Pay coverage over
several years without knowing that she was already getting the same
coverage from her HMO.

The appellate court majority found Haisch's arguments without merit.

"It is not reasonable for Haisch to have expected that Allstate would
'reimburse' her for charges she never had to pay in the first place, and
it was not 'unlawful' for Allstate to fail to advise Haisch that this
insurance policy would not operate in such a fashion," the court
concluded.

In a scathing dissenting opinion, Judge James B. Sult said he felt that
Haisch had established at least a prima facie claim for consumer fraud.

"Reduced to its essence, this is a case where an insurance company
repeatedly sold a consumer insurance coverage that the consumer may well
have chosen not to purchase had the company disclosed it intended to rely
on an obscure statue and to severely limit coverage if a consumer also
happened purchase the wrong kind of health insurance," Judge Sult wrote.

Haisch should have been told up front that her medical expenses would be
paid by her HMO, and Allstate's failure to do so was an omission of
material fact in the marketing of its automobile policy that constituted
an lawful act under Arizona law, he said.

"Here, we have a sophisticated insurance company extracting from a
uninformed consumer a premium purportedly purchasing full medical
payments coverage, and in fact, actually purchasing full coverage if a
consumer is fortunate enough not to enroll in an HMO," he said.

Haisch is represented by Steven C. Mitchell and Christopher A. O'Hara of
Hagens, Berman & Mitchell in Phoenix.

Allstate is represented by Floyd P. Bienstock and Bennett Evan Cooper of
Steptoe & Johnson in Phoenix. (Managed Care Litigation Reporter, July 17,
2000)


BMG DIRECT: Cleared of Deception in Shipping Charges for Selling by Mail
------------------------------------------------------------------------A
class action was brought against defendant BMG, which operates a music
club to sell cassette tapes and compact discs by mail. BMG advertises in
print media, by direct mail and over the Internet. Plaintiff alleged that
BMG violated General Business Law 349 by charging "false, inflated
shipping and handling charges" that exceeded the actual costs, thus
constituting deceptive practices. BMG moved to dismiss based on evidence
establishing that it fully disclosed the amount of the shipping and
handling charges. It also argued that its operations are governed by a
specific Federal Trade Commission trade regulation rule, and that
compliance with the rule constitutes an absolute defense. The court
dismissed the complaint, ruling that since BMG disclosed the amount of
the charges, plaintiff failed to allege facts that would support a claim
under GBL 349.

IA PART 49

Justice H. Cahn

ZUCKERMAN v. BMG DIRECT MARKETING, INC. QDS:22702821 - Motion sequence
numbers 001 and 003 are consolidated for disposition.

In motion sequence number 001, defendant BMG Direct Marketing, Inc. d/b/a
BMG Music Service ("BMG") moves, pursuant to CPLR 3211(a)(1) and (7), to
dismiss this class action complaint. In motion sequence number 003,
plaintiff Richard W. Zuckerman moves for leave to submit new evidence in
opposition to the motion to dismiss.

BMG operates a music club which sells cassette tapes and CD's by mail. It
advertises in print media, by direct mail and over the Internet. In his
complaint, plaintiff alleges that BMG has violated General Business Law @
349 by charging "false, inflated shipping and handling charges." The
complaint alleges that the shipping and handling charges greatly exceed
BMG's actual costs for shipping and handling each transaction, and
thereby constitute deceptive practices in violation of the statute.
Plaintiff seeks to require BMG to disgorge the excessive amounts.
Alleging that these acts were wilful, wanton, oppressive and malicious,
plaintiff also seeks punitive damages.

BMG moves to dismiss the action based upon documentary evidence that it
fully discloses the amount of the shipping and handling charges. BMG
further maintains that its operations are governed by the Federal Trade
Commission Trade Regulation Rule Concerning Use of Negative Option Plans
by Sellers in Commerce (the "Negative Option Rule") (16 CFR 425). BMG
asserts that compliance with that rule constitutes an absolute defense to
an action pursuant to GBL @ 349.

In motion sequence number 003, plaintiff seeks to introduce what he
labels "new evidence" in opposition to the motion to dismiss. The new
evidence consists of two membership guides issued by defendant, the
relevant portions of which are included as exhibits in motion sequence
number 001, and the complaint and orders denying BMG's motion to strike
the complaint in a similar California action, California Consumers v. BMG
(Cal Superior Ct, Sonoma County, Case number 216700). Since the relevant
portions of the membership guides were included in the record, there is
no reason to permit the addition of the full guides. The papers in the
California action do not constitute evidence, but the Court will address
the import, if any, of those orders.

While the California action involves a very similar claim to the one at
bar, a different statute is involved. Further, even to the extent that
the two statutes seek to protect the public against deceptive practices,
this court is bound by the decisional law of this State, and the
interpretation that California courts give to the California statute is
not binding on this court. Thus, the California interpretation of a
similar statute has little probative value in construing the New York
statute.

GBL @ 349(a) prohibits "deceptive acts or practices in the conduct of any
business, trade or commerce or in the furnishing of any service in this
state...." In determining what practices are deceptive, the Court of
Appeals has held that "the deceptive practice must be 'likely to mislead
a reasonable consumer acting reasonably under the circumstances' "
(Stutman v. Chemical Bank, _ NY2d _, 2000 WL 637530 May 18, 2000 citing
Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85
NY2d 20 (1995). BMG informed its customers of the charges for shipping
and handling prior to requiring payment, and with that knowledge, the
customer had the choice of making or not making the purchase. Thus, the
consumer was not deceived regarding the price he/she would have to pay.
Lewis v. Hertz Corp., 181 AD2d 493 (1st Dept 1992). In fact, the shipping
and handling charges should be considered as part of the total price.
Although denominated separately in advertisements and other publications,
they are in truth, part of the total price the consumer must pay.

While plaintiff contends that BMG's practices are deceptive in that the
actual costs of shipping and handling are less than the amount charged,
the courts of this State have refrained from entering into such an area
of inquiry. Thus, in Super Glue Corp. v. Avis Rent A Car System, Inc.
(159 AD2d 68 [2d Dept 1990]), the Second Department refused to address
whether the price charged by a car rental company for refueling were
excessive. The Court concluded that "in the absence of legislative
regulation, and since the courts are not empowered to set policy on
prices, excessive prices charged by Avis for CDW coverage or for
refueling, without more, are not deceptive practices, and hence, are not
actionable." Id. at 71. Similarly, in Sands v. Ticketmaster-New York,
Inc. (207 AD2d 687 [1st Dept 1994]), the First Department held that the
plaintiff's cause of action, brought under GBL @ 349, should have been
dismissed. The plaintiff alleged that the defendant's fees were
excessive. Since the fees were always disclosed, the Court held that the
challenged business practice did not violate the prohibition against
deceptive business practices.

Plaintiff argues that Sands v. Ticketmaster-New York, Inc. is
distinguishable because a service fee is not an ascertainable amount,
whereas the cost for shipping and handling can be calculated. However,
the First Department did not base its determination on that fact, but
rather on the fact that the amount was fully disclosed. Similarly, in
determining that an allegedly excessive refueling charge was not a
deceptive business practice, the First Department did not consider
whether the refueling service was optional, but only that the amount
charged for it was disclosed. Lewis v. Hertz Corp., supra. Nor is this a
case where the plaintiff was coerced into using BMG's services, and
therefore had no option but to accede to the allegedly excessive charges.
See, e.g., Negrin v. Norwest Mtge., Inc., 263 AD2d 39 (2d Dept 1999).
Thus, in a case such as this, where there is no coercion involved, the
focus is whether the amount of the charge is disclosed. If so, the
question of whether the amount charged is unreasonable or excessive is
not an issue for the courts to address. See, Sands v. Ticketmaster-New
York, Inc., supra; Lewis v. Hertz Corp., supra., since it is not a
judicial function to decide whether prices for merchandise are fair, or
reasonable. Since the amount of the shipping and handling charges was
fully disclosed by BMG, plaintiff has failed to allege facts which would
support a claim under GBL @ 349, and the complaint is dismissed.

In light of this determination, the Court need not address the question
of whether BMG's compliance with the Negative Option Rule would operate
as a complete defense to this action, pursuant to GBL @ 349(d).
Accordingly, the court ordered that

    -- the motion for leave to submit additional evidence is granted only
to the extent that the Court takes note of the California action pending
against defendant; and it is further

    -- the motion to dismiss is granted and the complaint is dismissed
with costs and disbursements to defendant as taxed by the Clerk of the
Court; and it is further

    -- the Clerk is directed to enter judgment accordingly.

(New York Law Journal, July 13, 2000)


BONE SCREW: High Ct Will Decide If Fed Approval Is Precluded from Fraud
-----------------------------------------------------------------------
The U.S. Supreme Court has said it will decide whether federal regulation
of medical devices precludes a lawsuit concerning fraudulent federal
approval for marketing bone screws for use in spinal surgery. Buckman Co.
v. Plaintiffs Legal Committee, No. 98-1768, cert. granted (U.S., June 29,
2000); see Medical Devices LR, Oct. 21, 1999, P. 8.

The questions raised in this case deal with whether plaintiffs can
inquire into the workings of a federal agency.

The case arose from ongoing pedicle screw multidistrict litigation.
Buckman Co. is a regulatory consultant for medical device manufacturers,
helping them navigate the Food and Drug Administration's regulatory
scheme. In 1984, bone screw manufacturer AcroMed Corp. hired Buckman as
its liaison with the FDA in its attempts to obtain marketing clearance
for a device called the Variable Screw Placement Spinal Plate Fixation
System, or VSP. Buckman, on behalf of AcroMed, applied to the FDA for
Section 510(k) clearance for the device.

Section 510(k) is a provision of the Medical Device Amend ments of 1976.
The MDA greatly expanded the FDA's role in regulating medical devices.
The MDA state that the manufacturer of a new medical device must present
the FDA with evidence that the device is safe and effective. However, if
that device can be proven to be "substantially equivalent" to devices
that were in use prior to the enactment of the MDA in 1976, that device
is exempt from the required FDA approval. This exemption is known as Sec.
510(k) clearance. Once a device has been approved for marketing under
Sec. 510(k), the manufacturer may not market or promote it for uses other
than those specified in the FDA clearance.

The FDA rejected Buckman's application for Sec. 510(k) clearance twice.
These applications stated AcroMed intended to market the VSP bone screw
for spinal surgery. Then AcroMed and Buckman separated the VSP into its
component parts, the screw and plate, and sought Sec. 510(k) approval for
each. This time, the companies said the devices would be marketed for use
in the arm and leg bones, and the application was granted.

It is legal for surgeons to use medical devices in any way they see fit,
no matter how the device is marketed. Many surgeons used the VSP for
spinal fixation, instead of in the arms and legs, an activity known as
"off-label" usage and one that in no way violates federal law.

Subsequently thousands of plaintiffs filed suit against many
manufacturers of pedicle screw systems, including AcroMed. The suits were
consolidated in a multidistrict litigation based in the U.S. District
Court for the Eastern District of Pennsylvania, of which this case is a
part.

The plaintiffs, represented by the Plaintiffs Legal Committee, contended
that Buckman and AcroMed deceived the FDA as to the intended uses of the
VSP by stating that they would be marketing the devices for use in the
arms and legs, when in fact they intended to market the device for use in
the spine. The PLC claimed this amounted to fraud under state law.

In 1995 the district court dismissed the "fraud-on-the-FDA claims," as
they came to be known, ruling they were preempted by the Medical Device
Amendments, which prohibit states from imposing requirements in addition
to those imposed by the MDA and the FDA.

Following the U.S. Supreme Court decision in Medtronic Inc. v. Lohr , 518
U.S. 470 (1996), which dealt with MDA preemption, the PLC sought to
revive its fraud-on-the-FDA claims. In 1997, the court affirmed its
previous decision. However, in November 1998, the U.S. Court of Appeals
for the Third Circuit reversed, ruling the claims could move forward.

Buckman filed its petition for a writ of certiorari on May 4, 1999.
AcroMed had previously settled out of the case.

Buckman stated in October 1999 that the high court should rule on this
matter to settle widespread confusion over the meaning of its ruling in
Medtronic and whether, and to what extent, states can allow common-law
claims against medical device manufacturers. In addition to the Third
Circuit, the 10th Circuit has ruled that Medtronic does not preempt state
claims of general applicability.

                      Supreme Court Agreement

On June 29, 2000, the U.S. Supreme Court said it will decide sometime in
2001 whether the Buckman lawsuit, in which more than 5,000 people have
filed claims against pedicle bone screw manufacturers, should be thrown
out.

Buckman's appeal was supported in a friend-of-the-court brief submitted
by Danek Medical Inc., the nation's largest supplier of spinal implant
devices. The Pharmaceutical Research and Manufacturers of America, the
Product Liability Advisory Council, and the Medical Device Manufacturers
Association also urge reversal of the Third Circuit's ruling, and will
file amicus briefs with the high court. (Medical Devices Litigation
Reporter, July 14, 2000)


CAPROCK COMMUNICATIONS: Cauley & Geller Files Securities Suit in TX
-------------------------------------------------------------------
The Law Firm of Cauley & Geller, LLP announced on July 26 that it has
filed a class action in the United States District Court for the Northern
District of Texas on behalf of all individuals and institutional
investors that purchased the common stock of CapRock Communications Corp.
(Nasdaq:CPRK) between April 28, 2000 and July 6, 2000, inclusive,
including those who purchased shares in CapRock's June 16, 2000 Secondary
Offering.

The complaint charges that the Company and certain of its officers and
directors violated the federal securities laws by providing materially
false and misleading statements about the Company's revenues.
Specifically, the complaint alleges that defendants' false and misleading
statements concerning the revenues to be derived from its dark fiber
segment, which would result in a second quarter 2000 loss per share of
only $0.08 and revenue of $70 million, artificially inflated the price of
CapRock stock to a Class Period high of $36. CapRock's top officers knew
but concealed that some $30 million of its projected $70 million in
second quarter 2000 revenues was to be derived from a contract which,
despite months of efforts, CapRock had been unable to have signed. The
upsurge in CapRock's stock price caused by defendants' false and
misleading statements allowed CapRock to sell 4.5 million shares of
CapRock stock for proceeds of $83 million and enabled defendants to
infuse CapRock with desperately needed capital to fund its operations. On
July 6, 2000, days after CapRock's Secondary Offering was completed,
CapRock revealed that it was in fact suffering a huge drop in revenues,
and that its losses would be 800% greater than defendants had stated in
the prior weeks, and exposed the problems CapRock had been experiencing
during the Class Period with its dark fiber business. This announcement
caused its stock price to drop to as low as $12 from its Class Period
high of$36 on record volume of over 4 million shares on July 6, 2000,
causing tens of millions of dollars in damages to members of the Class.

Contact: CAULEY & GELLER, LLP, Boca Raton Sue Null, Jackie Addison or
Sharon Jackson Toll Free: 1-888-551-9944 E-mail: cauleypa@aol.com


D.C. SCHOOL: Court May Take over School Transportation System
--------------------------------------------------------------
A report on the Washington Post says that D.C. district officials, facing
a possible court takeover of school transportation, want to hire a
special coordinator for the school system to fix a bus service that for
years has stranded special education students or failed to get them to
school on time.

According to the Post, bus service has worsened in recent months, and
attorneys for special-ed students in a class action lawsuit against the
District were in court threatening to push for a court takeover.

Appearing at a U.S. District Court hearing, attorneys on both sides said
they hope to avoid the appointment of a court receiver. But attorneys for
the city's physically, mentally and emotionally disabled public school
students said they may have to push for one if service doesn't improve,
the report goes on. "The specter of a receivership is certainly an
incentive for all of these bodies to take it seriously right now,"
plaintiffs' attorney Beth Goodman said of negotiations to create the
transportation job. "That is not something the District would like to
have happen."

In court filings, attorneys representing special-ed students detailed a
number of cases in which bus service has been poor or nearly nonexistent
since summer school began.

U.S. District Judge Paul L. Friedman told attorneys for the city and
schools that employee shortages and other bus service problems need to be
resolved by the time school opens Sept. 5. He asked attorneys for both
sides to finish negotiations on bringing in a transportation coordinator
and to file a plan with the court.

The plaintiffs and school system support the idea of creating the
position but have disagreed over some details of the proposal.

The transportation coordinator concept has been discussed by the school
system, Mayor Anthony A. Williams (D) and the D.C. financial control
board. The person would report to the school superintendent and would
oversee day-to-day operations and resolving systemic problems. Proponents
of the new position say someone needs to coordinate with the school
system and city government departments that play a role in bus service.

New Superintendent Paul L. Vance told Friedman that fixing the bus
service problem is a priority. In an interview, Vance said he was
planning to discuss the transportation job with David I. Gilmore, the
court-appointed receiver for the city's housing agency for the past five
years. "He's one of several persons we have in mind," Vance said. "His
reputation is certainly positive."

But Gilmore said he hadn't been told about the transportation job--and
didn't think it would raise "a spark in my heart. . . . I have no
interest in running the transportation system for the schools at all."
Gilmore, who had asked the control board to consider naming him to
replace former superintendent Arlene Ackerman, said he might be
interested in a broader school system job.

Grace M. Lopes, special counsel to the mayor for receiverships and
institutional reform litigation, said the new transportation job would
fill a void. "No one is addressing transportation and the big picture in
terms of planning because of the crisis atmosphere that is there," she
said.

Court papers filed by the plaintiffs called bus service "abysmal" and
cited failures involving some of the city's neediest children. They
included the case of a 6-year-old girl who suffers from spastic cerebral
palsy and is legally blind. The first day of summer school, a bus arrived
without a needed wheelchair lift. Other days, she was taken to school
late, once spending 2 1/2 hours riding the bus.

Another case involved an 11-year-old student with cerebral palsy who
didn't run into transportation problems until the school system took over
bus services. Then, she didn't get picked up for three weeks.

Interviews with bus drivers and school and city officials indicate that
the most immediate problem is that the school system does not have enough
drivers for the summer school routes--and could face a dire shortage in
the fall.

Bus drivers hired from the former contractor haven't been reliable, said
school officials, adding that 70 to 100 drivers a day miss work. School
administrators put out a request for proposals from companies to help
recruit new drivers. But after issuing the request and accepting bids,
officials canceled the proposal and drafted a new one with different
specifications--a step that special-ed advocates say delayed recruiting
and caused the school system to lose drivers to other jurisdictions.

Some drivers recently walked off the job, complaining they weren't
getting paid or were receiving checks for less than what they were owed.
School officials blamed the city's chief financial officer;
representatives of that office said some of the problems stemmed from
school workers failing to process time cards.

Bus drivers say the school system has done a poor job preparing routes,
forcing them to crisscross the city on overlapping runs. Alfred Winder,
executive director of school transportation, denied that.

Bus problems persist even though the District spends $ 40 million to bus
special-ed students, who number 4,000 during the regular school year. By
contrast, Montgomery County spends about $ 50 million to transport 92,000
children, including 11,000 special-ed students.

Officials say costs are higher in part because many D.C. children are
transported to private schools in Maryland and Virginia because city
schools can't provide needed services. (The Washington Post, July 27,
2000)


DOE: Hispanics Seeking Homestead Property Back Files Suit
---------------------------------------------------------
After waiting more than 50 years for the government to make good on their
promises to return Hispanic homestead property, the 35 families of the
Pajarito Plateau Homesteaders Corporation Inc. are fed up. The
organization recently filed a class action suit against the Department of
Energy (DOE) and the Office of the Secretary of Energy, a position
currently held by Bill Richardson.

"The reality is that Bill Richardson has not been a fighter for Hispanic
rights," says Joe Gutierrez, President of the Homesteaders organization.
"This suit belies the claim that Bill Richardson appeals to the Hispanic
voter. In contrast, Hispanics from Bill Richardson's home state and
congressional district are trying to hold Bill Richardson accountable for
his neglect to fight for Hispanic issues."

In 1942, the U.S. Army Corp of Engineers approached residents of the
Pajarito Plateau and forced them off their land, some even at gunpoint.
Most of these families were ranchers and farmers who left their
belongings under the assumption that they would soon return to their
homes and land.

This was not to happen. Their land was confiscated for a secret mission -
- a mission we now know to be the Project at Los Alamos, site of the
atomic bomb; their homes were bulldozed; their crops were destroyed; and
their livestock was used for target practice. The homesteaders lost their
livelihood because they trusted the government; they have yet to receive
reparations for their loss.

With this in mind, Congress enacted Public Law 105-119, Section 632,
which directs the Secretary of Energy to identify all parcels in the
vicinity of the Los Alamos National Laboratory that are unneeded for the
mission of the Department of Energy and transfer the lands. Section
632(c)(1) of the Act requires the Secretary to submit the results of a
title search "including an analysis of any claims against or other
impairments to the fee title to each parcel" to the congressional defense
committee.

Secretary Richardson has failed to discharge these duties owed to the
homesteaders, duties that Congress has directed him to perform. He has
"failed to cause preparation of a title search that makes an analysis of
claims against or impairments to the title of the United States. The role
of making such analysis was placed in the hands of the Army Corps of
Engineers, the same agency that violated the Constitutional, procedural
and civil rights of the homesteaders. As a result, the Army Corps of
Engineers has, as could be expected, produced an incompetent,
self-serving document that is a sham," as stated in the law suit.

The Department of Energy is currently declaring portions of the Los
Alamos National Laboratory facilities and land as surplus to the
government's needs. This is being done so that the lands can be given to
the County of Los Alamos, San Ildefonso Pueblo and private, commercial
enterprises instead of the rightful owners. The Department of Energy has
even been admonished for holding on to appropriated land for too long,
and even land laundering! Yet the homesteaders still have not received
reparation, nor have they had their day in court.

In a letter to Senator Pete Domenici (R-NM), Secretary Richardson vows
that the "Department of Energy will continue to work with these parties
to address their [the homesteaders'] specific concerns. In doing so, he
has offered the homesteaders what he thought to be fair reparation for
their loss. This token comes in the form of a nine-acre recreational area
for a monument. How could a monument be just reparation for one's
livelihood? (Source: Pajarito Plateau Homesteaders Corporation Inc.)


HMOs: Fed Ct Tells NH to Find People Owed Medicaid Refunds
----------------------------------------------------------
A federal court Tuesday ordered the state to try to find the 79 people
who may not know they are owed thousands of dollars in Medicaid refunds.

The state maintained it could not find them, but a federal judge told the
state to start advertising with the list of names in the state's
newspapers by Friday. The state maintained federal law and privacy
interests banned releasing the names.

The refunds are owed people whose homes or other assets were taken by the
state since 1992 to repay state-paid nursing home care for other people,
usually spouses. Money also is owed to the estates of dead nursing home
patients. The refunds total $675,000, and range from a few dollars to
$86,000 in one case.

The state agreed to repay about $6.5 million to 369 families or estates
to settle a class-action lawsuit that ended a state practice of filing
liens against homes and assets to recoup Medicaid payments.

New Hampshire Legal Assistance has asked the federal court to allow
publication of the names of 79 remaining class members who likely don't
know the government still owes them money. The deadline for filing claims
is August 16. Legal Assistance said the state never provided addresses
for some of those entitled to refunds and there is no guarantee many of
them ever received notices or believe they are entitled to refunds.

Lgal Assistance has been trying to contact lawyers who may have handled
estates and real estate sales for surviving spouses and re-contacting
class members who have yet to respond.

Assistant Attorney General Ann Larney has said said the had "paid out
over $6 million. . . . We feel we have reached the majority of the
plaintiffs who are class members."

Refunds already paid range from $6 to $120,000. The state is responsible
for 20 percent of the refund, the counties 30 percent and the federal
government the remaining 50 percent. (The Associated Press State & Local
Wire, July 26, 2000)


HMOs: LA Fed Ct Remands Aetna Case over Delayed Payments to State Court
-----------------------------------------------------------------------
A Louisiana federal judge has remanded a proposed class action accusing
Aetna U.S. Healthcare Inc. of failing to make timely payments for
services rendered under physician group agreements and other similar
contracts. U.S. District Judge Morey L. Sear ruled that the allegations
do not relate to benefit plans offered by Aetna to employers under ERISA
and that the federal court, therefore, lacks jurisdiction over the case.
Lakeland Anesthesia Inc. v. Aetna U.S. Healthcare Inc., No. 00-1061
Section: G(5) (E.D. La., June 15, 2000).

In its complaint filed originally in the Civil District Court for the
Parish of Orleans, plaintiff Lakeland Anesthesia Inc. alleges that Aetna
adopted a routine practice of intentionally delaying payment of
"complete, clean or otherwise valid claims" beyond 30, 45 and even 90
days. Lakeland further asserts that Aetna frequently classified complete
and clean claims as "incomplete" and made arbitrary and immaterial
changes to information required to process claims.

Lakeland sued Aetna for breach of contract and abuse of its rights under
the Louisiana Insurance Code. Aetna, however, removed the case to U.S.
District Court for the Eastern District of Louisiana after contending
that Lakeland's claims relate to benefits due under employee benefit
plans offered by Aetna to employers within the meaning of the Employee
Retirement Income Security Act.

Remanding the case to state court, Judge Sear held that ERISA does not
preempt Lakeland's state law claims. The plaintiff, he said, alleges only
state law claims arising out of Aetna's alleged failure to pay Lakeland
and other clinics and medical providers according to the terms of service
provider contracts between the defendant and the proposed class of
plaintiffs.

"Aside from Aetna's unsupported and conclusory statements, there is
nothing before this court that suggests that federal subject matter
jurisdiction exists based on ERISA's complete preemption provision,"
Judge Sear wrote. "The defendant has not provided the court with a single
employee benefit plan under which Lakeland allegedly seeks to recover
assigned benefits of a plan participant or beneficiary."

Even if Aetna had shown that a qualified employee benefit plan exists in
this case, it fails to present any of the additional prerequisites to
support a finding that Lakeland has "artfully pled a derivative action
for benefits under an ERISA-governed health care plan," Judge Sear said.

Paul A. Lea of Covington, La., argued for Lakeland. William Bernard
Gaudet and Ronald J. Sholes of Adams & Reese in New Orleans represented
Aetna. (Managed Care Litigation Reporter, July 17, 2000)


HOLOCAUST VICTIMS: Judge OKs Swiss Banks' Settlement for Money Hoarding
-----------------------------------------------------------------------
A federal judge approved a historic $1.25 billion settlement Wednesday
between Swiss banks and more than a half-million plaintiffs who alleged
the banks hoarded money deposited by Holocaust victims. The
long-anticipated ruling by U.S. District Judge Edward Korman brings
Holocaust victims and their heirs worldwide a step closer to collecting
claims against the banks.

In the ruling, the judge said the words of Holocaust survivor Ernest
Lobet best summarized his own feelings about the settlement. ''I have no
quarrel with the settlement,'' Korman quoted Lobet as saying. ''I do not
say it is fair, because fairness is a relative term. No amount of money
can possibly be fair under those circumstances.''

Korman now must sign off on a plan, still in the works, for dividing and
distributing the settlement the final phase of a painstaking global
campaign to compensate roughly 600,000 claimants. A court-appointed
special master, Judah Gribetz, is to file a draft of the distribution
plan within 30 days.

Elan Steinberg, executive director of the World Jewish Congress, hailed
Korman's decision as ''a belated victory.'' ''After more than a half
century, a measure of justice has been achieved for the victims of the
greatest crime of the century,'' he said.

Defense attorney Roger Witten said the banks have already put $550
million in escrow in anticipation of starting payments, possibly before
the end of this year. ''We're as anxious as anybody to get this money
out,'' he said.

At hearings last year, attorneys from both sides told Korman that an
overwhelming majority of the plaintiffs in the class-action lawsuit
supported a proposed out-of-court settlement reached in August 1998.

The suit was filed by Holocaust victims who deposited money in Swiss
banks for safekeeping as the Nazis gained power in Europe, expecting to
retrieve it later.

After the war, the plaintiffs claimed, they ran into a stone wall in
trying to claim the assets. In some cases, they lacked detailed account
information; some bankers even demanded impossible-to-obtain death
certificates of people killed in Nazi concentration camps.

The settlement covers Jews and other Holocaust victims who lost money in
Swiss accounts, as well as those whose belongings were plundered by the
Nazis and apparently wound up in Switzerland, a wartime depository for
gold and other assets.

A three-year independent investigation headed by Paul A. Volcker, the
former U.S. Federal Reserve chairman, found that up to 54,000 accounts
may have been opened by Holocaust victims.

A report issued last year by Volcker cleared the banks of systematic
destruction of records of victims' accounts, but said there was evidence
of ''deceitful actions by some individual banks.''

In May, the two largest Swiss banks Credit Suisse Group AG and UBS AG
agreed to grant access to databases containing 2.1 million Holocaust-era
accounts to help speed payments to victims.

Contacted Wednesday, Lobet a Glen Cove, N.Y., attorney who spent more
than two years as a slave laborer in Auschwitz said though he was
thankful to be part of Korman's ruling, the settlement itself is
bittersweet. ''Am I going to be compensated for Auschwitz? Obviously
not,'' he said. ''But at least it's an acknowledgment that something is
owed to the victims. .... It's the best that could be done under the
circumstances. It's time to close the books.'' (AP Online, July 26, 2000)



INGRAM BARGE: Judge OKs Chemical Leak Settlement; Attys to get $16.7M
---------------------------------------------------------------------
A federal judge Tuesday approved a $41.7 million settlement of claims
arising from a chemical leak from a barge that capsized on the
Mississippi River in 1997. About $16 million of the money will go to
people who claim the accident harmed their health or forced them to leave
their homes or close their businesses.

The attorneys for the group will receive $16.7 million, about 40 percent
of the settlement total. The rest of the money, about $9 million, is set
aside to cover medical expenses and future claims against Ingram Barge
Co., based in Nashville, Tenn.

U.S. District Judge John Parker accepted the settlement two weeks after a
pair of special masters appointed to review it recommended that he do so.
"The (settlement agreement) is fair and reasonable in light of the
complexity, expense and likely duration of the litigation, in light of
the risks involved in establishing liability and damages, and in
maintaining a class action throughout the trial," Parker wrote in his
ruling.

The settlement stems from a lawsuit filed after a barge, owned by Ingram
Barge and loaded with 400,000 gallons of toluene and benzene, capsized in
March 1997 near the west bank just south of the U.S. 190 Mississippi
River Bridge. Under the terms of the agreement, people will receive money
in amounts generally ranging from $50 to $2,000.

The largest single payment - $280,000 - would go to Tamara Lirette of
Baton Rouge, who the special masters found suffered extraordinary medical
problems caused by the spill.

The barge was loaded with benzene and toluene. Both chemicals are
flammable and toxic. Benzene is known to cause cancer. The chemicals
float on water, vaporize in the air and irritate the eyes, nose and
throat. About 42 people living near the river were evacuated for 11 days
while the spill was cleaned up, according to the special masters' report.
Southern University was briefly evacuated. Those exposed to the benzene
the longest will receive the most money, Parker ruled.

The 42 people evacuated will split $126,000, with some receiving $3,000
and others receiving as much as $18,000. The 16 people who served as
representatives of all the plaintiffs will receive $2,000 each for their
work.

After a daylong hearing, Parker rejected several objections to the
settlement. The people objecting could not show their medical problems
stemmed from exposure to the chemicals, or failed to properly file their
claims or objections, Parker ruled. (The Advocate (Baton Rouge, LA.),
July 26, 2000)


INMATES LITIGATION: Inmates At Ages of 18-22 Forfeit Right to Education
-----------------------------------------------------------------------
Prison inmates between the ages of 18 and 22 forfeit their constitutional
right to a public education, the Washington Supreme Court ruled Thursday.

The high court, on a 6-3 vote, rejected most of the arguments in a
class-action lawsuit filed by inmates who claimed the state's failure to
provide them with basic and special-education services violated the
Washington Constitution and various state and federal statutes.

The decision overturned a Thurston County judge's ruling that the state
was required to offer a traditional education to about 1,000 inmates
between the ages of 18 and 21.

The ruling prompted a dissent by Justice Charles Johnson, who accused the
majority of manipulating the legal definition of "child" and failing to
recognize the constitutional right of children to a high school
education, regardless of their criminal histories.

The six-member majority reached three conclusions:

   -- Inmates under age 18, like all other Washington youth, have a
       constitutional right to a public education. That right was
       satisfied by a 1998 law requiring the state to provide an
       education to juveniles incarcerated in adult prisons, the court
       said.

  -- Inmates over the age of 18 are not covered by the 1977 Basic
      Education Act, which requires the state to provide a basic
      education - through high school - to students up to age 21.

  -- Inmates with disabilities and over the age of 18 are not covered by
      the federal Individuals with Disabilities Education Act, which
      provides a basic education to individuals up to age 22.

Article IX of the Washington Constitution says the state has "the
paramount duty" to provide an education for all children within its
borders.

In a majority opinion written by Justice Faith Ireland, the high court
defined "children" as individuals up to age 18, not 22.

She noted that current law requires individuals under 18 to attend
school, supporting the "common understanding" that children reach the
"hallmark of adulthood" when they turn 18 and can vote, marry without
parental consent, make medical decisions and sue and be sued.

But Johnson, in a dissent signed by Justices Barbara Madsen and Gerry
Alexander, said the majority opinion ignores state law defining a "child"
for the purposes of education as someone between the ages of 5 and 21.

Thus the majority ruling "deprives a child of the constitutional right to
a high school education simply because he or she committed a serious
crime early in life," he wrote.

"I cannot agree with this erosion of such a significant constitutional
right."

Justice Phil Talmadge, who signed the majority opinion, filed a separate
opinion challenging Johnson's criticism as so broad that it would have
the judiciary assume responsibility for administration and funding of
education beyond the legislative and executive branches of government.
The case is Tunstall vs. Bergeson, No. 67448-5. (The Associated Press
State & Local Wire, July 27, 2000)


INMATES LITIGATION: NYC Ordered to Give Mental Health Care after Release
------------------------------------------------------------------------
New York City prisons were ordered earlier this month by a Manhattan
Supreme Court justice to provide inmates who have received mental health
care while incarcerated with continued treatment after release.

The temporary injunction was handed down in a class action filed on
behalf of prisoners in City jails such as Rikers Island. The lawsuit
alleges that inmates who are also in-patients are deprived of their right
under the Mental Hygiene Law to receive treatment as outlined in a
discharge plan.

The City said that its responsibility to the prisoners ended with their
release from jail. It said that as a matter of practice they do not
provide discharge plans for inmates who receive mental health treatment
and are released from City jails.

In a strongly worded opinion, Justice Richard F. Braun said that the City
must provide continued treatment under a discharge plan, lest it risk "a
return to the cycle of likely harm to themselves and/or others, through
substance abuse, mental and physical health deterioration, homelessness,
indigence, crime, re-arrest and incarceration."

The key legal issue in Brad H. v. City of New York, 117882/99, was
whether the plaintiffs had an individual right to sue under the Mental
Hygiene Law.

Justice Braun found that the Legislature, in enacting the Mental Hygiene
Law, "implied" an individual right to sue if discharge planning is
denied.

While the individual right to sue was not spelled out explicitly, it is
consistent with the legislative scheme of the Mental Hygiene Law, he
said.

"Creation of such an implied private right to sue would be consistent
with the legislative scheme of protecting the mental health of all the
people of our State," Justice Braun wrote, "including mentally ill
inmates who are treated in jail, and providing them with individualized
services, including written discharge plans."

Advocates for the mentally ill filed the class action in Manhattan
Supreme Court last August, challenging the City's policy of discharging
mentally ill inmates without providing continuation of treatment under a
discharge plan.

The plaintiffs claim that discharge planning is required by Mental
Hygiene Law @ 29.15 before the release of the mentally ill inmate. Such a
plan details treatment for the patient needed after discharge or
conditional release from in-patient health care. Under @ 29.15, the plan
can encompass provision of supervision, medication, after-care services
and assistance in finding employment following discharge.

Justice Braun held that the plaintiffs are entitled to a temporary
injunction requiring the formulation of discharge plans by mental health
care providers that work in the City prison system.

He said it is likely that the plaintiff class will prevail on the merits.

The providers of mental health care in the City jails are licensed and
subject to the requirements of the Mental Hygiene Law, the court
observed. It is also clear that patients who happen to be City jail
inmates are not receiving the required discharge planning.

Justice Braun rejected the notion that @ 29.15 could not have been
intended to apply to mentally ill patients in the prisons.

City lawyers argued that the Mental Hygiene Law authorizes unannounced
visits to mental health care facilities by investigators to ensure
compliance with the law, but that such visits are blocked by prison laws
and regulations. But Justice Braun pointed to a catchall provision in the
prison law that allows the City Department of Corrections to accommodate
visits by persons "otherwise authorized by law" to inspect City jails.

He also said that mental health discharge planning need not delay release
from prison, since a plan could conceivably be developed as soon as
treatment starts.

The court also found a potential for irreparable harm if the City is not
ordered to comply with the discharge planning requirement, and said that
equity favors the order.

"The comparative harm is greater to [plaintiffs] than any increase in
bureaucratic work and cost to [the City]," Justice Braun said.

Justice Braun narrowed the class of eligible plaintiffs in the case, but
certified the matter as a class action.

He said that members of the class would be those prisoners who received
mental health treatment while in prison more than "once or twice."

Justice Braun said the class should be narrowed to include those inmates
who qualify for a discharge plan under the Mental Hygiene Law, which
means patients who have received significant mental health care treatment
- more than one or two visits.

According to Justice Braun, the decision could affect about 25,000
persons per year who receive mental health care while incarcerated at
Rikers and the other New York City jails.

Most of the treatment is provided by St. Barnabas Hospital under a
contract with the New York City Health and Hospitals Corp., which
provides care for other prisoners.

Representing the plaintiffs were Christopher K. Tahbaz, John Beaglehole,
Eileen E. Sullivan, Faune Devlin, Jeffrey K. Powell and Kristen K. Sauer,
of Debevoise & Plimpton; John A. Gresham of the New York Lawyers for the
Public Interest; and Douglas Lasdon, Raymond H. Brescia and Heather Barr,
of the Urban Justice Center. (New York Law Journal, July 13, 2000)


NAPSTER: Online Music Swapping Service Shut Down under Court Order
------------------------------------------------------------------
U.S. District Court Judge Marilyn Hall Patel effectively shut down the
Napster online music-swapping service Wednesday, saying the Web site
represented wholesale infringement of copyrights held by record labels
and composers.

Patel's order takes effect Friday at midnight and stays in place until
the end of an as-yet unscheduled trial in a copyright infringement suit
filed against Napster by several major record companies and music
publishers.

The judge has enjoined Napster from causing or assisting Internet users
from "copying or duplication of all copyrighted songs and musical
compositions of which the plaintiffs hold copyright."

The case is a closely watched one because it will determine whether
Internet technology can be used to enable massive copying of copyrighted
works.

Napster's Web site provides free software that allows visitors to the
site to share MP3 music files with each other. The Recording Industry
Association of America says most of the music being downloaded through
Napster's system is copyrighted. In A&M Records Inc. v. Napster Inc.,
99-5183, filed in December, the association and several individual record
labels charge Napster with contributory and vicarious copyright
infringement. The suit has since been consolidated with a class action
filed by music composers in April, Leiber v. Napster, 00-0074.

The plaintiffs sought a pretrial injunction against Napster, saying its
continued operation was causing them irreparable harm.

Before an overflow crowd Wednesday at the U.S. District courthouse, Patel
agreed, noting that there was evidence of reduced CD sales and that
record labels were having difficulty entering the digital download
marketplace. She also said there's a strong likelihood that the
plaintiffs' arguments of contributory and vicarious infringement would
succeed.

"Napster supplies the software, the search engine and the means of
establishing a connection, and without these a user could not find the
songs," Patel said.

Patel gave a lengthy list of reasons for her injunction, most
eviscerating the defendant's arguments that Napster was not harming the
copyright holders and that its activities weren't protected under court
precedent or federal law.

"Because this is such a wholesale copying effort -- it's not as if it's a
handful of songs -- I'm not willing to put the burden on the plaintiff,"
Patel said. She said it's up to Napster "to figure out a way not to
facilitate copying of copyrighted material."

The judge said she was not trying to shut down the service and would
allow it to continue non-infringing activities, such as chat rooms and
services for new artists.

But Napster attorney David Boies argued that the order will in effect
shut down the site, because it is unable to distinguish between
copyrighted and non-copyrighted works.

"The only way to do this is to stop the service," Boies said.

Patel, however, shot back: "But what about all those substantial, non-
infringing uses you were trying to convince me of?"

The hearing was tough from the start for the Napster attorneys. Boies,
the lead prosecutor in the U.S. Department of Justice's antitrust case
against Microsoft Corp., presented the defense along with Fenwick & West
partner Daniel Johnson Jr. Patel sharply questioned them about arguments
that the service could be used for anything other than copyright
infringement.

"The guts of the Napster system is to facilitate the uploading and
downloading of music, much of which is copyrighted," Patel said.

During the hearing, only 50 people were allowed in the courtroom. In an
overflow room and in the hallway outside, reporters, Internet
entrepreneurs and lawyers -- including the attorney for heavy metal band
Metallica, which has criticized Napster -- strained to hear the
proceedings.

Napster initially sought dismissal of the suit, claiming that its system
of servers functioned as a "mere conduit" for information and was thus
exempt from copyright infringement under the Digital Millennium Copyright
Act of 1998. However, Judge Patel dismissed this argument in a May 5
ruling. The RIAA subsequently sought the preliminary injunction against
the company.

Patel set a $5 million bond for the plaintiffs to cover the Web site's
financial losses prior to the trial, assuming Napster emerges victorious.
Boies had sought a bond of $800 million to $1.5 billion. (The Recorder,
July 27, 2000)


PASCO SHERIFF: Zen Fest Search Suit Filed on Behalf of Patrons
--------------------------------------------------------------
Three attorneys file a federal civil rights lawsuit on behalf of all
patrons who were illegally searched at the 1998 festival. Nearly two
years after the controversial Zen Festival alternative music show in
Zephyrhills, a trio of attorneys has filed a federal class action civil
rights lawsuit against Pasco County Sheriff Lee Cannon. The suit, filed
in a Tampa federal court last week, demands a jury trial and cash damages
for at least 10,000 people who attended the Sept. 5, 1998, concert.

Land O'Lakes attorney Randall Grantham, who represented several Zen Fest
patrons arrested in drug searches at the festival gates, said he is suing
on behalf of everyone who had to undergo illegal searches, whether they
were arrested or not. "This case has bothered me ever since the first
person who had been arrested came to me," Grantham said Wednesday. "These
searches were illegal."

Controversy over the all-night music festival began as soon as the gates
opened. Promoters had hired off-duty sheriff's deputies to provide
security, and patrons were required to let the uniformed deputies search
them before they were admitted.

Patrons reported deputies opened wallets and cigarette packs and required
concertgoers to remove their shoes and socks, shake out undergarments and
remove hats as they entered the gates at Festival Park, just south of
Zephyrhills along U.S. 301.

Deputies arrested 43 people after searching them for drugs as they
entered. Most cases were resolved with pleas or involved misdemeanor
charges handled in county court, but 11 felony suspects challenged the
searches in Circuit Court through Grantham and the public defender's
office.

The Circuit Court tossed out the evidence, and the 2nd District Court of
Appeal upheld the decision, sparing the 11 from prosecution. In a 24-page
ruling from the three-judge appeals board, the court found that deputies,
even off duty, were still deputies and would be held to the same
standards as any other law enforcement agent. The panel also found
patrons did not surrender their rights by walking past a sign that warned
of searches and rejected the state's claim that the need to find illegal
drugs created an exception.

Grantham said most of the estimated 10,000 to 15,000 patrons at the show
have never had their day in court, but still had their rights violated.
Taking the case to federal court is unusual, he said, but such serious
violations of constitutional rights should be corrected. "It's rare for
people whose rights were violated but weren't arrested to go to court,"
Grantham said. "It's an important case."

Grantham is suing with civil rights attorneys John D. Mallah and Jeffrey
A. Blaker on behalf of lead plaintiffs Sherry Ankner of Sarasota and her
brother-in-law, Scott Ankner. Both attended the concert. Neither was
arrested, but Sherry Ankner's husband, Brian, was arrested and charged
with possession of cocaine and marijuana. The prosecution dropped the
charges after the searches were declared illegal.

The first step Grantham faces is getting a federal judge to certify the
case as a class action suit, then he said he will try to notify those
involved in the case. The suit could take years to resolve, but Grantham
said he is determined to prove his point.

In addition to monetary damages the court would have to set if the suit
is successful, Grantham also seeks a ruling forbidding such searches in
the future.

Sheriff's Office spokesman Jon Powers said it is department policy to
refrain from commenting on pending civil litigation.
(St. Petersburg Times, July 27, 2000)


SC: Retired Chief Justice Sues State in Sales Tax Dispute
---------------------------------------------------------
South Carolina is being sued by a retired Supreme Court chief justice,
who charges the state with fraud in the collection of a portion of sales
taxes from residents 85 and older.

Retired state Chief Justice Bruce Littlejohn filed the suit in Richland
County this month and claims the state has failed to tell retailers about
a senior exemption of 1 percent of the state's 5 percent sales tax on
items including food and services including telephone and electricity.

The state Revenue Department, which also is named in Littlejohn's suit,
provides elderly residents with a card to prove their age and to explain
the law to retailers.

Those older than 85 also do not have to pay 1 percent of the state's 7
percent accommodations tax on hotel rooms, room services and admissions
to amusement and other parks. "Since becoming 85 years of age on July 22,
1998, (Littlejohn) has purchased many items from retail establishments,
all of which collected the illegal taxes on behalf of (the state),"
according to Littlejohn's suit.

Littlejohn, who was elected to the high court in 1967 and retired in
1985, wants the suit to be given class-action status to force the state
to reimburse all residents older than 85 for taxes paid in the past three
years - about $300 a year, according to the suit.

South Carolina had 46,726 residents 85 or older in 1999, roughly 1
percent of the state's 3.88 million population, according to figures from
the U.S. Census Bureau. The state Department of Health and Human Services
estimates that will increase to 65,000 people this year.

Harry Hooper, general counsel for the state Revenue Department, said
retailers - not the state - are responsible for collecting sales tax.
"Basically, the grocery store, or the retailer, is liable for the tax,"
Hooper said. "South Carolina's sales tax is a vendor tax, so that the
taxpayer is the retail outlet."

Jim Hatchell, president of the 600-member South Carolina Merchants
Association, sees it differently. "The burden has to be on the consumer
on that type of thing," Hatchell said. "It's incumbent upon the consumer
to know what tax rate they pay." (The Associated Press State & Local
Wire, July 27, 2000)


TOBACCO LITIGATION: A.G. Said Lawsuits Could Affect Payment to States
---------------------------------------------------------------------
According to Associated Press news from Oklahoma, a new wave of
class-action lawsuits that could bankrupt tobacco companies if they are
victorious could also affect payments to Oklahoma and other states from
the national tobacco settlement, Attorney General Drew Edmondson says.

Edmondson said there have been questions about the impact of a recent
class-action ruling in Florida against the tobacco industry that awarded
plaintiffs $145 billion in punitive damages to sick smokers. When the
jury decision was announced, tobacco company lawyers predicted that
amount would break the industry.

The ruling would have no immediate impact on Oklahoma, which is slated to
receive $200 million over 20 years, he said.

And there are provisions in Florida law that set the maximum appeal bond
per defendant in a civil case at $100 million and bar punitive damages
from bankrupting a business, Edmondson told the Tulsa World's capitol
bureau. "That is still a lot of money, but at least by the larger
defendants is certainly doable," Edmondson said.

Edmondson said he didn't know how long the appeal would take, but said
the punitive damages provision may be used as a basis for appeal.

Even if the tobacco companies are ultimately forced to pay the $145
billion and go bankrupt in the process, Oklahoma would still get its
share of the master settlement, Edmondson said. "The way we are looking
at it now is if the verdict is upheld upon appeal and if one of the
companies can't stand the economic hit and goes belly up, we believe that
the worst that would happen to Oklahoma and to the other states is that
the flow of money would be disrupted," he said.

Oklahoma participated in a master settlement agreement between several
states and the country's leading manufacturers of tobacco products. The
states filed suit to recover Medicaid dollars spent to treat
tobacco-related illnesses.

The current state budget includes $101 million in tobacco money, and
Oklahoma is scheduled to get another payment of nearly $70 million in
April 2000.

The attorney general predicted that it could take a few years for the
issues to be resolved in bankruptcy court but once that happened the flow
of tobacco settlement money would resume, "perhaps with retroactive
payments." The bankrupt companies would still be required to meet all
master settlement obligations, and even if a tobacco company were
purchased by another company, that obligation would remain, Edmondson
said.

Edmondson said he is concerned that tobacco companies which did not
participate in the master settlement agreement could try to take a larger
share of the U.S. market. Those companies would be required under laws in
most states to put a certain amount of money in escrow to meet the future
medical needs of their customers, but they would not be placed under the
same marketing restrictions that apply to those companies that
participated in the master settlement. "What I don't think is going to
happen overnight is the 50 million to 70 million people who are addicted
to tobacco are going to go away," he said.

Edmondson said he would rather have those people served by companies that
have agreed to the marketing restrictions than companies that have not.
(The Associated Press State & Local Wire, July 27, 2000)


TOBACCO LITIGATION: Industry Tries to Get Smokers' Case Moving in Fd Ct
-----------------------------------------------------------------------
Fresh from transferring the landmark $ 145 billion smokers' case from
state to federal court, the tobacco industry is asking the new judge to
get the case moving by setting an initial hearing.

Smokers' attorneys planned to respond by asking U.S. District Judge
Ursula Ungaro-Benages to hold off until she considers sending the case
back to state court.

The nation's five biggest cigarette makers were able to move the case to
federal court Monday because of a union's attempt to intervene on July
14, the day a verdict was reached in the two-year trial.

The tobacco companies contend that questions raised by the Southeastern
Iron Workers health-care plan can be answered only in federal court.
Federal courts are seen as less friendly than state courts to
class-action suits like the one covering 300,000 to 700,000 sick Florida
smokers.

The industry's motion Tuesday asked Ungaro-Benages to set a hearing to
discuss a schedule for the case in federal court. Her office staff said
Wednesday that no action had been taken.

As the case stands, Ungaro-Benages also has been asked to enter a final
judgment on the record-setting punitive damage verdict, and hear motions
for a mistrial or a reduced verdict.

The Florida jury decided the industry makes a deadly product, awarded $
12.7 million in compensatory damages to three smokers representing the
class and set the record for a civil trial award. (The News and Observer
(Raleigh, NC), July 27, 2000)


TOBACCO LITIGATION: NY Jury Believes Smoker's Cancer Due to Toxins
------------------------------------------------------------------
A Brooklyn jury has absolved the tobacco industry of liability for lung
cancer in a man who smoked cigarettes for 30 years. The jurors apparently
believed that Clyde Anderson's cancer was not caused by smoking but was a
result of exposure to toxins while working as a bathtub refinisher.
Anderson v. Fortune Brands Inc. et al., No. 42821/97 (N.Y. Sup. Ct.,
Kings County, June 28, 2000).

Anderson, 56, smoked cigarettes, mostly Salems, from 1960 until 1993. He
developed lung cancer in 1996. After successful surgery to treat the
cancer that year, the illness has been in remission.

In 1997, Anderson sued five tobacco companies and two industry
associations, arguing that they knew of the dangers of smoking and of its
addictive nature. He also contended that the tobacco industry had the
ability to make a safer cigarette and that it should have performed
safety tests on its products.

The trial judge, Herbert Kramer, allowed only pre-1969 fraud claims to go
forward. He dismissed the post-1969 claims in a partial summary judgment,
saying there was no evidence that Anderson relied on misleading
statements by the tobacco industry after the government-required warning
labels began appearing on cigarette packs in 1969.

The defense argued that Anderson knew about the potential danger of
smoking because the debate about it had been widespread for decades. They
also contended that the plaintiff had been exposed to possible
cancer-causing toxic fumes over the course of his career in various
workplaces.

The jury answered no, by a 5--1 vote, to the first question on the jury
verdict form: "Did plaintiff's smoking constitute a substantial factor in
the cause of his lung cancer" The negative finding precluded the need for
the jurors to address the subsequent questions on the 21-page form.
Questions of whether the industry conspired to deceive the public or
failed to give adequate health warnings were never addressed.

The case was being carefully watched in light of the $21.7 million
awarded to a San Francisco smoker in April and the ongoing Engle class
action suit in Miami (see story, P. 3).

The defendants were Fortune Brands Inc., R.J. Reynolds Tobacco Co.,
Philip Morris Inc., Brown & Williamson Tobacco Corp., Lorillard Tobacco
Co., The Council for Tobacco Research-USA and The Tobacco Institute.
(Tobacco Industry Litigation Reporter, July 14, 2000)


U.S.: MN Seniors Lose Challenge to Medicare Managed Care Plan Rates
-------------------------------------------------------------------
Minnesota and its elderly residents have suffered an early defeat in
their lawsuit against the United States on claims that disparate federal
payments to the state's Medicare HMO plans stick Minnesota Medicare
enrollees with higher co-insurance costs and less benefits than enrollees
living in other states. Minnesota v. United States. (Managed Care
Litigation Reporter, July 17, 2000)


* Pension Reform Prospects Brighten As House Passes Bill
--------------------------------------------------------
Passage last Wednesday of comprehensive pension reform legislation by the
House of Representatives by a 401-25 vote significantly increases the
chances that a reform bill could be enacted this year.

"This is a huge momentum boost for the package," said James Delaplane,
vp-retirement policy at the Assn. of Private Pension & Welfare Plans in
Washington.

The bill, H.R. 1102, was introduced by Reps. Rob Portman, R-Ohio, and Ben
Cardin, D-Md. It would, among other things, gradually increase to $15,000
from the current $10,500 limit the maximum annual salary deferral an
employee could make to a 401(k) plan.

Other provisions in the bill would allow employees age 50 and older to
make an additional $5,000 in annual "catch-up" contributions to their
401(k) plans and allow employees moving back and forth between the
for-profit and non-profit sectors to transfer funds from 401(k) to 403(b)
plans and vice versa.

In addition, the pension measure would shorten, to three years from the
current five years, the maximum amount of time in which employers'
matching contributions to savings plans must be vested.

The measure also would allow employers to prove, through as yet undefined
"facts and circumstances," that their pension plans do not discriminate
in favor of highly paid employees. This approach would replace current
rigid mathematical non-discrimination tests.

The bill now moves to the Senate, where the biggest question is whether
there is enough time remaining in the session to consider the measure.

President Clinton opposes the legislation, under which he says too many
benefits would go to higher-paid employees. But he stopped short of
saying he would veto the measure. (Business Insurance, July 24, 2000)


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

Class Action Reporter is a daily newsletter, co-published by Bankruptcy
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