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               Friday, August 4, 2000, Vol. 2, No. 151


AMERICAN SAVINGS: Sp Ct Affirms Nationwide Class on Home Loan Kickbacks
AUDI, VOLKSWAGEN: Suit Says Gas Gauge Problem Puts Drivers at Risk
BIOMATRIX, INC: Faces Securities Suit; Moves Toward Genzyme Merger
BOND DEAL: Haney's Golf Course Deal May Violate Arbitrage Rules
CERULEAN COMPANIES: Claim over Conversion from Non-Profit Org. Pending

GEORGIA LIFE: Lawsuit Says Insurer Shortchanged Black Customers
HOLOCAUST VICTIMS: Chase Won't Open Nazi-Era Books
INMATES LITIGATION: Judge Sets Deadline in OK Medical Care Lawsuit
KOZMO.COM INC: Dot-com Delivery Service Faces Complaints on Redlining
MICROSOFT CORP: Bill Gates Says Gov't Case Is A Conspiracy

PAYDAY LENDERS: Consumers in Indiana and Illinois Sue Six Collectors
PYRAMID BREWERIES: Alleged of Illegally Receiving Price Breaks on Suds
SMART CHOICE: 1999 Securities Lawsuit in Florida Consolidated
SUMITOMO COPPER: RICO Claims over Copper Futures Survive Dismissal
TOBACCO LITIGATION: NYLJ Says Certainty of Verdict Reversal Overstated

WORLD FUEL: Shareholders Have Amended Complaint in FL Filed Feb & Mar

* More Investor Lawsuits Fuel D&O Market


AMERICAN SAVINGS: Sp Ct Affirms Nationwide Class on Home Loan Kickbacks
Question presented: Did the court of appeal err in holding that a home
mortgage borrower could certify a nationwide class in her action contesting
a lender's charges for collateral protection insurance absent some evidence
that California law would produce a different result than the laws of other

Facts: Jayne Briseno filed a class action against American Savings Bank
(ASB), a predecessor to Washington Mutual Bank, for overcharging home loan
borrowers on collateral protection insurance (CPI). Briseno alleged that
ASB's residential loan agreements permitted the bank to continue a
homeowner's own hazard insurance if the homeowner failed to do so.
According to Briseno, ASB instead placed properties under a blanket policy
with a much higher premium, for which ASB received kickbacks from the
insurance vendors. Briseno alleged breach of contract and several business

ASB opposed Briseno's request for certification of a nationwide class. ASB
noted that it issued and serviced loans throughout the United States, and
that its standard deed of trust contained a choice-of-law provision stating
that the deed of trust would be governed by the law of the jurisdiction
where the underlying property is located.

The trial court granted nationwide class certification, noting that there
was no indication that any state's laws were dissimilar to California's
regarding Briseno's claims, or that any state's laws would legalize the
alleged kickback.

ASB petitioned for extraordinary relief, contending that the trial court
failed to use the three-step analysis established in Clothesrigger Inc. v.
GTE Corp., 191 Cal.App.3d 605 (1987), in a way that accounted for the
holding of Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 (1992). The
court of appeal summarily denied ASB's petition. The California Supreme
Court granted review and transferred the action back to the court of

The court of appeal denied the petition, holding that ASB failed to show
any conflict of laws among the various jurisdictions that would defeat the
California trial court's certification of a nationwide class.

The court noted that Clothesrigger adopted a three-step analysis for
determining whether California's choice-of-law rules bar certification of a
nationwide class. The first step requires a determination of whether the
concerned states have different laws. In Nedlloyd, the Supreme Court held
that a contractual choice-of-law provision generally controls when the
agreement was negotiated at arm's length between sophisticated commercial

In this case, the court declared, the trial court did not err in certifying
a nationwide class. The appellate court distinguished choice-of-law and
choice-of-forum clauses. Choice-of-law clauses do not inherently defeat the
jurisdiction of a California court. At most, a choice-of-law clause may
require that a California court apply the law of another state. ASB's
agreement incorporated a choice-of-law clause that could not, of itself,
defeat the trial court's jurisdiction to certify a nationwide class.

More importantly, under the first Clothesrigger issue, the choice-of-law
clause could have no effect on the trial court's decision if California law
and the law of the other jurisdictions were not in conflict. ASB failed to
show that the law of any other jurisdiction would produce a different
result than California law. Although other states have laws permitting
lenders to obtain CPI, none of the statutes authorize overcharging or

Absent some showing that other states' laws would result in a different
outcome, there was no reason for the trial court to deny Briseno's
application for certification of a nationwide class.

Counsel for petitioner Washington Mutual Bank: Julia B. Strickland, Stroock
& Stroock & Lavan, 2029 Century Park East, 18th Fl., Los Angeles, CA
90067-3086, 310-556-5800

Counsel for Jayne Briseno: Barron E. Ramos, Blumenthal Ostroff & Markham,
7th Fl., San Diego, CA 92101-2431

Supreme Court Case No. S070418

Case below: G023218; Cal.Ct.App., 4th Dist.; 70 Cal.App.4th 299, 82
Cal.Rptr.2d 564, 99 C.D.O.S. 1474

Petition filed: April 6, 1999

Review granted: May 12, 1999

Justices voting for review: Baxter, Brown, Chin, George, Werdegar

Procedure: Petition for review after denial of petition for writ of
mandate. (California Supreme Court Service, June 30, 2000)

AUDI, VOLKSWAGEN: Suit Says Gas Gauge Problem Puts Drivers at Risk
A frustrated Audi owner has turned to the Montgomery County Court for help
in dealing with an allegedly recurring gas gauge malfunction. Villanova
contractor Andrew Fox last month filed a lawsuit seeking class-action
status, claiming that the gas gauges on certain 1998, 1999 and 2000
all-wheel-drive Audi Quattros did not properly function.

Representing Fox in the litigation are the law firms of Kimmel & Silverman
of Ambler, Pa., and Haddonfield, N.J., and Monheit Monheit Silverman &
Fodera of Philadelphia. The lawsuit was filed against Audi of America Inc.
and its parent company, Volkswagen of America Inc., both of which have
since petitioned the court to toss the case out. The Philadelphia law firm
of Pepper Hamilton represents the car companies.

Fox leased a 1999 Audi A6 Quattro on Aug. 1, 1999. Because of a problem
with the fuel-tank sensors, the fuel gauge sometimes will read half full
when the car is actually running out of gas, according to the lawsuit. This
puts drivers at serious risk because they never know when they will run out
of gas, the lawsuit says. Fox took the car in several times to have the
gauge fixed but the problem was never remedied, according to the lawsuit.
Instead, Fox and others have been told not to rely on their gas gauge but
to use their trip odometer to estimate the amount of gas remaining in the
tank, the lawsuit says. "I'm fed up," said Fox, who has repeatedly asked
that the lease agreement be torn up and that he be made whole. "I hope
Volkswagen realizes how potentially dangerous this problem can be. The
gauge will go from full to empty and back to full, all within 10 minutes."
Claiming he has had his gas gauge replaced four times in less than a year,
Fox claimed, "This is completely unacceptable for a car worth over $

The lawsuit maintains that Audi was aware of the problem gauges before Fox
and others either leased or purchased their cars but took no steps to
remedy the problem or inform the consumer. "That this situation hasn't been
solved or disclosed to consumers is ludicrous and unacceptable," said
co-counsel Peter Kohn of the Monheit firm. Responding to the lawsuit, Audi
and Volkswagen maintain that the lawsuit is too vague for them even to
reply. (The Legal Intelligencer Sububran Edition, July 5, 2000)

BIOMATRIX, INC: Faces Securities Suit; Moves Toward Genzyme Merger
Biomatrix, Inc. (NYSE: BXM), which is facing a securities lawsuit as
previously reported on the CAR, reported on August 3 that progress
continues toward the company's previously announced proposed merger
combining Genzyme Tissue Repair (Nasdaq: GZTR) with Genzyme Surgical
Products (Nasdaq: GZSP) and Biomatrix, Inc. to form a new publicly-traded
division of Genzyme Corporation called Genzyme Biosurgery.

The Company says that the merger has received clearance from the Federal
Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act and
is being reviewed by the Securities and Exchange Commission. Once
effective, a joint proxy statement/prospectus will be mailed to
shareholders of each company. A special shareholder meeting will be held to
vote on the proposed merger. The meeting is expected to occur in the third

Upon formation, Genzyme Biosurgery will have a portfolio of innovative,
market-leading products; a broad product-development pipeline; a premier
manufacturing, marketing, regulatory, and scientific infrastructure; and
substantial financial resources, the report goes on.

Biomatrix’s announcement also says that investors are urged to read the
joint proxy statement/prospectus relating to the formation of Genzyme
Biosurgery filed with the Securities and Exchange Commission because it
contains important information. The joint proxy statement/prospectus and
other documents filed by Biomatrix and Genzyme with the commission may be
obtained free of charge at the commission's web site (http://www.sec.gov)
and from Biomatrix or Genzyme. Requests to Biomatrix may be directed to
Anne Marie Fields, or you can access documents on the company's web site
(http://www.biomatrix.com).Requests to Genzyme may be directed to Sally
Curley, or you can access documents on the company's web site

            Wins Summary Judgment on Libel Charges

The Company also reports that the Superior Court of New Jersey granted
Biomatrix' request for summary judgment, finding the defendants, Raymond
Constanzo, Richard Constanzo, and Ephraim Morris, liable for defaming the
company, its chief executive officer and chief scientific officer, Dr.
Endre Balazs, M.D., and its executive vice president, Dr. Janet L.
Denlinger, Ph.D. The summary judgment ruling was issued in connection with
claims filed by Biomatrix, Dr. Balazs and Dr. Denlinger against the
defendants for defamation, invasion of privacy, product disparagement,
intentional interference with contractual relations, and intentional
infliction of emotional distress arising from false and malicious
statements repeatedly made on a variety of internet message boards.

In the court's decision granting the company's request for partial summary
judgment, The Honorable Peter E. Boggia, Superior Court of New Jersey,
ruled that "For over one year the defendants posted messages on a Yahoo
message board about the plaintiffs [Biomatrix, Dr. Balazs, Dr. Denlinger].
In their depositions, the defendants admit to posting the various messages
about the plaintiffs. It was further admitted by the defendants that they
had no reason to believe that any of the messages posted were in fact true.
In this case, the content of the statements was clearly libelous. The
messages contained accusations that were extremely offensive and

The announcement says that for more than a year now, the defendants have
authored and posted messages on Yahoo!'s Biomatrix, Inc. message board
under the following user names "voteREP," "voteREPBLCN,"
"vote_republican_2000," "vr_is_back," "cd_438," "cd_43eight," "meddra_man,"
"jenti_is_very_pro_life," "missyx_20000," "rnouth2857,"
"onecutelittlegirl," "bfriendly2me2," "allergictochickenbits," as well as
several others. In addition, the defendants have authored and posted
similarly libelous, false and malicious statements about Biomatrix, its
employees and its products on Yahoo!'s Genzyme Surgical Products and
Genzyme Tissue Repair message boards under these and other user names. Many
of the messages posted have been lewd, hateful, and offensive toward
Biomatrix, its employees and its products. In the court's decision, the
court pointed out that the defendants had admitted that those statements
were false or were made with no basis to believe that they were true. The
court, therefore, ruled that those statements were false and libelous.
Indeed, in sworn depositions, the defendants confirmed that they possess no
evidence of wrongdoing on the part of Biomatrix or its employees.

BOND DEAL: Haney's Golf Course Deal May Violate Arbitrage Rules
A $67 million tax-exempt bond deal in Colorado masterminded by a
controversial real estate developer and longtime municipal market
participant may violate arbitrage rules and the prohibition on federal
guarantees of bonds, Internal Revenue Service attorneys have advised field

The IRS so-called field-service advice refers to bonds sold in 1996 by
Castle Rock Ranch Public Improvements Authority, a nonprofit district
created by Franklin Haney to develop a golf course and adjacent houses.

The deal has triggered scrutiny by the IRS for several reasons. The bulk of
the bond proceeds, $54.5 million, was used to buy land from Haney himself,
who then used those funds to invest in the Portals II District of Columbia
office building, which now is being leased by Haney to the federal

This arrangement raises questions whether an improper federal guarantee is
backing the bonds, argues the IRS chief counsel's office, which on April 18
issued the advice memo that was publicly released last Friday.

The Portals II lease payments, about $20 million annually, are going to BFC
Guaranty Corp., of which Haney is a 49% owner, according to the bond
issue's official statement. BFC is also backing the bonds.

This design may create a problem because IRS regulations prohibit the use
-- unless explicitly excepted under law -- of federal payments as a direct
or indirect backing for municipal bonds.

The credit enhancement for the bonds is secured by lease payments received
from a United States agency, states the memo. The arrangement appears to
create an indirect federal guarantee of the bonds.

The IRS chief counsel office frequently issues field-service advice to its
agents who want legal input on a bond transaction they are auditing. The
advice is not binding, but if it is adverse to the issuer, as in this case,
it strengthens the case of the IRS enforcement division. Generally, the IRS
attempts to settle a case by having the issuer pay a fine rather than
taxing bondholders, which is seen as punishment of last resort.

The memo does not mention the bond issue, the issuer, or Haney by name.
However, sources confirmed that Haney s $67 million tax-exempt transaction
is the focus of the audit.

The field-service advice also raises the issue of possible arbitrage
violations. It notes that the golf course and housing project has never
been developed, and questions whether it was reasonable at the time of the
bond issuance to expect that it ever would be developed.

The IRS said that an appraiser's report in 1996 about the project's future
was at the very least, overly optimistic. If it were unreasonable to expect
that the project would ever be built, then it may be argued that the bonds
did not have an appropriate governmental purpose, that they overburdened
the tax-exempt market, and that they are, therefore, arbitrage bonds, the
IRS said. However, the memo said that additional information is needed to
determine this.

While this argument does not appear to match most people s traditional
definition of arbitrage -- investing tax-exempt bond proceeds in
higher-yielding taxable securities -- a source said the IRS has taken the
position that the transaction involves arbitrage because the bond proceeds
essentially helped generate the lease payments, which produce a higher
yield. That view is based on revenue ruling 94-42 s fine legal point
prohibiting a separate investment paying the debt service, the source said.

But another source expressed skepticism about the strength of that

Maybe you could say that it's the lease that is the investment-type
property that s at a materially higher yield, but I think the IRS is going
to have to push too hard to get to that one, the source said. The attack on
this transaction is probably not going to be an arbitrage attack. The
attack is going to be that these were never really municipal bonds. The IRS
will assert that it wasn t reasonable to expect that the project would be

Haney has a long, somewhat tortured, history in municipal finance. In the
1980s, the Tennessean, a longtime friend to Vice President Al Gore and
major Democratic Party contributor, sold industrial development bonds in
cities such as Knoxville and Memphis to finance his hotels at airports and
convention centers. Some bonds defaulted, although bondholders were
reimbursed by insurance companies.

In 1996, he was sued by Salomon Smith Barney Inc. s Smith Barney Managed
Municipals Fund over the substitution of escrow securities that were used
to back zero-coupon bonds. Last year, a Colorado jury awarded the plaintiff
$14.7 million.

Earle Taylor, a bond lawyer with Kilpatrick Stockton in Atlanta who
counseled Haney on the Portals II transaction, said Haney has asked his
firm for representation in this audit. Taylor declined to comment on the
field-service advice, which he had yet to see, he said. (The Bond Buyer,
August 2, 2000)

CERULEAN COMPANIES: Claim over Conversion from Non-Profit Org. Pending
On September 18, 1998, Plaintiffs Allen Saravuth, Nga Nguyen, Chansamone
Sengsavath and Fatana Pirzad, individually and on behalf of all others
similarly situated (collectively, the "Richmond County Plaintiffs"), filed
a lawsuit against the Cerulean Companies, Inc. (the "Company"), Blue Cross
and Blue Shield of Georgia, Inc. ("BCBSGA"), James L. Laboon, Jr., Fred L.
Tolbert, Jr., Richard D. Shirk, James E. Albright, W. Daniel Barker,
Elizabeth W. Camp, Louis H. Felder, M.D., Edward M. Gillespie, Joseph D.
Greene, Mel H. Gregory, Jr., Frank J. Hanna, III, R. Pierce Head, Jr.,
Charles H. Keaton, James H. Leigh, Jr., M.D., Julia L. Mitchell-Ivey,
Charles R. Underwood, M.D., W. Jerry Vereen, A. Max Walker, Dan H.
Willoughby, M.D., Joe M. Young, and John B. Zellars (collectively, the
"Defendant Directors") in the Superior Court of Richmond County, State of
Georgia, bearing Civil Action File No. 98-RCCV-806. In addition, the
Richmond County Plaintiffs filed a Motion for Temporary Restraining Order
and Interlocutory Injunctive Relief, which was heard and denied by the
Superior Court of Richmond County on September 21, 1998.

The Richmond County Plaintiffs identify themselves as individuals who were
entitled to receive shares of the Company's stock in connection with the
conversion of BCBSGA from a non-profit corporation to a regular business
corporation (the "Conversion"). The Richmond County Plaintiffs assert
claims for specific performance, fraud, breach of provisions of the
Insurance Code of Georgia, breach of fiduciary duty, and request
declaratory judgment and certification of a class action consisting of all
persons who were "eligible subscribers" of BCBSGA as of February 1, 1996,
and who did not become holders of Class A convertible common stock ("Class
A Stock") of the Company. The Richmond County Plaintiffs allege that they
and the members of the purported class are entitled to receive shares of
Class A Stock in the Company. The Richmond County Plaintiffs allege
alternatively that offering materials disseminated by BCBSGA during 1996
relating to Class A Stock of the Company contained materially misleading
and deceptive statements and omissions and that the Richmond County
Plaintiffs and the purported class members are entitled to an award of
damages in excess of $100 million. The Richmond County Plaintiffs also
asserted derivative causes of action against the Defendant Directors
alleging that the Defendant Directors breached fiduciary duties by, among
other things, approving the placement and issuance of Class B convertible
preferred stock ("Class B Stock") in the Company during 1996, the issuance
of Class A Stock in the Company, the settlement of the Let's Get Together,
Inc. et al. v. Insurance Commissioner, et al., Civil Action E-61714
(Superior Court of Fulton County, Georgia) lawsuit, and certain management

On November 9, 1998, Harrell Tiller, Charlie Deal and Olean Lokey joined
the case as additional named plaintiffs. On December 9 and 10, 1998, a
hearing was held on the plaintiffs' request for declaratory ruling on the
issue of whether plaintiffs are properly shareholders of the Company and on
December 17, 1998, the Superior Court ruled in favor of the plaintiffs. The
Company filed an appeal with the Georgia Supreme Court which accepted
jurisdiction and granted expedited treatment of the appeal. The Company's
Board of Directors appointed a Special Litigation Committee to review the
derivative claims. On April 14, 1999, the Special Litigation Committee
reported to the Board of Directors that it had concluded that the
derivative claims were without substance. On May 3, 1999, the Georgia
Supreme Court reversed the ruling of the Richmond County Superior Court,
holding that the Richmond County Superior Court erred in considering and
ruling upon the plaintiffs' claims. The Georgia Supreme Court found that
the Georgia Insurance Commissioner (the "Georgia Commissioner") had broad
power of review over the Conversion and that sufficient administrative
remedies with the Georgia Commissioner had been available to the plaintiffs
during and following the Conversion.

The Richmond County Plaintiffs did not file a motion for reconsideration of
the Georgia Supreme Court's decision. On May 5, 1999, BCBSGA and the
Company filed motions for summary judgment on the Richmond County
Plaintiffs' fraud claims. On May 20, 1999, the Company and BCBSGA filed a
motion for entry of judgment on all remaining counts of the Richmond County
Plaintiffs' Complaint. On May 28,1999, the Richmond County Plaintiffs filed
a Second Amended and Restated Class Action Complaint against the Company,
BCBSGA and the Defendant Directors. In addition to the factual allegations
contained in the initial complaint, the Richmond County Plaintiffs assert
that certain persons, including Charlie Deal and Olean Lokey, were entitled
to be offered shares of stock in the Company but never received an offer.
The Richmond County Plaintiffs have asserted claims for specific
performance, deprivation of possession of personal property, fraud,
constructive fraud, direct and derivative claims based on breach of
fiduciary duty. The plaintiffs request declaratory and injunctive relief,
damages, punitive damages, and certification of a class action on behalf of
all persons who were "eligible subscribers" of BCBSGA as of February 1,
1996 who did not become holders of Class A Stock of the Company. On July
29, 1999, the Superior Court of Richmond County entered an order dismissing
all claims against the Defendant Directors without prejudice. On September
21, 1999, the Superior Court of Richmond County entered orders denying the
motions for summary judgment and the motion for entry of judgment. On
October 27, 1999, the Company and BCBSGA filed a motion for reconsideration
of the motion for entry of judgment. The case remains pending before the
Superior Court.

On May 17, 1999, Harrell Tiller, Charlie Deal and Olean Lokey, who were
among the Richmond County Plaintiffs, filed two separate Petitions for
Declaratory Ruling (the "Petitions") before the Georgia Commissioner,
seeking a declaration from the Georgia Commissioner that they, and others
similarly situated, should have been issued shares of Class A Stock. On
June 22, 1999, the Georgia Commissioner entered orders on the Petitions
denying the relief sought. On June 24, 1999, Harrell Tiller, Charlie Deal
and Olean Lokey (the "Petitioners") filed two separate Petitions for
Judicial Review in the Superior Court of Richmond County. In these cases,
styled In Re: Harrell Tiller, individually and on behalf of all others
similarly situated v. Commissioner of Insurance of the State of Georgia,
Civil Action No. 1999-RCCV-471 and In Re: Charlie Deal and Olean Lokey,
individually and on behalf of all others similarly situated v. Commissioner
of Insurance of the State of Georgia, Civil Action No. 1999-RCCV-470, the
Petitioners sought judicial review of the decisions of the Georgia
Commissioner of June 22, 1999 (the "Judicial Review Proceedings"). On
September 21, 1999, the Superior Court of Richmond County entered orders
reversing the Georgia Commissioner's orders. On October 12, 1999, the
Company and BCBSGA filed Applications for Discretionary Appeal (the
"Applications") with the Supreme Court of Georgia, seeking to have that
court reverse the Superior Court of Richmond County's decisions. These
Applications were transferred to the Court of Appeals of the State of
Georgia on November 12, 1999. On October 21, 1999, the Georgia Commissioner
filed two separate applications for appellate relief from the Superior
Court's decisions with the Court of Appeals of the State of Georgia,
seeking to have that court overturn the Superior Court's decisions. On
November 22, 1999, the Georgia Court of Appeals granted the Applications
for Discretionary Appeal of all parties. On June 29, 2000, the Court of
Appeals entered a decision affirming the earlier decision by the Georgia
Commissioner which had held that the Petitioners were not entitled to
relief. On July 19, 2000, the Petitioners filed a Petition for Writ of
Certiorari in the Georgia Supreme Court, which remains pending.

GEORGIA LIFE: Lawsuit Says Insurer Shortchanged Black Customers
Life Insurance Company of Georgia overcharged thousands of black customers
and provided them lower benefits than whites, a class-action lawsuit
alleges. The lawsuit was filed Monday on behalf of 76-year-old Azalee
Morris of Memphis and was certified as a class-action suit by Judge Rita

The Shelby County Circuit Court lawsuit claims the insurance company gained
millions of dollars by inducing low-income black customers to buy the
policies. The lawsuit seeks unspecified monetary damages and asks the
company to change policy values to make up for the differences. Some
customers were required to continue making payments long after the premiums
exceeded the face value of the policy or faced losing all the premiums they
had paid and receive nothing, the lawsuit alleges.

Attorney B.J. Wade said Morris bought nine insurance policies from Life of
Georgia on behalf of her husband and two daughters with premiums as little
as 25 cents a week. In one case, she paid some $300 over 30 years for a
policy with a face value of $110.

Earlier this year, American General Life and Accident Insurance Co. settled
similar allegations of racial discrimination lodged by the Florida
insurance commissioner and in a federal class-action lawsuit.

Nashville-based American General may not have known that several smaller
life insurance companies it purchased had longtime dual pricing systems
based on race. But faced with a national investigation by insurance
commissioners and a class-action lawsuit in federal court, American General
settled charges of fraud and racial discrimination in June, agreeing to pay
holders of 9.1 million policies nationwide a total of $206 million. The
settlement affects tens of thousands of people, many of them poor
minorities who live in the South. All 50 states are expected eventually to
join the agreement.

Many of the customers not only were overcharged because they were black,
but also paid thousands of dollars in premiums on policies that will pay
only a few hundred dollars when they die. (The Associated Press State &
Local Wire, August 3, 2000)

HOLOCAUST VICTIMS: Chase Won't Open Nazi-Era Books
Chase Manhattan Bank - accused of helping the Nazis by freezing
Holocaust-era accounts - is refusing to open its archives to scrutiny,
World Jewish Congress officials charged.

Chase officials also have asked the Jewish group to side with them against
Holocaust survivors who've filed a class-action suit over the allegedly
frozen accounts, WJC executive director Elan Steinberg said.

That request - along with Chase's refusal to provide access to accounts -
prompted the WJC to break off talks aimed at opening the archives,
Steinberg said.

Steinberg also said a U.S. Treasury Department report written immediately
after the end of World War II accuses Chase's French branches of offering
to freeze American and Jewish accounts before the Nazis occupied France.
The report also shows that Chase officials in the United States knew what
was going on, but did nothing to stop it.

The Nazis seized on Chase because they thought the bank would play a big
role in the post-war money scene, the report says.

But bank officials fired back that they have no "deep, dark" hidden
records, saying whatever paper trail they had was subpoenaed by the U.S.
government for the Treasury Department report in 1945.

"Two months ago, we broke off the discussions with Chase because they
demanded the WJC join them in opposing the class action brought against
them by Holocaust survivors," Steinberg said. "They will not allow an
independent investigation into their archives ... The evidence is clear
that the French branches of Chase were collaborating actively with the

Steinberg accused Chase officials of using the talks as window dressing,
approaching the WJC so it would appear as if they were trying to make
reparations to Holocaust survivors whose funds were frozen during World War

Chase spokesman Jim Finn said he couldn't confirm talks had crumbled,
because the WJC had made no formal break with bank officials. "Any sense
that there is some deep, dark archive is not true," Finn added. (The New
York Post, August 3, 2000)

INMATES LITIGATION: Judge Sets Deadline in OK Medical Care Lawsuit
Attorneys seeking federal intervention in prison medical care have until
Sept. 18 to get their final findings to the judge overseeing the
class-action case. U.S. District Judge Michael Burrage is expected to rule
sometime after that, state officials said. Attorneys ended arguments last
week over whether the state Corrections Department was deliberately
indifferent to inmate medical care.

In a filing this week, inmate attorney Louis Bullock expressed concerns
that improvements made by the department in crowding, health and safety
would last. "Given the history of this case, there is reason to be
concerned that the compliance is but momentary, prompted solely by a desire
to be free of the federal court," Bullock said.

Prison crowding was a major issue when the lawsuit was filed nearly three
decades ago. In addition to medical care, issues of racial segregation and
integration and fire safety in the F Cellhouse at the Oklahoma State
Penitentiary remain undecided. Guy Hurst, the state attorney general's
chief of litigation, said the Corrections Department believes the issue of
racial segregation should be thrown out because its existing policy is a
good one. Hurst said it was also his understanding that a contractor was
working to improve fire codes in the F Cellhouse. (The Associated Press
State & Local Wire, August 2, 2000)

KOZMO.COM INC: Dot-com Delivery Service Faces Complaints on Redlining
When James Warren discovered Kozmo.com, he welcomed the company's promise
of instant gratification. New York City-based Kozmo takes orders over the
Internet for video rentals, CDs, magazines, snack foods and other
convenience items, and it guarantees delivery to your doorstep within an

Well, to some doorsteps anyway.

The promise faded when Warren, a contractor with the Environmental
Protection Agency in Washington, D.C., logged on to Kozmo's Web site from
his home computer. The site prompted Warren for his ZIP code before
allowing him to enter the online store. Then it denied him service, stating
that the company did not deliver to his Southwest Waterfront neighborhood.

Warren is black. So are 60 percent of the people who live in his community,
according to a federal lawsuit filed in April by Warren and two other
parties. The suit, filed in U.S. District Court for the District of
Columbia, alleges racial redlining of predominantly African-American
neighborhoods. Lake v. Kozmo.com Inc., No. 00-00815.

"This is just another example of here you are, you have the means in which
to partake in this business, and you're being left out," Warren says. "I
was under the impression that the Internet was supposed to be this big,
wide-open thing. [But] they're making assumptions based on who you are and
where you live--that you don't have access to computers. It's a slap in the

Named plaintiff Winona Lake is employed by the Equal Rights Center, a
nonprofit group also named as a plaintiff. She acted as a tester for the
group to determine whether Kozmo was discriminating in its choice of
service areas.

Lake lives in Washington's Capitol Hill neighborhood, which she describes
as a mix of ethnic backgrounds. Kozmo wouldn't deliver to her, either.

"I do an awful lot of online shopping," Lake says. "I figured going online
and ordering a CD from a place that promised delivery in an hour would be
great. ... By denying me access, they're denying a lot of other people."

                 Class Action for all Internet Users

According to the lawsuit, which cites 1990 census data, Kozmo serves ZIP
codes in Northwest Washington that have a 25 percent African-American
population, compared with an 86 percent African-American population in the
ZIP codes it does not serve. Overall, the District of Columbia is 66
percent African-American, according to the complaint.

Kozmo representatives declined to comment, citing the pending litigation.
In its response to the complaint, the company denies all allegations of

The plaintiffs filed the suit as a class action on behalf of all Internet
users who are denied service by Kozmo. In early June, plaintiffs lawyers
were focusing on expanding the class to include New York, Los Angeles,
Atlanta and Seattle. At the time, Kozmo operated in 10 cities nationwide.

"There's a theme where predominantly African-American communities are being
denied service. It's most striking in Washington, D.C., and Los Angeles,"
says David Berenbaum, executive director of the Equal Rights Center.

According to its Web site, Kozmo serves the Los Angeles neighborhoods of
Tarzana, Northridge, Burbank, North Hollywood, Van Nuys, Sherman Oaks,
Toluca Lake, Studio City, Universal City, Southern Glendale, Mulholland and
Southern North Hills, which are predominantly white, according to

Despite the litigation, Kozmo could be called the poster child of
successful Internet start-ups.

In April, the month the suit was filed, co-founder Joseph Park was named
"most effective start-up CEO" by the Industry Standard, a trade magazine
covering the Internet economy. Founded in 1997, the company expanded from a
handful of bicycle riders to 2,665 employees by the end of 1999. Kozmo
plans to add five more cities to its roster by the end of 2000.

Its Web site touts partnerships with name brands like Starbucks and boasts
senior management recruited from companies such as AT&T, Coca-Cola, FedEx
and UPS. Kozmo filed for an initial public offering in March, with an offer
amount of $ 150 million.

So what does it mean when an expanding company at the top of its game gets
hit with a discrimination lawsuit?

"The honeymoon's over," says David Sorkin, assistant professor and
associate director of the Center for Information Technology and Privacy Law
at the John Marshall Law School in Chicago. "We're finally seeing
e-commerce companies start to pay attention to reality. Until this year, it
largely didn't even matter if they made a profit. Now, there's a lot more
attention on them from investors, consumers, regulators."

Like many start-ups, Kozmo hasn't made much money yet. In 1999, the company
lost $ 26.4 million on revenue of $ 3.5 million, according to Securities
and Exchange Commission reports.

"When a start-up is in its preliminary stages, it's not going to pay much
attention to [potential discrimination and labor problems], and it's not
going to get a lot of attention," Sorkin says. "But Kozmo has grown so
rapidly, and now they're in the spotlight."

The lawsuit alleges violations of section 1981 of the Civil Rights Act,
along with the District's Human Rights Act, which has an unusual addition
to the standard laundry list of protections, says Washington, D.C.,
attorney Lars Waldorf, who represents the Equal Rights Center.

"Most state human rights acts cover basic protections such as race; some
add marital status and sexual orientation. D.C. goes beyond that to add
place of residence and place of business," Waldorf says. "It's a very
unusual provision, which also prohibits discrimination by public
accommodations." The act broadly defines public accommodations to include
entities that provide goods or services to the public, he says.

"What's interesting about this case is it asks the question, 'What is a
place of public accommodation when you're talking about the Internet? How
do you define that?'" Waldorf says. "Does the Internet affect one's ability
to make and enforce contracts?"

Most observers say no. "It doesn't matter if you receive orders by phone,
over the Internet or by carrier pigeon. You've got to follow the law," says
Richard Marks, chair of the Computer Law Division of the ABA Section of
Science and Technology. "This may have some initial novelty, but it's no
different from any other case that alleges discrimination or redlining."

                         Internet Users Targeted

Another question is whether there is some business justification for
Kozmo's marketing plan. Kozmo says there is. In its response to the
complaint, Kozmo states that its actions were based on "justified business
reasons unrelated to race, place of residence, place of business or any
other protected classification."

Although Kozmo wouldn't comment, The Washington Post quoted a Kozmo
spokesman in April as saying the company determined its service area by
targeting neighborhoods with high Internet usage.

"But that's not an issue in Washington because we have such high Internet
connectivity all over," says Berenbaum of the Equal Rights Center.
"Demographically, Internet connectivity coincides with incomes above $
30,000--not race--and we have very affluent African-American communities.
... We really believe this is just a movement of consumer racism to

"What you have to look at is, is there a rational geographic explanation
for their service area," Waldorf says. "The easiest way to determine the
service area is to figure out where their [distribution centers] are, take
a compass and draw a radius around it. Here at Kozmo, they're located in
downtown Washington, D.C.

"They will go miles and miles through Northwest Washington, D.C.," he says,
but they won't deliver five blocks east."

Waldorf adds that in some cases, Kozmo drivers even have to go through
nonservice areas to deliver their goods. For instance, Kozmo recently
started serving the House and Senate buildings on Capitol Hill, but it
doesn't serve the surrounding residential areas, which are predominantly

Much like the classic redlining cases against the banking and insurance
industries, this is a case where location shouldn't matter, the plaintiffs

Kozmo "is not attached to a physical place," says Waldorf, noting the
case's similarities to those against banks that refused mortgages to
African-Americans and companies that refused to write insurance in
African-American neighborhoods. It is just as wrong when Kozmo will not
deliver to these neighborhoods, he says.

The case also resembles recently settled suits against Domino's Pizza. In
several cities, the chain was accused of making customers in black
neighborhoods meet drivers on street corners instead of receiving their
pizzas at the doorstep. In those cases, Domino's argued that its drivers
were afraid to deliver to certain neighborhoods. The company agreed in a
settlement with the Justice Department to treat all neighborhoods equally,
except with proof of a threat to drivers.

Some say Kozmo is actually more similar to Domino's than to other
e-commerce services, which furthers the argument that this case is no
different from any other redlining suit.

"Kozmo is a dot-com. It has 'dot-com' in its name, and they're taking
orders over the Internet, but they're not really delivering an Internet
service, so this isn't purely an e-commerce situation," says John
Marshall's Sorkin. "If we get into a situation like taking loan
applications online, those kinds of things will really bring the question"
of discrimination law to the Internet.

In the meantime, Sorkin says, this case may force Kozmo to sit up and take

"I think Kozmo's going to have to be more careful about its distribution
areas, especially in new markets. Even absent the lawsuit, the publicity is
likely to make them pay more attention." (ABA Journal, August, 2000)

MICROSOFT CORP: Bill Gates Says Gov't Case Is A Conspiracy
For the first time, the usually low-key Gates has lashed out publicly at
aeconspiracies,' calling the government "worse than dumb" and showing some
agitated mood swings few have seen.

Pressures have been mounting on the chief of Microsoft since a court
ordered the bust-up of his company three months ago. All of this comes as
his title as the world's richest man slowly slips away - with his personal
stock losing $1.2 billion a week since the start of the year for a whopping
$37.5 billion setback this year. In a free-wheeling interview, the
billionaire nerd revealed a side of his personality that suggests he's
suffering from the stress of seeing his empire under the gun.

The cover story interview entitled "Bill Gates Unplugged" - in the
September issue of Red Herring magazine (full transcript on RedHerring.com)
- says Gates is growing more bitter about the government's antitrust case
against him.

Gates, however, doesn't give all the blame to the government. He spreads it
out. He told the magazine that the case is a conspiracy by his three main
business rivals: Larry Ellison of Oracle, Scott McNealy of Sun Microsystems
and Steve Case of AOL.

Asked whether the antitrust case would benefit consumers, Gates said:
"Let's be very clear about this. A few billionaires will benefit ... Larry
Ellison, Scott McNealy and Steve Case. "I mean, those are the primary
billionaires who have been behind this thing from the very beginning,"
Gates said.

Gates' dislike for the trio is widely known in Silicon Valley, but he's
always stopped short of actually pointing the finger at them for his legal

Essentially, the government's case blocked Microsoft from getting a tight
grip on Internet access with its Web browser the way it has on PCs with its
operating system, which runs 90 percent of the world's computers.

"They [in the government] say, 'You can't put the browser in.' And we say,
aeWell, what do you mean by the browser?' To this day, they haven't told us
what they mean by the browser."

Asked if he thinks the government is dumb, Gates grows agitated. "No, no,
no! Not dumb! Not dumb. This is worse than dumb. This is malicious."

Gates got more pumped up as he defended himself against any wrongdoing, and
he called "the political correctness [at the Department of Justice] a very
dangerous thing." He relaxed when talk turned to his having relinquished
CEO duties at Microsoft. Last summer, Gates turned over day-to-day work to
company No. 2 Steve Ballmer, but he remains chairman.

Gates said he's basically a programmer again, developing the new Microsoft
platform - .Net. "I think this .Net stuff is cool. I am sitting around
writing programs to make sure this stuff isn't just some high-level
strategy on PowerPoint slides. I am very enthused about getting more
hands-on time now that I'm not CEO anymore ... I wasn't a bad CEO."

The editor who interviewed him, Jason Pontin, said Gates summoned him for
the sit-down. "This is the most outspoken I've ever seen him," Pontin told
The Post. "He said it was fun."

Meanwhile, Microsoft asked a District Court judge to dismiss 62
class-action cases, many of which were filed after U.S. District Judge
Thomas Penfield Jackson in Washington, D.C., ruled that the company
violated federal antitrust laws. (The New York Post, August 3, 2000)

PAYDAY LENDERS: Consumers in Indiana and Illinois Sue Six Collectors
Consumers recently filed class actions in Indiana and Illinois against
payday lenders' debt collectors, alleging that the six collectors attempted
to invoke bad check laws against persons who defaulted on their payday
loans. (Allison v. Custom Financial Co., et al., No. 1:00 CV101 (N.D.
Ind.); Smith v. Diamond & Diamond, No. 3:00 CV 0259RM (N.D. Ind.); Cook v.
Westfield Acceptance, et al., No. IP00-0339-C-H/S (S.D. Ind.); Allison v.
AAA Acceptance, et al., No. IP00-0964 C-B/S (S.D. Ind.); and Borachuk v.
Coffey, No. 00 C 3442 (N.D. Ill.).)

According to plaintiffs' counsel, Edelman, Combs & Latturner of Chicago,
invoking bad check laws is a common collection practice and "one of the
greatest abuses of 'payday loans.'" The laws provide for multiple damages.

The consumers' civil complaints claim the Illinois bad check statute does
not apply to payday loans. The consumers also assert in their pleadings
that the Indiana Uniform Consumer Credit Code strictly regulates charges
that may be imposed on default, and thus, multiple damages under the bad
check laws are prohibited in Indiana. (Consumer Financial Services Law
Report, July 24, 2000)

PYRAMID BREWERIES: Alleged of Illegally Receiving Price Breaks on Suds
Claims That Pyramid (Nasdaq:PMID), Others, Fixed Prices and Gave Safeco
Field, Sea-Tac Special Prices.

Anyone who has purchased a beer at Safeco Field knows that brews do not
come cheap at the Northwest's premier ballpark.

However, according to a class action lawsuit filed on August 3, the
concessionaire at Safeco Field is reaping a windfall profit over and above
the cost of the premium-priced beer, all through an elaborate -- and
illegal -- conspiracy between a local brewery, its distributor and

The lawsuit, filed in King County Superior Court, alleges that Pyramid
Breweries (Nasdaq:PMID) and its distributor Western Washington Beverage
conspired with Service America Corporation (SAC), the concessionaire at
Safeco Stadium and Seattle Tacoma International Airport concessionaire Host
International to illegally circumvent Washington state law. That law
mandates that breweries and distributors offer the same pricing to all
retailers regardless of quantity.

The suit, filed by Jersey's All American Sports Bar on behalf of bars and
taverns that purchase beer by the keg for resale, contends that Pyramid and
Western Washington Beverage fraudulently disguised one of Pyramid's most
popular brands, Pyramid Hefeweizen, under the name Bavarian Hefeweizen, and
sold the beer exclusively to SAC and Host at a $25-per-keg discount.

According to Steve Berman, attorney representing Jersey's, this arrangement
was an attempt to create a way to offer Safeco Field and Sea-Tac Airport
volume discounts, something that Washington law expressly prohibits. Safeco
Field is the state's largest retailer of beer.

According to the suit, Pyramid and Western Washington Beverage offered the
disguised Pyramid Hefeweizen to Service America and Host while refusing to
sell it to other retailers.

"It is bad enough to pay $6 for a beer at Safeco Field, but to know that
they are getting the beer cheaper than anywhere else in the state makes it
even harder to swallow," said Steve Berman, attorney for the proposed
class-action lawsuit. "Considering the amount of tax money that went to
build the stadium, the least Service America could do is give fans a fair
shake when it comes to buying a beer."

According to Berman, documents uncovered during the preparation of the
lawsuit show that Western Washington and Pyramid also offered the disguised
Pyramid Hefeweizen to the Washington State Ferry System, another
high-volume customer. The ferry system declined the offer.

The suit, filed on behalf of Jersey's All American Sports Bar, seeks to end
the preferential pricing offered to Host and SAC, and to recover damages
for all Washington state beer retailers.

The suit states that Service America and Host paid an average of$70 per keg
of Pyramid beer. Jersey's, along with other Washington bars and taverns,
pay around $95 for a keg of Pyramid beer.

According to Berman, representatives of Pyramid met with the distributor
and the other defendants to create the scheme. "The vision that comes to
mind is a bunch of guys sitting in some back room, smoking cigars and
coming up with a way to dupe the state and other beer resellers," Berman
said. "We don't know whether they were smoking cigars, but we know all
about their plans."

Contact: Hagens Berman Steve Berman, 206/623-7292 steve@hagens-berman.com
or Firmani & Associates Inc. Mark Firmani, 206/443-9357 mark@firmani.com

SMART CHOICE: 1999 Securities Lawsuit in Florida Consolidated
Crown Group’s report with the SEC reveals that In March 1999, prior to
Crown's ownership interest in Smart Choice, certain shareholders of Smart
Choice filed two putative class action lawsuits against Smart Choice and
certain of Smart Choice's officers and directors in the United States
District Court for the Middle District of Florida. The Securities Actions
purport to be brought by plaintiffs in their individual capacity and on
behalf of the class of persons who purchased or otherwise acquired Smart
Choice publicly traded securities between April 15, 1998 and February 26,

These lawsuits were filed following Smart Choice's announcement on February
26, 1999 that a preliminary determination had been reached that the net
income it had announced on February 10, 1999 for the fiscal year ended
December 31, 1998 was likely overstated in a material, undetermined amount.
Each of the complaints assert claims for violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and
Exchange Commission as well as a claim for the violation of Section 20(a)
of the Exchange Act. The plaintiffs allege that the defendants prepared and
issued deceptive and materially false and misleading statements to the
public, which caused plaintiffs to purchase Smart Choice securities at
artificially inflated prices. The plaintiffs seek unspecified damages.
Smart Choice intends to contest these claims vigorously. The Company cannot
predict the ultimate resolution of these actions. The two class action
lawsuits have subsequently been consolidated.

SUMITOMO COPPER: RICO Claims over Copper Futures Survive Dismissal
Plaintiffs filed a class action, asserting claims under the Racketeer
Influenced and Corrupt Organizations Act. Plaintiffs alleged that the
prices of copper futures contracts traded on the Commodity Exchange Inc.
and the Comex division of the New York Mercantile Exchange Inc., were
artificially inflated by defendants' conspiracy. Two of the defendants
moved to dismiss the complaint for failure to state a claim and for failure
to allege fraud with sufficient particularity. After evaluating plaintiffs'
claims, the court found that they had sufficiently made claims under 18 USC
@ 1962(c) and (d), had sufficiently made mail and wire fraud allegations
and that there was a sufficient allegation of proximate cause. It also
found that plaintiffs' allegations precluded dismissal on statute of
limitations grounds. Accordingly, the court denied defendants' motion to

Justice Pollack

("CL") and Credit Lyonnais Rouse ("CLR") (collectively referred to as the
"Credit Lyonnais Defendants") each move, pursuant to Rules 12(b)(6) and
9(b) of the Federal Rules of Civil Procedure, to dismiss the Sixth Amended
Consolidated Class Action Complaint (the "Complaint") against them for
failure to state a claim upon which relief can be granted and for failure
to allege fraud with sufficient particularity.


In the Complaint, plaintiffs assert claims under the Racketeer Influenced
and Corrupt Organizations Act ("RICO"), 18. U.S.C. @ 1961 et seq. and the
common law of New York alleging that the prices of copper futures contracts
traded on the Commodity Exchange Inc. and the Comex division of the New
York Mercantile Eschange Inc. were artificially inflated between June 24,
1993 and June 15, 1996, inclusive, by an alleged conspiracy of certain
defendants herein.

A motion to dismiss under Rule 12 must be denied "unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief." Scheuer v. Rhodes, 416 U.S. 232, 236,
94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) (quoting Conley v. Gibson, 355 U.S.
414, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). For the purposes of this
motion, the factual allegations of the Complaint are accepted as true, and
all inferences are drawn in favor of the pleader. Mills v. Polar Molecular
Corp., 12 F.3d 1170, 1174 (2d Cir. 1993).


Sufficiency of Allegations Against Credit Lyonnais Rouse ("CLR")

Sufficiency of RICO Allegations

Sufficiency of Section 1962(c) Allegations

To state a RICO claim, a plaintiff must allege that defendants "conduct[ed]
or particpated... in the conduct of [an] enterprise's affairs through a
pattern of racketeering activity." 18 U.S.C. @ 1962(c). RICO defines
"enterprise" as "any individual, partnership, corporation, association, or
other legal entity, and any union or group of individuals associated in
fact although not a legal entity." 18 @ 1961(4). The enterprise may be
"proved by evidence of an ongoing organization, formal or informal, and by
evidence that the various associates function as a continuing unit." United
States v. Turkette, 452 U.S. 576, 101 S. Ct. 2524, 69 L.Ed.2d 246 (1981).
Defendants cite various Seventh Circuit cases to support their contention
that to properly allege an association-in-fact, there must be a structure
and goals separate from the predicate acts themselves. However, this
Circuit construes the enterprise element of RICO liberally; "The language
and the history [of RICO] suggest that Congress sought to define the term
as broadly as possible..." United States v. Indelicato, 865 F.2d 1370, 1382
(2d Cir.), cert. denied, 493 U.S. 811, 110 S.Ct. 56, 107 L. Ed. 2d 24
(1989) (en banc).

In Moss v. Morgan Stanley, 719 F.2d 5 (2d Cir. 1983), this Circuit held
that a RICO enterprise need not have an " 'economic goal... apart from the
commission of the predicate acts,' " but simply "an ascertainable structure
distinct from the pattern of racketeering, and [which] cannot simply be the
sum of the predicate acts." Schmidt v. Fleet Bank, 16 F. Supp. 2d 340, n. 5
(S.D.N.Y. 1998). This Circuit has explicitly rejected the view that
evidence offered to prove the "enterprise" and the "pattern of
racketeering" must necessarily be distinct. See id.

Plaintiffs allege several alternative associations-in-fact comprised of
various combinations of Sumitomo, Global, Winchester, CLR and the alleged
Winchester-CLR joint venture. At this juncture in the proceedings, the
agreement, dated May 20, 1991, between Winchester and CLR, which
establishes a "group of companies...for the purpose of carrying on, inter
alia, the buying and selling of non-ferrous metals, the buying and selling
of commodities in general, the buying and selling of foreign exchange
whether in the spot or the futures market and introducing clients to CLR"
(the "Winchester-CLR Agreement") alone serves as sufficient evidence of
enterprise structure distinct from the alleged particular acts, which
constitute the defendants' alleged pattern of racketeering. Plaintiffs have
sufficiently alleged the existence of a RICO enterprise. At this time, this
Court does not address plaintiffs' assertions regarding CLR's vicarious
liability for acts of Winchester.

Moreover, to be subject to RICO liability, a defendant must have
participated, directly or indirectly, in the operation or management of the
enterprise. Reves v. Ernst & Young, 507 U.S. 170, 183, 113 S.Ct 1163, 122
L. Ed. 2d 525 (1993). As this Court has noted before, liability is not
limited to those primarily responsible for an enterprise's affairs, in
upper management, or who occupy a formal position in the enterprise, but
may attach even to "lower-rung participants in the enterprise who are under
the direction of upper management." Id. at 183-84. However, "some part in
directing the enterprise's affairs is required." Id. at 184.

CLR contends that its role in the alleged enterprise was attenuated as it
can show that it did not have knowledge of the underlying business of
Sumitomo and Global and was thus unaware of the lack of commercial
justification for the trades it cleared on their behalf. It further argues
that its position as an "outsider" is determinative of the Reves test.
However, "once a RICO enterprise is established, a defendant may be found
liable even if he does not have specific knowledge of every member and
component of the enterprise." Mason Tenders District Council Pension Fund
v. Messera, 1996 WL 351250 at *6 (S.D.N.Y. 1996) ("Whether or not this
conduct is viewed as being at the core of the enterprise..."). Furthermore,
"the RICO statute has been repeatedly construed to cover both insiders as
well as those peripherally connected to a RICO enterprise, particularly
where the "outsiders" are alleged to have engaged in kickbacks in order to
influence the enterprise's decision." Id. See also Azrielli v. Cohen Law
Offices, 21 F.3d 512, 514-15, 521 (2d Cir. 1994) (Judge Kearse held that
the district court should not have dismissed the @ 1962(c) claim against
defendant who served as "the middle person in [a] flip sale" of a building
" 'by allowing his name to be used on the bogus contract and showing up at
the closing.' ").

Plaintiffs' allegations regarding the profit and loss share agreement
between CLR and Winchester and regarding the various forms of reciprocal
assistance between Hamanaka or Sumitomo and CLR and Winchester are at a
minimum sufficient to allege "substantial assistance on the part of CLR in
the overall manipulation scheme. See Napoli v. United States, 45 F. 3d 680,
683 (2d Cir.) cert. denied, 514 U.S. 1084, 115 S.Ct.1796, 131 L.Ed.2d 724
and 514 U.S. 1134, 115 S.Ct. 2015, 131 L.E.2d 1014 (1995). At this early
stage, these allegations are sufficient to satisfy Reves.

Allegations of the existence of a RICO enterprise must meet only the
"notice pleading" requirements of Fed. R. Civ. Pro. 8. Trustees of Plumbers
Nat'l Pension Fund v. Transworld Mech., Inc., 886 F. Supp 1134, 1144-45
(S.D.N.Y. 1995); Azurite Corp. v. Amster & Co., 730 F. Supp. 571 (S.D.N.Y.
1990). At this time, nothing more than those allegations made herein is
required of plaintiffs.

Sufficiency of Mail and Wire Fraud Allegations

Under RICO, a "pattern of racketeering activity" consists of "at least two
acts of racketeering activity" within a ten year period. See 18 U.S.C. @
1961 (5); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n. 14, 105 S.
Ct. 3275, 87 L.Ed.2d 346 (1985). Among the predicate acts enumerated in @
1961(1) are any acts of mail fraud indictable under the federal mail fraud
statute, 19 U.S.C. @ 1341, and any acts of wire fraud indictable under the
federal wire fraud statute, 18 U.S.C. @ 1343. n1

n1 The wire fraud statute, 18 U.S.C. @ 1343, provides in relevant part:
"Whoever, having devised or intending to devise any scheme or artifice to
defraud, or for obtaining money or property by means of false or fraudulent
pretenses, representations, or promises, transmits or causes to be
transmitted by means of wire, radio, or television communication in
interstate or foreign commerce, any writings, signs, signals, pictures, or
sounds for the purpose of executing such scheme or artifice, shall be fined
under this title or imprisoned not more than five years, or both..." The
mail fraud statute, 18 U.S.C. @ 1341, is similar to the wire fraud statute
in all respects material to the present discussion.

Plaintiffs allege that the Credit Lyonnais defendants have committed the
predicate acts of mail fraud and wire fraud in carrying out an ongoing
pattern of concerted activity to manipulate and artificially impact the
price of copper and Comex futures and options contracts. The elements of a
claim of mail or wire fraud are: (1) the existence of a scheme to defraud
involving money or property; and (2) the use of the mails or wires in
furtherance of the scheme. See United States v. Trapilo, 130 F.3d 547,
551-52 (2d Cir. 1997); McLaughlin v. Anderson, 962 F.2d 187, 191 (2d Cir.
1992) (citing Schmuck v. United States, 489 U.S. 705, 712, 109 S.Ct. 1443,
103 L.Ed.2d 734 (1989)).

In pleading a violation of the mail and wire fraud statutes, Rule 9(b) of
the Federal Rules of Civil Procedure must be satisfied. Mills, 12 F.3d at
1176; German de La Roche v. Calcagnini, 95 Civ.6322, 1997 WL 292108, at *7
(S.D.N.Y. 1997). Rule 9(b) provides: "In all averments of fraud or mistake,
the circumstances constituting fraud or mistake shall be stated with
particularity. Malice, intent, knowledge and other condition of mind of a
person may be averred generally." Fed. R. Civ. P. 9(b).

This Court has recognized the significance of Rule 9(b) in civil RICO
actions. See In re Sumitomo Copper Litigation, 995 F. Supp. 451, 455
(S.D.N.Y. 1998) (Pollack, J.). The rationale underlying a strict
application of the pleading requirements in civil RICO actions is that
simply bringing a RICO action against a defendant can unfairly brand him as
a "racketeer." Id. However, while Rule 9(b) should be construed strictly in
the context of civil RICO actions, it should not be exercised in such a
manner as to obstruct even plaintiffs with valid claims from initiating
such actions. Moreover, this Court has held that Rule 9(b) must still be
read along with Rule 8(a), which requires a plaintiff to plead only a
short, plain statement upon which he is entitled to relief. See Connolly v.
Havens, 763 F. Supp. 6, 12 (S.D.N.Y. 1991).

Defendant CLR's argument that plaintiffs' allegations fail to adequately
allege wire or mail fraud because they have not alleged facts from which
this Court could infer that CLR knew that the trades were not commercially
justified is overshadowed by Rule 9(b)'s provision for general averment
with regard to defendant's knowledge, especially when considered with the
earlier noted principle that once a RICO enterprise is established, a
defendant can be found liable even if he does not have specific knowledge
of all its components. See Mason Tenders, 1996 WL 351250 at *6.

This Court has held:

    "In cases in which the plaintiff claims that the mails or wires were
simply used in furtherance of a master plan to defraud, the communications
need not have contained false or misleading information themselves. See
Schmuck, 489 U.S. at 715. In such cases, a detailed description of the
underlying scheme and the connection therewith of the mail and/or wire
communications, is sufficient to satisfy Rule 9(b)... In complex civil RICO
actions involving multiple defendants, therefore, Rule 9(b) does not
require that temporal or geographic particulars of each mailing or wire
transmission made in furtherance of the fraudulent scheme be stated with
particularity. Spira, 876 F. Supp. At 559. In such cases, Rule 9(b)
requires only that the plaintiff delineated, with adequate particularity in
the body of the complaint, the specific circumstances constituting the
overall fraudulent scheme. Madanes v. Madanes, 981 F. Supp. 241, 254
(S.D.N.Y. 1997); Center Cadillac, 808 F. Supp. At 229; Beth Israel Med.
Ctr. v. Smith, 576 F. Supp. 1061, 1070-71 (S.D.N.Y. 1983).

In Re Sumitomo, 995 F. Supp. 451, 456 (S.D.N.Y. 1998) (Pollack, J.).

In this action, the Complaint asserts a detailed conspiracy to manipulate
and corner the market for physical copper and copper futures. "In light of
the complaint's allegations, it is certainly reasonable to infer that mail
and/or telephone communications were used in furtherance of the defendants'
scheme." Beth Israel, 576 F. Supp. At 1071. Furthermore, plaintiffs do
plead specific predicate acts of mail and wire fraud in the Complaint, such

53. ... Hamanaka sent a fax to Threlkeld at his office in Vermont, asking
him to verify fictitious trades which supposedly had occurred through DLT
and CLR on September 17 and September 28, 1990, involving 127,505 MT of
copper and more than $ 560 million.

105. The CLR-Winchester joint venture sent various warrant confirmations to
Sumitomo during the Class Period. These included a false warrant
confirmation, sent by Winchester (per Winchester Tokyo) in early August
1993 which materially overstated the amount of copper warrants which
Sumitomo held with CLR on the close of business on July 31, 1993.

119. ... After "washing" the funds [referring to "the first cash infusions
from the enterprise's put financing strategy"] through Sumitomo Hong Kong,
Hamanaka transferred the October 4 funds directly to Merrill Lynch. For the
second transaction, Hamanaka had J.P. Morgan wire the October 20 funds,
directly to CLR, to CLR's account at Citibank in New York for the further
credit of Sumitomo.

These and other similar allegations when viewed in light of the alleged
overall conspiracy adequately meet the requirements of Rule 9(b). As such,
at this juncture in the proceeding, this Court need not continue to address
the issue of whether the existence of any agency relationship, between
various entities allegedly involved in the conspiracy, was adequately
pleaded so as to otherwise satisfy Rule 9(b), as asserted by plaintiffs and
denied by defendant CLR.

Sufficiency of Proximate Cause Allegations

Common law standards of proximate cause apply in RICO cases. See Holmes v.
Securities Investor Protection Corp., 503 U.S. 258 (1992). In Laborers
Local 17, Health and Benefit Fund v. Philip Morris, Inc., 191 F. 3d 229
(1999), the Second Circuit quotes Holmes, 503 U.S. at 268, stating that
under RICO, "proximate causation is the requirement that there be 'some
direct relation between the injury asserted and the injurious conduct
alleged.' " While CLR suggests that this recent Second Circuit decision
somehow sets forth new pleading requirements, this Court finds that it
merely confirms pre-existing requirements. In Laborers Local 17, those who
suffered the direct injury of the harm, smokers allegedly harmed by tobacco
smoking, were not suing; rather labor unions were suing for damages
consisting of the payments that their health and welfare funds had made to
the individuals who had been hurt by tobacco smoking. 191 F. 3d at 229-30.
In contrast, in the present case, the plaintiffs consist of persons who
were allegedly directly injured by their presumed reliance on artificial
prices resulting from the enterprise's alleged manipulation of the market.
If CLR is shown to be a member of the enterprise, it will also be
responsible to plaintiffs for such injury. Again, for purposes of this
motion, all inferences are drawn in favor of plaintiffs, who will be
afforded the opportunity to further prove their allegations of proximate
causation. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.

Sufficiency of Section 1962(d) Allegations

Defendant CLR asserts that the elements of a RICO conspiracy claim require
plaintiffs to plead that CLR agreed to commit predicate acts prohibited by
RICO and that CLR knew those acts were part of a pattern of illegal
racketeering activity. While CLR cites authority from this District, the
Supreme Court's 1997 decision in Salinas v. United States, 522 U.S. 52, 118
S.Ct. 469, 139 L.C.2d 352, is controlling. The Supreme Court held that
plaintiffs need only allege that CLR "knew of and agreed to facilitate the
scheme." Id. at 478.

There is no requirement of some overt act or specific act in the [RICO]
statute before us, unlike the general conspiracy provision applicable to
federal crimes, which requires that at least one of the conspirators have
committed an 'act to effect the object of the conspiracy.' @ 371.


A [RICO] conspirator must intend to further an endeavor which, if
completed, would satisfy all of the elements of a substantive criminal
offense, but it suffices that he adopt the goal of furthering or
facilitating the criminal endeavor...One can be a conspirator by agreeing
to facilitate only some of the acts leading to the substantive offense. It
is elementary that a [RICO] conspiracy may exist and be punished whether or
not the substantive crime ensues, for the conspiracy is a distinct evil,
and so punishable in itself. Salinas, 118 S.Ct. at 476-77.

Although the Second Circuit has used "predicate acts" language, it has
expanded on the principle as viewed in other circuits and follows Salinas.
Chief Judge Winter held:

A RICO conspiracy charge "is proven if the defendant 'embraced the
objective of the alleged conspiracy,' and agreed to commit... predicate
acts in furtherance thereof." Id. (quoting United States v. Neapolitan, 791
F. 2d 489, 495 (7th Cir. 1986). Assuming that a RICO enterprise exists, the
government must prove only "that the defendant[s]... know the general
nature of the conspiracy and that the conspiracy extends beyond [their]
individual role[s]." United States v. Rastelli, 870 F.2d 822, 828 (2d Cir.
1989). In applying this analysis, we need inquire only whether an alleged
conspirator knew what the other conspirators "were up to" or whether the
situation would logically lead an alleged conspirator "to suspect he was
part of a larger enterprise." Viola, 35 F.3d at 44-45.; see also Salinas,
118 S.Ct. at 478.

U.S. v. Zichettello, 208 F.3d 72 (2d Cir. 2000).

Plaintiffs allege that CLR knew about and agreed to facilitate the
conspiracy to defraud and manipulate the copper futures market.
Specifically, plaintiffs allege that CLR engaged in conduct which exceeded
ordinary financial services and extended beyond brokerage and banking
industry customs, was sanctioned by the LME for its activities on behalf of
Sumitomo, joined the conspiracy by improperly concealing from Sumitomo's
accounting division and Treasury department the line of credit Hamanaka was
using to fund the allegedly manipulative transactions, and effectively
acted as Hamanaka's partner. CLR concedes that the allegations against the
defendants other than itself and CL, if proven, suffice to show that a RICO
conspiracy did exist. As such the allegations of CLR's involvement in the
conspiracy need not be great. "Once a conspiracy is shown to exist, the
evidence sufficient to link another defendant to it need not be
overwhelming." United States v. Diaz, 176 F. 3d 52, 97 (2d Cir. 1999)
(quoting United States v. Amato, 15 F.3d 230, 235 (2d Cir. 1994)).
Plaintiffs @ 1962(d) allegations suffice to satisfy Salinas and
corresponding authority from this Circuit.

B. Statute of Limitations

The Standard

Civil RICO claims are subject to a four-year statute of limitations. Agency
Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 156, 107
S.Ct. 2759, 97 L.ED.2d 121 (1987). The limitations period begins to run
when a plaintiff knew or should have known of his injury. Rotella v. Wood,
120 S.Ct. 1075, 1080, 145 L.Ed.2d 1047 (2000). The Supreme Court has
eliminated the injury and pattern discovery rule, under which a civil RICO
claim accrues only when the claimant discovers, or should discover, an
injury and a pattern of RICO activity, stating that it did not want to
"parlay the necessary complexity of RICO into worse trouble in applying its
limitations rule." Id. at 1080, 83. However, the Court added that, "in
rejecting pattern discovery as a basic rule, we do not unsettle the
understanding that federal statutes of limitations are generally subject to
equitable principles of tolling, see Holmberg v. Armbrecht, 327 U.S. 392,
397, 676 S.Ct. 582, 90 L.Ed. 743 (1946), and where a pattern remains
obscure in the face of a plaintiff's diligence in seeking to identify it,
equitable tolling may be one answer to the plaintiff's difficulty,
complementing Federal Rule of Civil Procedure 11(b)(3)."

The Injury

The first step in the statute of limitations analysis is to determine when
the plaintiffs sustained the alleged injury for which they seek redress.
Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1102 (2d. Cir. 1988).
Plaintiffs allege that as a result of the alleged conspiracy and
manipulative enterprise, Class members suffered economic injury from
artificially high and noncompetitive copper prices throughout the Class
Period, June 24, 1993 through June 15, 1996.

Inquiry or Actual Notice of the Injury

We then determine when they discovered or should have discovered the injury
and begin the four-year statute of limitations period at that point. Id.

Plaintiffs allege that they did not receive inquiry notice nor learn of the
factual basis for the alleged RICO violations and plaintiffs' alleged
injuries suffered therefrom until June 14, 1996, when Sumitomo first
reported the uncommercial positions and losses, accompanied by details of
manipulation. Plaintiffs also allege that the CFTC did not begin to become
aware of the material facts constituting the present claims until sometime
in April of 1996 and that Comex did not issue any public statements
addressing the manipulation of copper future prices until after June 14,
1996. CLR argues that this Court should find that plaintiffs were on
inquiry notice as of such time as the LME's October 11, 1993 public action
combined with 1993 news reports regarding alleged copper price manipulation
by Sumitomo and others served as "storm warnings" that wrongdoing may have
been committed. Salinger v. Projectavision, Inc., 934 F. Supp. 1402, 1408
(S.D.N.Y. 1996). Armstrong v. McAlpin, 699 F.2d 79, 88 (2d Cir. 1983)
("Where the circumstances are such as to suggest to a person of ordinary
intelligence the probability that he has been defrauded, a duty of inquiry
arises, and if he omits that inquiry when it would have developed the
truth, and shuts his eyes to the facts which call for investigation,
knowledge of that fraud will be imputed to him."). In re Ames Department
Store Litigation, 991 F.2d 968, 979 (2d Cir. 1993). Plaintiffs allege,
however, that the sanction was not publicly characterized as a fine for
price manipulation and that CLR publicly denied intending any "undue"
influence over prices thereby defeating a claim of inquiry notice.
Plaintiffs assert that despite any public notice, the statute of
limitations should be tolled due to defendants' fraudulent concealment of
the alleged manipulative scheme.

Fraudulent Concealment as a Tolling Exception

The doctrine of fraudulent concealment was designed to prevent a party from
"concealing a fraud, or... committing a fraud in a manner that it concealed
itself until such time as the party committing the fraud could plead the
statute of limitations to protect it." New York v. Hendrickson Brothers,
Inc., 840 F.2d 1065, 1083 (2d Cir.), cert. denied, 488 U.S. 848, 109 S.Ct.
128, 102 L.Ed.2d 101 (1988) (quoting Bailey v. Glover, 88 U.S. 342, 349, 22
L.Ed.636 (1874)). Under the doctrine of fraudulent concealment, the statute
of limitations will be tolled if plaintiffs prove three elements: (1)
wrongful concealment by CLR, (2) which prevented plaintiffs' discovery of
the nature of the claim within the limitations period, and (3) plaintiffs'
ignorance was not attributable to a lack of diligence on their part in
pursuing the discovery of the claim. Hendrickson Bros., 840 F. 2d at 1083.
Butala v. Agashiwala, 916 F. Supp. 314, 319 (S.D.N.Y. 1996).

Plaintiffs allege that the defendants fraudulently misrepresented and
concealed material facts from at least June 24, 1993 to the time of the
Complaint. Specifically, plaintiffs allege that (i) during 1993, CLR
affirmatively negotiated a deal with the LME to limit the public statements
of both about what had occurred during the Summer of 1993; (ii) CLR
affirmatively and falsely issued a public denial of any belief on CLR's
part that even any "undue influence" could have been exercised in the
market; (iii) the Credit Lyonnais defendants, in consideration for an
immediate $ 59 million payment agreed to conceal and did conceal from the
Sumitomo Treasury Department and Accounting Division CL's financing and
creation of extraordinary manipulative trades for Hamanaka; and (iv) the
Credit Lyonnais defendants provided secret code names to transactions.

CLR's various alleged agreements and dealings so as to conceal the cause of
action from the public and others in a potential position to act could
constitute fraudulent concealment as interpreted by the Courts. See
Meridian Int'l Bank Ltd. v. The Government of the Republic of Liberia, 23
F. Supp. 2d 439, 447 (S.D.N.Y. 1998) (RICO claims pleaded adequately to be
equitably tolled where pleadings include allegations of bribery of top
individuals in potential position to act.) In re System Software
Associates, Inc. Securities Litigation, WL 283099 at *11 (N.D. Ill. 2000)
(Newspaper articles did not provide constructive notice to securities
plaintiff in circumstance where "defendants fail[ed] to acknowledge...
their own emphatic details of any improprieties published in these very
same articles.")

"The question of constructive knowledge and inquiry notice may be one for
the trier of fact and therefore ill-suited for determination on a motion to
dismiss.... Nonetheless, the test is an objective one and dismissal is
appropriate when the facts from which knowledge may be imputed are clear
from pleadings and the public disclosures themselves." Salinger, 934 F.
Supp. at 1408; In re Merrill Lynch Ltd. Partnerships Litigation, 154 F.3d
56, (2d. Cir. 1998) (holding that the question of inquiry notice need not
be left to a finder of fact.) Dodds v. Cigna Sec., Inc., 12 F.3d 346, 352
n. 3 (2d Cir. 1993). This Court has previously held that "since issues of
constructive knowledge depend on inferences drawn from the facts of each
particular case, summary judgment is often inappropriate on issues on
inquiry notice. In fact, Southern District courts have variously described
defendants' burden in this regard as "extraordinary" and appropriate only
in "extreme circumstances." In re Prudential Securities Inc. Ltd.
Partnerships Litigation, 930 F. Supp. 68, 76 (S.D.N.Y. 1996). This same
logic extends to consideration of the issues of inquiry notice and
fraudulent concealment with respect to motions to dismiss. Plaintiffs'
allegations suffice to preclude dismissal on statute of limitations

C. Common Law Fraud Claim

As this Court finds that plaintiffs have sufficiently alleged federal
causes of action under RICO, it maintains its supplemental jurisdiction
over plaintiffs' remaining state law claims. Itar-Tass Russian News Agency
v. Russian Jurier, Inc., 140 F.3d 442, 447-48 (2d Cir. 1998).

Sufficiency of Allegations Against Credit Lyonnais, S.A. ("C.L.")

Credit Lyonnais, S.A. ("CL") is a corporation which is the ultimate holding
company or parent of defendant CLR.

Sufficiency of RICO Allegations

Sufficiency of "Enterprise" Allegations

Plaintiffs have sufficiently pled the existence of a RICO enterprise for
purposes of the notice pleading requirements. As discussed with regard to
CLR's association therewith, a defendant must have participated, directly
or indirectly, in the operation or management of the enterprise. Reves v.
Ernst & Young, 507 U.S. 170, 183, 113 S.Ct. 1163, 122 L. Ed. 2d 525 (1993).

Plaintiffs allege that CL directly participated in the alleged enterprise
by: assuming various CLR liabilities, thus enabling CLR to extend credit
lines to Hamanaka's division; (ii) guaranteeing credit lines extended by
CLR to Sumitomo; (iii) concealing from the Accounting Division and Treasury
Department of Sumitomo the credit lines that CLR had extended to Sumitomo;
and (iv) allegedly altering its normal way of doing business, creating
special procedures and actions. Like its codefendant CLR, CL asserts that
its role in the alleged enterprise was attenuated as it can demonstrate
that it did not have knowledge of the underlying business of Sumitomo and
Global and CL thus was unapprised of the lack of commercial grounds for the
trades which it allegedly enabled its indirect subsidiary CLR to clear.

CL's violation of its own rules in assisting the alleged enterprise does
not signify direct participation in the alleged enterprise's manipulative
scheme. Redtail Leasing, Inc. v. Bellezza, 1997 WL 603496 at *5 (S.D.N.Y.
1997) ("A defendant does not "direct" an enterprise's affairs under @
1962(c) merely by engaging in wrongful conduct that assists the
enterprise."). Furthermore, CL could argue its financing measures pertained
simply to its business relationship with CLR. Industrial Bank of Latvia v.
Baltic Fin. Corp., 1994 WL 286162 at *3 (S.D.N.Y. 1994) ("That [defendant]
Bank provided banking services - even with knowledge of the fraud - is not
enough to state a claim under @ 1962(c).").

However, Plaintiff's allegation that CL agreed to knowingly conceal its
financing of large manipulative positions from the accounting division and
the Treasury Department of Sumitomo, which plaintiffs further allege is
evidenced by an internal memo sent to this District and elsewhere, creates
potential questions of fact which must be construed in plaintiffs' favor in
considering this motion to dismiss. As such, plaintiffs' allegations
concerning CL's direct participation satisfies the pleading requirements
for Reves at this juncture.

Sufficiency of Vicarious Liability Allegations

"A corporation can act only through its agents, and the 'acts of
individuals on [the corporation's] behalf may be properly chargeable to
it." United States v. Paccione, 949 F.2d 1183 (2d Cir. 1991), cert. denied
sub nom. Vulpis v. United States, 505 U.S. 1220, 112 S.Ct. 3029 (1992)
(quoting United States v. Ingredient Technology Corp., 698 F.2d 88, 99 (2d
Cir.), cert. denied, 462 U.S. 1131, 103 S.Ct. 31111, 77 L.Ed.2d 1366
(1983)." "RICO liability may be imputed to a corporation where an agent
acts on behalf of a corporate entity with that entity's knowledge." Local
875 I.B.T. Pension Fund v. Pollack, 992 F. Supp 545, 568 (E.D.N.Y. 1998).

The issue of whether CL can be considered vicariously liable under RICO
should be informed by the standards under comparable federal substantive
law, here the Commodity Exchange Act, 7. U.S.C. @@ 1 et seq. ("the CEA").
CEA standards provide for such vicarious liability. Rosenthal & Co. v.
C.F.T.C., 802 F. 2d 963, 967 (7th Cir. 1986) ("there is no counterpart in
the securities laws to Section 2(a)(1) of the Commodity Exchange Act, that
is, no provision creating liability on the basis of respondeat superior");
C.F.T.C. v. Commodities Fluctuations Systems, Inc., 583 F. Sup 1382,
1384-85 (S.D.N.Y. 1984) (violations of salespersons would be imputed not
only to their employer but also to a clearing firm). Plaintiffs can argue
imputation of CLR's alleged involvement in the scheme of manipulation to
CL. As such, plaintiffs' allegations suffice at this time.

Sufficiency of Proximate Cause Allegations

While "merely pleading a close relationship with another entity that is
alleged to have made particular statements is insufficient to satisfy Rule
9(b)," Daly v. Castro Lanes, 30 F. Supp. 2d 407, 414 (S.D.N.Y. 1998),
plaintiffs' allegations that CL directly agreed to conceal financing from
Sumitomo constitutes a specific allegation of fraudulent activity which
contributed to the overall economic injuries suffered by the Class Members.

B. Sufficiency of Allegations of Aiding and Abetting Common Law Fraud.

As mentioned with regard to plaintiffs' allegations against CLR, "in cases
in which the plaintiff claims that the mails or wires were simply used in
furtherance of a master plan to defraud, the communications need not have
contained false or misleading information themselves. See Schmuck, 489 U.S.
at 715. In such cases, a detailed description of the underlying scheme and
the connection therewith of the mail and/or wire communications, is
sufficient to satisfy Rule 9(b)." In Re Sumitomo, 995 F. Supp 451, 456
(S.D.N.Y. 1998). Defendants' alleged manipulation of the copper prices
would constitute a "master plan to defraud. " As such, Plaintiff need only
plead details of the overall conspiracy at this time to satisfy Rule 9(b).


The plaintiffs sufficiently state a claim under RICO and satisfy the
requirements of Rule 9(b) of the Federal Rules of Civil Procedure. The
motions to dismiss the Sixth Amended Consolidated Class Action Complaint
against CLR and against CL are denied. (New York Law Journal, July 19,

TOBACCO LITIGATION: NYLJ Says Certainty of Verdict Reversal Overstated
The tobacco defendants reacted predictably to the jury decision in the
Engle class action to award nearly $ 145 billion in punitive damages
against them. Each protested that everything about the proceeding violated
long-established legal standards and predicted that the verdict would,
without doubt, be overturned on appeal.

According to the New York Law Journal, they are correct that the Florida
proceeding is vulnerable on a variety of grounds, but they are overstating
the degree of certainty that it will be reversed. Even a 20 percent chance
that it will be sustained (which is about how I would compute the odds)
implies that the tobacco industry faces a staggering loss that in expected
value terms would now come to roughly $ 29 billion.

Of course, the stock market may have already discounted this amount or more
from the total market capitalization of the tobacco defendants.
Alternatively, securities analysts, who often display a herd mentality, may
have collectively underestimated the risk in Engle, the Journal says.

Possibly, the industry and its counsel know this, but do not want to make
any concessions as they enter into a negotiating game with the Engle
plaintiff's attorney that involves the highest stakes in the history of
private civil litigation. Even if the tobacco defendants are still in
collective repression about the possibility that Engle might not be
reversed, n2 they are likely to twist slowly in the wind for the next
several months. Gradually, the prospect of a settlement may become more
attractive to them, and low visibility settlement talks might start at any

The Florida appellate courts have previously refused to reverse the class
certification in Engle. See R.J. Reynolds Tobacco Co. v. Engle, 672 So2d 39
(Fla. 3d DCA), rev. denied, 672 So2d 1100 (Fla. 1996). These decisions
were, however, prior to Amchem Products, Inc. v. Windsor.

The New York Law Journal article analyzes (1) how and with whom the tobacco
industry could negotiate a settlement, and (2) how such a settlement would
have to be structured in order to pass constitutional muster.

The industry could again seek a global settlement in federal court, one
that would resolve at least all punitive damages claims against it and
possibly even stay the Florida action under the All Writs Act, the article
says. According to the article, public policy makes such an alternative
settlement highly preferable, and notwithstanding the Federal
Anti-Injunction Act, such a stay is possible when the federal court has
before it a negotiated settlement, or believes a settlement is imminent,
and its ability to realize that settlement is jeopardized by litigation in
a state court. See Carlough v. Amchem Products Inc. , 10 F3d 189 (3d Cir.

                            Public Policy

The New York Law Journal says that from the public policy perspective, it
is disappointing that public health proponents and anti-smoking activists
have not yet recognized that the Engle verdict results in a tragic waste
and misapplication of the tobacco industry's financial assets. Eager to
celebrate the apparent destruction of the Wicked Witch of the tobacco
industry, the activists are strangely indifferent to the fact that the
recipients of these damages will be "addicted" smokers in one state only
(Florida), with none of the punitive damages going to any public health or
social welfare purpose.

This failure to address public health or medical monitoring goals
perpetuates the earlier and similar failure of the tobacco industry's
settlement with the state attorney generals to fund public health
objectives. In that November 1999 settlement, the tobacco industry agreed
to pay roughly $ 250 billion to the 50 states over a 20-year period.

Today, it is evident that those funds will not be used in most states to
address public health problems or to reduce teenage smoking. In most
states, the settlement's funds have disappeared into the general state
revenue coffers and are being applied to a multitude of unrelated purposes.
To this extent, smokers have arguably subsided non-smokers, and the public
policy goals of prevention and monitoring have been largely ignored.

The failure to apply the punitive damages in the Engle settlement to
sensible public policy goals would result in an even greater travesty. Not
only do the residents of only one state receive a windfall, but clearly
this juncture represents the last opportunity to tax the tobacco industry
in any massive way. Even if the award is scaled back, its imposition would
probably place some firms in reorganization.

Equally important, the Supreme Court has clearly indicated that repetitive
awards of punitive damages for the same conduct can offend due process. n4
In effect, there is a cumulative limit on the punishment that can be
imposed, and further massive awards of punitive damages would seem doubtful
if the Engle verdict were upheld. In short, the verdict wastes the last
clear chance to put the industry's punishment to some socially useful

See, e.g., BMW of N. Am. Inc. v. Gore, 517 U.S. 559 (1996); Pacific Mutual
Life Ins. Co. v. Haslip, 499 U.S. 1 (1991).

According to the Journal, from the industry's perspective, an alternative
global settlement also should be preferable. Most obviously, this is
because Engle, if upheld, would leave the tobacco defendants liable to
suits for compensatory and punitive damages in the other forty-nine states
(and extraterritorially), and such a record recovery should encourage
further litigation everywhere. If Florida did uphold this verdict, there
are at least some other states (not including New York n5) in which a
similar class action may be possible, and consolidated actions might be
brought in most states.

In Small v. Lorillard Tobacco Co., 94 NY2d 43, 698 NYS2d 615, the New York
Circuit of Appeals rejected a tobacco class action that did not assert
personal injuries or involve a fraction of the problems that Engle does.
Hence, Engle seems unlikely to encourage similar litigation in New York.

Yet, although this analysis suggests that the industry should desire a
global civil settlement (as it did in 1997), if there is any realistic
possibility that Engle could be upheld, two critical questions remain: (1)
Is there in fact any such realistic possibility?, and (2) Is a global
settlement of tobacco liabilities achievable through the mechanism of a
class action, particularly after the Supreme Court's recent decisions in
Amchem Products Inc. v. Windsor n6 and Ortiz v. Fibreboard Corp.?

The reasons why Engle should be reversed approach the self-evident, the New
York Law Journal says. First, it is the paradigm of the large sprawling
mass torts class action that Amchem and Ortiz rejected. Yet the Engle court
made no effort to respond to these decisions, to use subclasses to control
the intra-class conflicts, or to separately represent the interests of
future claimants. Defiant as the Engle court has been of the recent case
law, the Florida appellate courts had earlier opportunities to decertify
Engle and did not do so. This suggests at least two broad possibilities
according to the New York Law Journal. First, unlike in Amchem andOrtiz,
where other representatives of the plaintiff class intervened and objected
to what they perceived as a collusive settlement, defendants are hardly
able to raise the theme of collusion in Engle. Also, the Florida courts may
doubt that defendants should have standing to assert the inadequacy of the
representation given the plaintiff class by their own counsel.  Logical as
this position may sound, the Supreme Court has nonetheless resolved this
question in Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), ruling
that defendants do have an interest in assuring the finality of their
judgment that permits them to raise these questions about the adequacy of
plaintiffs' representation.

Second, even if every federal court to consider the matter to date has seen
a tobacco mass tort class action to be uncertifiable, Florida can
ultimately read its own class action rule as it chooses. Only to the extent
that due process is offended can the U.S. Supreme Court intervene. In this
light, the more powerful appellate arguments may be those involving the
award of punitive damages, not class certification. Here, defendants will
undoubtedly argue that the trial court put the cart before the horse in
allowing the jury to determine punitive damages on a class-wide basis
before it determined the total compensatory loss. Although a trilogy of
recent Supreme Court decisions on punitive damages has held that punitive
damages should be proportional to the compensatory damages, n10 the Engle
jury has not yet determined the total compensatory loss and, at most, has
only heard evidence that placed the total size of the class at between
200,000 and 700,000 class members.

This leaves the total compensatory loss very uncertain, and that loss would
arguably need to fall in the range of $ 35 to $ 50 billion to justify a $
145 billion punitive damages award if proportionality is required.

Interestingly, in a very similar setting, the Texas Supreme Court has just
held that punitive damages cannot be assessed until compensatory damages
have first been determined. (Southwestern Ref. Co. v. Bernal, 200 Texas
LEXIS 50 (May 11, 2000)). Still, there is a problem with this argument that
the determination of actual compensatory damages must precede the award of
punitive damages. In TXO Production Corp. v. Alliance Resources Corp., (509
U.S. 443 (1993). The Supreme Court upheld a $ 10 million punitive damages
award based on a $ 19,000 actual damages award, in part because it said it
was "appropriate to consider the magnitude of the potential harm that the
defendant's conduct would have caused to its intended victim if the
wrongful plan had succeeded, as well as the possible harm to other victims
that might have resulted if similar future behavior were not deterred."

Once the fact-finder's range of vision is extended to cover future harm to
others, the $ 145 billion award in punitive damages no longer seems
necessarily disproportionate to conduct that each year is believed to
result in 142,000 diagnoses in the United States of lung cancer that is
caused by cigarette smoking.

According to the article in the New York Law Journal, the Florida court was
correct, but that claims that punitive damages must be closely tied to
actual demonstrated compensatory losses are not that strongly supported by
the Supreme Court's recent decisions, as evidenced by the plaintiffs in In
re Tobacco Litigation Eastern District of New York, which is currently
pending before Judge Weinstein. There, plaintiffs cite American Cancer
Society data that there are 171,500 new lung cancer cases diagnosed each
year, of which 142,760 are in excess of the number that would arise in the
absence of smoking.

                               'BMW' Decision

Probably the strongest argument that the Florida court erred has not yet
been publicly stressed by the tobacco industry but comes from the Supreme
Court's 1996 decision in BMW of N. Am. Inc. v. Gore. (517 U.S. 559 (1996).
There, plaintiff sought to sustain a $ 4 million punitive damages award
with regard to a modest commercial injury for which the jury had awarded $
4,000 in compensatory damages (namely, the failure to disclose that a
supposedly new car had been previously used, damaged and repainted) by
arguing that such a punitive damages award was necessarily to cancel out
the gains that the defendant had received from a nationwide pattern of
similar misbehavior.

Rejecting this deterrence justification, the Court agreed with the lower
Circuit court that a state court could not consider out-of-state
misbehavior by the defendant in assessing punitive damages. To do so, it
realized, would permit every court in every state to assess astronomic
punitive damages for individual incidents of misbehavior and thereby result
in excess deterrence and "overkill." The upshot would be an impermissible
burden on interstate commerce and on the rights of other states to follow a
different regulatory policy. That seems to be what has happened in Engle:
the Florida jury reacted to evidence that the industry engaged in a course
of conduct over 50 years that caused the death of hundreds of thousands of
individuals. But just as in BMW, this involves the jury impermissibly
considering a nationwide course of conduct that produced nationwide
injuries in order to award a windfall to a citizen or citizens in just one
state. Moreover, if Florida can do this, it chills the ability of other
states to adopt a more tolerant policy toward tobacco use.

The point then is that, even though $ 145 billion may not be an excessive
punitive damages award for the conduct alleged (given the future injuries
present in this case, but not in BMW), it is an impermissible award for a
state jury that may consider only conduct and injuries affecting the
interests of those within its jurisdiction. Such a jury may not administer
punishment on a national basis.

By the same token, however, a jury in a nationwide class action could
consider precisely the nationwide conduct and consequences of the tobacco
industry's behavior and could award punitive damages intended to deter
future misconduct on a nationwide basis. Similarly, the parties to a
nationwide settlement could negotiate the amount of those punitive damages
without offending the principles announced in the BMW decision. This
conclusion that full punitive damages are only assessable in a nationwide
class action leads to the next question: Is a nationwide class action for
tobacco injuries truly possible? Was not this just what Amchem and Ortiz

This question must be subdivided to be answered coherently. If a nationwide
settlement is possible, it would presumably have to offer defendants a
complete resolution of all punitive damage claims against them and
protection from any future such punitive claims emanating from past
conduct. To do this effectively, the settlement would have to be structured
as two parallel class actions, one a mandatory (or non-opt out) class
action for punitive damages under Federal Rules of Civil Procedure Rule
23(b)(1)(B), and the other an opt-out class for compensatory damages under
F.R.C.P. 23(b)(3).

But a mandatory class was precisely what the settling parties attempted in
Ortiz and what the Supreme Court emphatically rejected with a strong
statement that the so-called "limited fund" class action should not be
expanded further and must be confined by the historical understanding of
its permissible scope. In effect, the subtext in Ortiz says: "Cut out the
originality and no more innovation in class action design without
Congressional approval."

Still, a punitive damages non-opt-out class action rests on an entirely
different rationale than did the proposed mandatory compensatory class
action in Ortiz. Ortiz's mandatory class was based on the claim that the
assets of the defendants were inadequate to pay all claimants. Hence, the
first claimants to be paid would deplete the fund available for all and
would result in the non-payment of late-arriving claimants.

The Court responded to this proposed justification with a variety of
objections that would not apply to a punitive damages class action: (1)
there was no proof that the total liabilities facing the defendant in Ortiz
exceeded its total assets (because it had potentially unlimited insurance
coverage); (2) all the defendant's assets were not contributed to the
limited fund; and (3) the class was fatally underinclusive because many
claimants were deliberately left outside the class's definition so that
they could settle on an individual basis.

Here, the rationale for the class would not be the inadequacy of the
defendant's assets (even if that were true), but rather the constitutional
limits on cumulative punishment through punitive civil damages. These
limits, most clearly expressed in BMW v. Gore, would necessitate a judicial
finding of the maximum amount of civil damages that could be imposed in the
aggregate for the defendants' past misconduct.

Once this fund size was determined, it too would obviously be depleted by
early awards to the first claimants, with the result that later claimants
will be denied punitive damage awards once the fund's ceiling is exceeded.
In effect, the same "run-on-the-bank" scenario is present, but with the
fund size being limited by legal criteria, rather than by the defendants'
available assets.

So viewed, Ortiz's criteria can be easily satisfied because (1) there would
be a judicial determination both of the constitutional limitation on
punitive damages and of the likelihood that this limitation would be
exceeded, absent a mandatory class, (2) all assets in this legally limited
fund would be applied and/or distributed to achieve just punishment; and
(3) no claimants would be able to escape the mandatory class. Such a
mandatory class action for punitive damages also has legal precedent (most
notably in Judge Jack Weinstein's Agent Orange decision n16).

See In re "Agent Orange" Prod. Liab. Litig., 100 F.R.D. 718 (E.D.N.Y.),
aff'd, 818 F2d 145 (2d Cir. 1987). But see In re Northern Dist. of Calif.
Dalkon Shield Prod. Liab. Litig., 693 F2d 847, 849 (9th Cir. 1982)
(proponent of limited fund certification must show that deposition of early
claims will adversely affect later claims). Even this latter standard can
seemingly be satisfied.

Most importantly, such an approach may allow the damages committed to the
fund to be applied exclusively to public health and social welfare
purposes, without any distribution to individual claimants. Thus, although
there are unexplored issues in this approach, it permits both sides to win.
Anti-smoking activists gain to the extent the fund is not dissipated or
distributed in " windfalls" to individual claimants, and the industry gains
ironclad protection from future punitive damage assessments (which
protection they would not receive from any settlement of Engle ).

Also, to the extent that all future tobacco litigants (whether suing
individually or on a collective basis) would be shorn of any punitive
damage claim, the industry is given relative peace to the extent that few
trial lawyers would pursue such an uneconomic cause of action against the
industry when it was not accompanied by the potential of punitive damages.

Such a "limited fund" class for punitive damages would be accompanied by an
opt-out class for compensatory damages under F.R.C.P. Rule 23(b)(3), which
class would have to satisfy the criteria set forth in Amchem Products.
Amchem's standard of "class cohesion" would clearly require subclasses
(which was lacking in Engle ) and probably also extensive delayed opt-out
rights that would permit class members to opt out for a reasonable period
after being diagnosed with serious illness that was likely to have been
cause by smoking.

The class member's estate might also receive a similar and second opt-out
right. Arguably, such broad "exit" rights satisfy Amchem's class cohesion
standard because all who remain in the class have effectively elected to do
so. n17 This approach was recently used in the pending "fen-phen" class
litigation that is now before the federal district court in Philadelphia.
n18 Space considerations limit further discussion of these issues, but they
are admittedly complex.

Such a global settlement would have one final critical element: It would
either have to be contingent on the reversal of Engle by an appellate court
or on a federal judge staying the Engle case in light of a nationwide
settlement. This prospect the Engle could be outflanked creates a final
carrot that should lead the tobacco industry into global negotiations - if
it can recognize its own rational self-interest. (New York Law Journal,
July 20, 2000

* More Investor Lawsuits Fuel D&O Market
As companies like Conseco Inc., Aetna and Reliance Group Holdings Inc. face
an ever-growing rash of investor lawsuits, the need for directors and
officers insurance is increasing as well, according to insurance

Robert Hartwig, vice president and chief economist for the Insurance
Information Institute, said he wasn't surprised the financially troubled
companies like Reliance and Conseco, whose stock prices have plummeted in
the past couple years, are defendants in investor-generated lawsuits. That
can happen to any publicly traded company facing financial turmoil, he
said. In other words, investor lawsuits are simple reality in the
rollercoaster world of publicly traded companies. "I would be surprised if
there weren't lawsuits," Hartwig said. "In general, when a company suffers
a severe decline in share price, like both of these companies have, you
often see a directors and officers lawsuit. There are attorneys
specializing in this, claiming to look out for the rights of shareholders,
but the objective is to collect a lot in fees, with the plaintiffs getting

He said the directors and officers line of insurance is now approaching $3
billion in gross premiums written. "Because of the general interest of the
public in investing, and the trial bar in suing, you have a potent
combination driving D&O insurance, "Hartwig said.

D&O insurance is "one of the most profitable insurance lines an insurer can
write," said Eric Simpson, senior vice president and head of A.M. Best
Co.'s property/casualty division It wasn't uncommon for insurance carriers
to generate combined ratios in the 70 and 80 range a decade or two ago. It
has "drifted" into the 90s and in some cases, pushing 100, in recent years,
Simpson said, but that's still good compared to standard commercial lines,
for example, where combined ratios are commonly in the 110 to 115 range. A
combined ratio below 100 represents a profit; above 100 represents a loss.
Looking ahead, Simpson said capacity is stable and at an all-time high.
Rates began flattening more than a year ago, he said, and multiyear deals
are declining, which would allow D&O writers a chance to make premium
increases at renewals if warranted.

Some of the biggest writers of D&O include Chubb, and Executive Risk, which
was bought by Chubb in 1999; American International Group Inc., and
Reliance--though its future as a D&O writer is uncertain. These are also
companies with the longest histories of writing D&O. Most companies and
their boards have some basic D&O coverage, Simpson said, but the question
is whether it's sufficient as liabilities increase. The average size of a
shareholder D&O liability claim award rose to $8.67 million in 1999, the
highest ever, according to the "1999 Directors and Officers Liability
Survey," an annual study by Tillinghast-Towers Perrin, a management and
human resources consulting firm in Chicago.

Though claim awards have risen, prices for D&O coverage declined for the
fourth consecutive year in 1999, according to the study's author, Mark
Larsen, a consultant to Tillinghast-Towers Perrin. He said the exception is
"substantial" premium hikes for high-tech and biotech companies with recent
initial public offerings, given the volatility of the tech sector of

The trend is similar for D&O claims from employees, which reported an
average cost of $306,000 vs. $287,000 in the prior survey, Larsen said.
"Shareholder and employee claim-cost trends are crucial since these are by
far the most frequent sources of D&O claims, with shareholder claims most
common for publicly traded companies and employee claims most frequent for
private companies and non-profit organizations," he said. Larsen said he is
still gathering surveys for this year's report and doesn't expect to have
that ready until later this year. Simpson added that there was an increase
in the number of claims settled for more than $100 million in 1999.

In general, the frequency of claims is rising, with a large number filed in
federal court in 1999; increased stock market volatility and more mergers
and acquisitions may mean more D&O claim activity, and increased scrutiny
by shareholders of how corporations are governed could lead to more D&O
claims, he said.

Much of the focus with the class-action lawsuits is on money, as far as
defense costs and settlements, but another important resource tied up by
these suits is managerial time, said Bob Card, director of risk management
for Risk International Services, Houston, a professional services firm with
specialty practices in risk management, claim management & recovery, risk
science, strife victims and insurance archaeology.

Typically, most, if not all, the actual defense costs and settlement value
of these suits are covered by insurance, he said. Although this relieves
the defendant company in the short run, insurance premiums over the
subsequent years may increase as a result of one or more shareholder suits.

These lawsuits are labor intensive, especially because management
credibility is at stake, Card said. So senior managers face pressure not
only to succeed in the suit, but to assure that the company's long-term
reputation with shareholders and customers is not compromised. The
attention spent on the lawsuit reduces the amount of concentration on
managing the company. (BestWire, August 03, 2000)

WORLD FUEL: Shareholders Have Amended Complaint in FL Filed Feb & Mar
In February and March 2000, two shareholders filed class action lawsuits
against World Fuel Services Corp. and four of its executive officers in the
United States District Court for the Southern District of Florida. The
lawsuits have since been consolidated. The lawsuit alleges violations of
federal securities laws and seeks an unspecified amount of damages arising
from the decrease in the Company's stock price, which occurred on January
31, 2000. On June 30, 2000, the plaintiffs amended their complaint to
delete two of the claims made therein and to drop two of the Company's
officers as defendants.


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