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/raid1/www/Hosts/bankrupt/CAR_Public/000822.MBX C L A S S A C T I O N R E P O R T E R Tuesday, August 22, 2000, Vol. 2, No. 163 Headlines ALABAMA: HIV Included in New 'Special Needs' Program in Settlement BRIDGEPORT: Remedies To Be Exhausted Before MR Over-Identification Suit BRIDGESTONE/FIRESTONE: Center for Auto Safety Brings Action BRIDGESTONE/FIRESTONE: Cincinnati Charges Recall Intentionally Confusing BRIDGESTONE/FIRESTONE: The Calgary Sun Reports on Complaint on Recall ELRON ELECTRONIC: Announces Dismissal of Claim in Haifa Court FIDELITY HOLDINGS: Will Vigorously Defend Securities Suit FIRST COMMERCE: Stull, Stull Files Securities Lawsuit HMOs: Can't Be Sued Under RICO Without Claims of Actual Injuries INFINITY BROADCASTING: Stull, Stull Files Securities Lawsuit INMATES LITIGATION: Prior Litigation Does Not Preclude Court Appointment INMATES LITIGATION: Testimony of 1971 Attica Uprising Completed KINDER-MORGAN: Curtis V. Trinko Announces Pendency of Securities Suit NAHC INC: Wolf Haldenstein Files Securities Suit in Pennsylvania NATIONSBANK: Investment May Pay off 3 Years after Agreement to Settle PINELLAS SCHOOL: Black Parent Sues Just after 36 Year Fed Suit Ends PRIVACY BREACH: States Threaten Action in Wake of MN Settlement SOUTHEASTERN PENNSYLVANIA: PA Ct Upholds Certification in PCB Case STRIP SEARCH: Airport Searches Reveal More Than Passengers Know TOYS 'R US: Faces Suits in 3 States on Sharing Online Customer Date WALT DISNEY: Attorneys Want Judgment to Triple to $720 Million ********* ALABAMA: HIV Included in New 'Special Needs' Program in Settlement ------------------------------------------------------------------ People with HIV will be among those included in a "special needs" program created as part of a class-action settlement against Alabama for its failure to meet constitutional standards for the treatment of the mentally ill. The settlement, coming in the 30th year of litigation in Wyatt v. Sawyer, establishes a number of specific remedies for improving conditions at mental hospitals, residences and group homes operated or supervised by the state Department of Mental Health and Mental Retardation. Under the agreement, the state is to allow the Alabama Disabilities Advocacy Program a role in formulating a statewide plan to improve quality, safety, protection and treatment. With input from the advocacy program, the department is to hire consultants to recommend policies and procedures regarding treatment and discharge plans for adults and juveniles with special needs at three state facilities. The special needs include HIV infection, blindness, deafness, traumatic organic brain injury, other serious physical impairments and a dual diagnosis of mental illness and mental retardation. Studies show the mentally ill at greater risk for HIV infection than the general population. U.S. District Judge Myron H. Thompson approved the settlement agreement July 13. Wyatt v. Sawyer, No. Civ.A. 70-T-3195-N (M.D. Ala., 7/13/00). (AIDS Policy and Law, August 18, 2000) BRIDGEPORT: Remedies To Be Exhausted Before MR Over-Identification Suit ----------------------------------------------------------------------- The U.S. District Court, District of Connecticut held that a class of minority students claiming that its members were over-identified as mentally retarded must first exhaust administrative remedies before proceeding with a lawsuit. Mrs. M ex rel. I. v. Bridgeport Bd. of Educ., 32 IDELR 236 (D. Conn. 2000). The class claimed that the district over-identified minority students as mentally retarded in violation of the IDEA, ADA, Section 504 and the Equal Protection Clause of the Fourteenth Amendment. The class alleged further that the district improperly classified minority students as mentally retarded at over three times the state average, and failed to identify their actual disabilities. The case was initially brought by one parent on behalf of her child, but she was later joined by other minority students. The district asserted that the court was required to dismiss the action for failure to exhaust administrative remedies. The District Court ruled that the one parent had complied with the requirement and could proceed with her case, but that the class was first required to exhaust its administrative remedies. None of the exceptions to exhaustion applied, as the class did not allege a district policy or practice that could not be remedied through the administrative process. The class itself alleged that previously misidentified minority students had received adequate relief through the administrative process. Further, the class's claims went to substantive district determinations, not to the structure of the district's identification processes. Under the IDEA, the appropriateness of identification was an issue to be determined on a case-by-case basis by an individual student's parents and educators. The class action would frustrate that objective. Finally, while the parent who originally brought the action did exhaust her remedies, that did not excuse the rest of the class from the exhaustion requirement. (The Special Educator, August 15, 2000) BRIDGESTONE/FIRESTONE: Center for Auto Safety Brings Action ----------------------------------------------------------- The Center for Auto Safety on August 21 brought suit against Bridgestone/Firestone, Inc. ("Firestone") and Ford Motor Co. ("Ford"). The lawsuit seeks injunctive relief that requires Firestone and Ford to immediately recall and replace all ATX, ATX II and Wilderness tires regardless of size or place manufactured. The Center for Auto Safety is a Washington, D.C., public interest organization whose mission, since its founding in 1970, has been to hold the automotive industry accountable for its products. Cohen Milstein Hausfeld & Toll, PLLC is a Washington, D.C. law firm which specializes in consumer litigation. The suit alleges that all Firestone ATX, ATX II and Wilderness tires, regardless of size or place manufactured, are defective. According to Cohen Milstein partner Michael D. Hausfeld, the Center's lawsuit is necessary because "Firestone and Ford have not yet fixed the defect, and the recall leaves millions of defective tires on the road, putting the lives of drivers, passengers and bystanders in danger." On August 9, 2000, Firestone announced its recall of certain ATX, ATXII or Wilderness tires. The recall is limited to 15-inch ATX and ATXII tires and to 15-inch Wilderness tires made in Decatur, Illinois. According to Clarence Ditlow, Executive Director of the Center for Auto Safety, the recall is too narrow and does not encompass all the defective tires: "If the problem is at the Decatur plant, as Firestone and Ford contend, then all the tire lines manufactured at the Decatur plant should be recalled. On the other hand, if as we believe, the tires suffer from a design problem, all of these tires, regardless of size, should be recalled. Either way, the recall simply is insufficient and imperils public safety." The lawsuit is also directed at the recall itself. According to Hausfeld, "The recall plan does not address public safety concerns quickly enough. Drivers who have brought their tires in for replacement have been told that they will have to wait weeks or longer for replacement tires." A copy of the complaint is available at www.cmht.com Contact: Cohen Milstein Hausfeld & Toll, PLLC Deborah Schwartz, 301/897-8838 Alexander E. Barnett, 202/408-4600 BRIDGESTONE/FIRESTONE: Cincinnati Charges Recall Intentionally Confusing ------------------------------------------------------------------------ A class-action lawsuit filed by a Cincinnati attorney says a recall of 6.5 million Firestone tires is intentionally confusing and risks lives because it discourages motorists from seeking replacements. "If the companies can spread this out over several years by giving customers the runaround, then they can discourage people from even trying to get replacement tires," attorney Stanley Chesley said Saturday. "They have been replacing these tires in other countries for two years, so why should Americans be treated as second-class citizens." Chesley filed the class-action lawsuit on August 18 in Hamilton County Common Pleas Court against Ford Motor Co. and Bridgestone/Firestone Inc. Bridgestone/Firestone announced a rolling recall Aug. 9 of 6.5 million P235/75R15 size radial ATX and ATX II brands, as well as Wilderness AT tires of the same size made at a plant in Decatur, Ill. The tires are mostly on Ford trucks and sport utility vehicles. The National Highway Traffic Safety Administration is investigating 62 deaths and 100 injuries that could be linked to the tires. Investigators say 80 percent of the accidents occurred when the tire treads came apart, causing the vehicles to roll over or spin out of control. Both companies claim they are working as quickly as they can to get the tires replaced, but Chesley's lawsuit claims the companies are not doing enough. The suit accuses the companies of restricting the availability of replacement tires and limiting the number of customers eligible to receive them. Chesley said the companies apparently want the recall process to be difficult so customers don't bother getting new tires. He said the companies save about $ 500 in tires and labor every time a customer decides not to take part in the recall. "What bothers me is that customers needing replacements are being treated shabbily and there is no uniform policy," said Chesley. "Customers seeking replacements should be treated as well as those who are walking in to buy new tires." But Ford and Bridgestone/Firestone said Saturday that they are doing all they can to get the new tires to their customers. "We've seen a few class action attorneys trying to capitalize on this situation after the" recall, Ford spokeswoman Susan Krusel said Saturday. "But right now, Ford is helping Firestone. We're working around the clock. Our No. 1 priority right now is to resolve this issue for our customers." "We want to make sure the tires get replaced as quickly as possible and we're taking extraordinary steps to make sure that happens," said Ken Fields, a spokesman for Bridgestone/Firestone in St. Louis. He said the company has doubled production of tires in the United States, increased imports and is reimbursing customers for buying competitors' tires. Chesley's lawsuit claims that a court order to improve the recall process is the only way to protect motorists' lives. "Ohio residents cannot rely on either Ford or Firestone to protect the interests of Ohio drivers," the lawsuit states. Chesley said the suit asks for unspecified money damages and the right to see the companies' documents pertaining to the tires. Chesley said he will work with attorneys in Ohio, Kentucky and West Virginia to expand his class-action suit. Eventually, it may be linked to similar suits in other states, he said. (The Associated Press State & Local Wire, August 21, 2000) BRIDGESTONE/FIRESTONE: The Calgary Sun Reports on Complaint on Recall --------------------------------------------------------------------- A new class-action lawsuit says a recall of 6.5 million Firestone tires is so complicated it discourages motorists from seeking replacements. "Everybody is getting some sort of runaround," said Stanley Chesley, who filed the lawsuit last Friday August 18 against Ford Motor Co. and Bridgestone/Firestone Inc. It announced a rolling recall of many of its tires, including about one million in Canada. Chesley's lawsuit says a court order to improve the recall process is the only way to protect motorists' lives. The suit asks for unspecified monetary damages. Chesley said he will work with other lawyers to expand the suit. (The Calgary Sun, August 21, 2000) ELRON ELECTRONIC: Announces Dismissal of Claim in Haifa Court ------------------------------------------------------------- Elron Electronic Industries Ltd. (NASDAQ:ELRNF) announced that, following the press release dated November 9, 1999 regarding a Statement of Claim (the "Claim") and an application to have the Claim recognized as a Representative (Class Action) Claim, the Application was dismissed by the Haifa District Court. The Claim and the Application were submitted against Europe Israel (M.M.S) Ltd. (the parent company of Elbit Medical Imagining Ltd.), ("EIL"), Elbit Medical Imagining Ltd. (in which the company held approximately 40% until May 1999) ("EMI"), Elscint Ltd. (a subsidiary of EMI) ("Elscint"), Control Centers Ltd. (the controlling shareholder of EIL), Marina Herzlia Limited Partnership 1988 (which is controlled by Control Centers Ltd.) and against Elron and 25 past and present officers in the above companies, including officers of Elron. The Claim was submitted by a number of investors and others, who hold shares in Elscint, while the Application was submitted on behalf of those who held shares in Elscint on September 6, 1999 and continue to hold such shares on the date of Application, excluding the respondents. The allegations which the claimants raised against Elron and its officers, relate to the period prior to the sale of Elron's holdings in EMI to EIL. These allegations include, inter alia, that Elron and its officers preferred the interests of Elron and the personal interests of the officers over the interests of Elscint and its minority shareholders, that they did not act in order to enable the minority shareholders of Elscint to participate in the proceeds of the sale of Elscint's assets and allegations against the transactions whereby the Company sold its holdings in EMI to EIL. Further allegations were raised against the other respondents. On August 17, 2000, the Haifa District Court decided to accept the defendants' request for dismissal of the Application by the claimants for the recognition of the Claim as a Class Action and ordered the application struck out in limine. FIDELITY HOLDINGS: Will Vigorously Defend Securities Suit --------------------------------------------------------- Fidelity Holdings, Inc. (Nasdaq NM: FDHG) announced on August 21 that a class action under the federal securities laws has been commenced against the Company and certain of its present and former officers and directors. The action is brought on behalf of a class consisting of all persons who purchased Fidelity common stock in the open market between November 15, 1999 and April 12, 2000 and have suffered damages thereby. The Company believes that the allegations in the complaint are wholly without merit and intends to vigorously defend against the action. The Company further believes that this action is an outgrowth of the decline in valuations of certain technology sectors since April of this year and various false and defamatory messages concerning the Company that have appeared on Internet message boards during the past several months. Fidelity has been contacted by numerous shareholders who have expressed concern over misinformation that has been disseminated in the marketplace about the Company, particularly the insulting, inaccurate and often profane missives written on Internet message boards. Fidelity takes the concerns of its shareholders seriously and is working diligently to address this issue, and is considering all avenues, including legal action, to combat this abuse. The Company appreciates the strong support of its shareholders and will continue to work in their best interests. FIRST COMMERCE: Stull, Stull Files Securities Lawsuit ----------------------------------------------------- A class action lawsuit was filed on August 18, 2000, on behalf of all persons (except defendants, their affiliates, and certain related parties) who exchanged shares of First Commerce Corporation common stock for shares of Banc One Corporation ("Banc One") common stock in connection with a Merger which occurred on June 12, 1998 and pursuant to a Registration Statement and Merger Proxy/Prospectus dated May 13, 1998. Banc One is the predecessor of defendant Bank One Corp. Defendant Bank One Corp. ("Bank One") (NYSE:ONE) is liable for the unlawful conduct of its predecessor, Banc One, under applicable principles of corporate law. The Complaint charges that defendants violated Sections 11, 12, 12(a)(2) and 15 of the Securities of 1933. The action, number 00C5096, is pending in the United States District Court for the Northern District of Illinois, Eastern Division, located at 219 S. Dearborn Street, Chicago, Illinois, 60604 against defendants John B. McCoy, Jr. (President and Chief Executive Officer of Bank One until his resignation on or about December 31, 1999), Richard J. Lehmann (head of Bank One's Credit Card line of business from prior to the Merger until July 26, 1999), Michael J. McMennamin (Vice President and the Principal Financial and Accounting Officer of Banc One at the time of the Merger) and Bank One Corp. Prior and at the time of the Merger, one of the major strengths of Banc One's operations and business purportedly was the tremendous growth reported at Banc One's credit card division, First USA Bank, N.A. ("First USA"), then the third largest credit card issuer in the country. The Registration Statement included Banc One's financial statements, which reflected enormous growth in First USA's credit card business for the most recent fiscal year (1997) and, by incorporating Banc One's April 21, 1998 Form 8-K report, for the quarter ended March 31, 1998. Based on Banc One's pre-Merger public statements, the market viewed the First USA credit card business as a major asset and strength of Banc One, as its growth in credit card accounts generated increased income for Banc One through fees, credit card loans with very positive margins, and securitizations of credit card loan portfolios. In fact, defendants' statements in the Registration Statement and Merger Proxy Prospectus -- including the Banc One financial statements incorporated therein -- misrepresented and/or omitted material adverse facts regarding the business and operations of First USA. Among other things, while defendants touted the strength and success of First USA, they failed to disclose that First USA had achieved its "growth" through illegal practices, including improper billing procedures and charging of excessive late fees and interest to its credit card customers, all of which violated the federal Truth in Lending Act and other laws. Defendants also misrepresented the financial success of First USA (and thus, Banc One) by issuing financial statements that, contrary to defendants' representations, did not comply with generally accepted accounting principles ("GAAP") or otherwise present fairly the financial condition of Banc One. This information was material to First Commerce shareholders considering how to vote on the Merger of First Commerce and Banc One, including whether the Exchange Ratio accurately reflected the value of Banc One common stock. As a result of defendants' dissemination of materially false and misleading statements, and their failure to include material information in the Registration Statement and Merger Proxy/Prospectus (and other public statements, press releases, and filings with the Securities and Exchange Commission incorporated by reference therein), First Commerce shareholders approved the Merger and acquired Banc One shares pursuant to an Exchange Ratio that was artificially deflated to the detriment of Plaintiff and other First Commerce shareholders as a result of defendants' wrongful conduct. Contact: Stull, Stull and Brody, New York Tzivia Brody, Esq., 1-800-337-4983 fax 212/490-2022 SSBNY@aol.com HMOs: Can't Be Sued Under RICO Without Claims of Actual Injuries ---------------------------------------------------------------- I a major victory for HMOs, a federal appeals court has upheld the dismissal of a class-action RICO suit against Aetna-U.S. Healthcare Inc. after finding that the plaintiffs failed to allege a valid RICO injury and therefore lacked standing to sue. In the suit, Maio v. Aetna Inc., a proposed class of consumers alleged that Aetna lured them in with false promises of high-quality care while secretly pressuring doctors to cut costs and provide only minimum care.Last year, Senior U.S. District Judge John P. Fullam tossed the case out, finding that the plaintiffs failed to allege an "injury in fact." Fullam ruled that "a vague allegation that 'quality of care' may suffer in the future is too hypothetical an injury to confer standing." To establish standing in federal court, Fullam said, a plaintiff must show an "injury in fact" that is "concrete and particularized" as well as "actual or imminent" as opposed to "conjectural or hypothetical." The Maio plaintiffs failed that test, Fullam said, because granting them standing "would require this court to assume that in every case, individual physicians and IPAs [independent physician associations] will be moved to put their own economic interests ahead of their patients' welfare." Even if that assumption were correct, Fullam said, Aetna "would not be the proximate cause of the providers' ethical lapses." On appeal, the plaintiffs' lawyers argue that Fullam missed the point since the injury the plaintiffs suffered occurred as soon as they were induced to pay for a policy with false promises. But the 3rd U.S. Circuit Court of Appeals has now upheld Fullam's ruling on somewhat different grounds. The court adopted in large part the arguments made by Aetna's lawyers, Alan J. Davis, Burt M. Rublin and Raymond A. Quaglia of Ballard Spahr Andrews & Ingersoll, who said the plaintiffs' theory was fatally flawed since it included no specific allegations of substandard care. Senior U.S. Circuit Judge Morton I. Greenberg said the court needed to address only one issue whether the plaintiffs alleged "a valid RICO injury to business or property sufficient to afford them standing under RICO to challenge Aetna's purportedly fraudulent scheme." The plaintiffs failed, Greenberg found, because their theory focused entirely on a claim that they had paid too much for an "inferior" policy." If we were to permit appellants to proceed with their RICO claims based on allegations of monetary loss proved solely by reference to what they consider to be the existence of coercive internal policies and practices which inevitably will affect the quality of care they will receive in the future, we would be expanding the concept of RICO injury beyond the boundaries of reason," Greenberg wrote. While the plaintiffs alleged that they lost money because their health insurance was inferior as a result of Aetna's policies, Greenberg found that "the only basis for their conclusion is their subjective determination that the policies and practices are so inherently unsound that they inevitably will serve as the impetus for physicians to provide substandard health care to their patients at the point at which the enrollees actually seek treatment." Greenberg, who was joined by Senior U.S. Circuit Judge Joseph F. Weis Jr. and visiting Senior U.S. District Judge Murray M. Schwartz of the District of Delaware, said the plaintiffs "cannot establish that they suffered a tangible economic harm compensable under RICO unless they allege that health care they received under Aetna's plan actually was compromised or diminished as a result of Aetna's management decisions challenged in the complaint." Unless the plaintiffs could claim that Aetna failed to provide sufficient health insurance coverage to the members of their HMO plan such that individuals were denied medically necessary benefits, received inadequate, inferior or delayed medical treatment, or even worse, suffered personal injuries as a result of Aetna's systemic policies and practices Greenberg said there was "no factual basis for appellants' conclusory allegation that they have been injured in their 'property' because the health insurance they actually received was inferior and therefore 'worth less' than what they paid for it." And such losses, Greenberg said, "would have to be alleged and proven on an individual basis." Instead, Greenberg said, "the property injury claimed in this case is comprised of two interrelated economic harms flowing from [the] purchase of an allegedly inferior health care product." First, he said, the plaintiffs claim that they have been injured in their property in the sense that their tangible property Aetna's "health care product" has a diminished economic value because of Aetna's managerial policies. Proceeding from that premise, he said, was a "second aspect of this theory of RICO injury" that as a consequence of the diminution in value caused by Aetna's conduct the plaintiffs are paying monthly premiums that are too high given what they actually are receiving. That theory of economic harm, Greenberg said, suffers from a fundamental flaw that is fatal to the RICO claim. "The damages concept of a 'diminution in property value' does not have a proper application to this case. While appellants describe Aetna's health insurance as an 'HMO product,' and claim 'injury' to this piece of property by virtue of Aetna's restrictive and coercive internal policies and practices which allegedly reduce its 'intrinsic' value, this characterization ignores the nature of the property interest at issue that which is conveyed through membership in Aetna's HMO," Greenberg wrote. Aetna's HMO, he said, "is not a tangible property interest, like a plot of land or a diamond necklace, as appellants' argument necessarily implies." Instead, he said, "the property at issue is not real or personal property; rather, it is a contract for health insurance. Thus, the nature of appellants' property interests at stake is their contractual right to receive benefits in the form of covered medical services." When viewed that way, Greenberg said, "the economic harm to appellants' actual property interests cannot be characterized in terms of a 'diminution in product value,' because the property rights at issue are different from interests in real or personal property." And since an economic injury to such "property" could not stem from a reduction in its value given the nature of the property interests at stake, Greenberg found that "the fact that Aetna implemented allegedly 'restrictive and coercive' internal policies cannot be considered the determinative factor that caused appellants to suffer an economic loss compensable under RICO." Because the plaintiffs' property interests in their memberships in Aetna's HMO plan take the form of contractual rights to receive a certain level quantity and quality of benefits from Aetna through its participating providers, Greenberg found that it "inexorably follows that appellants cannot establish a RICO injury to those property rights ... absent proof that Aetna failed to perform under the parties' contractual arrangement." Aetna's failure to perform, he said, would be evidenced by the receipt of inadequate, inferior or delayed care, personal injuries resulting therefrom, or Aetna's denial of benefits due under the insurance arrangement. But "absent allegations of such losses," Greenberg said, the plaintiffs "cannot establish that they have suffered an injury to their property rights encompassed in their HMO memberships i.e., their right to receive necessary medical services covered under their plan and cannot prove a consequential financial loss flowing from their property." Arguing for the plaintiffs on appeal was attorney Edith M. Kallas of Milberg Weiss Bershad Hynes & Lerach in New York. She was joined on the briefs by Milberg attorneys David J. Bershad, Patricia M. Hynes and Charles S. Hellman; solo practitioner James J. Binns of Philadelphia; Harvey Rosenfield of The Foundation for Taxpayer and Consumer Rights in Santa Monica, Calif.; and Eugene A. Spector, Jeffrey L. Kodroff and Andrew Abramowitz of Spector & Roseman in Philadelphia. (The Legal Intelligencer, August 14, 2000) INFINITY BROADCASTING: Stull, Stull Files Securities Lawsuit ------------------------------------------------------------ A class action lawsuit was filed on behalf of the public stockholders of Infinity Broadcasting Corporation (NYSE:INF) against certain of its officers and directors and the controlling shareholder of Infinity to enjoin certain actions of defendants related to the proposed acquisition of the outstanding shares of Infinity common stock by its majority controlling shareholder, defendant Viacom, Inc. ("Viacom"). The complaint charges that the consideration that Viacom has stated it will offer to members of the Class in the proposed stock acquisition is unfair and grossly inadequate, because among other things, the intrinsic value of Infinity's common stock is materially in excess of the amount offered, giving due consideration to the Company's growth and anticipated operating results, net asset value and future profitability. Contact: Stull, Stull and Brody, New York Tzivia Brody, Esq. 1-800-337-4983 fax 212/490-2022 SSBNY@aol.com INMATES LITIGATION: Prior Litigation Does Not Preclude Court Appointment ------------------------------------------------------------------------ An expert uniquely qualified in the area of correctional medicine is not disqualified from being court-appointed as an expert simply because he has been retained by a state correctional agency in prior litigation. (Reynolds v. G. Goord, Commissioner, Department of Correctional Services, et al., No. 98-6722 (S.D.N.Y June 26, 2000).) Dennis Reynolds, a prisoner, sued the commissioner of the New York State Department of Correctional Services and other state officials to avoid being placed in a form of restricted confinement for refusing - on religious grounds - to be tested for tuberculosis. To assist at a preliminary injunction hearing, Reynolds asked the U.S. District Court for the Southern District of New York to appoint a leading authority in the field of correctional medicine as an expert in the case. The New York Attorney General's Office objected to the request, arguing that the state's previous retention of the expert, Dr. Ronald Shansky, in a separate class action proceeding brought against the department by inmates infected with HIV was a disqualifying event sufficient to preclude the expert's appointment by the court. Judge Denise Cote rejected the state's position, after first referencing the broad language of Federal Rule of Evidence 706 and the "inherent powers" of the court to make such appointments. Significantly, Shansky's retention 18 months earlier in the HIV case did not develop to the point that the state could show a conflict of interest by the expert. Shansky had not become involved to any extent in the earlier litigation, and had not received any confidential or privileged information from the state in that case. As Judge Cote explained, "DOCS should not be permitted, by merely signing a contract with Dr. Shansky many months ago, to prevent his disclosure of relevant knowledge at any judicial proceeding in which the State is a party by arguing that they may thereafter be required to impeach their own witness." (Federal Discovery News, August 15, 2000) INMATES LITIGATION: Testimony of 1971 Attica Uprising Completed --------------------------------------------------------------- The testimony of 160 inmates concerning the 1971 bloody uprising and fatal shootings at Attica Correctional Facility has been completed. The last witness was heard early this month by Western District Judge Michael A. Telesca in Rochester. Before the end of summer, Judge Telesca is expected to decide how more than 570 claimants should share an $ 8 million settlement. In the settlement, the state admitted no wrongdoing but agreed to pay the inmates $ 8 million and their lawyers $ 4 million in legal fees and costs. The original class action in 1974 sought $ 100 million in damages. Judge Telesca said he planned to put each case into one of four categories based on the degree of injuries suffered, as well as a fifth category for the 32 inmates who died. The Westchester County District Attorney's Office is collecting unused mobile phones to be reprogrammed by Verizon Wireless to dial 911 and distributed free to crime victims in the county. Additional information is available by telephoning 914-285-3586. The program runs until the end of August. (New York Law Journal, August 9, 2000) KINDER-MORGAN: Curtis V. Trinko Announces Pendency of Securities Suit --------------------------------------------------------------------- A class action lawsuit was filed in the United States District Court for the District of Colorado on behalf of all persons who purchased or otherwise acquired the common stock of KN Energy, Inc. between the dates of March 19, 1997 and March 9, 1999, inclusive (the "Class Period"). KNE merged with and changed its name to Kinder Morgan, Inc. The complaint asserts claims against KNE under the federal securities laws, Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, 15 U.S.C. ss 78(j)(b), 78(t)(a), and Rule 10b-5 (17 C.F.R. ss 240.10b-5), common law fraud, and negligent misrepresentation, in connection with a series of public filings made by KNE, and several newspaper articles and press releases concerning KNE. The complaint alleges that various statements disseminated by KNE and certain of its senior officers and directors were material misrepresentations and/or omissions of material fact concerning: (a) the extraordinary risks posed by the high proportion of "keep whole" contracts to which the Company was party in connection with its processing plant operations; and (b) the reporting of materially misleading financial information by reporting as income proceeds from extraordinary transactions, not in the ordinary course of business, to bolster KNE's financial results in order to facilitate certain securities offerings of KNE essential to financing of a major corporate acquisition, without disclosing the increased exposure to risks of future losses created by the transactions. Contact: Law Offices of Curtis V. Trinko, LLP, New York Curtis V. Trinko, 212/490-9550 Email: ctrinko@trinko.com or Berman DeValerio & Pease, LLP, Boston Michael Lange, 617/542-8300 or McGloin, Davenport, Severson & Snow, P.A., Denver Gary C. Davenport, 303/863-9800 NAHC INC: Wolf Haldenstein Files Securities Suit in Pennsylvania ---------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP is commencing a class action lawsuit in the United States District Court for the Eastern District of Pennsylvania on behalf of all purchasers of Novacare Inc. securities between April 5, 1999 and November 22, 1999, inclusive (the "Class Period"). Novacare, now known as NAHC Inc. (OTC Bulletin Board: NAHC) traded on the New York Stock Exchange until November, 1999 and now trades on the OTC Bulletin Board. The complaint charges the Company and certain officers and directors with violating Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that during the Class Period, defendants misrepresented the Company's liquidation value and financial condition by making false and misleading statements inflating the proceeds from the sale of its component businesses. As a result of defendants' misrepresentations, the price of the Company's common stock was artificially inflated throughout the Class Period. A copy of the complaint may be viewed directly on the Wolf Haldenstein website at www.whafh.com. Contact: Wolf Haldenstein Adler Freeman & Herz LLP Fred T. Isquith, Esq., Gregory M. Nespole, Esq., Michael Miske or George Peters (800)575-0735 classmember@whafh.com whafh@aol.com website: www.whafh.com NATIONSBANK: Investment May Pay off 3 Years after Agreement to Settle --------------------------------------------------------------------- It's been three years since NationsBank agreed to dole out $ 30-million to settle claims that it duped customers into buying mutual funds and stocks they thought were federally insured. And it's been nine months since those customers were supposed to have started seeing their money. Finally, the saga is about to end. Lawyers say they will submit a final list of claimants by this week to U.S. District Judge Steven Merryday in Tampa, who presided over the class-action suit against the bank. If the judge signs off as expected, anyone left out of the payout has 30 days to appeal. "The way it looks now, the actual checks are going to be in the mail by the first of October . . . It's almost over," lawyer Jonathan Alpert said. While waiting, his lead plaintiff in the case died and others struggled through financial turmoil. Don't blame the bank for the delays, though. In 1998, NationsBank (now called Bank of America) put aside the money in a fund it cannot touch. The Garden City Group, a New York administrative group, was charged with figuring out who gets what. "In unraveling a massive fraud, they may have been justified in taking this length of time," Alpert said. He has reason to be understanding. Part of the delay was because of poor communication between his office and his co-counsel in New York. The size of the payout may defuse some of the anger over the delay. Duped mutual fund customers are being paid dollar for dollar for their losses, reimbursed as if they had invested as they thought they had: in a "safe" one-year CD paying 5 percent. Investors in individual stocks and bonds, who the court thinks should have had a better idea of the risk, will get back 97 percent of their recognized loss or about 50 percent of their actual loss. (St. Petersburg Times, August 21, 2000) PINELLAS SCHOOL: Black Parent Sues Just after 36 Year Fed Suit Ends ------------------------------------------------------------------- A parent claims black children are shut out of programs which could help them advance. A St. Petersburg parent has filed a lawsuit against the Pinellas County School District, saying the district is failing to educate black children in violation of the state Constitution. The lawsuit was filed August 17 morning in Pinellas-Pasco Circuit Court by Tampa lawyer Guy Burns, who also represents the National People's Democratic Uhuru Movement in its quest to open an all-black Marcus Garvey Academy charter school. The lawsuit comes one week after U.S. District Judge Steven Merryday declared Pinellas schools free of discrimination and ended a 36-year federal lawsuit that has required cross-county busing for desegregation and race ratios in schools. In ending the lawsuit, Merryday approved a negotiated settlement between the school district and the NAACP Legal Defense Fund, which represents African-American students. As part of the settlement, the district has pledged to address "black student achievement, black student discipline and the assignment of black students to classes and programs." "It appears we're trying to re-litigate the same thing, only this time couched in state court," said School Board attorney John Bowen, who plans to ask that the suit be dismissed. "We cannot guarantee results, but we can guarantee that we will continue to try forever to increase student achievement for black students and all students." Burns and his client, William Crowley, say the district's plans don't go far enough. The lawsuit seeks class action status and accuses the district of depriving black children of their rights to an equal, high quality education and special programs that could help them achieve the same success as white students. "We believe this case presents new issues," Burns said. "It addresses the quality, rather than counting numbers." The suit does not ask for any specific remedy. Instead, it asks the court to declare that Pinellas schools are discriminatory and "have failed to make adequate provision for the education of students of African descent." Crowley, who is black, filed the lawsuit on behalf of his 8-year-old son Akwete Osoka, a second-grader at Sawgrass Lake Elementary School. Crowley enrolled Akwete in the Marcus Garvey Academy after-school tutoring program, where he said his son started reading above grade level. Crowley credits the nurturing environment of the academy, where students get close attention and learn about their African heritage. "It's not just my child that's going through this," Crowley said. "It's never their fault. It's always our fault, the parent or the child. My responsibility was to approach the school system and see if they could find a solution. That didn't happen." At a news conference August 17 morning at Uhuru headquarters on 18th Avenue S, Burns and Uhuru leader Omali Yeshitela lashed out at the school district for accepting the failure of black students. They were joined by several other community leaders, including Lou Brown of the Coalition of African-American Leadership. "This community is still faced with a crisis," Yeshitela said. "Every year an African child is in the Pinellas County school system his achievement goes down." The lawsuit details the failure rate of black students with numerous statistics. Among those included in the lawsuit are that the number of black students failing all subjects is 21/2 times higher than the number of white students and that only about one-third of black students complete high school with a diploma. District officials, at least initially, did not dispute the statistics in the lawsuit. Steve Iachini, the district's director of research and accountability, is studying the figures to see whether they accurately portray the achievement gap. On behalf of the Marcus Garvey Academy, Burns has sought to intervene in the desegregation case and implored Merryday to hold a second public hearing about the settlement. Both efforts failed. Burns sought again to change the district's post-desegregation plans. He appealed Merryday's decision to end the lawsuit and the dismissal of the motion to intervene. (St. Petersburg Times, August 18, 2000) PRIVACY BREACH: States Threaten Action in Wake of MN Settlement --------------------------------------------------------------- The attorney general whose lot it was to follow Humphrey is Mike Hatch, a fellow Democrat and a former state commerce commissioner and plaintiffs' attorney who made a name for himself representing cancer victims in need of bone marrow transplants. Hatch, too, appears to have found a popular issue and scored with it. Financially speaking, he did so at several orders of magnitude less than Humphrey with his tobacco settlement: a few million dollars compared to $ 6 billion. But the issue he seized on-privacy-has been called the sleeper issue of the coming election cycle, if not the decade. At least that was the media buzz for a few weeks earlier this year. But it remains to be seen how potent an issue it will be. A lot of people don't mind their mail boxes cluttered with offers, free or otherwise, and are willing to give out a lot of personal information to keep it coming. But apparently there is a limit, and however this issue plays out, Hatch will go down as someone who had an important role in defining it. Last year and again this spring, Hatch went after two financial-service heavyweights that allegedly were trading in personal financial information in a manner that would arouse all but the most blase consumer-citizen. After laying down a devastating paper trail, Hatch won settlements with both companies. Months after those settlements, plaintiffs' attorneys around the country are filing lawsuits that one defense attorney describes as virtual clones of the Hatch lawsuits. The defendants in the Minnesota cases were Minneapolis-based US Bancorp and affiliates, and MemberWorks Inc., based in Stamford, Conn. Subsidiaries of MemberWorks sell a variety of products and services through telemarketing. US Bancorp settled in June 1999. It then did one of those strange post- settlement dances reminiscent of certain physics particles that can be in two places at once. While denying culpability, it used the whole episode as an occasion for publicly redeeming itself, redefining its policies in a way that it-and Hatch, too-says made US Bancorp an industry model for privacy protection ["State Fraud Suit Against US Bank Settles, but Spotlights Consumer Privacy Issues," August 1999, p. 58]. After MemberWorks' settlement this spring, that company took a harder line. When asked in an e-mail interview how important it was from a business standpoint that MemberWorks be able to buy financial information, George W. M. Thomas, senior vice president and general counsel replied: "MemberWorks has never bought 'financial information' or 'customer' lists from financial institutions." "It's a Clintonian definition of sex applied to the word 'bought,'" says Hatch, "They lease it. Or, as they said at one point, they pay a commission to the bank in exchange for the bank giving access to the data to a third-party company. Who is the third party? A telemarketing company that is part of MemberWorks." Consumer Complaints "Privacy was not on my screen as an issue," Hatch says, "up to the time of the bank suit. It came as a result of complaints filed with this office-hundreds of them." Investigators worked them back to several sources, but primarily to US Bancorp and MemberWorks, Hatch says. The allegations in both lawsuits were similar: US Bancorp sold information about its credit-card customers to MemberWorks. This information, according to the complaints, included phone numbers, Social Security numbers, credit card numbers, account status and something identified as "behavior score." MemberWorks then used the information to "target consumers for credit transactions, create bulk mail and telemarketing solicitations." The price for the information was a little more than $ 4 million, plus 22 percent of "membership" revenue that MemberWorks got from sales of its various products and services to the bank's customers. The complaint quotes the bank's privacy policy, as gleaned from its web site. "US Bancorp and its family of financial service providers understands that confidentiality is important to you and essential to our business. It is our policy that all personal information you supply to us will be considered confidential." "Part of this was a fraud claim," says Hatch. The complaint also details other questionable practices, including allowing an acceptance of the MemberWorks phone jockey's offer to be finalized with a phone transfer from the customer's US Bancorp account without written authorization. That constituted a violation of National Automated Clearing House Association rules to which US Bancorp had agreed, according to the complaint. Hatch clearly expected that he could parlay these victories into legislative reform, but he ran into a wall at the state level, as did consumer advocates in other states. A Wall Street Journal article this spring detailed how a swarm of lobbyists derailed privacy initiatives in Minnesota and elsewhere. At the federal level, the Gramm-Leach-Bliley Act, passed late last year, provides some privacy protections. But, according to Hatch, those are weak. Banks don't have to disclose if they intend to provide information to an affiliate. That's quite a loophole, considering the major effect of the bill was to dramatically enlarge the universe of potential affiliates. "And," Hatch adds, "they can disclose information to third parties without telling you, as long as it is for the sale of a financial product, which is not defined." Under Gramm-Leach-Bliley, banks have to disclose sale of information to a third party selling a non-financial product, such as hotel or restaurant discounts. "But watch," Hatch says. "Someone will claim that is a financial product, too. A 'discount program.'" Gramm-Leach-Bliley does require an 'opt-out' choice, but according to Hatch it is "pretty artfully written." What is needed, he maintains, is clear and meaningful notice, and a requirement for affirmative permission from the customer. An Irresistible Alloy Hatch says that months after the settlement, his office still gets phone calls on this issue from consumer groups and media. Meanwhile, other lawsuits are being filed, with most of the action in California, under statute 17200, the state's unfair competition law. 17200 is a consumer tool that essentially empowers individual plaintiffs to file cases in the name of a larger group that does not have be certified as a class in order to get class action-like relief ["A Controversial State Consumer Law Casts a Wide Net," March 2000, p. 99]. It essentially deputizes citizens to become private attorneys general. Raoul D. Kennedy, a partner in the San Francisco office of Skadden, Arps, Slate, Meagher & Flom, estimates there are as many as a couple of dozen privacy cases targeting banks in the California courts. "They are all follow-on cases to Mike Hatch," he says. "The alloy of Mike Hatch and 17200 was too good to be true for a couple of plaintiffs' firms." Kennedy represents defendants in several of these cases. He says he is confident that, while Hatch's complaints have been virtually cloned in these cases, his success won't be, for a number of reasons. First and foremost: California banks had disclosure and an opt-out clause. Also, Kennedy notes, a recent California Supreme Court decision, Kraus v. Trinity Properties Inc., has taken away one significant route to getting damages under 17200. "There is a question as to whether any of the relief that is currently being sought is still legally viable," he says. "Milberg Weiss Bershad Hynes & Lerach, the firm that has most of the cases, in fact, has just amended one of its complaints to make it a class action and has settled on that basis." Restitution Option "Kraus did definitely change the landscape for cases like ours-the 'non-class action private attorney general actions,'" says Milberg Weiss partner Bonny E. Sweeney. Before Kraus, she explains, the "unaffected plaintiff" bringing suit on behalf of the general public could get an order for so-called fluid damages. Unlawfully obtained profits would have to be distributed to one or more organizations, typically non-profits that advocated for the interest of the victims. It's possible there will be an attempt to convert more of these cases to class actions, Sweeney acknowledges. But she maintains it is not true that the 17200 claims need to be abandoned. A claim for injunctive relief is still viable, she says, and more important, Kraus doesn't prohibit restitution for the actual victims of the unlawful practice. "The defendant banks in these cases took something of value that belonged to their customers, private information about their financial affairs, and they sold it and made a profit on it," she argues. "It's our position that even after Kraus, we can get an order forcing the defendants to return the money to their customers." Sweeney acknowledges that some or all of the banks in the California cases may have opt-out clauses. Because the plaintiffs in her cases have not gotten to discovery yet, she says she does not know exactly what she will be up against. In any case, according to Sweeney, the presence or absence of such a clause is not necessarily determinative. "There are different kinds of privacy policies, and different kinds of opt-in and opt-out features," she says. Meanwhile, in the wake of the Minnesota settlement, other states have threatened action. A spokesperson for US Bancorp says the bank has been in discussions with a large group of state attorneys general, and that a settlement may be announced soon. (Corporate Legal Times, September, 2000) SOUTHEASTERN PENNSYLVANIA: PA Ct Upholds Certification in PCB Case ------------------------------------------------------------------ A class certification for medical monitoring of a group of plaintiffs exposed to PCBs, as a result of living or working near the Paoli Railroad Yard in Pennsylvania, has been affirmed by a state commonwealth court. Foust et al. v. Southeastern Pennsylvania Transportation Authority et al., No. 2569 C.D. (Pa. Commw. Ct., June 29, 2000). The class certification was appealed by Monsanto Co., General Electric Co. and CBS Corp. from an order of the Court of Common Pleas of Chester County. The present litigation began as three class action lawsuits filed in federal court, but the U.S. District Court for the Eastern District of Pennsylvania ultimately denied class certification. Subsequently, 290 people filed individual claims in Philadelphia Common Pleas Court. The cases were eventually transferred to Chester County. Plaintiffs sought recovery for personal injuries, medical monitoring, emotional distress, real property damage and punitive damages. In 1993, the plaintiffs asked the court to certify the class for medical monitoring, emotional distress, real property damage and punitive damages, but did not seek class certification for the personal injuries claim. In 1999, the trial court granted the motion for class certification as to the medical monitoring claims, but denied certification on the other claims. Defendants requested an interlocutory appeal, which the trial court denied. Ultimately, the commonwealth court granted the defendants' petition for review. The defendants argued that the plaintiffs failed to meet the numerosity requirement of class certification that demands evidence that the class is dominated by common issues and demonstrates that the class action suit is the most efficient method of litigation. With regard to numerosity, the court said if the class was not certified, the individual suits would drain the trial court's resources. In arguing that the plaintiffs lacked the commonality requirement needed for a class action lawsuit, the defendants first asserted that each individual's exposure to the PCBs would need to be addressed separately. The plaintiffs, citing Redland Soccer Club Inc. v. Department of the Army, 548 Pa. 178, 698 A.2d 137 (1997), said they only needed to show exposure greater than normal background levels, which places them at a significantly elevated risk of contracting a latent disease. The court also dismissed the defendants' appeal on issues of causation, medical monitoring and proof of negligence. In its decision, the commonwealth court said: "If each case were tried separately, it is easy to see that the results could be unfairly diverse not because of the individual cases or claims but, rather, because different juries viewing the same evidence might come to different conclusions on the scientific issues." The plaintiffs are represented by Martin D'Urso of Philadelphia. The defendants are represented by Robert Shaughnessy of Washington, D.C. (Toxic Chemicals Litigation Reporter, July 14, 2000) STRIP SEARCH: Airport Searches Reveal More Than Passengers Know --------------------------------------------------------------- Some might consider it an X-rated X-ray. The government calls it security. A device called BodySearch, made by a Billerica-based company, is being used by U.S. Customs inspectors at six airports - including O'Hare International Airport in Chicago - to detect contraband. It eliminates the need for the strip search because the machine can see through clothing. By using a patented technology, the low-power X-ray machine penetrates only a few millimeters below the skin. Its goal? To detect objects that are concealed under clothing without having to conduct strip searches and intensive pat-down searches. The resolution of the BodySearch scans are so sharp that the shape of a person's navel is visible, along with the shapes of other, more private parts. And that's raised the concern of some groups who say it violates privacy. U.S. Customs currently uses BodySearch technology at international airports in Atlanta; Chicago; Houston; Los Angeles; Miami; and John F. Kennedy in New York. It also is being used at six prisons across the country, and at a gold mine in South Africa. With a price tag of roughly $140,000, some private businesses can afford to buy one. "I think they're kind of controversial for an employee operation," said Ralph Sheridan, president and CEO of American Science and Engineering, which makes BodySearch. However, he sees no controversy in both U.S. and foreign governments using the device for security and crime-fighting purposes. "Our whole goal is to make the government more effective in dealing with these problems," Sheridan said. It also may be a way for those doing the searching to stay out of trouble themselves. At O'Hare International Airport, for example, a BodySearch scanner was installed last fall, following an effort by almost 100 black women to file a class-action lawsuit alleging they were singled out for the more traditional body searches because of their race and gender. "People don't want to feel violated, and yet we are very strong on law enforcement," said U.S. Rep. Danny Davis, D-Ill., when the scanner was introduced at O'Hare. American Science and Engineering also has developed similar products that can see into trucks and cargo containers without having to open them. Though these devices can also pick up human forms - say, a truckload of illegal immigrants hiding under a load of produce - the resolution isn't as good, so features of the human body can't be seen clearly. The technology has earned American Science and Engineering a dubious distinction. Privacy International, based in Washington, gave the company one of its annual "Big Brother" awards. The prize honors the invention that most invades a person's privacy. David Banisar, the deputy director of Privacy International, said his colleagues were shocked when they saw one of the images that BodySearch devices record. "If you look at the pictures, you could literally see everything. You could see the pubic area," Banisar said. "This is a very intrusive thing. It has been installed with very little discussion among anybody about whether this is a good idea or not." U.S. Customs spokesman Dean Boyd says advocacy groups have spread a lot of misinformation. He says BodySearch scans are strictly voluntary, and that people have to sign a release form before the government will do the scan. "Everyone thinks this is some government people who sit around in a crowded room and look at the images and store them and pass them around to people. Like we're doing this just for kicks," Boyd said. Boyd said U.S. Customs doesn't keep BodySearch images unless contraband is detected. In those cases, the images could assist in prosecution. Not everyone who passes through Customs at the six airports with BodySearch will be asked to undergo a scan. Only passengers suspected of having contraband are asked to either undergo a pat-down search or a BodySearch. Though U.S. Customs says that only one in 2,000 passengers ever gets to that level of a search, the American Civil Liberties Union isn't satisfied the technology is being used fairly. "The biggest problem in Customs searches is that they are conducted with only a minimum level of suspicion and are conducted disproportionately against people of color," said ACLU legislative counsel Greg Nojeim. "The BodySearch is Customs' non-answer to these problems." The ACLU is urging Congress to consider limiting Customs' use of BodySearch. But Sheridan doesn't think that's necessary. "It's an alternative to a strip search," Sheridan said. "And a strip search is much more invasive than the BodySearch technology." Many of the people who oppose BodySearch have never experienced what the device can do. Privacy International's Banisar says he's never asked any Customs officials if he can try it. "I'll let one of them go through it," Banisar said. "And I'll watch." (The Associated Press State & Local Wire, August 21, 2000) TOYS 'R US: Faces Suits in 3 States on Sharing Online Customer Date ------------------------------------------------------------------- After revealing that it was sharing online customer data with a California marketing firm, Toys"R"Us is facing class-action lawsuits in three states accusing it of failing to protect personal privacy. The legal dispute centers on the Paramus toy giant's relationship with Coremetrics, a data analysis firm that said it hid identification codes on the computers of Toys "R"Us customers to track their Internet browsing habits. Class-action lawyers snapped into action after Internet privacy specialists disclosed the relationship July 31. In at least seven lawsuits filed in New Jersey, Texas, and California, lawyers claim that the Toys"R"Us Web site violated federal law and its own privacy policy by failing to disclose that it shared customers personal information with an outsider. One law firm accused Toys"R"Us of a "sophisticated and covert scheme to secretly track its customers,"while another claimed that Coremetrics was building"super profiles" of customers based on their Internet habits. Attorneys who filed the lawsuits said it is likely that the federal cases will be consolidated in one courthouse, either in Newark or California. Toys"R"Us and Coremetrics, based in San Francisco, deny they did anything wrong. They claim that Coremetrics was working as a contractor to analyze how customers behaved online at the Web site. "Any information that was provided to us by Coremetrics was used exclusively within toysrus.com to enhance our customers shopping experience,"said Brandon McCormick, a spokesman for the Woodcliff Lake-based Web site. After the first lawsuit was filed, however, Toys"R"Us changed its privacy policy, disclosing that it may share information with third parties, the lawsuits said. The company also ended its deal with Coremetrics, calling it only"exploratory" and not a"contractual, legal relationship per se." Coremetrics places small strings of code known as"cookies"on computers to collect data. The company said it never shared Toys "R"Us data with other firms, and that it was helping Toys"R"Us improve its Web site by tracking how customers got to the site and what advertising hooks they prefer. The lawsuits will be closely watched in the industry as a legal test of how the courts treat companies that claim they will not disclose information to third parties, said Robert Smith, editor of the Privacy Journal newsletter. "Once a company makes a commitment, they have to abide by it," Smith said."Companies have to realize that they have to post a policy with great care and deliberation." The lawsuits also underscore the sensitivity of personal privacy in the Internet age. Computer users routinely 1 complain in surveys that a fear of being surreptitiously watched deters them from using the Internet. Those lawsuits also come at a time when state and federal regulators and legislators have failed to reach a consensus on how to protect personal privacy and prevent unauthorized disclosure of online data. Still, the Federal Trade Commission and state attorneys general are working to protect privacy. The FTC, for instance, is investigating DoubleClick, the giant online advertising service, for its business practices. DoubleClick has come under fire for now-suspended plans to link profiles of customers activities online with details of what they own and buy off line. DoubleClick, Engage, and other online advertising services have placed cookies on millions of computers. Class-action lawyers, who have sued over such issues as tobacco, securities fraud, and defective products, are turning to online privacy and have sued DoubleClick and other companies. "There's a whole network of lawyers just waiting to jump on these things,"said Robert Gellman, a privacy consultant and former congressional aide."You've got trial lawyers sitting there waiting to catch anybody doing anything inconsistent with their privacy policy." In the Toys"R"Us case, the lawyers mobilized after Interhack Inc. of Columbus, Ohio, an online firm devoted to computer security and privacy, issued a July 31 press release. Interhack said toyrsus.com and a related site, babiesrus.com, claimed that they while they didn't share information with third parties, they actually sent data to Coremetrics. Interhack also suggested that Coremetrics, which began operations March 27, shared its Toys"R"Us data with its other corporate clients. Those allegations help form the basis for several of the lawsuits. Coremetrics dismissed the release as"highly speculative and misleading,"adding: "Interhack's statement is based entirely on the erroneous assumption that Coremetrics collects data across multiple sites with the intention of reselling it to third parties. This is entirely untrue." Officials at Coremetrics, which worked for Toys"R"Us from April 24 to Aug. 2, said they couldn't share the firm's data because they didn't own it. Meanwhile, Toys"R"Us has posted a statement on its Web site announcing that it has ended its relationship with Coremetrics. It refers customers to the Coremetrics site for advice on removing cookies from their computers. Toys"R"Us, which owns its Web site with minority investor Softbank, insists that customer data never went outside of Coremetrics. "We feel very strongly that our privacy policy was clear, and that in the course of business, our consultants were permitted to help us understand our data,"said spokeswoman Rebecca Caruso. Yet, privacy advocates say that Toys"R"Us could have avoided the litigation by being more forthcoming about its relationship with Coremetrics. "If Toys 'R Us had said, 'We are passing all your personal data to Coremetrics, I don't think there would have been any legal action," said Andrew Shen, a policy analyst at the Electronic Privacy Information Center, a private non-profit advocacy group in Washington. (The Record (Bergen County, NJ), August 21, 2000) WALT DISNEY: Attorneys Want Judgment to Triple to $720 Million -------------------------------------------------------------- Attorneys for two businessmen who won a $240 million judgment against Disney for stealing a sports complex idea asked a judge to triple the damages to $720 million. The plaintiffs' attorneys, including Johnnie Cochran Jr. and Willie Gary, also formally asked the judge to make the company pay an estimated $7.5 million for their legal fees and costs. The attorneys can ask for triple damages under Florida law because a six-person jury found earlier this month that Disney was "willful and malicious" in misappropriating the idea. Disney attorneys have said they plan to appeal. "The motions were expected and it doesn't change our position that we felt this decision was a gross miscarriage of justice," said Disney spokesman Bill Warren. "We still have every confidence that this preposterous verdict will not stand." Nicholas Stracick, a retired baseball umpire from Buffalo, N.Y., and Edward Russell, an architect from Fonthill, Ontario, testified they pitched their idea for a sports complex to Disney officials in the late 1980s. Disney officials rejected their plans in 1989. Four years later the company announced it would build a $100 million sports complex. Disney's Wide World of Sports opened in 1997. The case was closely scrutinized by Disney watchers and trial lawyers because the company usually settles such cases, rarely letting them go to trial. (The Associated Press State & Local Wire, August 19, 2000) LONG-TERM CAPITAL: Former Investor Does Not Have Standing for RICO Claim ------------------------------------------------------------------------ An action arose out of the near collapse of the Long Term Capital Hedge Funds. Plaintiff company, a former investor in the funds, alleged that defendants violated the Racketeer Influenced and Corrupt Organizations Act, by engaging in a fraudulent scheme to gain control of the funds and to "squeeze out" plaintiff. Defendants moved to dismiss plaintiff's complaint for lack of standing. Plaintiff, an outside investor, asserted that it had suffered a direct injury, since defendants wrongfully stripped away 90 percent of its equity interests. The court granted the motion to dismiss, finding that plaintiff's RICO claim failed, since its alleged injuries were merely derivative of the injuries suffered by defendant, Long-Term Capital V, Ltd. It also found that plaintiff's claim that it was treated differently than the principal investors was meaningless. Judge Scheindlin LAKONIA MANAGEMENT LIMITED v. MERIWETHER QDS:02762766 - This action arises out of the near-collapse in September 1998 of the initially heralded, and now infamous, Long Term Capital Hedge Funds (the "LTC Funds" or "Funds"). Plaintiff Lakonia Management Limited ("Lakonia") is a former investor in the Funds. Plaintiff alleges that defendants -- individuals, partnerships and corporations associated with the Funds -- violated sections 1962(b) and 1962(d) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. @@ 1962(b),(d), by engaging in a fraudulent scheme to gain control of the Funds and to "squeeze out" plaintiff and other investors for insufficient consideration. In addition to its federal RICO claims, plaintiff asserts related state law claims for breach of fiduciary duty. Defendants now move, pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6) and 9(b), to dismiss plaintiff's First Amended Complaint ("Complaint") for lack of standing, for failure to state a claim upon which relief may be granted and for failure to plead fraud with particularity. Defendants' motions are granted in their entirety. Dismissal of a complaint for failure to state a claim pursuant to Rule 12(b)(6) is proper only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim that would entitle [it] to relief." Harris v. City of N.Y., 186 F.3d 243, 247 (2d Cir. 1999). "The task of the court in ruling on a Rule 12(b)(6) motion is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998)(internal quotations omitted). Thus, to properly rule on such a motion, the court must accept as true all material facts alleged in the complaint and draw all reasonable inferences in the nonmovant's favor. See Harris, 186 F.3d at 247. Nevertheless, "[a] complaint which consists of conclusory allegations unsupported by factual assertions fails even the liberal standard of Rule 12(b)(6)." De Jesus v. Sears, Roebuck & Co., 87 F.3d 65, 70 (2d Cir. 1996)(internal quotations omitted). In deciding a Rule 12(b)(6) motion, the district court must generally limit itself to facts stated in the complaint, documents attached to the complaint as exhibits or documents incorporated in the complaint by reference. See Dangler v. New York City Off Track Betting Corp., 193 F.3d 130, 138 (2d Cir. 1999). However, courts may also consider matters of public record, see Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d Cir. 1998), cert. denied, 119 S. Ct. 868 (1999), as well as "documents either in [plaintiff's] possession or of which plaintiff[] had knowledge and relied on in bringing suit", Brass v. American Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993). See also Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1992)(finding that on motion to dismiss, district courts may consider documents of which plaintiff had actual notice and which were integral to its claim even though those documents were not referred to or incorporated in the complaint). Rule 9(b) sets forth additional pleading requirements with respect to allegations of fraud. Rule 9(b) requires that "[in] all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." But, under Rule 9(b), "[malice], intent, knowledge and other condition of mind of a person may be averred generally." Rule 9(b) "applies to civil RICO claims for which fraud is the predicate illegal act." Moore v. PaineWebber, Inc., 189 F.3d 165, 172 (2d Cir. 1999). (Discussion in New York Law Journal, August 9, 2000) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *